Free Trade: OIH

Here’s another trade that looks good.

OIH seems to trading in a range so a condor or butterfly might work here, but I am just looking at selling some puts for now.

Sell the Apr 115 puts and buy the April 110 puts for a credit of .56.

That’s about a 12% roi.

Again, trade at your own risk. I am not using real money on this trade.

Fee Trade: PCLN

I’ve been working on a new trading system for credit spreads. This pick came from that system. So far the system has been hitting 90% winners.

PCLN: Sell Apr 210/200 Put spread for .82 credit.

Max Profit $164

Max Loss $1836

Potential ROI: 8.9%

You should take the spread off when it gets to .10, or if you are down 10%.

This is just an example, trade at your own risk.

For Psychic, Suit Came as Surprise

He calls himself “America’s Prophet,” a psychic, trained by Nepalese monks in the art of time travel, who can foretell the future of the stock market.

But to the authorities, Sean David Morton is simply a fraud — and a really, really bad psychic.

In a case that seems ripped from the pages of the satirical newspaper The Onion, the Securities and Exchange Commission sued Mr. Morton for securities fraud on Thursday, claiming he swindled more than $6 million from investors by promising them “piles of money,” along with spiritual happiness.

Source: youtube.com Sean David Morton

“I have called ALL the highs and lows of the market giving EXACT DATES for rises and crashes over the last 14 years,” Mr. Morton claimed at one point, according to the documents filed in connection with the case.

Next to the Ponzi scheme orchestrated by Bernard L. Madoff, the Morton case might seem like little more than a footnote in the annals of financial fraud. But the story is so unlike the usual Wall Street fare — it touches on late-night talk radio, a company called Magic Eight Ball and the Dalai Lama — that even in this post-Madoff world it all seems a bit hard to fathom.

By his own reckoning, Mr. Morton is a modern-day Nostradamus. According to his Web site, delphiassociates.org, the Dalai Lama sent him to a monastery in Nepal, where a fusion of Eastern spirituality and Western psychic techniques helped him develop the “spiritual remote viewing” system.

He told The Los Angeles Times in 1991 that he grew up in Texas, the son of a public relations official for NASA. His dinner table companions, he said, were astronauts, who told him of their sightings of extraterrestrial life.

 Mr. Morton’s reach was broad. He solicited investors through a newsletter with 20,000 subscribers, run through his Delphi Investment Group; his Web site; and his frequent appearances on radio shows like “Coast to Coast,” a late-night syndicated program focused on the paranormal. He and his wife, Melissa, created three unregistered vehicles for their investors. One was called Magic Eight Ball Distribution.

The S.E.C. named Mrs. Morton and a religious organization the couple founded as relief defendants, meaning that the regulator is seeking to retrieve profits from them but has not filed civil charges against either.

According to the S.E.C., Mr. Morton pledged to invest the money he collected with foreign currency traders, who would act according to his psychic revelations. The strategy purportedly earned returns as high as 117 percent over five-month periods.

The reality, the S.E.C. claims, was less impressive — and fraudulent. In court filings, the agency claims that Mr. Morton actually deposited only $3.2 million into the trading accounts. The rest was funneled to various entities, with $240,000 sent to the Prophecy Research Institute, a nonprofit religious group set up by the Mortons.

His predictions weren’t particularly accurate, either. On a Nov. 21, 2001, radio broadcast, Mr. Morton predicted that the Dow Jones industrial average would rise between April and June of 2002, cresting at “12,000 or so” by December of that year. According to the S.E.C., the index fell that year, ending at 8,341.

 “Morton’s self-proclaimed psychic powers were nothing more than a scam to attract investors and steal their money,” George S. Canellos, the director of the S.E.C.’s New York regional office, said in a statement.

Neither of the Mortons could be reached for comment on Thursday. But as part of a 2009 lawsuit aimed at halting an S.E.C. investigation, the Mortons argued that they were the targets of “two (or more) dishonest and incompetent S.E.C. employees, who apparently need to justify a trip to California in order to visit Disneyland and eat In And Out Burgers at the taxpayers’ expense.”

A federal judge dismissed that lawsuit in December.

Diana B. Henriques contributed reporting.

Why Are People So Cheap?

This post has no educational value. I am just venting my frustration.

Got an email today from a member that was having a problem getting our emails. So when I investigated, it turns out that he has taken advantage of the $1 30 day trial FOUR TIMES. What a wonderful fellow (sarcasm). He went through the effort of using different email addresses and different names to create new accounts every time his 30 days was up so he would not have to pay the monthly fee.

And this is supposed to be someone who can afford to be investing? If you have thousands of dollars in the market, why would you go through all this trouble to screw me out of a few dollars a month?

You are stealing you loser. Why would you stoop so low to save a couple dollars a day?

And it’s not like he did not get any value of it. He was a member for four months and complained when he missed one email. He was obviously using the service. Hell, one good month pays for a whole year of the membership even if you only have $10,000 to invest, which is the minimum I suggest you start with.

