[9:35am ET] The amount of government in our lives has become overwhelming. I believe the problem has a lot to do with lobbyists who have become very sophisticated and well-funded. Something must be done before the largest capital market in the world seizes up from non-confidence.
Anyone who operates in Hong Kong or Singapore must be having a good laugh these days. I have been giving serious thought in joining them
http://ronsen.blogspot.com/2009/04/saturday-mornin…
I can tell from the Discourse that many of you are learning to trade, and that you appreciate the fact that learning to trade is a process, not an event. It’s why we are all called students of the market. The learning never stops.
So watching the price action Friday, I noticed that while all the other bank stocks were going up, Goldman moved right up to 123 and then backed off. Now 123 happens to be the price they sold their 40 million share secondary offering at. Average daily volume: 25 Million shares. With the MACD rollover just now happening, and the RSI coming down off an overbought 75, I’m increasing in confidence that this is a relatively low risk trade. Given the secondary offering provides 40 million shares worth of resistance, the stock is just a few points away from that, which… Read more »
In this article, Mr. Mortgage talks about the discount to original note value that the different banks are accepting based on successful bids at the foreclosure auction. He notes that in 90% of auctions, the public bids are too low so those properties go back to the bank as REO, but that for the ones that succeed, this discount represents some measure of how many cents on the dollar receive when they sell off the properties in their portfolio. He shows 3 months of data – Jan, Feb, and March. Most show increasing discounts (declining recovery rates). They range from:… Read more »
theres a scribe document in zerohedge abt market intervention by Fed/Govt and attributes to national security. Forget FAZ/FAS, that would make holding overnight positions nervous…. I know they do this all the time in developing countries (e.g. In India, central bank intervenes in the market through their insurance companies which are govt owned) but after reading this about USA, its just another grand casino…. Make the quick bucks if you can and switch to buying real assets, i guess, no 201Ks 🙂
This article goes into deeper analysis of the comparison:
http://contraryinvestor.com/mo.htm
key points:
1. after QE announcement, nikkei rallied 19% before sliding down 48% over next 2 years
2. japan took the measure proactively from relatively strong financial base (surpluses and high personal savings)
The US? Reactionary QE with deep deficits and indebtedness.
Obviously we all know by now that it’s gambling. As in not analogous to gambling, but the real thing. I’m sure everyone here who plays the ultras already has rules in place, so I’m repeating mine for the sake of comparison. (a) Limit position size. I use a sliding scale that generally starts with capping positions at 6% of the portfolio. I don’t suggest moving up above 6% for single stocks, but will move to 20% with sector funds. (b) Scale into the trade. No one walks up to a gaming table and bets his entire wallet on one throw.… Read more »
RE:>”Scale into the trade. No one walks up to a gaming table and bets his entire wallet on one throw. I use 20%, which works out to opening positions at 1.2% of the portfolio.” and that is the most important piece of trading information that I have yet to knuckle into my skull. I’m still playing large trades as if I were still with a high cost broker. That’ll have to change. Si02, although you’ve spelled it out today the understanding was already implicit that these 3X trades are costing me, especially in this choppy environment (artificially created by trading… Read more »
I think we all know I’m not chastising anyone here re: trades, just having fun.
The social equity part I take seriously but the money – eh, it’s just tuition.
In FAZ @ 8.70 and AUY May 9 calls over the weekend. I expect to trade out of FAZ for a small gain (or more, FSM be praised!) but hold the calls on AUY and come out pretty ok before expiration. I don’t see gold going below 850 and believe it’ll creep back into the 9 handle over the next week or so.
It’s also interesting to read SiO2’s comments, which were apparently posted while composing my own.
What would the effect be (if any) of small investors closing their positions and withdrawing from trading ultras for a week?
“What would the effect be (if any) of small investors closing their positions and withdrawing from trading ultras for a week?” A very good question 2nd. Disaster of some kind. David, that was not the point of the post. Yes, those ETFs syphon money from investors by design and out in the open (although the majority of mom & pop don’t know that). Sure they are great gambles if you get the direction right, but the majority of traders lose money. But that is not the main point of the post. 2nd’s question is. P.S. Where was the last “eclipse”,… Read more »
> “What would the effect be (if any) of small investors closing their positions and withdrawing from trading ultras for a week?” > A very good question 2nd. Disaster of some kind. I don’t think so. ProShares stated that shares of ultra ETFs can be redeemed for their “fair value,” and it will be the LARGE investors who will be arbitraging away all deviations of these ETFs from where they are supposed to be. Don’t forget: the biggest provider of market liquidity (highest frequency program trader) is Goldman Sachs, and I trust in them taking advantage of such an arbitrage… Read more »
Nobody cares about the value of the ETFs, the issue is the withdrawn liquidity. So I guess that would leave GS trading against GS? Hey, trillions have been created out of thin air lately anyway.
On that note, if you were to bet between retail investor trading leveraged ETFs vs GS, who might win?
