TheFinancialWhiz.Com - Investing and Trading Advic TheFinancialWhiz.Com - Investing and Trading Advic A blog devoted to investment strategies that should meet or beat the market with less risk. The blog uses investments such as stock options, ETFs, and stocks to realize these goals. Articles
Chinese Yuan: The New Carry Trade Choice
2007-03-20 18:58:00 As mentioned in my previous post in regards to the New Turkish Lira being the top currency choice to hold long in a carry trade portfolio, my new short position choice is now the Chine se Yuan. The FOREX broker that I use, Oanda, is currently offering an interest rate of 5.925% per annum to traders ... More About: The N , Carr , Trade
The Turkish Lira Carry Trade: High Interest Rate, Stable Currency
2007-03-17 01:06:00 For the past few years, probably the most popular currency trading strategy is that known as the Carr y Trade . Traders feel they are acting as banks, keeping the interest rate differentials by paying out lower interest rates (Borrowing) and bringing in money through higher interest rates (Lending). The best part about this type of trade ... More About: Inter , Kish , Currency
The FOREX Market: Prime Conditions for the Reverse Scale Trading Strategy
2007-03-14 05:32:00 For those of you who have never heard of the foreign exchange market, you are missing out on the 24-hours-a-day market that is only closed Friday evening through Sunday afternoon. This fast moving market gives you the ability to leverage your transactions not by the typical 2x that you are allowed in the US Stock ... More About: Market , Strategy , Forex , Trading , Ever
Option Collars - Low-Risk, Low-Cost, Market Perform Trading Strategy
2007-03-10 06:24:02 This trading strategy is very similar to the Put Option Dividend Strategy , but this strategy can be applied to stocks that don’t pay dividends, which provides some versatility and diversification. It would also keep transaction costs low as opposed to the Put Option Dividend Strategy with Covered Calls Strategy, which requires more options to be sold instead of one long-term option. The ideal situation would be to combine the two approaches into companies that you feel are fundamentally sound, and you will have a market-beating, low risk portfolio of stocks that generate returns greater than or equal to the market. The stock I would like to use as an example of this strategy is Google (GOOG). While the ability of you or I to purchase 100 shares of Google may be extremely limited because of its current trading price of $452.96 for a total cost of $45,296.00, it does represent a prime example of this type of strategy. Today (March 9, 2007) we purchased the following position:... More About: Market , Trading , Cost , Risk
Utilizing Leveraged and Unleveraged ETFs and Mutual Funds to Create a Fully
2007-03-08 18:22:01 As mentioned in a previous post about the performance of the Leveraged ETF portfolio, I am currently testing a fully diversified portfolio that should perform in any type of market. While the performance may be mute and more of an average, the risk should be a lot less than a pure equity portfolio. The performance is also magnified by the leverage aspect of the portfolio which will increase the total returns, but may increase the portfolio’s risk. I put together a portfolio of different ETFs and Mutual Fun ds and the composition is as follows: (Name - Ticker Symbol - Allocation) Direxion S&P 500 Bull 2.5x - DXSLX - 33.74% ProFunds Ultra International - UNPIX - 12.27% ProFunds Ultra Emerging Markets - UUPIX - 4.29% ProShares Ultra Real Estate - URE - 4.91% PowerShares DB Commodity Index Tracking - DBC - 6.13% Direxion 10 Year Note Bull 2.5x - DXKLX - 10.74% ProFunds U.S. Government Plus - GVPIX - 6.13% Vanguard Convertible Securities Funds - VCVSX - 6.13% PowerShares List... More About: Mutual fund , Mutual Funds , Rage , Ever
Update on the Ultra-Leveraged, Speculative ETF Strategy
2007-03-08 18:22:01 It has been one month since I posted the Ultra -Leveraged, Speculative ETF Strategy on the site. I have actively been testing this strategy since I posted the idea. In the example, I had mentioned how we looked to take a bear market approach to the S&P 500 since it was approaching the 1999-2000 peak and the market has not corrected more than 4% in over three years. Here is the update as of March 7, 2007: On February 8, 2007 the following purchases were made in the $145,000 portfolio: Long SDS - Proshares Ultrashort S&P 500 ETF - Trading at $56.20 We take a $145,000 position in that ETF by purchasing 2,580 shares for a total cost of $144,996 Short SSO - Proshares Ultralong S&P 500 ETF - Trading at $89.47 We take a $145,000 short position in this ETF by purchasing 1,620 shares for a total cost of $144,941.40 Let us fast forward to the present day of March 7, 2007 and take a look at the portfolio’s performance. Long 2,580 shares of SDS - Proshares Ultrashort S�... More About: Update , Rage , Ever
Stocks that fit the profile for the Put Option Dividend Strategy
