OFFICIAL STOCK MARKET & ECONOMY THREAD VOL. SCHOOL'S OUT

[lazyj10]

Great advice.

And, to be frank, 4 should be applied to anything you're not absolutely 100000% long on.

 

[frankmatthews]

Originally Posted by bruce negro

Don't many people just use options to hedge their risk? I could definitely see where being aggressive with options could do serious damage, but does anyone have experience with using them to hedge? I'm talking like, you buy a put option on AAPL, allowing you to sell at $340 in order to minimize your risk in case of a market crash. Has anyone gone about trying to create and initiate these types of contracts?

Yes many people do this but it can be pretty expensive to hedge positions with options.  It's more useful to high net worth, conservative investors.

A put option on AAPL to guard against a 10% drop will cost you $50 per share.  You take this position and AAPL needs to go over $600 just to break even.
You want that protection to last more than a month and it costs even more.

I've been thinking of starting a covered call portfolio to profit from these exact type of hedges in the short term.

DaJoka004 wrote:

---

You don't like making money? I'd be interested to hear your reasoning behind why it's not a good investment right now. 
Too bad I couldn't get an options account. I wanted to buy the March 505 calls when they were below $1 in January. Now sitting above $40. 

I didn't say it wasn't a good investment, depending on your time frame and strategy it could turn out great for you.  It's not MY type of investment
since I'm more of a contrarian and there is clearly a speculative bandwagon going on with AAPL.  Any type of market correction, which I believe is overdue, and
AAPL will fall the hardest and fastest due to it's speculative rise.

At 20 times 2011 earnings it seems a bit expensive.  I'm not sold that AAPL's best years are ahead of them but that is clearly how the market is pricing
it's stock.  Smartphones are already a mature market and tablets will soon be as well.  I don't see how they are going to meet their growth estimates with
the current product lineup.  I'd need to see some proof of the piles of innovation they are supposedly sitting on before buying in long term.

If you are bullish on the market then AAPL would seem like a sure thing.  I'm more bearish at this point.

As far as your options account, I called my broker after being denied and in so many words he told me to apply again and lie about my income
and experience.  I've been trading options for a few years now.

 

[ahyoon chef]

SNPK

 

[dajoka004]

FrankMatthews wrote:

DaJoka004 wrote:

---

You don't like making money? I'd be interested to hear your reasoning behind why it's not a good investment right now. 
Too bad I couldn't get an options account. I wanted to buy the March 505 calls when they were below $1 in January. Now sitting above $40. 

I didn't say it wasn't a good investment, depending on your time frame and strategy it could turn out great for you.  It's not MY type of investment
since I'm more of a contrarian and there is clearly a speculative bandwagon going on with AAPL.  Any type of market correction, which I believe is overdue, and
AAPL will fall the hardest and fastest due to it's speculative rise.

At 20 times 2011 earnings it seems a bit expensive.  I'm not sold that AAPL's best years are ahead of them but that is clearly how the market is pricing
it's stock.  Smartphones are already a mature market and tablets will soon be as well.  I don't see how they are going to meet their growth estimates with
the current product lineup.  I'd need to see some proof of the piles of innovation they are supposedly sitting on before buying in long term.

If you are bullish on the market then AAPL would seem like a sure thing.  I'm more bearish at this point.

As far as your options account, I called my broker after being denied and in so many words he told me to apply again and lie about my income
and experience.  I've been trading options for a few years now.

TTM is 15.44.
But good call on the options account info.

 

[Betonblck]

Originally Posted by LazyJ10

Options are totally worth the risk...IMO

Unless you're clearly being speculative, then you have to be willing to lose it all.

If you believe a company will be at XXX.xx and have done your homework to back up your theory, there's a lot less capital outlay for buying calls. Assuming you're buying OTM with a decent time horizon (i.e - expiration 6 mo's out).

With volatility, obviously that impacts the price, but at the same token, on a depressed day, you could buy your calls or double-down.

SMH at thinking that you can predict the exact price of a stock 6 months out and that this type of position isn't speculative.  (Unless you have insider information)

 

[jc08]

If interested in options I encourage you to read "Dynamic Hedging" from Nassim Taleb for the math/science behind it and any of his other material for qualitative aspects. Below is a pretty interesting article.

http://www.gladwell.com/2...02_04_29_a_blowingup.htm

Essentially his thesis is to buy deep OTM calls/puts because he believes tail risks are way underpriced in the market. But this usually means his investments lose money on a day to day basis frequently, but the days they payoff (ie during Financial crisis) his investments in options more than payoff the losers. I find it interesting and try to incorporate it into my strategies but it is hard to stomach the constant losses which is one of the many fallible heuristics humans have.

 

[lazyj10]

Originally Posted by cguy610

Originally Posted by LazyJ10

Options are totally worth the risk...IMO

Unless you're clearly being speculative, then you have to be willing to lose it all.

If you believe a company will be at XXX.xx and have done your homework to back up your theory, there's a lot less capital outlay for buying calls. Assuming you're buying OTM with a decent time horizon (i.e - expiration 6 mo's out).

With volatility, obviously that impacts the price, but at the same token, on a depressed day, you could buy your calls or double-down.

