LOL!'s Market Timing Newsletter

[LOL!]

So the Fed raised rates, but as we can see now that was priced into the market ahead of time and so far only a slight whimper of volatility showed up.

I made some transactions in order to improve the tax efficiency of my portfolio, but did not change the asset allocation at all. I did feel like a high frequency trader though scalping a couple cents here and there.

For instance, I placed two orders at different brokers simultaneously: Sell VSS at one and buy VSS at the other. These are free trades for me at both. I used limit orders and placed the sell at 2 cents higher than the buy limit. And my orders were filled almost right away. I felt like I should just sell back and forth to myself with the same 2 cent "spread" all day long making a few bucks on every round trip. Or maybe I should have tried a 4 cent or 8 cent difference?

I wonder if this is legal, but I was providing liquidity as they say. The exact times of executions were different by tens of seconds, so I don't think I was actually selling/buying to/from myself.

But once again with no special news nor announcements on the horizon, I think the markets will just slowly churn along with a slight downward bias for a little while.

 

[Fermion]

What you are doing is entirely legal and does work, but the risk is that one time one of your limits is going to trigger and then the market is going to shoot off that direction and not swing back for a long time (if ever). You get rewarded for risk, and you are getting a small reward for a small but non-negligible risk.

 

[Mulligan]

What you are doing is entirely legal and does work, but the risk is that one time one of your limits is going to trigger and then the market is going to shoot off that direction and not swing back for a long time (if ever). You get rewarded for risk, and you are getting a small reward for a small but non-negligible risk.

I tried to do the same thing with another person and makers snagged it. He put in highest bid and I put in the exact same ask and we hit buttons immediately... Nothing happened for 10 minutes and then sell notification occurs with him not getting them...


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[LOL!]

I tried to do the same thing with another person and makers snagged it. He put in highest bid and I put in the exact same ask and we hit buttons immediately... Nothing happened for 10 minutes and then sell notification occurs with him not getting them...

Please remind me who your brokers were as I do not want to use at least one of them.

Your separate orders could have not been published, but sent to a proprietary dark pool or held up by the broker.

I would say that in a market trending up, I might try to do the buy before the sell.
But in a market trending down, I might try to do the sell the buy.
Or something like that. Yes, risk is involved.

 

[Rickt]

LOL, are making these scalping trades in pre-tax (IRA/ROTH/401K) accounts or in taxable accounts?

 

[Mulligan]

Please remind me who your brokers were as I do not want to use at least one of them.

Your separate orders could have not been published, but sent to a proprietary dark pool or held up by the broker.

I would say that in a market trending up, I might try to do the buy before the sell.
But in a market trending down, I might try to do the sell the buy.
Or something like that. Yes, risk is involved.

That was my guess, too. A small transaction. It was a very illiquid stock that I wanted to free up cash and friend wanted it. When ever I have bought on an "official" ask price it clears instantly. But when we manufactured it, they held it up and gave it to someone else.


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[LOL!]

LOL, are making these scalping trades in pre-tax (IRA/ROTH/401K) accounts or in taxable accounts?

The purpose of the trades was not to scalp, but to improve tax efficiency.

So I sold VSS in a taxable account and bought it in my 401(k). The trades let me avoid the upcoming 4th quarter distribution in my taxable account, but I now will get it in my 401(k). And future distributions will also be in tax-advantaged. The VSS dividend is less than 50% qualified nowadays, so it hurts.

I realized a long-term capital gain from the sale, but that gain is offset by carryover losses dating from 2009, so those capital gains will not appear on my tax return.

 

[Rickt]

Ok, got it. Thanks LOL!

 

[papadad111]

And we grind lower.

So do u think it's gonna end being an up or a down year for the majors ?

Seems like we are a little oversold here but tax loss selling and rebalancing along with the new rate trend of the fed has me continuing to believe 1850-1950 happens much sooner than 2050-2150.

What a lousy boring flat line year it's been. Of course it could always be worse.

 

[23window]

Isn't any tax loss generated with the near simultaneous sell and buy order of the same fund negated by the wash sale rule? Maybe I missed something.

 

[bingybear]

So the Fed raised rates, but as we can see now that was priced into the market ahead of time and so far only a slight whimper of volatility showed up.

I made some transactions in order to improve the tax efficiency of my portfolio, but did not change the asset allocation at all. I did feel like a high frequency trader though scalping a couple cents here and there.

For instance, I placed two orders at different brokers simultaneously: Sell VSS at one and buy VSS at the other. These are free trades for me at both. I used limit orders and placed the sell at 2 cents higher than the buy limit. And my orders were filled almost right away. I felt like I should just sell back and forth to myself with the same 2 cent "spread" all day long making a few bucks on every round trip. Or maybe I should have tried a 4 cent or 8 cent difference?

I wonder if this is legal, but I was providing liquidity as they say. The exact times of executions were different by tens of seconds, so I don't think I was actually selling/buying to/from myself.

But once again with no special news nor announcements on the horizon, I think the markets will just slowly churn along with a slight downward bias for a little while.

So are you trying to capture a loss? To be legal you would need to transfer the loss to the replacement shares unless the replacement is not significantly identical (from your description is sounds exactly identical).

By doing this in different accounts under your control and at different brokers, you just made more paper work for you to track.

Since I would think you know what a wash sale is, would not tracking it and proper filing be fraud?

 

[bingybear]

The purpose of the trades was not to scalp, but to improve tax efficiency.