2007-03-07 06:20:03 BMY - Bristol Myers Squibb WB - Wachovia Bank C - Citigroup UST - UST Inc. PTR - PetroChina NCC - National City FITB - Fifth Third Bank VZ - Verizon Communications SO - Southern Company DUK - Duke Energy ED - Cons Edison T - AT&T MRK - Merck MO - Altria Group More to be added soon. More About: Stocks , Strategy , File , Hat , Stock
February 27, 2007: A Well-Needed Breather
2007-03-07 06:20:03 The main premise of this site is to develop and communicate new trading strategies, but sometimes there is a shock that comes along that tests even the best disciplined investors. Tuesday, February 27, started out with an approximate 10% drop in the Chinese A-shares stock market, which sparked a worldwide equity sell-off. While the 10% drop sounds like a lot, the Chinese stock market since February 5th has seen a non-stop 15% growth up until this drop. The problem is that there is so many risk-adverse investors right now that they weren’t valuing investments with appropriate risk premiums. The emerging markets do present some risks that are not an issue in developed markets, but investors were valuing those securities as if they were in a developed market environment. Another issue was that of the massive selling and profit-taking that went on domestically and around the world. This little shock in a somewhat unrelated region of the world sparked this weak open and market ... More About: Need , Breath , Breathe , Brea , Well
Ultra-Leveraged, Speculative ETF Strategy
2007-03-07 06:20:03 For those of you who are risk takers, speculators, or just looking to make a quick buck, this next strategy may be for you. Going back to a previous strategy where we were utilizing leveraged ETFs to achieve greater diversification and less risk, we are now going to use those leveraged ETFs to massively leverage our portfolio. As of February 8, 2007, the S&P 500 is currently trading at 1444 and its index tracking stock the SPY is currently trading at 144.60. The market for the month of February has been on a tear and my belief is that we are about to experience a short-term pull back. There are two types of ETFs, there are Ultra -short, which go up 2% for every 1% loss in the S&P and there are Ultra-Long, which go up 2% for every 1% gain in the S&P. To idea of this strategy is if we are bearish on the market, we will buy the Ultra-short and sell the Ultra-long, giving us a 4x leveraged position without buying on margin. The opposite should be done for a bullish mar... More About: Strategy , Rage , Ever , Trat
Selling Covered Calls Against LEAPs Positions
2007-03-07 06:20:03 While this strategy can leave the investor slightly unprotected against the downside (or upside) depending on how the strategy is used, it can provide returns that are less volatile and will outperform in a flat or falling market. The idea here is to expand on a typical covered call trading, holding long shares and selling calls against that position (1 call for every 100 shares). This strategy is suggested to be used with index funds that follow the broad market indexes, to avoid individual firm risk. Lets take a look at how this strategy can be used. Portfolio 1 - All Stock SPY - $101,346- 700 shares Portfolio 2 - Using LEAPS 7 SPY December 2008 $120 Call - Total Cost: $23,310 $78,036 in cash While purchasing the call option does entail an additional cost because of the premium, which is $8.49 per share, or a 5.9% premium to the current price, it does allow us to gain a full allocation to the index with about a 5th of the actual cost. We then will look to sell covered call agai... More About: Selling , Calls , Cover , Again , Over
Selling Deep In-The-Money Call Options Against Stocks
2007-03-07 06:20:03 Another strategy that can be used by investors is one that has a high probability of success and a low probability of loss. This strategy is to provide consistent returns and is not speculative by any means and will not produce outsized returns. The premise of the investment strategy is to hold long 100 shares of stock of a particular security and selling a deep in the money call option in the hopes of being assigned. The investor will weigh risk/return on a particular stock and this strategy should be used in a diversified manor to provide more consistency to weigh out any outlier security that does not perform as to expectations. To get a better idea of how this strategy works, we will apply it to Advanced Micro Devices (AMD), which has recently been under pressure from its larger rival Intel. It is currently trading at $15.69 a share and we will be looking at going long 100 shares of stock. Which would give us a total cost of $1,569. Because we like the company and feel the... More About: Selling , Stocks , Money , Stock , Options
Why Should You Protect Your Principle with the Put Option Dividend Strategy
