HOLY SMOKES : Did i read this right? Dow below 10,000 S&P;1,100 Nasdaq 1500. Is this possible by October?

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[quote author="muzie" date=1224574499]Is everybody still trying to call a bottom/2nd crash of armageddon?



I think the short story's done for a little while. Probably won't be a raging bull either.



I'm just going to sell calls against my long positions here. The VIX is still so high, I'd need a 15% drop before I lose a single dime on the covered call position I sold, and a sideways/rising market will hand out a hefty 7-10% premium for barely a month of holding.



So worse case we crash another 20% and I lose about 5% after the premium, and best case I collect a large premium. Rinse & repeat, until the VIX dies down to less freaky levels.</blockquote>


I'm not. I mean I have my long term views as to where its going to be, but no I'm not worried about the bottom.

I could care less where the market goes...up...down...sideways. I adjust and use and abuse. I have no love for any stock, fund, bond...nothing.

I have about 20% of my capital in long term equities, and the rest is for day trading; anywhere from 15 trades to as high as 60-70 trades a day. You should come over and help me do my taxes at the end of the year...



You're trade is not a bad one. The LIBOR rate as well as 2-year swaps keep trending down and these are all indications that credit is getting cheaper between banks, meaning cheaper credit for consumers. So you might be ok in short term. We might be going side-ways or slightly up in near term. Housing data is due to report later this week, so we'll see how the market reacts to that. Tomorrow should be a big day as well as a few big boys report. One being apple and people usually look at apple for hints in consumer spending.
 
[quote author="awgee" date=1224157400]Instead of looking for a bottom throught technical analysis or historical P/E ratios, you may want to think about historical dividend yields. Once folks get over the idea of speculating on stock appreciation, they will look at dividends.



What do you think the historical average dividend yield is? And what do you think it is today? And what has it been at market bottoms?



Oh yeah! Dividends! What a concept.</blockquote>


S&P 500 Dividends to Fall Most Since '58 This Quarter, S&P Says

http://bloomberg.com/apps/news?pid=20601213&sid=aar.N5PyekYo&refer=home
 
[quote author="blackvault_cm" date=1224587141][quote author="muzie" date=1224574499]Is everybody still trying to call a bottom/2nd crash of armageddon?



I think the short story's done for a little while. Probably won't be a raging bull either.



I'm just going to sell calls against my long positions here. The VIX is still so high, I'd need a 15% drop before I lose a single dime on the covered call position I sold, and a sideways/rising market will hand out a hefty 7-10% premium for barely a month of holding.



So worse case we crash another 20% and I lose about 5% after the premium, and best case I collect a large premium. Rinse & repeat, until the VIX dies down to less freaky levels.</blockquote>


I'm not. I mean I have my long term views as to where its going to be, but no I'm not worried about the bottom.

I could care less where the market goes...up...down...sideways. I adjust and use and abuse. I have no love for any stock, fund, bond...nothing.

I have about 20% of my capital in long term equities, and the rest is for day trading; anywhere from 15 trades to as high as 60-70 trades a day. You should come over and help me do my taxes at the end of the year...



You're trade is not a bad one. The LIBOR rate as well as 2-year swaps keep trending down and these are all indications that credit is getting cheaper between banks, meaning cheaper credit for consumers. So you might be ok in short term. We might be going side-ways or slightly up in near term. Housing data is due to report later this week, so we'll see how the market reacts to that. Tomorrow should be a big day as well as a few big boys report. One being apple and people usually look at apple for hints in consumer spending.</blockquote>




So far, so good. Whoever bought my 40 calls is getting hit by the double wammy of the deflating options premiums and the fact the stock did go down today. Still got some losses as not everything was covered with calls and I moved from 50% to 66% uncovered longs now. At this rate even if the stock goes back up, it looks like the calls will still be showing me a profit though.
 
[quote author="blackvault_cm" date=1224587141][quote author="muzie" date=1224574499]Is everybody still trying to call a bottom/2nd crash of armageddon?



