frommi

Hey gio, don`t be upset :). Your time will come and being a lonely rider is not the worst position to be in the investment world. The problem is only that you are not so lonely as you think when you look outside this board. At the moment i feel that being a bull is a lot harder after the last year. Anyway, FFH is probably the only reasonable portfolio hedge one can think of and it was you that convinced me of that.

Sorry but this has nothing to do with technical analysis. This is just painting. When you look at the DOW now it has already broken the graph. And there was never ever a crash in the history of the stock market that was anounced in the news paper. When you look at how crashes work psychologically you would clearly see that a crash can only come as a surprise. When its in the news act the other way round is historically the better approach to make money.

And btw. when looking for the next country to default you should probably look closer at europe. Ukraine, italy and greece are in my opinion close to one, the EZB has lost most of its weapons and politicians here are more and more thinking about not bailing out anyone anymore.

I am not an expert, but isn`t it obvious that Japan is trying to inflate its debt away? Inflation is picking up in Japan, so this seems to work. We can argue now if that will lead to hyperinflation in the end, but at the moment this is pure speculation without facts. Wages rise -> tax incomes rises -> debt can be reduced, but this takes decades to play out. I don`t see a reason why they should default.

I was talking about the very long term, perhaps >10 years away. I don`t know if we call it wifi than, but i am sure that we someday have a technology that just spans a network of small connected units like a peer to peer network with small independend stations for every home. When this time has come, telcos will play a minor role and internet access/mobile/phone is free for those who can run a station. Perhaps i am a bit utopic here, but the future always is.

The best way to play this is probably to buy the content providers. If they weren`t that expensive at the moment i would bet on GOOG,DIS and NFLX. Telcos are in the long run not necessary for in-city communication when you have a lot of connected wifis. But that would mean the market is partially right with the current valuations ... ;D

Buying OTM options with only 1-2 month DTE is like buying heavily overvalued stock. They simply have no value, when you buy them you have to prey a world collapse happens, because otherwise you won`t make money. You can be right with your directional call and still lose money. An experienced option trader calls these types of options junk and sells them, >75% of these options are worthless on expiration. They are only good for one kind of trade and that is when you go long volatility. But you don`t go long vol when the 1 year IV-Rank is >50% (as it is since 1 week in SPY), you are doomed to lose statistically on these kind of trades.

That sounds like a part of the product that got outsourced, but what if the main company simply insources it again or changes the process that this part is not necessary anymore? I have seen this a lot with car parts suppliers. That can only be a moat when its patent protected. And patents are more like temporary moats.

Perhaps we should talk about what kind of moats really exist. Right of my head i see only two kind of moats 1) Size (KO/PEP control nearly every bottler in the world, if one new pops up they simply buy it) 2) Monopolies (MSFT with Windows for a long time or any other type of monopoly) For a small cap these are hard to reach, because big contracts go normally to big companies, so that leaves local monopolies for small caps.

Bought some more BP today, oil&gas companies are now at the target of 25% of my portfolio. Next funds go to something else.

The problem is being right twice. The next bounce up can easily kill the profits and because of the late buys the chance is good that the hedge result is a loss. I can`t foresee the future but the VIX has spiked to a 1 year high yesterday.

More Lukoil

When you sell a put option you still have an upside exposure to the stock. When you sell a put option with a delta of 0.5 (which is exactly an ATM put) you have an upside exposure of 50%. Of course the delta gets smaller the more out of the money the option gets, so its not exactly as i posted but roughly the same in both directions. The closer this construction gets to expiry the more it gets like you described.

Ok than you are not really further levered up. Its just like the whole portfolio is leap call BAC+long JPM,C,SHLD. The leverage is in the leap call and you can`t really blow up completly but you have a lot of downside risk. Thats ok, as long as you can live with it. And through your derivative setup you are removing the call premium but pay margin interest instead.

I don`t think that a bank would be allowed to do what Eric is doing. When you look at the risk profile Eric has just a big LEAP call position in BAC and is long in JPM,C and SHLD. If this risk profile is further levered up or not does he only know himself, but from what i read its further levered up. So when a 100% stock portfolio will suffer a 50% drawdown he is on the edge of losing everything. I don`t think that is something worth copying, especially with this combination of securities. Let argentina blow up and he is probably in trouble. But as always thats my understanding of his situation, i can be wrong. :)

Nowhere. You are a great mind and it is a pleasure to understand everything you do. Thanks for being so kind to lay down this whole thing, because now i fully understand what you are doing and it starts to make sense for me.

ERIC, correct me when i am wrong but you are saying that you can lever the upside without risk. And that is simply not possible, you can only move the tail risk to an end where you want to have it. Its not possible to remove the tail risk completly from the equotation. If that was possible, every investment company in the world would do this because this would mean free money. And Richard is right when the BAC idea stand alone is a good one, it doesn`t need additional legs. What you are doing is a pairs trade where you move your blow up risk to another end.

Lukoil

I can recommend "Option Volatility & Pricing" from Sheldon Natenberg.

I just closed my TWTR trade with a return of around 25%, not bad for 2 weeks. But i was lucky because TWTR has not really moved :). I learned a lot, and i think i have now the answer to the topic. The best way to short depends on the IV of the options of the underlying. When IV is low buying puts is the best option, when IV is high selling OTM Calls with around 40-50 days to expiration. In any other cases its buying an ATM put and selling an ATM call, that is a synthetic short stock, but without the need/cost of lending the stock. Of cause you need a mental stop loss for that kind of position.

I don`t view it as so negative, when you have something better with more upside potential why not switch? 35% in a short timeframe is not too shabby and you simply don`t know what the stock will do next. There are only very few stocks that you can hold forever and most of the time you know it only in hindsight. And when you don`t sell after 35% you probably aren`t able to pull the trigger at 100% either. But at some point the undervaluation is away and you have to rely only on the business running well. The margin of error has evaporated and without it the holding is now a lot more risky.

I don`think its a good idea. You should perhaps think about the other side of the trade to understand my point. You can be relative sure that you buy the call option from a professional options trader. And what does the options trader do? He buys stock or other options to hedge his trade. So what you are doing is paying someone else to buy stock for you, because you want to be protected on a large downswing. When you are not sure if the market rises further and your holdings are fair or overvalued then either sell covered calls on your holdings or sell and buy undervalued stocks.

3 years electrical engineer and then software coding&design for 16 years. I own a small software company since then together with a colleague and work as a freelancer. Studied 4-5 years technical analysis with minor success, i was once a daytrader. (And lost a lot of money)

I exclude them all, because i can`t detect a fraud. But perhaps thats the reason they are so cheap.

Seems like it's time to find a loan: http://finance.yahoo.com/q/ks?s=EDS+Key+Statistics I would be careful with chinese -EV stocks.