2007-03-07 06:20:03 The stock market is full of volatility and this causes a deception of returns to retail investors. For example, lets say that you put $1,000 into the stock market last year and your investment declined 10%, you now have $900 in your investment account. Now, this year your investment increased 10%, most investors would think that they are at break even, but because of compounded returns, they are now left with $990, or a loss of $10. If you were to go back a few years to the end of the bubble this is what the returns looked like: 2000 -9.95% 2001 -13.11% 2002 -23.36% Taking into account compounding that is 40% loss from the highs. So in other words for every $1 invested at the beginning of 2000 in 2002 would now be worth $.60. In order for the investment to get back to break even from that fall, the market would need to return 66.7%. Using the Put Option Dividend (POD) strategy and the Covered Call POD strategy, the investor using the original POD strategy, that original decline... More About: Strategy , With , Your , Should , Trat
Utilizing Leveraged ETFs to Simulate the Performance of the S&P with Less R
2007-03-07 06:20:03 This strategy involves a relatively new investment product to the market known as Ultra shares, which mimic the returns of the underlying index times two. The idea behind the Exchanged Traded Fund (ETF) is that if the S&P 500 increases 1%, the ETF will increase 2% and vice versa for a decline. The worry is that people will use these ETFs as a speculative tool and since they are marginable, they can be traded with 4x leverage. Take for instance a normal ($100,000) portfolio, which is invested in securities that closely follow the S&P 500, so we will use the SPY (iShares S&P 500 Index Fund): We purchase 702 shares of SPY @ $142.45 = $100,000 Possible Outcomes: Market falls 15% = $85,000 Market stays the same = $100,000 Market rises 15% = $115,000 We can simulate this portfolio with the ETF, SSO, offered by Proshares, which is a leveraged S&P 500 ETF. We can purchase $50,000 worth of SSO to create a $100,000 exposure. Here are possible outcomes: We purchase 576 ... More About: Performance , With , Rage , Ever , Vera
Writing Covered Calls Against the Dividend and Married Put Option Strategy
2007-03-07 06:20:03 The idea here is to combine two very conservative strategies, covered call writing and married puts on dividend paying stocks. Both strategies can be utilized in a self-directed IRA fund, which will benefit from the tax-deferred nature of the account type. The idea with combining both the married puts strategy as describe in the previous post and covered call writing strategy that will be described in this post is the low risk nature of a married put on a dividend paying stock and the monthly/bi-monthly income generated by selling calls against the shares held in the portfolio. In the previous example, I described a purchase of 100 shares of Altria Group (MO) at $88.00 and combining that with one January 2009 $90 Put Option at $8.80 with a total cost of $9,640. With this current setup the investor is protected to the downside by the dividends received on the 100 shares of Altria and can participate in the upside. Since we are currently long 100 shares of Altria Group, we can now... More About: Writing , Strategy , Calls , Cover , Again
Low-Risk Trading Strategy using Married Put Options and Dividend Paying Sto
2007-03-07 06:20:03 What if you could go back 7 years to the very top of the stock market bubble, what would you do differently? What if you could have bought insurance on the performance of the stocks in your portfolio? There exists a strategy that protects the investor from both downside risk and opens it up for unlimited profit potential. It is the same as an insurance policy, you pay a little as you go along, for protection against loss. Today there exists opportunities that provide investors with an at worst loss of $0.00 and an unlimited profit potential over a two year period. As with everything dealing with the stock market, there is never a free lunch, and yes there is a time value to your money, that even though you might have a realized loss of zero, you may have less buying power in the future. The strategy is a well known strategy known as a “Protective Put” or “Married Put“, which involves purchasing an interval of 100 shares of a particular stock and buying on... More About: Strategy , Trading , Options , Risk , Sing
Update on the Utilizing Leveraged ETFs to Lower the Risk in Your Portfolio
More articles from this author:2007-03-07 06:20:03 When I first introduced this strategy, I mentioned how it could have been used following the recession from 2000 - 2002, that strategy can be viewed here. A new interest has been shown in this strategy following the 4% drop of the S&P that occurred in the month of February because of the events that took place on February 27, 2007. Investors are finally realizing that they had taken on too much risk and now they are rebalacing their portfolios. Another new issue is how correlated the global markets are now, most investors thought that by investing in International companies that they were protected from negative news domestically, however, last Tuesday has proved otherwise. Over the past month the S&P 500 has declined 4%, while aggregate bonds has increase around 1.25%. If someone where to enter into the leveraged ETF strategy on February 1, this is what their portfolio would have looked like today, March 3, 2007. I will also provide a comparision of what your portfol... More About: Portfolio , Port , Your , Update , Rage 1, 2, 3 |
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