So I sold VSS in a taxable account and bought it in my 401(k). The trades let me avoid the upcoming 4th quarter distribution in my taxable account, but I now will get it in my 401(k). And future distributions will also be in tax-advantaged. The VSS dividend is less than 50% qualified nowadays, so it hurts.

I realized a long-term capital gain from the sale, but that gain is offset by carryover losses dating from 2009, so those capital gains will not appear on my tax return.

Being that you did not have a loss on what you sold, I don't see any issue with it. Not sure that you need two brokers to execute the trade. I'm sure either broker could handle that volume.

 

[LOL!]

Being that you did not have a loss on what you sold, I don't see any issue with it. Not sure that you need two brokers to execute the trade. I'm sure either broker could handle that volume.

I did need two different accounts for what I did. I avoided a dividend in one account (a taxable account) that would have increased my AGI. Instead I received the dividend in a tax-advantaged account. The dividend was a significant amount and was not completely qualified.

And as noted, I sold at gain and not a loss, so no possibility of wash sale.

But yep, I did not need two brokers technically, except that the accounts were at two different brokerage firms.

 

[bingybear]

I did need two different accounts for what I did. I avoided a dividend in one account (a taxable account) that would have increased my AGI. Instead I received the dividend in a tax-advantaged account. The dividend was a significant amount and was not completely qualified.

And as noted, I sold at gain and not a loss, so no possibility of wash sale.

But yep, I did not need two brokers technically, except that the accounts were at two different brokerage firms.

I agree with different accounts. Brokers may just be where you have things set up. I use several brokers, but each have both normal and (R)IRAs. So I could do this in one house. I moved accounts int 2008 so that each account registration at each brokerage was below the SPIC coverage limit.

 

[papadad111]

Looking at KMI again.

Started eyeballing March 2016 near the money calls 15 and 17.50 strike.
Have not pulled trigger but thinking


Mad money only.

 

[FIRE'd@51]

Looking at KMI again.

Started eyeballing March 2016 near the money calls 15 and 17.50 strike.
Have not pulled trigger but thinking


Mad money only.

Rather than paying 1.10 for the March calls, why not sell the Jan 15th 14-strike puts for 0.40. If you get assigned, you own KMI at 13.60. If KMI is above 14 at expiration, you pocket the 0.40 for a 2.8% return in two weeks. Then you can rinse and repeat.

 

[papadad111]

Good approach also. I think there is more upside so the calls give me more upside vs selling puts.

May add your suggested short-put trade too ...

 

[LOL!]

Back on 12/18 I wrote:

But once again with no special news nor announcements on the horizon, I think the markets will just slowly churn along with a slight downward bias for a little while.

which was looking wrong until the last two days when things got dumped and are pretty much back to where they stood on the 18th.

This suggests a little pick-up might occur next week, but I've got no plans to change anything.

Happy New Year! And a Prosperous 2016 to Everyone.

 

[Ed_The_Gypsy]

Happy New Year! And a Prosperous 2016 to Everyone.

+1



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[papadad111]

Back on November 13 ..I made year end and 2016 prediction. I was more pessimistic on the markets end at 1950 versus 2043 .. for 2015 but indeed we finished lower for the year vs prior year.

I have strengthened my conviction to the forecast -- down 20 percent from here, to 1850 for SPY in 2016 and a recession in 2017 with market recovery to 2100 by 2017 year end.

With Oil at 35, I just don't have any upside case right now. And the fed not doing a one and done, Japan, eurozone and China remain slow while stimulus is coming the impact is very slow if at all.... plus USA election year - our market will be propped up til late summer - August and September - then a precipitous 20 percent drop ...

I'm bearish.

We are below water for the year again SP 500 below 200 day moving average.

Lots of retail anxiety in Q4 and the Black Friday deals are now being pulled up to earlier in the month of November : singles day.

So here is my forecast.

Near term we will keep bleeding 0.25 - 0.5 percent per day. Small down days will land us lower-- will end the year we will be down 3-5 percent for the year. 1950 or so ..


Long term. 2016 will be another down year and 2017 will start off down too and end up about where we are today - SP 2100. New market highs not til 2018. Interest rates will rise , but less than 75 basis points from where we are today.

Position yourself in equities that pay dividends and probably better to hold cash vs Bonds. Dollar will move up just a bit from here. Not a lot more.

The upside bet is for stabilization in oil and related energy shares. 55 will be the norm for a barrel of crude.

I don't like it. Looking into a long dated out of the money SP500 or similar broad market put strategy.

Hmmm.

 

[NW-Bound]

I was up late last night, saw that the Chinese market dropped 7% and trading was halted.

Woke up just now, and saw the Dow dropping 400 points or more than 2%. Fun time!

Not buying nor selling. May buy if it drops some more in the days ahead.


PS. Oops. Just saw one of my cash-covered put option orders just hits. This one is on a biotech ETF.

 

[LOL!]

Thank God for a balanced portfolio. My total is actually up today while the DOW went down 330.

Déjà vu from one year ago.

The general market will have to go down more than 3% before I get interested.

 

[NW-Bound]

Market is already down 2%. You can get another 2% right now with a Feb put option.

 

[Dash man]

I'm feeling pretty lucky today. In mid December I moved my 401k entirely into the stable vale fund in preparation to rolling in into an IRA, plus DW exercised a large chunk of her options. We're heavy in cash during this downturn while reevaluating our asset allocation. Might luck into some discount shopping this month!


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[Fermion]

I am just so glad I put $100k into that CapitalOne360 deal. Kind of wish I had put $200k in, but I would need two more wives.