I think the short story's done for a little while. Probably won't be a raging bull either.



I'm just going to sell calls against my long positions here. The VIX is still so high, I'd need a 15% drop before I lose a single dime on the covered call position I sold, and a sideways/rising market will hand out a hefty 7-10% premium for barely a month of holding.



So worse case we crash another 20% and I lose about 5% after the premium, and best case I collect a large premium. Rinse & repeat, until the VIX dies down to less freaky levels.</blockquote>


I'm not. I mean I have my long term views as to where its going to be, but no I'm not worried about the bottom.

I could care less where the market goes...up...down...sideways. I adjust and use and abuse. I have no love for any stock, fund, bond...nothing.

I have about 20% of my capital in long term equities, and the rest is for day trading; anywhere from 15 trades to as high as 60-70 trades a day. You should come over and help me do my taxes at the end of the year...



You're trade is not a bad one. The LIBOR rate as well as 2-year swaps keep trending down and these are all indications that credit is getting cheaper between banks, meaning cheaper credit for consumers. So you might be ok in short term. We might be going side-ways or slightly up in near term. Housing data is due to report later this week, so we'll see how the market reacts to that. Tomorrow should be a big day as well as a few big boys report. One being apple and people usually look at apple for hints in consumer spending.</blockquote>
Looks like Apple beats on the EPS but was a little shy on the revenue for 3Q08, but the real problem is the 4Q08 guidance...Revenues of $9-$10B vs. estimate of $10.5B and EPS of $1.06-$1.35/share vs. estimate of $1.65/share. LOOK OUT BELOW....
 
[quote author="usctrojanman29" date=1224647696][quote author="blackvault_cm" date=1224587141][quote author="muzie" date=1224574499]Is everybody still trying to call a bottom/2nd crash of armageddon?



I think the short story's done for a little while. Probably won't be a raging bull either.



I'm just going to sell calls against my long positions here. The VIX is still so high, I'd need a 15% drop before I lose a single dime on the covered call position I sold, and a sideways/rising market will hand out a hefty 7-10% premium for barely a month of holding.



So worse case we crash another 20% and I lose about 5% after the premium, and best case I collect a large premium. Rinse & repeat, until the VIX dies down to less freaky levels.</blockquote>


I'm not. I mean I have my long term views as to where its going to be, but no I'm not worried about the bottom.

I could care less where the market goes...up...down...sideways. I adjust and use and abuse. I have no love for any stock, fund, bond...nothing.

I have about 20% of my capital in long term equities, and the rest is for day trading; anywhere from 15 trades to as high as 60-70 trades a day. You should come over and help me do my taxes at the end of the year...



You're trade is not a bad one. The LIBOR rate as well as 2-year swaps keep trending down and these are all indications that credit is getting cheaper between banks, meaning cheaper credit for consumers. So you might be ok in short term. We might be going side-ways or slightly up in near term. Housing data is due to report later this week, so we'll see how the market reacts to that. Tomorrow should be a big day as well as a few big boys report. One being apple and people usually look at apple for hints in consumer spending.</blockquote>
Looks like Apple beats on the EPS but was a little shy on the revenue for 3Q08, but the real problem is the 4Q08 guidance...Revenues of $9-$10B vs. estimate of $10.5B and EPS of $1.06-$1.35/share vs. estimate of $1.65/share. LOOK OUT BELOW....</blockquote>
Wow, I'll never understand the market. Apple up big time and so is Yahoo yet the market is tanking. Oh wells, I'm in the black on the puts FOR NOW.
 
I hope you kept your puts. I sold my 40 XOM puts for 6.35 this morning netting me a nice profit. If market rebounds I might rinse and repeat, but I'm out for now.
 
[quote author="blackvault_cm" date=1224719544]I hope you kept your puts. I sold my 40 XOM puts for 6.35 this morning netting me a nice profit. If market rebounds I might rinse and repeat, but I'm out for now.</blockquote>
Still holding on tight, I was attempted to dump them when the Dow hit a loss of 400 this morning but I think there's some more downside to go before the day is done. I might sell off 3 of each puts to lock in some profits if the indexs plunge at the end of the day.
 
