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OfflinegeokillsA
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Re: Stock Update for August 30, 2011 - S&P Testing resistance, shorting APKT [Re: geokills]
    #15016380 - 09/02/11 07:52 AM (12 years, 4 months ago)

Market very weak on the non-farm payrolls number indicating that no jobs were added to the economy last month.  I bought back the Sept $400 call I had sold on AAPL for a 75% gain.  Closed out my short on APKT as the stock is showing some uncanny strength this morning (probably on account of other shorts covering), still holding a position in SDS as well as my October $120 puts on the SPY.  Took a trading position to the long side on CMI, as it moved above its opening rotation high (first 15 minute candlestick).


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Re: Stock Update for August 30, 2011 - S&P Testing resistance, shorting APKT [Re: shr]
    #15017061 - 09/02/11 11:20 AM (12 years, 4 months ago)

i have a question

is there anything special about investing in bear stocks? such as small cap/financial/energy ect..

i'll rephrase - is there anything I should know before investing in them? or are they just played like regular stocks, besides the fact you're betting that sector of the market will go down.


if I worded this poorly i can try again. i'm looking at direxion


Edited by shr (09/02/11 11:42 AM)


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Offlinescatmanrav
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Re: Stock Update for August 30, 2011 - S&P Testing resistance, shorting APKT [Re: shr]
    #15018355 - 09/02/11 03:25 PM (12 years, 4 months ago)

"I bought back the Sept $400 call I had sold on AAPL for a 75% gain."

Doesnt this mean you can buy apple for $400/share? Trying to figure out how you gained from this. I can only imagine you sold them at 400 and then bought them back, but I though puts were to sell the stock at a price and calls were to buy it?

One other thing I'm having trouble with is entering and exiting at the right price. I saw you mention before you never buy things at market, always limit. Playing on my fake portfolio I've been trying to do limits and stops but I always seem to mix it up. If you are buying stock and set a stop then you buy it above the stop and if you set a limit, you buy it below the limit. If you are selling stock and set a stop then you sell it below the stop and if you set a limit you buy it above the limit. Is that right?

Any info/websites on setting limits and stops would be good. I understand stopping out on a sell, its mainly buying using limits and stops I'd like to understand better. Some stocks I've looked at have a big difference in the bid/ask prices and I feel that limits will help to not screw myself with these stocks? Are limits even useful if the bid/ask price difference is a penny or two, or would a market order be the same?

And one more (I know I have a lot of questions :smile: I have been reading for hours every day though), how do you feel about trailing stops? It seems you usually set them manually, a lot of days though I will be able to be on the market for the first 30 minutes, then I have to go to work. I was thinking of trying to utilize trailing stops in some instances on these days. I understand the basic idea (set a percentage and it moves up with the stock, but not down) but maybe theres something about them I'm missing, or maybe you just prefer the control.


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OfflinegeokillsA
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Re: Stock Update on Inverse / Bear ETF's [Re: shr]
    #15022571 - 09/03/11 12:31 PM (12 years, 4 months ago)

Quote:

shr said:

is there anything I should know before investing in [inverse/bear ETF's]? or are they just played like regular stocks, besides the fact you're betting that sector of the market will go down.




The inverse ETF's, such as SDS, TZA, TWM, SKF, et al, are good short-term trading vehicles to help you hedge your long side exposure, or simply to capitalize on short term down drafts in the market.  However, there are a couple of major considerations:
  • Historically, markets have always held an upside bias.  This is because the majority of major money managers ONLY invest to the long side.  Because the biggest money is committed (in aggregate) to being long, the short side will (in aggregate) be the more difficult trade, because there simply isn't as much money looking to pile in on short trades vs long trades.

  • Inverse ETF's have a decay aspect, whereby if you hold them for any appreciable length of time, you will return less than the advertised 1x or 2x or 3x rate of movement of the underlying index or basket of stocks.  This is due to the daily re-balancing of the funds, which you can read about: here.