Needless to say his account has been terminated and steps have been taken so he cannot sign up again.

Now I am going to have to waste precious time to see if this is a larger problem and many people are doing this or if this guy was the only one with no scruples, values, or decency.

On days like this, I wonder if it is worth it. It’s not like I am making millions of dollars with this site. It’s just something to keep me busy since the trades don’t take up that much time. 

Oh well, I guess it’s part of life. The sad thing is, that if others are doing this as well, I will have to do away with the $1 trial and then it will hurt the people who actually are honest enough to follow the rules.

Thanks for letting me vent. I feel a little better. I think I am going to go punch something now.

Start With Papertrading

I am a newer subscriber. I paper traded  DIA using the exact recommended prices.  I was filled right away on the 1st and 3rd leg. The 2nd leg is at $1.71. Using a limit order of $1.79, I haven’t been filled.  Can you suggest what I should do in cases like this?

My short answer:

I would have entered the trade as one, instead of three options separately.
Sounds like you will have to adjust your price to get filled. my software is showing a price of 1.76 right now. Try that, and if not, reduce it penny by penny until you get it.
 
It’s a good thing you are papertrading. It is exactly problems like there we want to overcome before we use real money.

This situation is exactly why I advise all members to start with papertrading. Look, the market is not going anywhere. I know that you are anxious and eager to start making money but patience is very important. My trades are waiting trades. I mean that you put them on and then wait for time decay to do its thing. You need patience to trade these.

But when you start there are many things that can trip you up. Not knowing how to place an order correctly or misunderstanding your broker’s platform can cause a winning trade to turn into a big loser. I have seen it happen to members many times.

I am in the process of coming up with a papertrading manual that will give exercises on entering and exiting trades plus help you see how options work on a more advanced scale than what is normally discussed. This manual is in the works and will be posted on the members section of the site.

But to anyone who is starting out in options or selling options, or trading in general: Papertrade first, for as long as it takes for you to get comfortable with your broker platform, until you understand what all the order types are, until you understand which trades are debit trades and which are credit trades, until you can execute a trade like a condor (4 legged) in less than 1 minute.

Once you have these basics down, then and only then should real money be brought into the picture, because if you have real money on the line, and you need to move quickly to exit a trade, if you are not experienced you will screw up and cost yourself more money.

Iron Condors and Volatility

Question:

In your lesson you said that volatility is not good for options trading since you trade within  a statistical mean. If you do condor trades don’t you need volatility?  Won’t you make more money or will out of the money be the same at any price?

My answer:

The higher the volatility, the higher the option prices.
But in a condor, volatility is not as important as price action.
If volatility drops, we can exit the condor trade faster. But if it rises it just means we have to be in the trade longer. Volatility is more important in trades like calendars where it can destroy the trade if it drops too much.

Difference Between Stock Options and Futures Options

Obviously, there is a difference between stock options and futures options, and the primary differences are in flexibility as well as overall risk.

Let’s first review what futures contracts are as opposed to stock options. Futures contracts are standardized contracts that guarantee to buy or sell a specific commodity of standard quality, at a particular date in the future. This sum will be at market price. Contracts are traded on what are called future exchanges. So right away we can tell that futures contracts are not direct like stocks or bonds. They are still considered securities, but with a different type of contract.

Price for futures contracts is determined by what is referred to as instantaneous equilibrium, that takes into account basic supply and demand as well as competitive buy and sell orders on the market. The asset here may not necessarily be commodities; it can be anything from securities to intangible assets or even stock indexes. The future date is referred to as the delivery date. The settlement price refers to the official price of the contract at the end of a trading day.

1. One significant difference between futures contracts and stock options is that futures give buyers an obligation to fulfill delivery according to the contract’s terms, and the obligation for the seller to deliver the asset as agreed. The only escape here is if the holder’s position is closed before the expiration date. Whereas stock options are flexible by their nature, futures contracts require obligation. Futures are known as exchange-traded derivatives, as the exchange company’s clearinghouse plays the part of counterparty on all of the futures contracts.

2. Another major difference in these two contracts is the way in which gains are received. In options trading, a gain can be realized by exercising when the option is deep ITM, or by going to the market and taking an opposing position, or by waiting until the expiration and then collecting the difference in prices (in this case asset price and strike price). However, when it’s time to collect gains on futures positions, you will notice that these gains are “marked to market”, which means the change in the value of positions will be automatically handled at the end of every trading day.

3. Volatility is also traded differently. With equity options volatility makes the price of the option go up, in the futures it is the opposite.

4. Futures options also have many more strike prices than normal equity options.

5. Volume can also vary from option to option just generally many more equity options are traded than futures options.

Freeze Congress Salaries Until We See How Their Laws Turn Out

In a bold move, Mayor Bloomberg of New York called to free Congress salaries. He did it in response to Congress wanting to limit Wall Street bonuses but I happen to agree with him.