[quote author="usctrojanman29" date=1224709244]

Wow, I'll never understand the market. Apple up big time and so is Yahoo yet the market is tanking. Oh wells, I'm in the black on the puts FOR NOW.</blockquote>


Well there's the part where AAPL, it's already down 55%. They're not going out of business you know. "Deep recession" doesn't mean all stocks need to go down to 10% of their highs.



Or do you mean you expected the market to be up?
 
He meant market. The market is down because we see more signs that we are entering a recession. The financial capital (London) is draging it's country through the mud. They are in a recession, Europe will follow and America next (i think we are already in one).



Also, you have to look at Apples guidance in detail and draw logic as to how it affects the rest of the world. Apple has the hottest items on the market. If someone wants to buy a gadget they will most likely target an iphone, itouch, or ipod as they are probably #1 on their lists.. Apple came out and announced that they expect sales to slow down in the next two quarters. If hot items like theirs are slowing down, then what do you think that will do to other items that are #2, #3 etc. on peoples list? Meaning if you do have cash you will probably just buy an ipod and ignore #2 and #3 on your list..



Apples products are a good indication of how other products will do.
 
[quote author="muzie" date=1224756973][quote author="usctrojanman29" date=1224709244]

Wow, I'll never understand the market. Apple up big time and so is Yahoo yet the market is tanking. Oh wells, I'm in the black on the puts FOR NOW.</blockquote>


Well there's the part where AAPL, it's already down 55%. They're not going out of business you know. "Deep recession" doesn't mean all stocks need to go down to 10% of their highs.



Or do you mean you expected the market to be up?</blockquote>
I never had an action going on AAPL or any other individual stock because it can move in very weird ways that's why when I play with options I go with indexs.
 
[quote author="muzie" date=1224574499]Is everybody still trying to call a bottom/2nd crash of armageddon?



I think the short story's done for a little while. Probably won't be a raging bull either.



I'm just going to sell calls against my long positions here. The VIX is still so high, I'd need a 15% drop before I lose a single dime on the covered call position I sold, and a sideways/rising market will hand out a hefty 7-10% premium for barely a month of holding.



So worse case we crash another 20% and I lose about 5% after the premium, and best case I collect a large premium. Rinse & repeat, until the VIX dies down to less freaky levels.</blockquote>


I was thinking about your comment today... Have you looked in to futures on stocks? You could sell a futures position against your stock position and obtain the same downside protection without all the option premium. Of course, you give up all upside as long as you are in the position, but it is a far cheaper source of downside protection.
 
[quote author="IrvineRenter" date=1224761443][quote author="muzie" date=1224574499]Is everybody still trying to call a bottom/2nd crash of armageddon?



I think the short story's done for a little while. Probably won't be a raging bull either.



I'm just going to sell calls against my long positions here. The VIX is still so high, I'd need a 15% drop before I lose a single dime on the covered call position I sold, and a sideways/rising market will hand out a hefty 7-10% premium for barely a month of holding.



So worse case we crash another 20% and I lose about 5% after the premium, and best case I collect a large premium. Rinse & repeat, until the VIX dies down to less freaky levels.</blockquote>


I was thinking about your comment today... Have you looked in to futures on stocks? You could sell a futures position against your stock position and obtain the same downside protection without all the option premium. Of course, you give up all upside as long as you are in the position, but it is a far cheaper source of downside protection.</blockquote>
You know, one of the option gurus on CNBC was talking about selling covered call options on stocks that you are long to collect a nice premium while you wait for them to pick up. As I don't own any individual stocks, there's no way in hell am I going to sell uncovered call options on any stock in this market.
 