Suffice it to say that I almost always close any short or leveraged ETF position within a few days (typically within one or two, as I did with the SDS yesterday).  If you really want to short more often or for longer periods of time, you should just get your trading account margin approved by your broker, so that you can do an actual short sale on the individual stock or index/sector ETF, since shorting these primary issues will not experience the same daily re-balancing decay as the inverse ETF's.


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OfflinegeokillsA
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Re: Stock Update for August 30, 2011 - S&P Testing resistance, shorting APKT [Re: scatmanrav]
    #15022756 - 09/03/11 01:17 PM (12 years, 4 months ago)

Quote:

scatmanrav said:

"I bought back the Sept $400 call I had sold on AAPL for a 75% gain."

Doesnt this mean you can buy apple for $400/share? Trying to figure out how you gained from this. I can only imagine you sold them at 400 and then bought them back, but I though puts were to sell the stock at a price and calls were to buy it?




Just as you can short a stock, you can also short an option.  I sold (aka shorted) the Sept $400 call option to someone else, in order to capture the time value of that option.  The buyer of the $400 call, paid me $530 in order to be able to force me to deliver 100 shares of AAPL at $400 a share, anytime up until the expiration of the option contract on September 17th.  Because I did not expect AAPL to be above $400 within that time frame, I expected the call option to remain unexercised and to expire worthless, thereby allowing me to keep the $530 I received for selling the rights to the 100 shares @ $400 to someone else.  I ended up buying this option back early, because AAPL had fallen to its support level near the 50 day moving average really quickly, and the value of that $400 Sept call had deteriorated significantly, allowing me to buy the contract back for only $100, which removed my obligation to potentially deliver 100 shares of AAPL to some other person.

I could have hung on for another couple of weeks in hopes to capture that last $100, but because I now believe that AAPL could bounce at this support level, I would rather wait for the bounce, and then sell another Sept call option (which I will choose based on my expectation that it will expire worthless) to capture even more premium.  Of course, if AAPL continues to fall next week, I would have been better off not buying back my short $400 call yesterday, but that's just the give and take of trading risk.  This short call was actually part of a calendar spread against the Jan 2013 $305 call that I own on AAPL.  The long term call is based on my underlying thesis that AAPL will be much higher in a couple of years, and I am selling the nearer term calls in order to effectively lower my cost basis in the considerably more expensive Jan 2013 long call.  If I do it right, I will end up taking in enough premium along the way to have fully paid for my Jan 2013 $305 call by the time 2013 rolls around.  If however, I short a call at say $400 and AAPL moves above $400 before that short call expires, someone will force me to deliver 100 shares of AAPL to them and I will thus be forced to exercise my long Jan 2013 call to make good on the deal.

More info: Calendar Spread Example


Buying a Put option is an appropriate way to capitalize on the anticipation of downside in a stock, but because the price that people pay for an option contract increases when the market is more volatile (which it is right now), I would rather be a seller of the option instead of a buyer, because that allows me to receive the increased volatility premium, rather than pay up for it!  Also, selling an out of the money call option can make you money even if the stock doesn't go down at all, all the stock has to do is stay below the strike price of the out of the money option.  Because I don't expect AAPL to fall a whole lot, that's another reason I'd rather sell a call option instead of buying a put.

Please note, options are leveraged trading instruments that can make (or lose) money in a flash.  It literally took me YEARS to feel comfortable enough with my understanding of the market to start trading these derivatives.  Even then, I still ended up losing a boat load of money when I first got involved with options!  Therefore, I cannot stress enough how important it is that you learn how to trade good ol' stocks first (and really learn how they move), because it is the movement of those underlying stocks that is responsible for the movement of the option contracts.



Quote:

One other thing I'm having trouble with is entering and exiting at the right price. I saw you mention before you never buy things at market, always limit.




