LOL!'s Market Timing Newsletter

[LOL!]

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]

Avoiding Frequent Trading Restrictions by Using Multiple Accounts

....
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]

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]

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]

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]

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]

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]

@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.

 

[utrecht]

Earlier today when SPY spiked to 199.50, I doubled down on SDS as 21.40. I sold it about 30 mins later for 21.70. It lowered my cost basis on the SDS position Im still holding. I still believe the market is going to pull back soon.

 

[NW-Bound]

If you are still net long the market, then if the market surges against your expectation, your total portfolio still goes up, just not as much.

I use these short-term bets as a way to implement "Tactical AA", to reduce or increase my stock percentage temporarily if the market is crazier than what I think it should be. And I am not right all the time, but these short-term bets can reduce portfolio volatility despite what some people may think.

 

[utrecht]

If you are still net long the market, then if the market surges against your expectation, your total portfolio still goes up, just not as much.

I use these short-term bets as a way to implement "Tactical AA", to reduce or increase my stock percentage temporarily if the market is crazier than what I think it should be. And I am not right all the time, but these short-term bets can reduce portfolio volatility despite what some people may think.

I agree but I also speak from experience when I say that when you're wrong, it sucks big time. I'm a bull and look for trades that take advantage of upswings in the market or a specific stock. Ive recently turned very bearish and have several bearish trades on. When Im wrong and the market spikes up which I love to see, but Im losing money on my trades, I want to punch someone in the throat. But you are correct, it does lower your overall volatility when you have some trades that are opposite of your over all AA.

 

[Fermion]

I am unsure of the direction of biotech. I traded in and out of Gilead the past few days, and also Amgen (although my last sale for a profit was at $140 which was evidently $5 or $6 too early).

I currently have some Gilead $95 Jan 2016 calls but am very uneasy. I would feel a lot better if everything just lifted off and Gilead went back to $110.

 

[LOL!]

Overall portfolio is UP for the year! I love it when everything turns from red to black. So what could go wrong now?

 

[NW-Bound]

Congrats! I am still down about -2.7%.

Things can always go wrong with the market of course, but with a lead on me, you most likely will stay ahead.

 

[utrecht]

I bought back my weekly SPY 195.5 calls this morning at a loss. My weekly SPY 186 puts will expire worthless for a nice profit. For the second time in the last 2 days I made a quick day trade of SDS. SPY has serious resistance at 200. When it hit 200, I bought SDS at 21.30 and sold it at 21.42 about 3 mins later. At the end of the week I will total up my SP500 related trades for the week. I dont normally trade this much but it was a strange week and Im trying to recover the loss on the weekly calls that looked very safe when I sold them.

Still holding one batch of SDS shares.

 

[NW-Bound]

I accumulated $21.5K worth of SPXL (3X leveraged S&P) more than a week ago. My timing was not great, so the cost basis was around $72 although it dropped as low as $65. It closes at $79.77 today. To hedge, I already wrote calls on it earlier, which were out-of-the-money then, but are in the money now.

If the market holds up until the options get exercised, I will make $3200 profit or 15%. If the market drops more than 5% from the current level, I will start to lose money on this bet.

 

[Fermion]

I do feel a bit like we are tilting at windmills here.

 

[NW-Bound]

Well, the day is still young. When investors feel frustrated is when there's money to be made.

Biotech does not seem to go anywhere the last few days, but I have made a bit of money going short, then long it. Too early to know for sure what my profit will be, but my covered calls on both long and short ETFs are still outstanding, and both are now in-the-money. It's a weird situation how I got there.