If GS/C/JPM made all their money last quarter from their trading desks, then given the contracting global economy, would all profits not necessarily be at the expense of either small investors or counter-parties? We should look into moving ourselves to the sidelines and allow HB&B to play survival of the fittest. For J6P, watching the game on TV beats risking life and limb on the field. I’d rather be on the couch watching when banks undergo real-life stress tests (let’s face it, that simulated stuff doesn’t really cut it).
2nd, I am going to wait for you and Vinod to get bullish or bearish, only then i am putting my cash:):) Till then i am just checking the pulse…….
Ummmm…Goldman?
Oh wait! That was a rhetorical Q, right?
So you think these leveraged ETF’s may have been specifically created to generate trading revenue during what would have been perceived as a low trading volume period – makes sense. The ETF of direct concern for me is SRS. The last double inverse I played was TBT, which seemed to move in a manner correlated to TLT and was ultimately profitable (funny no one mentions it anymore). I did have to have to hold it one month and double down on it, so the risk was quite clear. What happened with SRS? Anecdotal observation suggests to me some sort of… Read more »
SI02..Are you mocking what you dont understand or relate to? Thought educated rational trader should take all useful methods into consideration?
Very surprised….and disappointed at your response….
“SI02..Are you mocking what you dont understand or relate to?”
?? No, if you read carefully you will see that those comments were clearly quoted off zerohedge.
I was wondering when zerohedge would come to their senses.
I have been observing ultra ETFs since their inception, and EVERYTHING that happened to them, as far as I can tell, is a consequency of their design, which is fully predictable, and a consequence of the market moves that took place (i.e., FAS dropped so much since inception because financials dropped, and FAZ dropped because it evaporates superfast and will go to 0 much sooner than people think). I do not see any conspiracy against ultra ETFs (except the fact that creators of these ultra ETFs must have known that eventually they will take money from all long-term investors in… Read more »
sentiment
SiO2
Good post and you have save me some money long ago when you warn about it
New one are coming they are TYD/TMF bullish 10 year and 30 year bond and for bear TYO and TMV
I plan to short 10 of each when available to get my cut of these pies
2nd
Best trade for last three days was buy SRS near closed and sell next day with in first 30 minutes
Vinod
My best trades were doing the same thing with FAZ. I bought some today @ $8.70 for the weekend party. Hope the trades continue to work. I almost bought some SRS, but just missed it.
Have a great weekend everyone! It is 78 degrees here in Nasvhille,TN today. I just got back from mountain bike riding and cutting the grass.
BAC reports before market open, place your bets!
A number of my options expired today, some long and some short. Unfortunately, 10 contracts of the FAS $7.50 puts which I bought last Thursday (at $0.45) after the short squeeze have expired. Same lesson, once again: NEVER buy short-term options… Fortunately, 5 contracts of ERX $22.50 puts, which I sold for $3.00 about a month ago have expired. Last Thursday, when they were trading $0.25 bid, $0.35 ask, I decided to close them, thinking that this week we will have a pull-back. Habitually, I clicked the “sell” button, and then realized that I have just *sold short* 5 more… Read more »
First thing, with all due respect, it is not wise or prudent to trade when intoxicated. That comes after the winnings and the end of the day. Second, if it was April 9 calls that were sold, they expired worthless today and would show up red in the account. Thirdly, from the posts that you have made and taking into consideration the account size, it may be more prudent to paper trade or virtual trade to gain the necessary experience to trade with funds, that if lost are extremely hard to replace. In any event best of wishes to trading… Read more »
thanks for the concern Miadhach. Yes, Friday’s a dangerous day for me but I’m happy to follow others lead here and that is what I did Friday arvo (evening my time). However, that was admittedly the longest time I’ve held FAZ. I did want to hold it for Monday morning and have done so, without loss. Now as for the calls, after the straddle I was sure selling May calls for FAZ at $9 dollars would be a fairly simple move. Take the premium, hand the underlying over to someone else Monday morning (I’ll be astounded if the market shoots… Read more »
When you write a covered call, you are going short the call hedged with your long position in the underlying. (Short an April FAZ call against the 100 FAZ you currently hold). You are selling the call – creating it out of thin air. All your short positions show up as a negative – negative quantity for contracts, negative dollar amount for costs. When you initiate the short, your cash goes up by the “cost” amount, and the liability of the short is entered into your portfolio. To close the position: a) the counterparty exercises, you lose the underlying, and… Read more »
Thanks dave, I was fairly certain I had done it right. You’ve helped me understand the mechanics of it.
Will print this out as part of my options notes.
I have vague memories of similar practices learnt in a basic accounting course at university.