While I generally believe that limit orders are the way to go, I do use market orders on occasion.  Specifically, for rapid intraday trades where I'm just flipping stuff around and only planning to hold the position for something like 5 minutes to 5 hours.  This is a direct result of the fact that I generally only take day trades on very rapidly moving stocks (in order to make the short-term trade worthwhile).  If I place a limit order, I may not get filled on a trade that is flying to the moon and jumps over my limit, and by the time I realize it, the good entry is history and I surely wouldn't want to chase it after it has already moved a few percent in a very short period of time.  I also almost always use market orders on my stop losses (though limit orders that are a couple of percent below your stop level are appropriate if you are worried about flash crashes taking you out of your position at a disagreeable price).

Note, I have never used buy stops.  They may work for some people, but to me I'd much rather use an alert.  You should be able to identify support and resistance levels on a chart in any time frame.  Therefore, either set an alert to alert you when the stock is nearing support or breaking through resistance, so that you can evaluate its movement in the context of the broader market in order to make an informed buying decision; or just set a limit buy order at support, which will trigger if and when that support level is reached.  I prefer to set alerts, because if the entire market is falling off a cliff, the support level (or breakout above resistance) probably won't hold and if you had a good-til-canceled limit or buy stop order just sitting there, you'll get filled and start taking losses as the market continues to plummet.


Quote:

Playing on my fake portfolio I've been trying to do limits and stops but I always seem to mix it up. If you are buying stock and set a stop then you buy it above the stop and if you set a limit, you buy it below the limit. If you are selling stock and set a stop then you sell it below the stop and if you set a limit you buy it above the limit. Is that right?




  • MARKET Buy: Will purchase shares at current offer price.
  • MARKET Sell: Will sell shares at current bid price.

  • LIMIT Buy @ $5: Will purchase shares at or below $5.
  • LIMIT Sell @ $5: Will sell shares at or above $5.

  • BUY Stop @ $5: Will purchase shares at or above $5.
  • SELL Stop @ $5: Will sell shares at or below $5.



Quote:

Some stocks I've looked at have a big difference in the bid/ask prices and I feel that limits will help to not screw myself with these stocks? Are limits even useful if the bid/ask price difference is a penny or two, or would a market order be the same?




Stocks with wide spreads between the bid and ask prices are absolutely best traded by using limit orders.  If you begin to trade options, this becomes even more important as spreads tend to be even wider.  Generally speaking, if your trade is short to medium term, you want to trade the most liquid stocks that will necessarily have tighter spreads.  If your trade is a longer term trade, a moderate spread won't be as big of a deal since your plan is to hang onto the thing for a long while anyway.  For highly liquid stocks where the spread is a penny or two, a market order during regular trading hours is probably fine, though for what it's worth, I will only use market buy orders on very fast intraday momentum trades.  Any trade I plan to hold at least overnight, I will always use a limit buy.



Quote:

And one more (I know I have a lot of questions :smile: I have been reading for hours every day though), how do you feel about trailing stops? It seems you usually set them manually, a lot of days though I will be able to be on the market for the first 30 minutes, then I have to go to work. I was thinking of trying to utilize trailing stops in some instances on these days. I understand the basic idea (set a percentage and it moves up with the stock, but not down) but maybe theres something about them I'm missing, or maybe you just prefer the control.




I'm not a big fan of trailing stops, however in your case (since you are leaving your trading desk), if your trade is only intended to be a day trade, a trailing stop would seem to be appropriate..  I kind of do the same thing as a trailing stop, only manually.  What I mean is, I will re-set my sell stop levels at the end of each trading day, based on that day's trading action (or even during the trading day, based on intraday support levels -- though I totally get that a lot of people don't have access to their trading account all day and therefore can't do this).  On intermediate term trading positions that make it through that first day (because every trading position starts out as a day trade), I'll typically move my sell stops to that day's intraday low, and continue to do that at the end of each subsequent day.  I generally don't like trailing stops because they can get triggered unexpectedly, for example if you have a 1% trailing stop and you get a really strong market opening that people take profits into, but then the uptrend resumes throughout the later part of the day.  Or if there's a news event, like a Fed or Presidential speech, those can temporarily whipsaw the markets quite a bit.  Hell, even that earthquake we saw on the east coast a week ago or so caused a temporary dip in the market, after which we closed at the intraday highs.

