We generally restrict iron condor trades in our paid newsletter and managed accounts to index products. For those who prefer ETFs, we look at SPY, DIA, IWM, QQQQ; otherwise, SPX, RUT, NDX, DJX are bigger proxies, or on the futures side of things we’ll look at the Emini S&P 500 or Nasdaq 100 (ES and NQ). The reason we trade index products is that diversification reduces the impact of company-level surprises: an iron condor on, say, RIMM will get…
Wednesday, August 19, 2009
The financial sector of the U.S. economy has had nearly a year to address the problems that exacerbated the crisis last fall. But many observers think that the banks haven’t done enough, and that another round of trouble may be developing for the sector. I will outline some of those concerns and then suggest some ways to use options to profit if there is indeed another shoe to drop in banking. The Thesis The primary obstacle facing large banks is…
Friday, January 16, 2009
In this mini-series, we’re examining the value of beta as a measurement of risk. In this post, we want to examine how the betas of some popular stocks, indexes, and ETFs changed during 2008 and especially during the fall crash. First, we should clarify exactly what we’re measuring. What is beta? Beta is metric that describes the systemic risk of an asset or portfolio. Because it is not possible to alleviate all risk by simple diversification, investors and traders…
Thursday, January 15, 2009
The old maxim is that when major market movements occur, all betas go to one. We decided to look at the beta for a few stocks during 2008 to determine whether and to what extent that maxim held true. The reason we wanted to investigate the beta exhibited during 2008 – and especially during the fall crash – is that investors and traders use beta as a measurement of how risky an asset is relative to the market, with the…
Thursday, December 18, 2008
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Mr. Potter: [to George Bailey] Look at you. You used to be so cocky. You were going to go out and conquer the world. You once called me “a warped, frustrated, old man!” What are you but a warped, frustrated young man? A miserable little clerk crawling in here on your hands and knees and begging for help. No securities, no stocks, no bonds. Nothin’ but a miserable little $500 equity in a life insurance policy.
Monday, August 31, 2009
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