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Posts Tagged ‘Portfolio’

DHH Options Time

Dark Horse Hedge is Rocking (2) & Options Time Again

By Scott at Sabrient and Ilene at Phil’s Stock World 

My heater’s broke and I’m so tired 
I need some fuel to build a fire (actually need something that cools heat down)
The girl next door (Tokyo), her lights are out, yeah
The landlord’s gone, I’m down and out
It’s cold gin (option) time again
You know it’ll always win – KISS

The tragic developments in Japan took center stage this past week and our hearts go out to everyone in Japan, and everyone who is touched by this catastrophic event.    

Prior to the earthquake and tsunami, the VIRTUAL Dark Horse Hedge virtual portfolio was positioned with a 70% Long / 30% Short tilt. We are now considering moving to a 50% / 50% balance. We will most likely do that, assuming no material change in the world events, by adding to our short positions next week.  In the meantime, we have two option positions which are expiring today and we wanted to add to the review we began last week.  (Click here for our first four long positions reviewed a week ago.)  

Options Expiration:

Radware Ltd (RDWR): On November 11, 2010 we added Radware (RDWR) to the virtual portfolio using Phil’s Buy/Write strategy.  At that time RDWR was trading at $33.39 and we added half the shares we wanted (100) and sold the March $35 2011 call and March $35 2011 put to complete the buy/write. On December 7, 2010 when the stock traded up to $40, we rolled the call out to the Jan $35 2012 call, which we sold for $9. We kept the March $35 2011 put we had already sold for $5.10.  The put (as 65-70% of options do) will expire worthless today yielding a $5.10 profit.  At this time, we believe it is prudent to hold the shares, currently trading at $35.56, and the Jan $35 2012 call.

Xyratex (XRTX): On December 20, 2010 we added Xyratex (XRTX) using the buy/write strategy and acquiring half the shares we wanted exposure to and selling March $15 calls and puts for a net $3.60.  XRTX is trading at $11.14 today on expiration day, so the call side will expire worthless ($1.80 profit) and the puts will be exercised – the


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Bring Out Your Dead

Portfolio house keeping – time to say goodbye to mistakes, rebalance what’s left and raise cash? – Ilene 

Bring Out Your Dead

Courtesy of Joshua M Brown, The Reformed Broker 

unemployment

A slightly better than expected reading on weekly Jobless Claims has the market feeling bouncy this morning.  We also just got AAII sentiment numbers that are as negative as you get (20% bulls, 49% bears!).

Combine these two data points and a Dow that just barely managed to keep itself above the 10,000 level yesterday and you have the recipe for a nice bounce.

I’m planning to use it.  I’m planning on bringing out my dead for the cart man to carry away.

Sunlight is the greatest disinfectant known to man, so with this morning’s early rays of sunshine I will cleanse the house that is my long book.  I’ll be scouring my portfolios searching for the stocks that have become corpses during the correction’s long night.

This is not because I don’t believe that the bounce could be sustainable (I’m willing to give it the benefit of the doubt for now).  Rather, my expulsion of these stock market casualties has more to do with my desire for liquidity and my wish to be rid of that awful stench of death.

When the cart comes by, I’ll be heaping it with the bodies of a few nat gas stories that are going nowhere, a huge retailer that seems to have no bottom and a financial name or two.

I don’t give specific financial advice here on this site, but it certainly wouldn’t hurt to use this opportunity to accept some of the mistakes of the summer and prepare your portfolio for the fall.

Bring out your dead.

Weekly jobless claims fall 31,000 to 473,000 (MarketWatch) 


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The Dark Horse Hedge

The Dark Horse Hedge

By Scott Brown at Sabrient, and Ilene, at Phil’s Stock World

Silhouette of Horses Jumping a Steeplchase

Scott Brown, Managing Director – Retail Division at Sabrient, is launching a newsletter with Phil’s Stock World based on the highly successful and popular Investors’ (H)Edge product.  The Dark Horse Hedge newsletter is a Long/Short retail portfolio taking advantage of technical market trends to tilt the balance of LONG vs. SHORT in bearish, bullish or range bound markets for added Alpha (the measure of return on a risk adjusted basis).  Long and short equity positions taken in The Dark Horse Hedge portfolio will be chosen using to Sabrient’s rating system, which is primarily based on fundamental criteria. Because the stock positions will generally be held for intermediate to long periods, these positions are ideal for using with option strategies taught by Phil Davis, of Phil’s Stock World.