Set a trailing stop too tight, and you'll probably get shaken out of your position early.  Set it too wide, and you risk getting taken out right as the stock is bouncing off of support.  Put plainly, I would much rather identify support levels, and set my stops based on those levels, rather than an arbitrary percentage or dollar amount.

Good luck!  Also, if you ever want some quick reference general investing related information, just type in your subject followed by "investopedia" into Google (e.g. sell stop investopedia).  They're pretty good about providing clear and concise explanations on many market subjects.


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Re: Stock Update for August 30, 2011 - S&P Testing resistance, shorting APKT [Re: geokills]
    #15023050 - 09/03/11 02:25 PM (12 years, 4 months ago)

I would suggest to read and reread all that geo took the time to post. Let me put in a few observations which may be helpful.

You can buy puts or calls but you can only sell options if you own enough stock to cover them. If you own 100 shares of xyz, you can sell one call contract which is for 100 shares. If your broker allows it, you can sell 1 put contract. No one is allowed to sell "naked" options or options on stock they do not hold. You can buy all the options you can afford.

I happen to like trailing stops. I use them to lock in a profit when i think a stock might be volatile. You don't want them to be too close but give you a little room. A good time to consider a trailing stop is when you are thinking about selling a stock or option. If you want to reap your profit but think there might be an upside, put a trailing stop on it. Sometimes a stock will shoot up, perhaps on a rumor, and then fall, perhaps on the news. Your trailing stop allows you to ride it up and then get off before it drops back down.

I like placing limit buy orders for a low price just in case i get lucky. A trailing buy order can be set to follow the price and only buy when it goes up a certain amount. This is the opposite of a trailing stop. You do this when you want to buy a stock that has gone down but don't want to see it drop even farther the next day. If it keeps dropping, your buy order follows it. If it then turns around and starts going up by an amount you specified, then it buys. For example, xyz is trading at 15. It has a 52 week high of 20 and a low of 12. It's been dropping lately and you want to buy but want to take a chance on getting it cheaper. So you put your trailing buy order saying if it rises a certain amount, lets say .30, you will buy. If it keeps dropping,  you wait and see. If the next day it's down to 13, you saved money. The down side is that it could rise .3 and then fall costing you an extra 30 cents a share. The upside is you get to ride it down and perhaps pick it up really cheap.

Use trailing stops when you want to sell, trailing buys when you want to buy.


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Offlineshr
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Re: Stock Update on Inverse / Bear ETF's [Re: geokills]
    #15025614 - 09/03/11 10:42 PM (12 years, 4 months ago)

thank you geo, helpful information



now I don't have to wait for the market to dip to profit :smile:


Edited by shr (09/03/11 10:46 PM)


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Offlinescatmanrav
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Re: Stock Update for August 30, 2011 - S&P Testing resistance, shorting APKT [Re: Stonehenge]
    #15025708 - 09/03/11 11:16 PM (12 years, 4 months ago)

I did believe me. I just reread the first four pages of this thread again too for like the forth time. I understand alot of it now. I'm very serious about learning it though, so I appreciate all the info from everybody.

I dont plan on using options right away, but I want to learn about them and all of the market right away so I know how it all works together. The AAPL explanation helped. I've read about/understand calendar spreads, although how to implement them is far beyond me yet of course. I've actually had money in my stock account for the last 3 days, but havnt jumped into buying anything. I kinda figured the curve was gonna go back down too, prices have almost dropped back down to the lowest theyve been in a month over the last few days so hopefully when things bounce back up I can get in.

Trailing stops I was thinking of using for intraday/short term trades where they are going up rapidly. I keep seeing these stocks that rise 20-30% in a day and wanting to catch them early on for some of that huge swing straight up and then get out (while away from my computer) as soon as it does anything else. Unfortunately a lot of them are low volume stocks with those wide gaps between bid and ask prices, something to be very weary of naturally. But I stare at charts and numbers everyday for hours and read a lot, surfed investopedia a lot, I do love that site. You do explain it even better though I think. Hopefully soon I will get these trends and the feel for the curve and be able to pick some liquid stocks that are going up in the early morning.

