LOL!'s Market Timing Newsletter

[LOL!]

Quote:

Originally Posted by LOL! Wow, there goes my VXF play. I am thinking of doubling up in the last half-hour here. Update: OK, did it.

Sold out a moment ago, so unwound this trade which was nicely profitable. However, BND is up as well, so I will not buy it back just yet and just hold the cash instead. BND goes ex-dividend tomorrow, too.

[update] Ack! Sold too soon. But a 4-figure gain is nothing to sneeze at. OK, I am miffed.

[papadad111]

What's the real economic cost of trading ?
What's your tax rate ? I suspect you are paying 40 percent of profits to fed and state taxes on these short term trades.

You are bumping up agi - eg, does that impact your obamacare subsidies ?

Any other implicit costs ? Such as the stress when a trade goes haywire. ?

[papadad111]

Quote:

Originally Posted by NW-Bound OK, I have not been following biotech stocks, but the low P/E of Gilead looks intriguing. So, I looked up its financial statements and saw something very interesting. Revenue jumped from $11B in 2013 to $25B in 2014. Income after taxes jumped from $4B to $11B. This huge 2013/2014 increase was attributed to sales of a highly effective drug called Sovaldi to treat Hepatitis C. Treatments may run as high as $84K/patient. Will political pressure take away all this earning?

I think the fear of what happens in the election will cause this one to trade down. As said, I see 70's in this stock. For the reason you have stated and the pipeline for next new wonder drug being 3- 5 years out.

[utrecht]

Just sold next week expiration SPY 195.5 calls (not puts) for $1.10

[utrecht]

Just bought a GOOG 600/570 1X2 put back spread while GOOG was at 610.70. It expires Oct23. Its essentially a 600/570 put spread while also selling an equal number of extra 570 puts. It costs nothing.

Max profit is at 570. Break even is all the way down to 550. If Im wrong and GOOG moves up or doesnt drop at all, I lose nothing as everything expires worthless.

[LOL!]

Quote:

Originally Posted by papadad111 What's the real economic cost of trading ? What's your tax rate ? I suspect you are paying 40 percent of profits to fed and state taxes on these short term trades. You are bumping up agi - eg, does that impact your obamacare subsidies ? Any other implicit costs ? Such as the stress when a trade goes haywire. ?

For my trades, the cost is essentially zero, otherwise I would be figuring out a way to make it zero. As I noted before:

1. I pay no commissions because I have a few brokers that have no commissions on mutual funds, ETFs, and stocks. They give me no commissions because I follow their rules or they have given me bonuses for transferring money into my account there. Specifically:
TDAmeritrade: No commissions on about 100 ETFs (see their web page)
WellsTrade: No commissions for 100 free trades per account per year, so with 5 accounts that is 500 free trades. This is because I am grandfathered into their free-everything PMA package (see their web page).
Vanguard: Of course no commissions on Vanguard products
Fidelity: No commissions on many iShare ETFs and Fidelity mutual funds.

2. Some brokers have frequent trading restrictions that I avoid. For instance, TDAmeritrade would have you pay a commission on those no-commission ETFs if you don't hold them at least 30 days. The way around that is to buy in one account and sell in another account. I could buy in my 401(k) and sell in my IRA. Or buy in my Roth and sell in my spouse's traditional IRA.

3. I pay no taxes on short-term trades because I am doing this either in tax-advantaged accounts like IRAs or 401(k)s or if I do a trade in taxable account, then I am tax-loss harvesting or using up a carryover loss to offset any realized capital gain. For instance, I can buy VXF in my 401(k), but sell VTI for a loss in my taxable, so no wash sale.

4. I am unconcerned about health insurance subsidies because I am not eligible for them. As noted in #3, I do not increase my AGI because of these trades.

Does this all make sense?

[CoolChange]

Quote:

Originally Posted by LOL! .... 2. Some brokers have frequent trading restrictions that I avoid. For instance, TDAmeritrade would have you pay a commission on those no-commission ETFs if you don't hold them at least 30 days. The way around that is to buy in one account and sell in another account. I could buy in my 401(k) and sell in my IRA. Or buy in my Roth and sell in my spouse's traditional IRA....

I follow this thread not for the individual trades so much as for nuggets like this, obvious once I read it; but, I had not thought of doing this myself. I have multiple accounts at both TDAmeritrade and Fidelity.

Thank you for sharing!

[utrecht]

Im still short SPY 195.5 Calls that expire next week. Now I sold an equal number of SPY 186 puts that expire next week for $1.35. Ive created a SPY 195.5/186 strangle and collected $2.45. If SPY finishes next week between 195.5 and 186 I keep the entire $2.45. Right now its worth $1.59 (I'm short so I make money as it drops).

Actually I didnt do it to create a strangle. Last week I sold a long term holding of 1000 shares of SPY. The 186 puts I just sold are a way to create income or buy my shares back. If SPY is below 186 next Friday, I will buy my 1000 shares back at an effective price of $184.65. I sold them for $192.90. Thats a savings of $8250. If SPY isnt below 186 next Friday I keep the $1.35 and will sell more puts to continue to lower my cost basis on the shares when I eventually buy them back. If I am put the shares, I will sell covered calls against them. I dont believe the market is going to shoot up anytime soon.

[utrecht]

I sold my GILD Oct/Nov 105 call calendar. It was a bullish trade made when GILD was 99.89. Its now 97.90...down 2%. Bought for 2.11 and sold for 2.14. I closed it because IBB is +3% today and GILD is still in the red...even today. That's a bad sign. Im out with a couple bucs in my pocket.

