QQQ

[haha]

I find myself with 70 QQQ puts suddenly at the money, with plenty of time to run. Another 50 2-3 points OTM.

Buying puts on an overvalued QQQ, when the VIX is historically low I believe has a high expectation. Unfortunately, it can also be very frustrating.

However, the VIX jumped from 16 or so to over 18 today.

With a little luck the next few weeks could usher in party-time for ol' Mikey.

 

[John Galt]

Sounds to me like you have been in the VO and water.

John Galt

 

[dex]

You might want to go to
www.traders-talk.com
if you are going to talk like that

 

[Cut-Throat]

I find myself with 70 QQQ puts suddenly at the money, with plenty of time to run. Another 50 2-3 points OTM.

Buying puts on an overvalued QQQ, when the VIX is historically low I believe has a high expectation. Unfortunately, it can also be very frustrating.

However, the VIX jumped from 16 or so to over 18 today.

With a little luck the next few weeks could usher in party-time for ol' Mikey.

Just when I think I know a little about investing, I read a post like this and think 'I must be a total idiot - I have no clue what mikey just said!"

 

[unclemick]

Mikey

I hope we're talking frosting on the cake and not the cake. If so - good luck.

Perhaps I'll wax eloquent someday if I 'make a killing' in one of my hobby stocks. Not to be confused with my real ER.

 

[Guest]

I thought I understood English, but now I am not sure.

 

[wabmester]

I find myself with 70 QQQ puts suddenly at the money, with plenty of time to run. Another 50 2-3 points OTM.

Translation:  I've been betting that the NASDAQ 100 ETF will drop, and it finally has.   I have an option to sell 7000 shares at around $34 each, and the option doesn't expire for a while yet.   I also have options to sell 5000 shares at around $32.

Buying puts on an overvalued QQQ, when the VIX is historically low I believe has a high expectation. Unfortunately, it can also be very frustrating.

Translation: my options were cheap, so I hope to make a killing, but so far I've been having my ass handed to me.

However, the VIX jumped from 16 or so to over 18 today.

Translation: S&P 500 volatility went up today.  Finally.  I'm betting this means that investors are starting to panic.

With a little luck the next few weeks could usher in party-time for ol' Mikey.

Translation: Woohoo!

 

[haha]

Translation:  I've been betting that the NASDAQ 100 ETF will drop, and it finally has.   I have an option to sell 7000 shares at around $34 each, and the option doesn't expire for a while yet.   I also have options to sell 5000 shares at around $32.

Translation: my options were cheap, so I hope to make a killing, but so far I've been having my ass handed to me.


Translation: S&P 500 volatility went up today.  Finally.  I'm betting this means that investors are starting to panic.

Translation: Woohoo!

Wabmester, you got it, as to facts and emotions. And Uncle Mick, yes, definitely a side-line. Though I don't call a hobby something that takes time and thought, and has what I believe to be a postive expectation . These are mostly to hedge long positions that I don't want to sell and pay tax on. These longs are not directly represented in the QQQ. I just used the QQQ because I thought it was the most overvalued ETF out there, and QQQ options are relatively liquid.

My drums are a hobby, since it would be a cold day in hell when I would be able to make any money with them.

Mikey

 

[wabmester]

Mikey, care to share your thoughts on portfolio insurance? I've been considering doing the same thing for a while, but couldn't bring myself to pull the trigger while the market was trading in such a tight range.

Some questions for you:

How far out do you go on expiration?

How far out of the money do you go on the puts?

Do you try to control a size similar to the size of your equity positions?

Do you consistently rollover your options, or do you make your bets based on analysis?

If you consistently rollover, do you buy new puts both at expiration and when you sell in-the-money?

What makes you pull the sell trigger?

 

[brewer12345]

Mikey, care to share your thoughts on portfolio insurance?   I've been considering doing the same thing for a while, but couldn't bring myself to pull the trigger while the market was trading in such a tight range.

Some questions for you:

How far out do you go on expiration?

How far out of the money do you go on the puts?

Do you try to control a size similar to the size of your equity positions?

Do you consistently rollover your options, or do you make your bets based on analysis?

If you consistently rollover, do you buy new puts both at expiration and when you sell in-the-money?

What makes you pull the sell trigger?

I'm not Mikey, but I will pitch in my two cents. I occasionally dabble in options, mostly as a sideline. I think that over the long term, portfolio insurance is too expensive and prone to underperformance due to "user error". This is really the province of big, sophisticated institutions with lots of computing, trading, and people power to make it work. Even so, many of the dynamic strategies failed in major market plunges (1987, etc.). I generally think that a smarter way to manage risk is to structure your portfolio appropriately rather than depend on complicated options strategies. The other major issue with options is that there are way smarter people fishing in that pond than you or I and they may well be on the other side of the trade. Not a comforting thought.

Having said that, I occasionally plunk down some change for options. More often than not, it is a way for me to make a speculative bet on a company when I don't really want to commit the full amount of capital to buy the underlying stock. Effectively, I get the leverage without the downside of a long or short position. Sometimes I lose my whole investment and sometimes I make a score, so I keep this to small amounts. The other way I have used options is when I have an individual stock that has mushroomed in value to the point where it is a larger portion of my portfolio than I am comfy with. However, I am starting to abandon protective puts in favor of simply selling a chunk of such a position. It accomplishes essentially the same thing awith less complexity and expense and is something of a forced rebalancing.

 

[haha]

I'm not Mikey, but I will pitch in my two cents.<snip> The other major issue with options is that there are way smarter people fishing in that pond than you or I and they may well be on the other side of the trade.  

Hmm..., well I am Mikey, but with that ringing introduction I feel somewhat at a loss for words.