I'll definitely be in on posting what I'm investing it when I finally do, thanks again!


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Growing with bags, start to finish (including my new grain and substrate prep)
Anyone looking to start bulk tubs/mono tubs/shotgun hybrids? Good tubs to use..
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OfflinegeokillsA
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On Selling Puts (naked / short puts) [Re: Stonehenge]
    #15026127 - 09/04/11 01:56 AM (12 years, 4 months ago)

Quote:

Stonehenge said:

You can buy puts or calls but you can only sell options if you own enough stock to cover them. If you own 100 shares of xyz, you can sell one call contract which is for 100 shares. If your broker allows it, you can sell 1 put contract. No one is allowed to sell "naked" options or options on stock they do not hold. You can buy all the options you can afford.




In fact, you can sell naked options, though a typical brokerage account does not come with this privilege, you must fill out an additional application form in order to obtain it (similar to the request for margin approval).  Additionally, selling options on stock you don't own typically results in a maintenance requirement equal to the strike price of the contract x 100 shares.  You can get around this with spreads, which limit your risk and thus limit (or even eliminate) the maintenance requirement.  An example of an options spread is exactly what I was talking about with the AAPL calendar spread in my last post above, where I held a long dated in the money call option to cover my short sale of a near dated out of the money call option.

One strategy for selling naked options that I prefer, involves selling out of the money puts on stocks that I would like to own.  For example, say I wanted to buy 100 shares of Bank of America (BAC) that is currently trading at $7.25.  Instead of paying up the $725 to buy them right now, I might consider selling a January 2013 $6 Put, which would result in the buyer of the put contract paying me $80.  For this $80, the buyer of the $6 put option can force me to buy 100 shares of BAC at $6, anytime up through the January 2013 expiration of the contract.  Naturally, he would only force me to buy 100 shares if BAC was in fact trading below $6, so if BAC stays above $6, I get to keep his $80 and that's all she wrote.  But if BAC trades below $6, I will get those shares "put" to me (in turn costing me $600, or 100 shares x $6 a share).  However, since I received $80 for selling the put option in the first place, those 100 shares actually cost me only $5.20 per share ($600 put contract obligation - $80 put contract premium received / 100 shares).  With this type of trade, it is very important that you have complete confidence in the price you'll end up paying for the stock in question, if indeed it does get put to you.  If you do, it's a great way to either take in some premium, or end up buying a stock you like at a relative discount.



  • PS. I'm happy to help shr and scatmanrav :smile:.  Honestly, one of the hardest things to master in trading
    is knowing when to trade, and when not to trade..  Frankly, it is more important to know when to sit on
    your hands, because if you can't do that, you'll get eaten alive in difficult choppy markets like the one we
    see right in front of us.  Remember, there is no need to force a trade.  Attempting to rush profits will -- and
    unfortunately, I know this from direct experience -- result in disaster.

  • PPS. Please be careful when reading some of my older replies.  I started this thread when I had very
    little experience and I am certain some of my early advice could be called into question.  Note that I have
    made an effort to keep the first post in this thread updated with good general information for those new
    to trading... But after that, all bets are off! :tongue2:


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InvisibleStonehenge
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Re: On Selling Puts (naked / short puts) [Re: geokills]
    #15027677 - 09/04/11 12:54 PM (12 years, 4 months ago)

I should have said my broker does not allow selling naked options. This is what i was told. However it does make sense that if you had enough cash or margin in the account to cover it it would be similar to shorting a stock.