The Dark Horse Hedge (DHH) newsletter will follow a number of guidelines in an attempt to minimize systemic risk, or “Beta.” Beta is a measure of the volatility of a portfolio in comparison to the market as a whole.  To keep beta low, the DHH portfolio will have both long and short positions.  Consequently, dramatic moves in the market will always be in the direction of at least part of the portfolio.

Using Sabrient’s rating system, we will focus on being long high quality stocks, and short low quality stocks.  Long positions should fare better than average during market selloffs.  In contrast, the short positions, selected from the lowest ranking stocks, should perform well during selloffs. These stocks are also expected to underperform higher quality names in a stronger market.  This strategy is designed to balance the goal of attaining Alpha with the desire to keep Beta relatively low.

We will follow this list of guidelines in building the DHH portfolio.

1.  When fully invested, the Portfolio will have 24 positions.  However the portfolio may not be fully invested.

2.  Tilting (or weighing) of the portfolio will be based on the position of the SPX relative to its 50 and 200 day Moving Averages

  • If the SPX is below both its 50


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Q3 $100,000 Virtual Portfolio – The Income Producer

I recently went down to Florida to see my folks and found something disturbing as I talked to their friends.

We all know that many people who have been on fixed incomes lost 50% of more of their virtual portfolios during the crash but what I hadn’t realized is how deeply this was impacting those retirees because their fund/pension managers have, for the most part, done nothing to adjust their investing strategies at the market bottom. 

The average American has just $88,000 when they retire but we’re not talking about them – we are talking about the retirees we aspire to be – the upper percentile Seniors in like the ones in West Palm Beach and  Boca Raton, Florida.  The average couple there had closer to $1M in portflio assets before the crash and closer to $600,000 now.  Even so, that can cause quite an income adjustment for a retired couple

Fortunately most of these people own their homes and get free government health care (Medicare) so they are not as devastated as younger Americans who are still paying off their homes and just working on saving for retirement while trying to provide health care and education for their children.  With Social Security (another thing that is iffy for us younger Baby Boomers down the road) adding $2,000 a month, the average 6% rate of return on a balanced virtual portfolio of $1M was $5,000 a month plus $2,000 from SS = $7,000 a month, generally enough to pay taxes and bills for the house, eat out once in a while, support 2 cars, do a bit of traveling and even belong to a golf club (dues in the average high-end development are $15,000 a year). 

 

The idea, of course, is to do all this WITHOUT dipping into the $1M principal that’s invested in stocks and bonds.  Then came the crash.  The S&P dropped from 1,500 to 666, down 55% in less than a year.  Suddenly the $5,000 a month that came from investments dropped to $2,500 a month or less.  Even worse, many classic virtual portfolio mainstays like dividend paying financial institutions and American manufacturing companies were among the worst hits with dividends being canceled and some financials going to zero so quickly there was no chance to get out, especially with the do-nothing type of investment brokers that most retirees end up with. 

Unfortunately, we hit a bottom (sort of)
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Vacation-Proof Your Virtual Portfolio

A couple of years ago, Option Sage (Gareth) and I put up a very popular article titled "Vacation-Proof Your Virtual Portfolio."

In it we discussed several strategies for hedging existing positions, moving them into neutral positions ahead of a time when you would be going away and not able to keep your eye on the markets.  As we cashed out last week, it hasn’t been much of an issue coming into this long weekend but some of you still have long postiions that need protecting and Sage has been kind enough to provide us with access to a free on-line seminar on the subject through his educational platform at www.MarketTamer.com.   