You can't sell uncovered options calls anyway. You have to be margined to do that if your broker will even allow it. Uncovered options are generally refered to as "naked" options. Yeah don't do it. I trade options more than stocks and I've never done it....yet....haha



But yes, its a wonderful strategy. I would target areas with very limited upward potential. So if you own bank stocks such as BOA or WFC then I would write covered calls. Logically, it will take ages for banks to get back to the levels they were at before especially since regulation is coming their way. On top of this we won't have a housing bubble anytime soon driving profits for banks like they did before the bubble burst. So the probability of bank stocks going up is pretty slim. Some might have bottomed out, but I bet they will trade sideways for several years.



As long as it goes down or stays flat, keep collecting a small premium.
 
[quote author="blackvault_cm" date=1224767676]You can't sell uncovered options calls anyway. You have to be margined to do that if your broker will even allow it. Uncovered options are generally refered to as "naked" options. Yeah don't do it. I trade options more than stocks and I've never done it....yet....haha



But yes, its a wonderful strategy. I would target areas with very limited upward potential. So if you own bank stocks such as BOA or WFC then I would write covered calls. Logically, it will take ages for banks to get back to the levels they were at before especially since regulation is coming their way. On top of this we won't have a housing bubble anytime soon driving profits for banks like they did before the bubble burst. So the probability of bank stocks going up is pretty slim. Some might have bottomed out, but I bet they will trade sideways for several years.



As long as it goes down or stays flat, keep collecting a small premium.</blockquote>
I might use that strategy when I do decide to pick up some individual stocks. I too pretty much play with going long on calls or puts on the indexs (although I was tempted to pick up a few put options on Amazon before closing today). Send me a PM with your e-mail blackvault, I'd like to share option timing with you (I seem to be pulling the trigger a bit early and having to wait until my option positions get into the black).
 
There are other strategies you can use as well. Some I use often such as Conversions/Reversals (find overpriced/underpriced option contracts, buy the stock and sell the calls/puts; use anytime you see the opportunity as its guaranteed profits), Short straddles (when the market is dead with no volatility) or Long Strangles (lots of volatility...yum)



When you do protective puts as you mentioned prior, make sure you always use 1:100 ratio. Meaning for every call/put you sell make sure you own 100 shares. If you don't, then you will be "naked" on the uncovered shares.
 
[quote author="blackvault_cm" date=1224768427]There are other strategies you can use as well. Some I use often such as Conversions/Reversals (find overpriced/underpriced option contracts, buy the stock and sell the calls/puts; use anytime you see the opportunity as its guaranteed profits), Short straddles (when the market is dead with no volatility) or Long Strangles (lots of volatility...yum)



When you do protective puts as you mentioned prior, make sure you always use 1:100 ratio. Meaning for every call/put you sell make sure you own 100 shares. If you don't, then you will be "naked" on the uncovered shares.</blockquote>
Tell me more about how Long Strangles work...
 
[quote author="usctrojanman29" date=1224768075][quote author="blackvault_cm" date=1224767676]You can't sell uncovered options calls anyway. You have to be margined to do that if your broker will even allow it. Uncovered options are generally refered to as "naked" options. Yeah don't do it. I trade options more than stocks and I've never done it....yet....haha



But yes, its a wonderful strategy. I would target areas with very limited upward potential. So if you own bank stocks such as BOA or WFC then I would write covered calls. Logically, it will take ages for banks to get back to the levels they were at before especially since regulation is coming their way. On top of this we won't have a housing bubble anytime soon driving profits for banks like they did before the bubble burst. So the probability of bank stocks going up is pretty slim. Some might have bottomed out, but I bet they will trade sideways for several years.



As long as it goes down or stays flat, keep collecting a small premium.</blockquote>
I might use that strategy when I do decide to pick up some individual stocks. I too pretty much play with going long on calls or puts on the indexs (although I was tempted to pick up a few put options on Amazon before closing today). Send me a PM with your e-mail blackvault, I'd like to share option timing with you (I seem to be pulling the trigger a bit early and having to wait until my option positions get into the black).</blockquote>


Well if you always find yourself chasing the black ink from drowning in red, I bet you are buying deep out of the money option contracts. Though cheaper and bigger payoffs, they tend to not mature and you will (in most cases) lose money. If you play with those type of contracts make sure you can reload over and over as losses will mount fast (trust me been down on that road numerous times).