IMO, the best strategy is to pick a good entrance point and hold the stock for long term or until you have reason to believe it has topped out. Day trading is risky at best and many people have lost money doing it. They make money on their long term stock and often lose it back on complex strategies. There are people who are able to make it work but i do not advise it. If you use your trailing stops and other methods of limiting loss it can be an interesting pastime. But keep in mind that a trailing stop or any stop does not guarantee you will not lose more than the amount you set aside for that trade. More often than we would like, a stock will experience a sudden drop and even a heavily traded stock can go straight down. Your stop is really an order to sell at market, no one can assure you of getting that price even if the stock is above that price now. This is even more true for thinly traded stocks.  Geo, i know you've said that before but i thought it deserved a little emphasis.


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Offlinescatmanrav
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Re: On Selling Puts (naked / short puts) [Re: Stonehenge]
    #15028717 - 09/04/11 04:14 PM (12 years, 4 months ago)

And no one was prepared for what happened in 2008. Sometimes I'm just looking at the charts and reading what people are investing in going "Noooo, dont get in now!" Its like a horror movie with a mass murdered just around the corner. But at times you see someone did good trading and made money and its good.

You have to know when and where all the information is coming from and keep that in mind, but it is still all usful just following the terminology and the trades and what happened. Learning from mistakes as much as things going right you know?

Could you sell an out of the money put like that on any normal account, as long as you keep enough cash in the account to cover it, since you arent being required to sell shares to anyone? A very interesting idea indeed either way.


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Growing with bags, start to finish (including my new grain and substrate prep)
Anyone looking to start bulk tubs/mono tubs/shotgun hybrids? Good tubs to use..
How I do grain (old still good tips)
Turn your closet into a fruiting chamber
Casing layer colonization and overlay


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OfflinegeokillsA
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Re: On Selling Puts (naked / short puts) [Re: scatmanrav]
    #15030433 - 09/04/11 10:21 PM (12 years, 4 months ago)

Quote:

scatmanrav said:

Could you sell an out of the money put like that on any normal account, as long as you keep enough cash in the account to cover it, since you arent being required to sell shares to anyone?




New accounts generally have no option privileges, and thus will require you to fill out an additional application form for your broker stating your experience and intentions.  Most brokers won't want to give new accounts options privileges outright, because it is very easy to lose a lot of money very quickly, if you aren't familiar with how they work.  Typically, the first level of approval you will receive will allow you to buy calls and puts, and possibly also spreads.  However, shorting a call or a put by itself will likely require a higher level authorization, meaning that you'll have to state that you have at least some experience trading options on your application form, and that you are intending to engage in a variety of complex strategies.  When in doubt, just talk to your broker, they want your commissions so I'm sure they'll walk you through it.  Just make sure you take the time to really understand how options work before you begin trading them.  I spent years trading plain ol' vanilla stocks before buying my first option.


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InvisibleZippoZM
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Re: On Selling Puts (naked / short puts) [Re: geokills]
    #15030601 - 09/04/11 10:48 PM (12 years, 4 months ago)

okay folks, I'm back in the game. My brokerage account has 5K cash in it, and 12K available with my margin trading ability.

any trades you would recommend?


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PEACE

:mushroom2:zippoz:mushroom2:



"in times of widespread chaos and confusion, it has been the duty of more advanced human beings - artists, scientists, clowns, and philosophers - to create order. In such times as ours however, when there is too much order, too much m management, too much programming and control, it becomes the duty of superior men and women and women to fling their favorite monkey wrenches into the machinery. To relieve the repression of the human spirit, they must sow doubt and disruption"

"People do it every day, they talk to themselves ... they see themselves as they'd like to be, they don't have the courage you have, to just run with it."


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OfflinegeokillsA
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Re: On Selling Puts (naked / short puts) [Re: ZippoZ]
    #15030655 - 09/04/11 10:58 PM (12 years, 4 months ago)

Not at the moment, though I am holding one over-sized position over the long weekend... CASH! :tongue2:


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InvisibleStonehenge
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Re: On Selling Puts (naked / short puts) [Re: geokills]
    #15033774 - 09/05/11 04:51 PM (12 years, 4 months ago)

One of the reasons i'm bearish on the long term is because productivity in the usa has been dropping lately. That is the often overlooked factor. In the long run increased productivity leads to prosperity. Dropping productivity leads to the opposite. The run of natural disasters is not helping any. It's like a perfect storm of bad factors going off at once. High unemployment, low productivity, housing mess is still there, debt crisis, deficits and so on. The whole world is experiencing some variation of this. Japan had the worst disaster but china had earthquakes, many other areas have been hit by quakes and storms.