I don’t recommend many services but Sage was an original member who went on to write many of our educational posts over the years and went on to develop an on-line trading education system that is very, very good for learning stock and options trading.  PSW members get a special offer of $99/month, which is 1/3 the going rate AND he will give you that $99 back if you are not satisfied after the first month!  So check out the link above, there are 3 free lessons there and read through the article.  If you plan on going away with positions open this summer in this crazy market – I think it will be time well spent…

Those of you who know Sage have probably already linked over but for those of you who didn’t get a chance to meet him when he was on-line with us all the time, here’s a copy of Market Tamer’s recent press release, which tells you a bit about Gareth and the company he’s been building:

Taming The Market
 
A shockingly simple yet amazingly powerful concept has been ignored by major hedge funds, mutual funds, and retail traders alike.  On their quest to outperform the market, Wall Street’s best often get sucked into a single style of investing or trading:  long only, long/short, distressed, diversified and the list goes on.  They use a single approach to exploit a changing market.  And often a single approach works – for a while.  Bill Miller of Legg Mason was regarded as one of the stars on Wall Street until his virtual portfolio suffered substantial losses during the crisis of 2008.  Victor Niederhoffer was once acclaimed as the number one hedge fund investor in the world until his fund blew…
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$100,000 Hedged Portflio Update

We didn’t do a wrap-up last week as I instead wrote a long, Members Only post (only Part 1 too) on "Setting Up A $100,000 Hedged Virtual Portfolio" concentrating on a virtual $20,000 allocation in the financials for our first sector.

We’re going to do more of these on the weekends as people find them useful and also because, although they are very popular, I do get tired of just reviewing what we did for the past 5 trading days every week.  So maybe a little of both today but I aim to keep this short (as I usually do, but it never works out) so we can do another post on earnings plays tomorrow.

How is our new sample virtual portfolio looking after a week?  Well let’s see

  • 500 UYG at $3.48, selling 5 May $3 calls for .72 and 5 May $3 puts for .28, net $2.48/2.74
    • UYG now $3.79, May put and call combo now $1.12 = net $2.67 ($95 profit on $1,240 = 7.7%)
  • Selling 2 FAS $7.50 puts for .45 naked
    • FAS closed at $9.40 so 100% profit of $90
  • 500 C at $3.04, selling May $3 puts and calls for $1.11, net $1.93/2.47
    • C now $3.65, May $3 put and call combo is $1.19 = net $2.46 ($265 profit on $965 = 27.5%)
  • Selling 2 IYF May $36 puts for $2 naked
    • IYF closed at $40.26, May $36 puts $1.20 ($160 profit on $400 =40%)
  • Selling 2 JPM May $29 puts for $1.95 naked
    • JPM closed at $33.26, May $29 puts $1.17 ($156 profit on $390 = 40%)
  • Selling 7 FAZ May $10 puts for $2.40 naked (adjusted to reflect Monday’s gap down open)
    • May $10 puts are now $2.67 so a loss of $189 (-11.3%).  Both our July and Oct escape rolls are still intact so no worries here anyway (this is a hedge to the others)
  • 5 FAZ Oct $12.50 calls for $4 (adjusted), selling 5 May $21s for $1.05, net $2.95.
    • The Oct $12.50s are now $3.29, May $21s are now .45 so net $2.85, a loss of $50 (3.4%)

So far so good!  The FAZ hedges are holding up nicely while all of our upside plays were winners.  Our 3 April put sales are expired $90 in profits so risk off the table and cash put back to work and May Put sales look safe enough at the moment, up…
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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743"

Thank you for you time!

 
 

Chart School

Richard Wyckoff SP500 price forecast

Courtesy of Read the Ticker.

Richard Wyckoff used Point and Figure charts to target price zones where the energy or 'effect' from a 'cause' or consolidation would run out. Time to see what it says about the current SP500 price advance.

Reference: The Wyckoff Method Applied in 2009: A Case Study of the US Stock Market

Within the pdf linked above, page down to page 34 or page 6, figure 8. There you see the forecast price zone of the SP500 from the top in 2007 to a bottom in 2009. The forecast is of price only, and not time. It was very accurate.

