Special Announcement:
Introducing Reese Harper Cavanaugh Born 8/02/2011
Thanks to everyone who has wished us well.
Archive for the “Uncategorized” Category
Save The Date: Options Block Live at Elephant & Castle
Join us for the first-ever live recording session of The Option Block (an Itunes Top 20 Business Podcast) taking place on July 21 from 3:30-6:30pm at Elephant & Castle (111 W. Adams). (more…)
Ratio Repair Strategies
For the out of the money calendar ratio, I’m about to explain an interesting concept. From our previous post, let’s say the stock is at $45 at expiration in the front month. If that is the case, the short calls expire worthless, and the long call for the second month is now the front month call. (more…)
Adjustments vs. Losses
Is Silver The Next Big Thing?
If anyone was watching the market this week, silver was a big mover. There is no doubt that it is rallying right now. (more…)
Every Friday is Expiration Friday!
Weekly options on several securities have been around for awhile. In the past two months the weekly options have exploded. Exchanges are constantly introducing new products, some of them never get off the ground, and some of them take off. The weeklys appear to be taking off. We are noticing it, as more and more clients are trading them, and we get to experience the joys of expiration every Friday. Before you go diving into the weeklys (if you haven’t already). We would like to point out to you what you need to know before you dive in.
As we are very big fans of objective, non-biased, FREE information, we found a great place to read up on the weeklys –
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Balancing on the Teeter-Totter
Think back to when you were a kid and rode on a teeter-totter. You went down, and you went up. However, in order to get off of it, you had to wait until it was level.
Often times in the investing world, we see people try to get out of the market when it is either too high or too low. For purpose of example, we are going to assume that everyone is a long only investor. It is not that we are against being short, we just want to keep things simple.
Let’s say that you are at the top of the “toy range”. If you try to get out there, you will obviously fall and possibly hurt yourself (although my 3 year old son tends to disagree as his hobbies include jumping off of bunk beds…but I digress). It is difficult to get out at the top of the market. However, people try to do it every day, and there are a lot of skinned knees because of it.
When you go down, and your butt is about an inch off the ground, it is also very difficult to get off of it without hurting the other person. As soon as your weight comes off, the other person is in for a fast drop. Not only does it endanger the other person, you may not be quick enough to avoid your side coming up and smacking you on the butt. It is difficult to get into a trade at the bottom of the market.
With that in mind, the best way to do this is to make sure the board is level and get on at the exact same time. As a father of a 1 and 3 year old, I understand that is easier said than done (for kids my age anyway). However, my son loves it, and I accept his imperfection in getting onto playground equipment. It isn’t pretty when we get on to ride, but we make it work. The end result is my son screaming with joy (my daughter is still too young).
In the investing world, you will very seldom buy the bottom or sell the top. I’ve seen many people try to do it through the years, and they typically get burned. I’ve never been able to buy the exact bottom or sell the exact top.
The lesson here is simple. Accept your imperfections as this still can be a very exciting ride.
Buy and Hold IS NOT Dead!
Considering the volatility and price fluctuations in the stock market over the past ten years this may be considered an extremely bold statement. The past ten years has been coined the “lost decade” to buy and hold investors, meaning that they are no better off than they were ten years ago in a standard buy and hold environment. Even more, the current market environment is being dubbed as a traders market and that label is discouraging to investors that are looking for equity risk exposure in their portfolios for the long term. (more…)
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