I was surprised to see the market tank so quickly. I had thought it would be overall up for another couple weeks or so. I suspect a rise is coming but it will barely form a peak above recent results before it goes back down.

The naked option that you can't sell would be a totally naked one, not just selling it short. If you have cash or margin then you are covering it. I've heard brokerages and market makers will do this sometimes. I don't know how true it is.


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“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.” (attributed to Alexis de Tocqueville political philosopher Circa 1835)

Trade list http://www.shroomery.org/forums/showflat.php/Number/18047755


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Re: On Selling Puts (naked / short puts) [Re: geokills]
    #15034122 - 09/05/11 06:06 PM (12 years, 4 months ago)

Really nasty bank / debt related news coming out of the EU today.  Expect tomorrow to be a very rough market.
Futures currently have us set to open down some 2.5%.  Zippoz, I wouldn't be quick to throw your capital around,
whatever you do, play it close to the vest!  If you do something tomorrow, don't do it in the first 5 minutes. 

As my mentor often says:
Quote:

Don't be the first man out of the fox hole.  You might be a hero,
but your metal of honor will be awarded posthumously!" :wink:





These charts of the S&P (not prepared by me) indicate the trends worth
watching for relevant support and resistance based on time frame:



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InvisibleZippoZM
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Re: On Selling Puts (naked / short puts) [Re: geokills]
    #15034369 - 09/05/11 06:51 PM (12 years, 4 months ago)

yeah, i dont know what exactly i want to do here....

im kind of torn, I feel like i might be better off just going into the local pawn stores and picking up a fair amount of silver bullion and coins.

I also have a gold placer mining claim on option, I feel like tossing some money and sweat into that project might be a better investment than playing with the markets.....

with the volatility going on, i feel like i might only be able to make some money by shorting stocks or investing in mining companies.


--------------------
PEACE

:mushroom2:zippoz:mushroom2:



"in times of widespread chaos and confusion, it has been the duty of more advanced human beings - artists, scientists, clowns, and philosophers - to create order. In such times as ours however, when there is too much order, too much m management, too much programming and control, it becomes the duty of superior men and women and women to fling their favorite monkey wrenches into the machinery. To relieve the repression of the human spirit, they must sow doubt and disruption"

"People do it every day, they talk to themselves ... they see themselves as they'd like to be, they don't have the courage you have, to just run with it."


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Re: Stock Update for September 5th, 2011 - EU bank crisis hits its stride. US markets will be rough! [Re: ZippoZ]
    #15034466 - 09/05/11 07:08 PM (12 years, 4 months ago)
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I don't blame you for sitting out on the stock market.  It is in fact the smart thing to do right now, given
what is coming out of Europe as well as the wildcard Obama economic speech scheduled for later this week.
I definitely would only be trading lightly, no major positions, if indeed any at all.

That being said, I am watching Molycorp (MCP), a rare earth metals/mining play.  The stock hasn't been
trading for very long, but it has an interesting chart pattern that makes for a low risk entry.  Because the
prevailing bias on this stock is to the upside, I am considering purchasing some LEAPS (January 2013 call
options), if I see the lower red support line hold up with a positive bounce near the stock's 200 day moving
average.  I will then start selling near term out of the money calls against the leap in order to pay for the
position via a repetitious calendar spread (same as the AAPL calendar spread I explained a few posts up).
Fundamentally, the company is in a good sector, as indicated by the internal GE report that I attached to
this post, which focuses on the rising costs of the rare earth metals used in their lighting products.