Ri...

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Phil's Favorites

Got Growth?

Got Growth?

Courtesy of Wade of Investing Caffeine 

Investing in the stock market can be quite stressful, especially during periods of volatility…but investing doesn’t have to be nerve-racking. Investing legend T. Rowe price captured the beneficial sentiments of growth investing beautifully when he stated the following:

“The growth stock theory of investing requires patience, but is less stressful than trading, generally has less risk, and reduces brokerage commissions and income taxes.”

What I’ve learned over my investing career is that fretting over such things as downgrades, management changes, macroeconomic data, earnings misses, geopolitical h...



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Zero Hedge

The Founding Fathers Fought the Revolutionary War to Stop the Type of Militarized Police We Now Have In the U.S.

Courtesy of ZeroHedge. View original post here.

Submitted by George Washington.

Former Congressman – and Cleveland mayor – Dennis Kucinich wrote a must-read post yesterday:

The Boston Massacre of March 5, 1770, was a catalyst toward the American Revolution. Five civilians were killed by the British soldiers. The Declaration of Independence, in condemning the offenses against liberty by George III, stated:

He has kept among us, in times of peace, standing armies without the consent of our legislature.

 

He has affected ...



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Option Review

Elizabeth Arden Put Option Activity Revisited

It’s an ugly day for investors in Elizabeth Arden, with shares in the name losing roughly one-quarter of its value overnight after the retailer of beauty products and fragrances reported a wider than expected loss and sales that were lower than analysts anticipated. Shares in the name are down more than 23% in the final hour of trading to stand at $14.95.

On Friday of last week we wrote a short note about put option activity on the stock...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Sabrient

Sector Detector: Bullish investors jockey for position as if the correction is over

Courtesy of Sabrient Systems and Gradient Analytics

As many investors enjoy the final weeks of summer, some optimistic bulls seem to be positioning themselves well ahead of Labor Day in anticipation of a fall rally. Indeed, last week’s action was impressive. After only a mere 4% correction, investors continued to brush off the disturbing violence both at home and abroad, and they took the minor pullback as their next buying opportunity. But was that really all the pullback we’re going to get this year? I doubt it. But I also believe that nothing short of a major Black Swan event can send this market into a deep correction.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then ...



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OpTrader

Swing trading portfolio - week of August 18th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

The Stock World Weekly Newsletter is ready to go! View it here: Stock World Weekly. Just put in your user name and password, or take a free trial. 

 

#120692880 / gettyimages.com ...

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Market Shadows

Helen Davis Chaitman Reviews In Bed with Wall Street.

Author Helen Davis Chaitman is a nationally recognized litigator with a diverse trial practice in the areas of lender liability, bankruptcy, bank fraud, RICO, professional malpractice, trusts and estates, and white collar defense. In 1995, Ms. Chaitman was named one of the nation's top ten litigators by the National Law Journal for a jury verdict she obtained in an accountants' malpractice case. Ms. Chaitman is the author of The Law of Lender Liability (Warren, Gorham & Lamont 1990)... Since early 2009, Ms. Chaitman has been an outspoken advocate for investors in Bernard L. Madoff Investment Securities LLC (more here).

Helen Davis Chaitman Reviews In Bed with Wall Street. 

By Helen Davis Chaitman   

I confess: Larry D...



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Digital Currencies

BitLicense Part 1 - Can Poorly Thought Out Regulation Drive the US Economy Back into the Dark Ages?

Courtesy of Reggie Middleton.

An Op-Ed piece penned by Veritaseum Chief Contracts Officer, Matt Bogosian

This past weekend (despite American Airlines' best efforts), Reggie and I made it to the Second Annual North American Bitcoin Conference in Chicago. While there were some very creative (and very ambitious) ideas on how to try to realize the disruptive Bitcoin protocol, one of the predominant topics of discussion was New York Superintendent of Financial Services Benjamin Lawsky's proposed Bitcoin regulations (the BitLicense proposal) - percieved by many participants at the event as an apparent ...



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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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