[LOL!]

What a GREAT day in the stock market today! It was about an overall 2.8% gain from market open to close.

And I didn't do any trades today or yesterday except for some small-time automatically reinvested dividends, so I missed making extra money.

[NW-Bound]

Quote:

Originally Posted by LOL! What a GREAT day in the stock market today! It was about an overall 2.8% gain from market open to close...

This market is nuts! It opened low because of the weak job report. I put aside my laptop and went out to work on my outdoor home project. Came back in for lunch and learned about the surprising recovery.

If this holds up and my puts stay out-of-money, I will not get assigned more EM stocks.

[utrecht]

Raise your hand if you thought the market would jump 6% in 4 days.

I bought a large position of SDS which is the Double short SP500 ETF.

[NW-Bound]

Why so timid with an ETF that's only 2X leveraged, and not a 3X leveraged?

I bought SPXL which is 3X bull S&P at 66 on 9/28, near the bottom. It just closed at 76.53, a gain of 16%. In dollar amount, the gain of a few $K's is peanuts compared to what I have lost on my long-term core holdings, but it satisfies my need for "revenge".

Anyway, still being greedy and holding out for more gain, I wrote a call on some shares instead of selling them outright, and may do the same on the rest tomorrow. If the market crashes again, I don't know yet what I will do.

[Fermion]

Quote:

Originally Posted by utrecht Raise your hand if you thought the market would jump 6% in 4 days. I bought a large position of SDS which is the Double short SP500 ETF.

What are you planning to do about your naked $195 SPY weekly calls?

BTW, good move on Gilead the other day. It is indeed not going up with the greater market and I would be wary.

[utrecht]

Quote:

Originally Posted by Fermion What are you planning to do about your naked $195 SPY weekly calls? BTW, good move on Gilead the other day. It is indeed not going up with the greater market and I would be wary.

I bought the 2x short SP500 etf because I think the market is severly overbought. Therefore, I'm not doing anything with my naked calls at this point.

[bingybear]

Quote:

Originally Posted by LOL! For my trades, the cost is essentially zero, otherwise I would be figuring out a way to make it zero. As I noted before: 3. I pay no taxes on short-term trades because I am doing this either in tax-advantaged accounts like IRAs or 401(k)s or if I do a trade in taxable account, then I am tax-loss harvesting or using up a carryover loss to offset any realized capital gain. For instance, I can buy VXF in my 401(k), but sell VTI for a loss in my taxable, so no wash sale. Does this all make sense?

selling in a taxable account and buying in a tax preferenced account would not avoid the wash rule. Buying significantly different funds would... even in the same accounts.
-- just want to make sure I'm clear on the reason for no wash sale.
edit-- looking online... a 401k may be able to avoid the wash sale, but wonder for how long.

[LOL!]

@bingybear, yes, the reason for no wash sale is that I use two investments that are not "subtstantially identical" which is the IRS term. Do you see how VXF and VTI are not substantially identical?

The IRS does not use the term you used: substantially different.

[NW-Bound]

Quote:

Originally Posted by NW-Bound Yes, in a down market like this, all I can do is to try to make some bitty money with some short term trades, which is nothing compared to the loss. I just sold an ultrashort (2x) bear biotech fund. I bought it at the wrong time (too early), and have waited patiently to make 10%. Just a few hundred shares, so the gain is minuscule compared to the other losses. I only want to prove to myself that no sector is immune in a bear market.

Biotech sector is so weak it's hard to understand, even though I have been shorting it.

The above post was on 9/2, a month ago. I bought this 2x bear biotech ETF (BIS) way too soon way back in May, then again in June and July. I waited patiently to be vindicated, and when biotech started to crumble, I sold too soon. It is now around 40, but I already sold or wrote calls in the 30s.

Anyway, Quicken says I am down -$1.49 today. It's just coincidental, but that's the closest to break even I have ever seen, yet I have some positions that are up as high as 19% today, and as low as -7%. They just cancel each other out perfectly.

I have been logging the movement of my stash every day for the last 16 years, and I call it a break-even day when the bottom Quicken line moves up or down a couple of $K, and have not seen a single digit until today.

[bingybear]

Quote:

Originally Posted by LOL! @bingybear, yes, the reason for no wash sale is that I use two investments that are not "subtstantially identical" which is the IRS term. Do you see how VXF and VTI are not substantially identical? The IRS does not use the term you used: substantially different.

yes, I guess I did not follow the "technical terms". In general conversation, if two things are not identical, then they are different. Yes I see how those two etfs are different (not substantially identical). In your example you changed funds and you changed accounts. It was not obvious what was the reason you were using for avoiding the wash sale. I knew you could not use IRA or spouse's accounts to buy a substantially identical investment and avoid the the wash sale. Doing such a thing in an IRA will remove the ability to take the loss. However, I looked up on line and found that a 401k is a bit of a gray area.
So my question was about with reason were you using for avoiding the wash rule, not substantially identical investments where you could have done this in the same account. Or because of different accounts which may be a gray area with 401k (an IRA would not avoid the wash sale)?
Thanks for the answer... the investment difference.

[NW-Bound]

I switched to going long on a biotech ETF, and wrote an out-of-money call on it to hedge. It surges and gets close to that strike price already.

Perhaps another case of selling too soon, but that's what you get for playing it safe. If this ETF holds up until the end of the month, I make about $900 on an outlay of $5400. If it goes higher, my gain is capped at that level. I am OK with that.