   



If the market continues to be weak after the first fifteen minutes tomorrow, I will consider re-entering my
APKT short, as well as some SPY puts and/or a position in the SDS, in anticipation of testing the 1100 - 1120
range of the recent lows on the S&P, and on a failure of that range, a test of 1050.


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InvisibleZippoZM
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Re: Stock Update for September 5th, 2011 - EU bank crisis hits its stride. US markets will be rough! [Re: geokills]
    #15034507 - 09/05/11 07:15 PM (12 years, 4 months ago)

Moly corp, ive met a few people from that company at a trade show before.... they are just another western company that is making millions from the China Steel Delema....

long story short, The Chinese are the number one manufacturer of steel out there, and one of the few countries whos environmental regulations actually allow large blast furnace steel plants to operate (the usa pretty much only has the cleaner Electric Arc Furnaces, which can only make steel from scrap, not raw ore and additives)

You know, its interesting.... Everything I see these days industry wise, the only people really making money in the usa outside of the Tech sector..... it all involves Chinese acquisition of US assets and products.


--------------------
PEACE

:mushroom2:zippoz:mushroom2:



"in times of widespread chaos and confusion, it has been the duty of more advanced human beings - artists, scientists, clowns, and philosophers - to create order. In such times as ours however, when there is too much order, too much m management, too much programming and control, it becomes the duty of superior men and women and women to fling their favorite monkey wrenches into the machinery. To relieve the repression of the human spirit, they must sow doubt and disruption"

"People do it every day, they talk to themselves ... they see themselves as they'd like to be, they don't have the courage you have, to just run with it."


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Offlinepothead_bob
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Re: On Selling Puts (naked / short puts) [Re: Stonehenge]
    #15035046 - 09/05/11 08:43 PM (12 years, 4 months ago)

Quote:

IMO, the best strategy is to pick a good entrance point and hold the stock for long term or until you have reason to believe it has topped out. Day trading is risky at best and many people have lost money doing it. They make money on their long term stock and often lose it back on complex strategies. There are people who are able to make it work but i do not advise it.




This is good advice here.  Recently, I read a book which discussed a reasoning why beating the market by day-trading is so difficult.  It presents something called "The Pie Theory".  The Pie Theory says that the market produces a finite number of returns for investors over time.  Since the Great Depression it's been something like 7% per year.  These returns come from growth in company earnings and trickle down to investors through capital gains and growth in dividend payments.

That 7% is the whole pie.  It is simple logic and arithmetic to see that if one group of investors makes 9% a year, another group needs to make 5%.  It is mathematically impossible for all investors to beat the market.  There is only so much pie to go around and all investors own the market at any given time.  For every winner, there must be a loser, relatively speaking.  The long-term, passive investor will find little trouble in getting their fair share of the pie because they hold their investments long enough to experience the earnings and dividend growth.  But to a short-term investor (day-trader), that growth is practically insignificant because they don't stick around long enough.  They try to make their money utilizing the short-term driving force of speculation.  My problem with that, of course, is that speculation is driven by human emotion and I wonder if human emotion is something you can actually predict with any significant level of certainty.

There is another important angle, though.  Investors can never get the whole pie because there is overhead.  The people that facilitate trades, manage funds, give advice, all take a little sliver of the pie.  It is a certifiable fact, though, that the active investor will incur many more fees and overhead costs in their strategy because of their high frequency of trading.

Since all investors, both passive and active day-traders, own the market and because their gross returns must equal out in the long-term, your average long-term passive trader will do better than your average day-trader.  This is just simply due to the increased overhead.

This isn't to say you can't still make money as a day-trader.  It's just unlikely you are going to outperform a guy who just buys the market and leaves it sit.  And you're probably going to do a lot more work and go through a lot more stress, too.  There will be some star players, but for each one of those there's gotta be a guy that loses his shirt.

Hope I got that right.


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No knowledge can be certain, if it is not based
upon mathematics or upon some other knowledge
which is itself based upon the mathematical
sciences.
  -Leonardo da Vinci (1425-1519)

Speak well of your enemies.  After all, you made them.


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