Like Brewer said, people who do options are naifs, stupid, and otherwise incapable of rational action. I admit that it is an addiction. I just cling to the idea that it is possibly less destructive than drugs or skydiving.

Mikey

 

[unclemick]

Judging only by the locals - fishing or sailing can be worse - depending on the level of addiction of course.

 

[Dante60093]

Hmm..., well I am Mikey, but with that ringing introduction I feel somewhat at a loss for words.

Like Brewer said, people who do options are naifs, stupid, and otherwise incapable of rational action. I admit that it is an addiction. I just cling to the idea that it is possibly less destructive than drugs or skydiving.

Mikey

Mikey,

I say more power to you if you can make a profit through option trading.

As for me, even though I studied Finance in the business school where Fama and Miller reign, option and futures trading are way over my head.

I have heard though that for people who have the know-how its better than straight securities trading in many ways.

With the QQQ move, what is the range of the magnitide of your winnings, if I may ask?

Dante

 

[wabmester]

Options can give you a bit of an adrenaline rush, but if you want something akin to skydiving, my drug of choice is short selling.   There's nothing quite like the thrill of unlimited downside potential  

 

[brewer12345]

Options can give you a bit of an adrenaline rush, but if you want something akin to skydiving, my drug of choice is short selling.   There's nothing quite like the thrill of unlimited downside potential  

No thanks. You can keep the hard stuff. I'm happy with just the occasional hit of my chosen gateway drug.

 

[yakers]

Options can give you a bit of an adrenaline rush, but if you want something akin to skydiving, my drug of choice is short selling. There's nothing quite like the thrill of unlimited downside potential

AFAIK that kind of rush is called "betting the rent". Exciting, but too much for me. Of course, I have slowly bee watching my mostly indexed portfolio slowly fade. Maybe I'm the frog that hasn't figured out that the water is warming.

 

[Nords]

Buy low/sell high or sell high/buy low...

... it's the same thing!

If you're betting the rent for a rush, you're not doing your research. Short-sellers are (well, should be) the market's hardest-working value investors. It doesn't matter in which order you buy/sell as long as you avoid combinations like "sell low" and "buy high".

While I learned to read financial reports so that I could become a better investor, I REALLY started paying attention to them to become a better short-seller. I end up reading dozens of them per year (although I'd have bigger profits if it was hundreds) and I'm starting to recognize a few of the bigger, easier targets.

My problem is finding available shares to borrow to go short. Many think that KMart is overpriced. Few have been able to borrow shares to short it.

My favorite short is IPOs. This month is promising to be a great hunting gallery for shorting. I've never seen so many IPOs struggle to get public while the market is dropping. (Unlike the last decade, when the market was rising.) If you want this quarter's "Dummies" approach to short-selling, just let an IPO go public and short it a few days later. Some issues may continue to climb (not likely this month!) but the majority will fall.

I'm still waiting for PlanetOut (LGBT) and PRN Corporation (PRNC) to price.

Google will be a short-seller's dream.

 

[unclemick]

Back to my old theory - it's male and biological (unless we have some women - traders lurking ?). To think - I once hesitated to mention my stodgy old hobby stocks.

Go guys!

 

[wabmester]

It's amazing how well some short-sellers research their targets, like this guy who bribed FBI agents for info about their criminal investigations:

http://www.lewrockwell.com/stein/stein10.html

 

[Dante60093]

Of course, I have slowly bee watching my mostly indexed portfolio slowly fade.

Yakers,

I can totally empathize. Even though I have less than 30% of my savings in stocks, I have seen them lose 14% of their value from their peak just this past June 30 to today. I have no bonds to speak of so essentially no counterbalance. The remaining 70% is in cash.

Maybe its time to learn how to sell short (for me).

Dante

 

[unclemick]

If you are not thoroughly enjoying the recent dip and can't wait for your stocks to fall further to bargin levels to buy some more (like an item you want to go on sale), perhaps you should consider a balanced fund - wherein the impersonal computer buys on the way down and sells on the way up to hold a fixed asset balance.

Even after thirty years of investing - the rational part of my brain still gets 'frozen' / overwhelmed by the emotional part - so I gave up about ten years ago - moved my 7-8 Vanguard mostly index funds to Lifestrategy (quasi 60/40 balanced). Kept 10%, now 15% in hobby stocks looking for bargins.

Pogo(the cartoon) - If you look yourself in the mirror and see - 'I have met the enemy and I is them' - perhaps balanced index or even a timed asset class like Vanguard Target Retirement is for you.

Or - I have discipline - yes, yes - I love slice and dice - Bernstein, Coffeehouse await.

Chickenheartedness being one of my all time favorite investment theories - 75% balanced index out of the can, 10% REIT Index to counterbalance/boost yield(super mini Bernstein) and for the joy of watching falling markets to buy 'bargins/dividend stocks' - about 15% putz or mad money.

Back in the 70's (when I was a legend in my own mind) - I played with with warrants and did things like borrow short/bought mortgage REITs long. As time passed - it was a wash with wins/losses canceling each other.

Male hormones being what they are - if golf or tennis doesn't do it - then perhaps a speculation or two at the edges - I don't recommend confusing it with real ER. In the old days, if I had a 'win' - it was live large party time. Meanwhile - plunka, plunka slow moe DCA (autodeduct) got me to ER.

 

[Jarhead*]

UncleMick:

Excellent post. (Perfect timing also. Conversation was drifting into short-selling methods).
It is damn tough for an individual that has ER'd the old fashioned way, (30 years of 60 plus hour weeks), to retire, and have the self-discipline to do next to nothing with his portfolio.
Hang gliding, sky-diving, cliff-diving, etc. etc. are less risky for an adrenalin rush, than thinking you can jump in with the pros.