You are welcome. Options are most fun when they expire worthless. Well unless you own them of course. 🙂
I’ve been to both places many times over the past 45 years. From a living style, I prefer Singapore. People are friendly, easy to move around without getting trampled to death, modern city center, well maintained, excellent transportation system, subway is outstanding. Many places to relax, great food, have a cool drink, and enjoy the scenery. I don’t think you can move there unless you have sufficient income although I am not sure. Hong Kong is really for the business comunity. Lots of contacts from mainland China and easy accessibility. No problem flying from Beijing to HK. Rent in modern… Read more »
Well, the S&P touch the top of rising wedge at 875 which I mentioned on wensday (I know, spelled wrong, but I’m taking a stand against stoopid spellings 🙂 Should have waited for that touch of upper trend line before buying inverse etfs, so got a bit burned. Bummer. Next week should be interesting. I just can’t see it pushing higher out of this channel. I just can’t! But like I said wensday, I wouldn’t be surprised if I was proven wrong… I guess just like oversold markets can mark the steepest plunges, overbought markets can mark the sharpest melt… Read more »
I agree, unfortunately I read the resistance to be around 850 and got in just prior to that with my shorts. Still holding all of them.
has anyone ever considered buying and selling these shortly after the close for a quick 2% move? I’ve noticed that XLF will oftentimes moves 1/2% or so and the FAZ/FAS etfs take a few moments to correspond. For example, XLF is currently at 11.08 x 11.09 (+1.09%) and FAS is at 9.40 x 9.41 (+4.09%) while FAZ is at 8.88 x 8.89 (-4.72%). You could buy FAZ at 8.89 and sell it at 8.98 or so for a quick 1% gain, assuming it gets adjusted to reflect the move in the financials (i do know, though, that the XLF etf… Read more »
I’m thinking I’ll just trade for the last 5 minutes of the day on Monday. I think I’ll
a) be less stressed
b) make a LOT more money
Dave, this is a tough market. I think i will wait out for a decisive break on the downside, then short equities, buy gold miners. If i look at the charts of gold miners, i have to wonder if the bear market is in stocks or gold?
Yeah it is a tough market. It doesn’t help that I’m – well that I have a fair amount of goldcorp. 🙂 As CP said the other day, why the heck didn’t I sell when the MACD rolled over on April 7? Sheesh.
It will be interesting to see what happens to gold once the novacaine wears off and this rally goes away. It will probably be the safe haven again. Or maybe they’ll just sell gold even harder at that point.
I guess if it were easy it would be called “the stock goodie bag”.
I’m seeing that people generally don’t want to hold the banks going into the weekend.
Last few days SKF and SRS rallied hard into the close.
EDIT: today was no exception
Wow and they REALLY didn’t want to hold BAC!
Dave,
Do you understand what SKF and SRS is actually based on? They are listed at ETFconnect.com as holding the same backing, but in slightly differing dollar amounts.
thanks to those talking up FAZ at 2pm. I took a slice. BUT it pays to be sober when trading. I thought it was 3pm and had a heart attack as I realised I had 2 hours to close and FAZ was dropping fast. However, it did end up just in the green for me. Anticipating some turbulence monday morning I’ve gone and sold FAZ $9 calls. Will be happy to have the underlying taken away from me first thing Monday. But it shows up as a negative in my account. Is this normal? Just checking through all the TMF… Read more »
wouldn’t you sell calls if you thought FAZ was going to go down?
Interesting to note a few things: Dollar (UUP) is up pretty significantly and the uptrend is still in tact. Normally this portends to market weakness. Treasury yields are up pretty significantly and have been in an uptrend since the day after the Fed announced it would start buying the long end of the curve. I still stand by the theory that this will end in pain. The “rebound” theory is predicated on lower yields for an extended period so we can refinance our way out of this debt induced economy. What happens if investors demand higher yields? Answer: higher cost… Read more »
Sold May $16 calls at $0.7 each. ACI is trading now at $14.80, which is right around my cost basis. So I wouldn’t mind if these shares are taken away from me at $16.70, and I also wouldn’t mind pocketing $0.7 for each share if ACI goes down temporarily (it is a good company and it won’t go down too much if the market takes a plunge, and will recover promptly when the market comes back to the current levels).
Sure looks like it to me. I wonder why I’m betting against this trend…
me too pal, me too….I’m holding tight to these inverse positions though. Volume is light today on SPY and with such “great news” shouldn’t we be up more? Monday will be the decider for me I think. After a couple of up days my inverse still haven’t gotten to out of hand. FXP is actually up. Patience through the weekend. A sell here = whipsaw IMO.
yeah, me too. my XLF stop loss signal of $11.35 has not been breached yet. Will be interesting to see how things pan out next week without options expiration. WFC earnings are coming up so that could be yet another catalyst for the hope buyers.
So GS is charting its own path now – and by that I mean down.
(its no longer well correlated with $SPX)
I’m guessing this bodes modestly well for SKF.
SRS is showing higher lows too.
and see where we came from, and if anything has been rectified. Richard Fuld, from the years 1993 to 2007, is reported to have received nearly half a billion dollars in total compensation. In 2007, Fuld was reported to have earned a total of $22,030,534, which included a base salary of $750,000, a cash bonus of $4,250,000, and stock grants of $16,877,365. CNN named Fuld as one of the “Ten Most Wanted: Culprits of the Collapse” of the 2008 financial collapse in the United States; he was placed at number 9 on the list. On November 10, 2008 Fuld sold… Read more »
You too Seamus!
Ah…Mom….the dementia isn’t getting better if you know what I mean.
But it’s one day at a time and stay on the sunny side!
Hope everyone has a relaxing weekend.