Options like that have high payouts, but you have to have deep pockets. For example when I play with those I usually commit 10K. I will probably buy in 10 segments. 1k, 1k, 1k etc. So I can cost average numerous times as they are very risky. If first one skyrockets, cash in and move on.



But I would recommend day trading "in the money" option contracts. Like tomorrow Im going to buy XOM and CSCO Nov calls. I'm dumping 4K in each in 2 segments. So 2k for XOM and 2K for CSCO, then repeat if the price runs from me.

CSCO is an excellent one to day trade at right times because its not very volitalte but the Delta of calls and puts is very high. Currently its at 0.80 meaning for every dollar it moves up the option will move 80 cents.



The one I'm eyeing is +cyqkc 15@2.85...



So if csco moves 50 cents tomorrow. My profit will be .50(price movement) X .80(delta) = .45 profit (16%) less 1.7 cents (extrinsic value or theta)



My point being is that if you buy DEEP out of the money contracts deltas are very low. For example 25 dollar strike on CSCO costs 4 cents only and delta is 2.3 cents. So for every dollar it will move 2.3 cents. You might think this is nice since you gain pretty much a 50% return for each dollar movement vs. about 28% on the previous example (2.85 + 0.80/2.85-1) but the BID and ASK spreads for the 4 cent options will destroy you to pieces. So don't even bother. This current 4 cent option has a bid of 1 cent and an ask of 4...instant 75% paper loss. Yikes.
 
[quote author="usctrojanman29" date=1224768750][quote author="blackvault_cm" date=1224768427]There are other strategies you can use as well. Some I use often such as Conversions/Reversals (find overpriced/underpriced option contracts, buy the stock and sell the calls/puts; use anytime you see the opportunity as its guaranteed profits), Short straddles (when the market is dead with no volatility) or Long Strangles (lots of volatility...yum)



When you do protective puts as you mentioned prior, make sure you always use 1:100 ratio. Meaning for every call/put you sell make sure you own 100 shares. If you don't, then you will be "naked" on the uncovered shares.</blockquote>
Tell me more about how Long Strangles work...</blockquote>


My favorite play is strangles. Buy calls and puts of the same underlying asset, same strike price, same expiration. As one moves one way, the other will move opposite giving you a wash. The key here is volatility. The max you can lose on each is 100% while you gain 100%. So once one moves 105% the other will still be -100% netting you 5%.



The key is you need atleast 100% gain on one before you even make a penny.



3 months ago I strangled lehman, as I didn't know where it was going to go and I didn't care. I put 1k in each calls and puts. Lost 1K on calls, but lehman went bankrupt and I netted roughly 19K or 1900%. If Lehmans stock stayed flat, i would have lost 2K.
 
[quote author="blackvault_cm" date=1224767676]You can't sell uncovered options calls anyway. You have to be margined to do that if your broker will even allow it. Uncovered options are generally refered to as "naked" options. Yeah don't do it. I trade options more than stocks and I've never done it....yet....haha



But yes, its a wonderful strategy. I would target areas with very limited upward potential. So if you own bank stocks such as BOA or WFC then I would write covered calls. Logically, it will take ages for banks to get back to the levels they were at before especially since regulation is coming their way. On top of this we won't have a housing bubble anytime soon driving profits for banks like they did before the bubble burst. So the probability of bank stocks going up is pretty slim. Some might have bottomed out, but I bet they will trade sideways for several years.



As long as it goes down or stays flat, keep collecting a small premium.</blockquote>


Similar to the futures strategy, you could create a synthetic short in options by selling the calls and buying puts. Since you are selling as much premium as you are buying, it is a wash.



Selling options is really where the money is. Almost 2/3 of all options expire worthless. Selling premium is how most professional options traders make their living. It is a very risky way to make a living. I have seen performance graphs of hedge funds that do this. You see a steady, upward equity curve punctuated by 50% drawdowns. Over time it makes money, but the volatility is extreme.
 
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