SMH at thinking that you can predict the exact price of a stock 6 months out and that this type of position isn't speculative.  (Unless you have insider information)

I don't understand how you're taking anything I said to mean I/anyone can predict the price of stock X.   I'm using the 6 months as an example for black-scholes or other model based pricing.    

 

[lazyj10]

Originally Posted by DaJoka004

Originally Posted by freakydestroyer

Originally Posted by DaJoka004

You don't like making money? I'd be interested to hear your reasoning behind why it's not a good investment right now. 
Too bad I couldn't get an options account. I wanted to buy the March 505 calls when they were below $1 in January. Now sitting above $40. 

You didn't get approved? What was wrong?

I'm assuming my income level. I'm still a student for another year. I'm sitting on a fully invested $40k right now and I can't buy options? +%!@++!%.

Who are you using?  If you really want to do options, just go to optionxpress. They've merged with Schwab, so they may be a little more stringent than they once were.

 

[natch johnson]

Originally Posted by LazyJ10

My insight for airlines is to never buy them.

lol fair enough. I see LUV as the "GE" of the airline industry. I'm a fan of their business model, was planning on buying and holding for the long run. Let me know your reasoning for avoiding airlines if you get the chance...

 

[lazyj10]

The airline industry is hugely unprofitable and difficult to predict. They are also high cost and at the mercy of a lot of outside industry influences which impact their pricing. Further, pension and union contracts turn me off even more.

The industry also is cannabalizing.

Out of any of them, I do think Southwest is probably a better one. I havent followed or looked at their FS, but from a management and market standpoint theyre pretty good.

 

[wizards23]

LazyJ, I agree on airlines. I wouldn't trade them either

 

[Betonblck]

What's ya'll take on the overall direction of the market. I'm about to come into a little extra cash to invest however, I am concerned about oil prices causing a drop in the market. It's going to go into two companies that aren't really hurt by a slowing economy but the entry point is still crucial (DLTR- Dollar Tree and CMG- Chipotle Mexican Grill)

This is typically the time when gas prices go crazy through Memorial Day. If we see $4.50-5.00 for regular, we will see a HUGE drop in the market.

 

[crazy dav0]

i just recently went 100% liquid ... ^^^ conservative yes ... but unemployment, greece, oil ... doesn't sit well with me regarding the market continuing to rise ... i'd rather miss out on a lil more in gains than have the market tank ...

looking fwd to earnings season though ... i'll make a play of 2 then

 

[freakydestroyer]

Originally Posted by cguy610

What's ya'll take on the overall direction of the market. I'm about to come into a little extra cash to invest however, I am concerned about oil prices causing a drop in the market. It's going to go into two companies that aren't really hurt by a slowing economy but the entry point is still crucial (DLTR- Dollar Tree and CMG- Chipotle Mexican Grill)

This is typically the time when gas prices go crazy through Memorial Day. If we see $4.50-5.00 for regular, we will see a HUGE drop in the market.

I like LNKD and SKUL a lot right now, both fairly low priced and both IPO'd mid last year I believe.
Also AMZN looks like it can come back strong.

 

[lazyj10]

I'm 3/4 invested and of that I'm 50% in high yield dividend stocks.

Haven't followed Macro market lately due to my job being super demanding currently.

 

[beermann2]

Picked up some gld miners on tues selloff. I buy on the dip and wait...

I haven't been able to follow the market, my net has been down. But I see inflation coming. High gas prices is one of those signs.

 

[aztec06jr]

How's everyones portfolio performance lately?

Any concerns about rising gas prices?

 

[mojodmonky1]

i had been sitting and holding shared of YOKU for a few months now. TBH, I am a very unsaavy investor and had no idea that Youku was even looking at buying Todou. Needless to say I was pleasantly surprised to see YOKU shares rise 25+% today. I got out too early though (sold at $29). I wish I had me some TUDU shares as that went through the roof with the buyout today.

win some lose some when you play with Chinese companies. I'm still holding on to some shares of JASO that tanked.

 

[dajoka004]

Originally Posted by aztec06jr

How's everyones portfolio performance lately?

Any concerns about rising gas prices?

I never pay much attention to gas prices. I feel like there is a constant threat of rising prices. If it has affected me in the past, I haven't noticed.
+1.27% overall today. AAPL and IGTE leading the charge. 

 

[dajoka004]

+3.19% or $1225 today.

Almost my best single day gain ever.

Led by DXPE, IGTE and AAPL.

 

[aztec06jr]

Nice. I had similar gains percentage wise, but not $ wise

One day...haha

 

[dabottom305]

I have $500 available to invest.

Any advice on how I can put my money to work for me?

I just opened up a betterment.com account and I already have Scottrade account.

Scottrade doesnt let me buy penny stock and I was looking for stock thats close to $1.

I looking for decent returns within 6 months to a year.

 

[finnns2003]

Morgan Stanley now pricing AAPL stock near a $1000 bull valuation

Damn! Up to $582 today.

 

[lazyj10]

On an earnings multiple valuation, isn't AAPL trading under the avg of the S&P for the same multiple?

I don't know because I haven't looked in detail because AAPL isn't my cup of tea....

 

[dajoka004]

 $600 here we come.