Sunday, December 1, 2013
Thursday, November 28, 2013
Destroy the image and you will break the enemy.
~Shaolin Abbott, Enter the Dragon
Let’s stop those damned pictures. I don’t care so much what the papers write about me — my constituents can’t read, but damn it, they can see pictures.
~ William Marcy “Boss” Tweed
If you don't know William Banzai, you might want to check out some of his holiday "cheer". This prolific visual master of political and social commentary, and Photoshop maestro, will make you laugh, learn, wonder, and remind you that the devil is in the details. Whenever I try to turn a turkey into a Twinkie, or photograph the Fed "chairmen" at the prom, the inspiration is all Banzai.
The williambanzai7.blog is here although it might be worth checking out the full Banzai and commentary at Zerohedge.
Wednesday, November 27, 2013
The wheel is turning and you can't slow down
You can't let go and you can't hold on
You can't go back and you can't stand still
If the thunder don't get you then the lightning will
Sunday, November 24, 2013
I can saw a woman in two
But you won't want to look in the box when I'm through
I can make love disappear
For my next trick I'll need a volunteer
Contestants who switch have a 2/3 chance of winning the car, while contestants who stick with their initial choice have only a 1/3 chance. One way to see this is to notice that, 2/3 of the time, the initial choice of the player is a door hiding a goat. When that is the case, the host is forced to open the other goat door, and the remaining closed door hides the car. "Switching" only fails to give the car when the player picks the "right" door (the door hiding the car) to begin with. But, of course, that will only happen 1/3 of the time.
Wednesday, November 20, 2013
The enlightened ruler is heedful, and the good general full of caution.
Here a look at the year-to-date gains made by some of the more popular solar stocks compared to the SPY.
And here is a look at the decade-long peaks and valleys of this sector...
Ignore the lower indicators (volume, stochastics, and money flow). They just came along for the ride.
Saturday, November 9, 2013
A more comprehensive year-by-year look (2008-2010) at the daily price and volatility comparisons can be found here.
Sunday, November 3, 2013
I first started trading when someone showed me a candlestick chart. I was so amazed by this that I bought Steve Nison's book on the subject and devoured the contents. Never again did I look at a stock chart unless it was of the candlestick variety.
According to Steve Nison, candlestick charting first appeared sometime after 1850. Much of the credit for candlestick development and charting goes to a legendary rice trader named Homma from the town of Sakata. It is likely that his original ideas were modified and refined over many years of trading eventually resulting in the system of candlestick charting that we use today.
The figure below shows the symbols used to describe a day in the life of a stock.
And you can see the candles at work in this recent AIG chart:
I bring this up because of the large 7% gap in price that reduced AIG's $52 share price to $48. Gaps in price fascinate me almost as much as candlesticks do. Couple that dual fascination with a little historical data dealing with gaps in price at or near 10%, and you have information that might be useful.
According to an article I read back in 2007 (I'll have to reference it later since 2007 was a long time ago), "down gaps" of around 10% just like the one you see in the chart tend to produce results at the end of a five-day period after the gap occurred which outperform a benchmark, consisting of seven million trades between 1995 and 2006, by roughly 2%. This most likely occurs because the smart money is buying rather than selling after this "massive" drop. Remember that whole "buy low, sell high" thing?
It's important try to determine why a stock would tumble so severely. Much of the time I let the candlesticks confirm my suspicions. Since when do I believe anything I read?
It may be a little early but since I believe that the next week or two for AIG will be flat or slight up, I could collect some easy premium selling a conservative covered call using a November in-the-money or at-the-money strike with maybe a little extra put thrown in there for insurance to keep the downside in check in case I jab myself in the eye again.
Gaps, candlesticks, and options. Just when I thought I was out....
Wednesday, October 30, 2013
The current price of WFM is at $64. Hmmm. Because its dead on the whole dollar (64) looks like I will have use the strangle's evil twin...the straddle. A straddle is an options strategy with which the investor holds a position in both a call and put with the same strike price and expiration date. So in this case I will simply buy a November $64 call and a November $64 put. Shoot, my Halloween theme just shot out of here like a bat out of the batcave. Wait just a second...I guess I will get to use my Attack of the
By buying the 64 strike call and a 64 strike put for .47 and .45 respectively everything is fairly "even Steven". Remember that .47 for example is multiplied by 100 because there are 100 share for each option contract. So one call option will cost $47 and one put option will cost $45.
The answer is two fold. First and as per usual I am utilizing a pre-earnings strategy. Earnings for WFM is November the 6th right after the close. This strategy is all about the volatility, and the anticipation of a good or bad earnings result can make both calls and puts rise. This is referred to as the volatility rush, and the plan is to buy a few days before the earning announcement and sell prior to that announcement. If you don't sell prior to the announcement you may be turning a fairly low risk strategy into a high risk lesson in volatility crush as option prices can deflate immediately after the announcement; another example of "buy the rumor sell the news".
If you are new to options, but observant, you might ask, "why just buy a few days before the earnings announcement, why not buy a few weeks before the announcement." The simple answer is that options decay like that new car you just drove off the lot. The right balance between time decay and volatility is key to making $$ using this strategy.
Notice the rise of the pre-earnings rush and the fall of the post earning crush? Keeping your eye on implied volatility (IV) will at least give you a logical reason to enter a trade with a particular stock.
Sunday, October 20, 2013
I'm attracted to shiny objects and bright colors so this chart kept my attention as I mixed and matched these colored cells finding several patterns, even some that don't really exist.
I get the whole equal sector strategy. Just looks at the white cells in the chart and the one-to-ten year chart at the bottom of the first page in the actual .pdf version. Although we may never see another 2008 (I'm lying, again) you can see how the best performing sector took a 15% beating that year, and unless you found yourself in a few inverse ETF's or cash (any port in a storm) you would have been lucky to have taken a 15% hit by the end of 2008.
I'm not so sure that the next market collapse will be so kind regarding its time span and magnitude, and you can be sure that it will happen at the most inopportune time.
Not surprisingly, this colorful SPDR "periodic table" was created to sell an equal weight sector strategy, but instead I took it as a reminder of why I disregard blind faith as an investing strategy.
Monday, October 14, 2013