Global Market Comments
January 6, 2025
Fiat Lux
Featured Trade:
(TESTIMONIAL)
(PLAYING THE SHORT SIDE WITH VERTICAL BEAR PUT SPREADS)
(TLT)
Global Market Comments
January 3, 2025
Fiat Lux
Featured Trade:
(A COW-BASED ECONOMICS LESSON)
SOCIALISM
You have 2 cows.
You give one to your neighbor.
COMMUNISM
You have 2 cows.
The State takes both and gives you some watered-down milk.
FASCISM
You have 2 cows.
The State takes both and sells you some milk at an inflated price.
NAZISM
You have 2 cows.
The State takes both and sends you to a concentration camp.
BUREAUCRATISM
You have 2 cows.
The State takes both, shoots one, milks the other, and then throws the
milk away.
TRADITIONAL CAPITALISM
You have two cows.
You sell one and buy a bull.
Your herd multiplies and the economy grows.
You sell them and retire on the income but worry about your cholesterol level and blood pressure.
ROYAL BANK OF SCOTLAND (VENTURE) CAPITALISM
You have two cows.
You sell three of them to your publicly listed company, using letters of
credit opened by your brother-in-law at the non tax treaty offshore bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows.
The milk rights of the six cows are transferred via an anonymous intermediary to a Cayman Island Company secretly owned by the majority shareholder, who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more. You sell one cow to buy a new president of the United States, leaving you with nine cows. No balance sheet was provided with the release. The public then buys your bull. You are lauded as a titan of free market capitalism.
SURREALISM
You have two giraffes.
The government requires you to take harmonica lessons.
AN AMERICAN CORPORATION
You have two cows.
You sell one and force the other to produce the milk of four cows.
Later, you hire a consultant to analyze why the cow has dropped dead. PETA sues you and pickets your office.
A FRENCH CORPORATION
You have two cows.
You go on strike, organize a riot, and block the roads because you
want three cows. And you have a fabulous time doing all this. The world is shocked.
A JAPANESE CORPORATION
You have two cows.
You redesign them so they are one-tenth the size of an ordinary cow and
produce twenty times the milk.
You then create a clever cow cartoon image called a Cowkimona and market
it worldwide. Then your stock crashes.
AN ITALIAN CORPORATION
You have two really fine, stylish cows which cost a fortune, but you don't know where they are.
You decide to have lunch with a fine bottle of Antinori and top it all off with a potent grappa and double espresso.
A SWISS CORPORATION
You have 5000 cows. None of them belong to you.
You charge the owners for storing them. The US IRS launches a criminal investigation and arrests every Swiss banker when they go shopping in New York.
A CHINESE CORPORATION
You have two cows.
You have 300 people milking them.
You claim that you have full employment and high bovine productivity.
You arrest the newsman who reported the real situation. Then your stock crashes.
AN INDIAN CORPORATION
You have two cows.
You worship them and feed them all your garbage.
A BRITISH CORPORATION
You have two cows.
Both are mad but drink great beer.
AN IRAQI CORPORATION
Everyone thinks you have lots of cows.
You tell them that you have none.
No one believes you, so they bomb the ** out of you and invade your
country.
You still have no cows, but at least you are now a Democracy.
AN AUSTRALIAN CORPORATION
You have two cows.
Business seems pretty good.
You close the office and go for a few beers at the bar to celebrate.
“When you think you know more than everyone else about the consumer, you’re in trouble,” said Mickie Drexler, the legendary CEO of J Crew and Apple board member.
Global Market Comments
January 2, 2025
Fiat Lux
Featured Trade:
(NEW VIDEO UPDATE ON EXECUTING A VERTICAL BULL CALL DEBT SPREAD),
(AAPL), (GS)
Come join me for lunch at the Mad Hedge Fund Trader’s Global Strategy Luncheon, which I will be conducting in Sarasota, Florida on Thursday, January 16, 2025. The cost of the luncheon will be $277.
An excellent meal will be followed by a wide-ranging discussion and an extended question and answer period.
I’ll be arriving early and leaving late in case anyone wants to have a one-on-one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at an exclusive Sarasota hotel. The precise location will be emailed with your purchase confirmation. Mad Hedge guests will be assigned their own dedicated table in a ballroom with 200 other participants.
I look forward to meeting you, and thank you for supporting my research.
To purchase tickets for this luncheon, please click here.
I have just updated the training video for Vertical Bull Call Debit Spreads that goes out with every trade alert. With a market meltdown forecast for the new year, some great entry points for these will be setting up.
Since then, we have learned a lot from customer questions. The nature of the options markets has also changed. So, the new video extends to 27:43 minutes. To watch it in its entirety, please click here.
I recommend watching it on full screen so you can read all the numbers on my options trading platform.
We have recently had a large influx of new subscribers.
I have no idea why. Maybe it’s my sterling personality and rapier-like wit.
Most investors make the mistake of investing in positions that have only a 50/50 chance of success, or less. They’d do better with a coin toss.
The most experienced hedge fund traders find positions that have a 99% chance of success and then leverage up on those trades. Stop out of the losers quickly and you have an approach that will make you well into double digits, year in and year out, whether markets go up, down, or sideways.
Bring on the Vertical Bull Call Debit Spread.
This is a matched pair of positions in the options market that will be profitable when the underlying security goes up, sideways, or down in price over a defined limited period of time.
It is the perfect position to have onboard during markets that have declining or low volatility, much like we have experienced for most of the last several years, and will almost certainly see again.
I have strapped on quite a few of these babies across many asset classes this year, and they are a major reason why I am up so much last year.
To understand this trade, I will use the example of Apple trade, which most people own and know well.
On October 8, 2018, I sent out a Trade Alert by text message and email that said the following. Please note these are pre-split prices.
BUY the Apple (AAPL) November 2018 $180-$190 in-the-money vertical BULL CALL spread at $8.80 or best.
At the time, Apple shares were trading at $216.17. To accomplish this, they had to execute the following trades:
Buy 11 November 2018 (AAPL) $180 calls at….………$38.00
Sell short 11 November 2018 (AAPL) $190 calls at….$29.20
Net Cost:…………………….………..………….…..................$8.80
A screenshot of my own trading platform is below:
This gets traders into the position at $8.80, which costs them $9,680 ($8.80 per option X 100 shares per option X 11 contracts).
The vertical part of the description of this trade refers to the fact that both options have the same underlying security (AAPL), the same expiration date (November 16, 2018), and only different strike prices ($180 and $190).
The maximum potential profit can be calculated as follows:
+$190.00 Upper strike price
-$180.00 Lower strike price
+$10.00 Maximum Potential Profit
Another way of explaining this is that the call spread you bought for $8.80 is worth $10.00 at expiration on November 16, giving you a total return of 13.63% in 27 trading days. Not bad!
The great thing about these positions is that your risk is defined. You can’t lose any more than the $9,680 you put up.
If Apple goes bankrupt, we get a flash crash, or suffer another 9/11-type event, you will never get a margin call from your broker in the middle of the night asking for more money. This is why hedge funds like vertical bull call spreads so much.
As long as Apple traded at or above $190 on the November 16 expiration date, you will make a profit on this trade.
As it turns out, my take on Apple shares proved dead-on, and the shares rose to $222.22, or a healthy $32 above my upper strike.
The total profit on the trade came to:
($10.00 expiration - $8.80 cost) = $1.20
($1.20 profit X 100 shares per contract X 11 contracts) = $1,320.
To summarize all of this, you buy low and sell high. Everyone talks about it but very few actually do it.
Occasionally, Vertical Bull Call Spreads don’t work and the wheels fall off. As hard as it may be to believe, I am not infallible.
So if I’m wrong and I tell you to buy a vertical bull call spread, and the shares fall not a little, but a LOT, you will lose money. In those rare cases when that happens, I’ll shoot out a Trade Alert to you with stop-loss instructions before the damage gets out of control.
I start looking at a stop loss when the deficit hit 10% of the size of the position or 1% of the total capital in my trading account.
To watch the video edition of How to Execute a Vertical Bull Call Spread complete with more detailed instructions on how to execute the position with your own online platform, please click here.
Good luck and good trading.
Vertical Bull Call Spreads Are the Way to Go in a flat to Rising Market
“Semiconductors are the new industrials,” said Josh Brown of Ritholtz Wealth Management.
Global Market Comments
December 31, 2024
Fiat Lux
Featured Trade:
(SO WHAT IS YOUR “INFLUENCER” SCORE)
(REPORT FROM THE ORIENT EXPRESS)
First, there was your grade point average, then your SAT score, followed by GMAT and LSAT scores, and finally your FICO.
Now there is a new metric with which you will be judged, your “Influencer” score.
A new breed of marketing research firms are using data from social media sites, like Facebook, Linkedin, and Twitter, to rank members according to their ability to spur their friends to action.
Companies like Klout, Peer Index, and Twitter Grader are using complex algorithms to mine their data and rank members. This is far more than just a simple listing of “friends.”
Scores range from 1-100, with a major league socializer achieving a 40 ranking, and someone like Bono or Martha Steward coming in at a godlike 100.
These scores will be made public and could have a major impact on your career prospects, your credit rating, and even your sex life. I can hear this conversation coming already: “Thanks for the invitation to the opera, honey, but I have a better offer from an 80 score to go to the Giants game.”
Do you like your new BMW, American Express card, or Rolex watch and are you talking about it with your friends? Advertisers are willing to pay big bucks to get to know you.
Last year, Virgin America airline offered free tickets to Los Angeles and San Francisco to highly ranked influencers, while Audi made available special discounts for a new car. Las Vegas casinos are giving away weekends with complimentary show tickets and generous room service tabs.
I have to tell you that I am looking forward to the new system. I just passed 1,700 likes on Facebook and have a massive Twitter following.
My website gets 30,000 hits a day and is read in 125 countries, so I should score pretty highly.
I understand that Maria Shriver has recently become available. Hey, Maria! Want to check out my 90? I’ll even fire my cleaning lady!
Will a 90 Score Tickle Your Fancy?