Wall Street evidently neglected to read beyond the headlines Friday stating, as The New York Times put it, “Jobless Rate Holds Steady, Raising Hopes of Recovery”. One need look no further than paragraph two to find the other side of the story that the rest of us already know: “The monthly snapshot of the job market released by the Labor Department on Friday was hardly cause for celebration....”
Sunday, August 23, 2009
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Volatility Tracker for the week of August 24, 2009 ‘Reflation’ is the name of the conceptual cure for the cognitive dissonance experienced by any rational observer of this market. Equities returned to short-term overbought status this week [4] and options are relatively fairly priced [6]. At 16%, the 21-day realized volatility of the S&P 500 is as low as it’s been since the financial crisis began, though it would be folly to try to call a bottom in volatility, or a…
Tuesday, July 7, 2009
Every time I write about financial journalism, I always end up sounding cantankerous and bitter. So let’s start things off with some genuine praise. The story “Biggest VIX Drop Hides Options Bets S&P 500 Will Fall” yesterday from Bloomberg includes the following: The reading indicates a 68 percent likelihood the S&P 500 will fluctuate as much as 7.3 percent in the next 30 days, according to data compiled by Bloomberg. That compares with the VIX’s all-time high of 80.86 in November,…
Monday, March 23, 2009
Long-term Equity Anticipation Securities (LEAPS) are a class of options with expiration dates longer than a year. Their purpose is to allow investors who would otherwise hold shares of an underlying equity to buy an option instead, and thereby participate in expected price movement without tying up as much capital. However, we caution investors against using LEAPS as stock substitutes without first taking volatility considerations into account. Let’s say you want to buy 1000 shares of Cisco Systems (CSCO). At $15.91,…
Monday, November 17, 2008
Perennial debates about the value of fundamental vs. technical vs. quantitative analysis are missing the point. The only valid school of analysis is the objective kind. Consider some of the feel-good subjective components that have adulterated each approach: Fundamental analysis: any valuation based on growth estimates is suspect. And you don’t need us to remind you of the dismal record of bright young sell-side analysts when it comes to pricing stocks. Picking strong companies with stable earnings trading at a huge discount to…
Saturday, March 6, 2010
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