I think Congress should have term limits. 4-6 years and you are done. Go back to your job/business/etc. The founders of this nation were all citizen representatives. These people in Congress today have to inclination what the common man in their district is going through. They are not informed about the issues enough to vote properly and they care about getting reelected than doing any good.

They vote their own pocketbooks. And that is a hainous crime. I am really sick of Dems and Repubs fighting and attacking one another just because of party lines. I don’t care what party you belong to but your loyalty should be to the people.

It’s obscene that Congress passed salary increases for themselves when we were in the middle of 2 wars, an economic downturn, and “on the verge of economic collapse”.

I forgot the number but the recent Congress took more days off than any previous session of Congress including the infamous “Do Nothing Congress”. They make more money and they work fewer less. are they not ashamed of themselves? Or do they sit in their private conferences and just laugh at us for allowing them to basically rob us blind?

Let’s have some accountability in Congress. Let’s make some benchmarks and have Congress’ compensation tied to those benchmarks.

• If they balance the budget, they all get $20,000 for the year.
• If the number of high school students that go to university increases by 5% then get $10,000 a year.
• If GDP is positive, then get $10,000 for the year.

We have over 10% unemployment, yet Congress, most of whom are already millionaires, makes over $200,000 a year, gets the best medical plan around, and gets all their living expenses paid for.

What a shame.

2009 Investment Returns

OptionGenius.com reports a positive return on investment of 47.18% for 2009 and a 5.73% ROI for December.

Houston, Texas, January 20, 2009 – OptionGenius.com, a stock option selling advisory service for individual investors, reported monthly gains for December 2009 of 5.73% and a gain of 47.18% for the year of 2009.

Founded by Allan Sama, OptionGenius.com lets anyone see Sama’s actual option trades and adjustments through real-time updates; by making the same trades themselves, OptionGenius.com members can enjoy the average 8% to 10% monthly returns Sama consistently achieves. Even with the Dow down 34% in 2008, Sama and his members made 102.14% for the year.

By limiting the number of trades to only those with a 75% or higher probability of success, OptionGenius.com (http://www.optiongenius.com) has far outpaced the stock market the past few years.

The trades for December were in

• SPX – the S&P 500 Index
• RUT – the Russell 2000 Index
• MNX – the Mini NASDAQ 100 Index

While Sama continues to make above average gains, he does not promise any home runs. In fact, while other advisory services proclaim trades that net 100-1000%, Sama aims for 10% on each trade.

“As an option seller, I look for base hits. I want a couple singles and maybe a double each month. I use strategies that bring me consistent income month after month, no matter what the market is doing. It could be up, down, or sideways and I can still profit” says Sama.

To learn more about OptionGenius.com or to try the service for $1.00, visit http://www.optiongenius.com.

What is an Exchange Traded Fund (ETF)

An Exchange Traded Fund (ETF) is a type of investment fund that is traded on stock exchanges.  This type of fund is similar to stock, and holds assets at about the same price as the net asset value.  

The first ETF in the business was introduced in the early 1990s and were called Spiders (SPY).  This ETF tracked the S&P 500 index.  The Qubes (QQQQ) came a few years later and this tracked the 100 largest non-financial companies on the Nasdaq. Some of the biggest players in the ETF market today include State Street Global Advisors, Barclay’s Global Fund Advisors and Vanguard.  Of course there are many types of ETFs, and they can track everything from the United States stock market to just parts of the stock market, like large or small stocks or specific industries.  ETFs even track foreign markets, individual countries, and commodities.

 There are hundreds of ETFs to choose from.  An Exchange Traded Fund combines the valuation feature of mutual funds (the same kind that can be bought or sold at the end of each day for a net asset value) with a tradability feature of a closed-end fund (the type that trades throughout the day with prices different than the net asset value).  Closed-end funds are not actually ETFs even though they are all traded on an exchange. 

 ETFs offer investors a chance at undivided interest (with simple and lucrative operation like traditional mutual funds) with a little bit extra protection: ETFs can be bought and sold every day like stocks, just as you would find with a broker-dealer.  Another difference is that Exchange Traded Funds do not sell or redeem shares at net asset value.  Therefore, financial institutions purchase and sell ETF shares in large blocks, which can run anywhere from 25,000 to 200,000 shares.

 ETFs offer other advantages such as easy diversification, lower expense ratios, and better tax efficiency (due to their index fund-like operation).  ETFs are less expensive than other financial products because of the lack of management and because of fewer expenses in meeting shareholders purchases and redemptions, as well as lower marketing costs.  They are also very flexible in terms of buying or selling.  Because they are publicly traded, shares for ETFs can be bought on margin and sold short.  Investors can also take advantage of hedging, stop orders and limit orders. Options are also traded on most major ETFs.

 You may want to look into the flexible and potentially lucrative market of Exchange Traded Funds, especially if you are just starting to invest your own money.  They may look and act like stocks but they give you a whole world of opportunity, as they combine the best features of many different types of funds. 

 As ETFs become more and more popular several mutual funds and hedge funds are beginning to have ETFs are part of their portfolios.