Please Tax Us
In France the 16 richest (Link) have banded together and signed a petition to INCREASE their taxes. Just like Warren Buffett in the USA. – He was ridiculed by almost every right wing outlet
Of course in the USA Republican’s have to take a pledge NOT to increase taxes on the rich. In America we privatise the profits and socialize the risk.
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KISS & Stocks
(Keep It Simple Stupid)
If you don’t understand a term look in up at Investopedia.com dictionary
AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!
DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES
Our bear s still out there
| Index | Percentage | Volume |
|---|---|---|
| Dow | +2.97% | ave. |
| NASDQ | +4.29% | ave. |
| S&P 500 | +3.43% | ave. |
| Russell 2000 | +4.87% | - |
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Technicals, Fundamentals & Analysis
Shorter Term Outlook.
day/days/week
- Gold got so far over extended above its 50 & 17 day moving average it just had to blow off some overbought steam and fall. No major bad news from Europe and an overbought gold position falling triggered the algorithms of the High Frequency Traders, that dominate our stock market, into selling.
- Rumors of a possible QE #3 announcement and a short sale ban on financials also seemed to juice the algos of the HFT’s. (see Jackson Hole link below) Add to this the Somewhat oversold conditions of stocks and you have the fundamentals behind yesterday’s rally.
- HFT’s are what moves the markets, not your traditional traders. They majority have long since left the building. Any competent analysis of market direction has to focus on HFT’s.
- The McClellan Oscillator (MO) rose to +4.56 (-30 somewhat oversold, -60 oversold, -90 OMG oversold)( +30 somewhat overbought, +60 overbought and +90 OMG oversold) = Neutral
- Through these last two months and for over a year the MO has been an excellent forecasting tool – More tomorrow
- Reading The Tea Leaves – Futures are down. However the major question will gold see a second day of declines from its super way overbought highs. It’s really hard to see US markets move deeply into overbought territory right now. With MO at +4.56 there is wiggle room for both bears and bulls. But we probably need at least a bear market before the Fed act and are @ 3 to 5% away from that right now.
Longer Term Outlook
weeks, month, months
- Repeat - May 20th forecast still stands. The May 20th summer forecast has come to pass and now we wait to see the Fed’s next move. Add to this Europe is a whole lot worse than previously thought back in May.
- Repeat - Reading Tea Leaves - I believe we need another 5 to 10% on the downside before the Fed will intervene more strongly (QE #3 or something else) Perhaps this will come at the end of the week when there’s a meeting in Jackson Hole Wyoming. LINK After the rally yesterday I see less of a chance that the Fed makes a move – So still CAUTIOUSLY BEARISH
But maybe the following can help turn those bears into bulls.
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“Demystifying and Discussing Simple Option Strategies”
by JS
COVERED CALLS
Most people think using options is an exotic and a very risky strategy, however using options can actually lower risk for investors, and can also be used to increase yield for conservative investors.
An option is a “right” to buy or sell a stock at a fixed price anytime up to a specific date.
Options are sold, or bought by contracts: One contract covers 100 shares of a stock. When you see a price (premium) for an option, it is the price for coverage of one share of stock. Example: listed price of option is $.35, which means you’ll pay $35 for each contract (100 shares) you buy. Expiration date is the date the option has to be acted on (generally 3rd Saturday of each month) or it will expire worthless to the buyer.
Example:
KMP is the underlying stock these options are covering. First you must own 100 shares of KMP and want to keep it as a long term investment.
The symbol for a KMP call is: -KMP110917C67.5
What these numbers/letters mean:
- - (minus sign) means option;
- KMP is ticker symbol of stock covered;
- 11 means yr. 2011;
- 09 means Sept. (the 9th month);
- 17 means Sept 17 (expiration date),
- C means a call,
- 67.5 is the price you must sell the stock if you sold the call.
KMP closed Fri. @66.25 and you bought the stock at that price. The price of this option then was bid 1.79 – asked 1.91.
Strategy:
You own the stock, want to hold it but you want to increase your yield, taking a chance it may be CALLED (taken). You SELL the call, pocket $1.79 per share, and wait to see if it’s taken from you by Sept 17. If taken, you profit:
- 67.50 price paid for your stock when called
- - 66.25 price when you bought the stock
- 1.25 profit (price above where it was when you bought the stock)
- 1.79 premium you received for call you SOLD (the bid price)
- 3.04 Total profit for less than a month, less commission
Commission = commission to buy stock + to sell call + when your stock is taken from you. If the commission is $8 on each the total would be $24
Per 100 shares, profit $304 – $24 = $280 total profit
If you want to, you can buy KMP again if your option is bought.
If KMP is not taken (price dropped or stayed below $67.50), you keep the premium (179.00) and can sell another call for a future month. Either way you make a profit if the stock is taken or an extra dividend if it isn’t.
AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING
JS is a frequent contributor in the comments section of blog. Also look for Paul’s Corner every Tuesday and Thursday.
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You don’t have to be rich to use covered calls or many option strategies – [editor]
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Current Positions
Below – Investors411 hypothetical portfolio that should outperform the S&P 500.
Have not had time to check, but YSL #5 probably did very well yesterday.
NLY - Annaly Capital Mgt. Ultra high dividend stock – It’s been shaky, but so far NLY has held up reasonably well through current stock market slide. NLY is the only position in Investors411 hypothetical portfolio. Easily outperformed S&P 500 over last couple months and 14% dividnd is added bonus.
I still have a Put position to protect NLY. (strike price $17.00 for 3rd Friday in Sept) Also puts on other dividend stocks.
GLD – (Long Gold ETF) Obviously a MAJOR mistake to sell and take meager +3% profits back at $157. Like a millions of other people who see worldwide economic problems ahead – waiting to buy another dip.
If/when the MO low enough I will buy some YSL #5 stocks for our hypothetical portfolio Gold was way too far above its 50 & 17 Moving Averages to buy. Yesterday’s -3.75 brought it back some. Chance we’ll see another day of selling and a better entry point at end of day or tomorrow.
Disclaimer - Personally I own a group of dividend stocks including NLY, SNH, KMP, MO, HTD, T, ABV & AGNC and a few other smaller positions I have puts on about half of dividend stocks I own. I buy everything in the hypothetical Investors411 portfolio. I also ow SDS & TZA (ETF’s that double and triple short the market) as hedges. Buying some more hedges (TZA) at open. For those that do options – I bought a November 19th call on GLD for $355 at 191. How much can an option move in a single day? My GLD call option went from $655 and ended the day at $410. Bummer
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Long Term Outlook (for US Economy)
BEARISH
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Long Term Outlook (for US stocks)
CAUTIOUSLY BEARISH*
*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.
* Everything written in BROWN is a repeat from a previous day
AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING
ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE
