Stock Option Investment Advice

Some Market Parameters to Consider Heading into 2018

It is year-end, and time to reflect on this year’s market activity. It certainly has been a strong up trending year for equities. And with all the very positive news currently, there is room for more gains in 2018. However, markets do not just go up forever. The markets are extended without a normal set back of 10% in some time. Is it time to be cautious? While at the library this weekend, I looked through the Value Line Survey. They had a table of some key market and economic parameters for the present vs. historical highs and lows. Some that caught my attention are listed below: Parameter                Current              Last Top            Last Low PE on VL stocks        20.3                    19.6                   14.3 Dividend Yield VL      1.9                       2.0                     4.0 Prime Rate                4.5                       4.3                     3.3 AAA Corp. Bonds      3.5                       3.5                     5.5 Short Interest/Vol      16.8                     17.9                    8.6 As you can see most of the…

Stock Option Investment Advice

Part 2: Stock, or Portfolio Insurance?

Here is Part 2 of our Stock, or Portfolio Insurance? Series:  Selecting the Right Put In this video we discuss which broad based ETF or Index Put to Select to Insure an overall portfolio. In Part 1 you saw that using an SPY Put option (the 250, ATM strike) was better insurance on a portfolio over buying shares of an Inverse or Leveraged ETF. However, was this the best strike selection? What about lower strike, lower cost, Out of the Money Puts? Wouldn’t puts with a higher delta, deeper In the Money perform better? This video breaks down the costs, outcomes, pros and cons of the different strikes you can use to insure a portfolio.  We also give you an outline of how to analyze which put might be best to insure your portfolio. I hope you enjoy Part 2, and I look forward to your thoughts and comments!

Stock Option Investment Advice

Portfolio Insurance (2017) – Part 1: For the Stock Traders

This article is Part 1 of a series on evaluating the ways to add Portfolio Insurance if you are anticipating a market correction or market decline. Most of us are probably in more Bullish positions, based on the last 12 months performance of the market. Every week new highs are being hit, and bullish stock and option traders have been doing well.   Over the last 12 months, we have seen SPX (S&P 500 index) and SPY (S&P 500 ETF) gain over 17% (SEP 13th, 2016, SPY closed at $213.23 and is currently around $250.00).       During that same time period, NDX (NASDAQ 100 index) and QQQ move up 26% (SEP 14th, 2016, QQQ at $115.85 to about $146.00).     Sure, there were small hiccups here and there along the way, but the extended growth has led to many pundits, gurus and other stock prognosticators warning of…

Stock Option Investment Advice

A Balanced Approach for Portfolio Success

The Conservative Barbell Strategy: We recently reviewed a book written by Nassim Taleb called “The Black Swan”. In it, the author suggests an approach for investing called the Barbell Strategy. The approach is based on the concern that unexpected market events can happen with devastating impact to our portfolios. The Black Swan is about such events that are generally unknown, unpredictable, and cannot be planned against to mitigate losses. Because they are unpredictable they cannot be avoided, we need a way to protect assets as best we can against these unforeseen events. The Barbell strategy uses the two extremes: Ultra conservative positions at one end and highly leveraged, speculative positions at the other end of the risk range. The strategy advocates having most assets in very safe securities like treasury bills or conservative options and a small portion in high risk – high reward securities like long put or call…