With all Due Respect to Bernard Baruch



I know enough to know that when someone starts a sentence with the words “In all due respect…,” there’s no great love coming forward. You know the tone. The same one that’s used right before you hear something like “in my humble opinion.”


I tend not to use profanity, except when paying for sex, but when I hear either of those sets of words, my first response is “F**k you, will all due respect.”


Sometimes, I may instead say “In my humble opinion, you can go and F**k yourself.”


And then I stop listening to whatever it is that’s about to be uttered, but I amuse myself with an internal giggle at their expense.


Many years ago, when I was first getting started in life and the greater world of investments, I was very fortunate to have received a cold call from a young man named Bob Shapiro.


To make a long story short, Bob was just starting out with E.F. Hutton, of E.F. Hutton fame and became my stock broker for the next 25 years.


How often have you known a cold call to work out?


I followed him to Smith Barney and then to UBS and to all of the corporate in-betweens and iterations after E.F. Hutton gave up its soul and life.


Sadly, Bob passed away about 4 years ago.


Bernard BaruchAlthough I told him that I had, I never did read any of the writings of Bernard Baruch. Bob had recommended that I do so.


If you read my blog on a regular basis, you’ll know by the persistent presence of typos, I don’t even read my own blog, much less the writings of a long dead legendary investor, whose mere mention of his name causes phlegm filled sputum to be hurled outward.


It’s bad enough that there’s an entire summer’s worth of swatted flies on my computer monitor, I don’t need any Baruch related detritus.


I’ll never know whether Baruch had the same penchant for run-on sentences as I seem to have.


Anyway, Bob was a fan and being a man of structure and integrity, he ascribed to at least one one of Baruch’s investing principles. That was to cut your losses once you’ve reached the 10% mark.


Bob practiced what he preached. He was consistent in his application of the rules and he was a good shepherd of my portfolio, using his discretion to trade.


Sometimes performance disappointed, but Bob never did.


In the intervening years, I still haven’t read Baruch’s works, but I’ve adopted Bob’s belief in rules.


The only thing is that I don’t buy into Baruch’s “10% Rule.”


For starters, I hate to take a loss, unless its being done for tax purposes.


Sometimes, though, I’ll admit that I used “taxes” as an excuse to just get rid of a loser or what I think to be “dead money.”  Invariably, those have been technology stocks. Other than Google, VMWare, Riverbed Technology, Apple and Microsoft, I’ve not had good luck with technology.


Actually, when I lay it out like that, the technology winners outnumber the losers. Dell, Hewlett-Packard and Research in Motion are my losers, but I hold grudges for a long time and human nature makes it easier to remember the dregs.


Part of the reason that I hate to take losses is that during my years with Bob, I saw many stocks recover from that 10% drop and often quite quickly. Beyond that, there were certainly many holdings that might have had paper losses approaching 10%, yet went on to recover and profit. Rio Tinto, a holding that I’ve had since 1994 was one such example.


In the meantime, though, I’ve had plenty of stocks that have had losses in excess of 10% but I’ve nursed them back to health.


Riverbed Technology is one example, but the most recent is Transocean, one of the bad boys of last year’s Gulf Oil spill.


I own shares of British Petroleum, Halliburton and Transocean and I refer to them as my Evil Troika, yet I welcome them to my portfoklio.


My current batch of Transocean has a cost basis of about $58.50 and I’ve owned it since mid-July. After a late day surge, shares closed at $53.


Using that simple rule, I should have banished the shares, even after that promising surge in the final hour of trading.


I suppose that if I included the $0.79/share dividend, we’d be borderline.


Yet there they are. Still sitting there, with a nasty shade of red clearly indicating that its been a loser.


Before today’s surge, I actually sold $52.50 calls expiring on Friday, for about $0.44 cents.


That seems like a pretty bad risk – reward, but as I looked at my history with Transocean going back to the most recent purchase in July, with the premium received today added to all of the other premiums, if assigned, I’ll net a 0.7% profit.


Paltry, sure. But still a profit. Annualized, that’s 2.8%, which is a lot better than the 1.6% S&P 500 deficit thus far this year.


Better yet, to compare apples to apples, during the period of ownership the S&P 500 has dropped from 1316 to Thursday’s close of 1215, which happens to be a 7.6% loss.


I’ll take 0.7% and forget about the annualization. Better yet, those particular shares are in a tax deferred account, so I have no concern about buying them back when they inevitably fall again, since the wash sales rule is moot.


In the past 6 weeks I’ve been up to New York twice to attend funerals and have had a chance to reflect a bit on the lives and memories of friends and family.


I also think about Bob fairly often, despite the fact that we only met a single time.


Strangely, I also end up thinking about Bernard Baruch, a man I’d never met and it’s very unlikely that I ever will. I doubt that he believed in reincarnation and I’m not certain that he and I will end up in the same place when it’s my time.


Thinking about what a different investing world it has become, with immediate access to information, bid-ask differences of a penny and significantly reduced transaction costs, I wonder what Bernard Baruch would teach us today?


In all likelihood, he would be going by the name “Barry Barch” and would be pushing whatever the intangible asset of the day happened to be.


In all likelihood, he’d be recommending sales of options on the VIX futures, which themselves are a measure of the implied neurotic tendancies of investors who are uncertain of what to do in the face of earning’s season reports.


Bob, on the other hand, would probably not follow him in that direction.


In my humble opinion


 


 


 


 


 


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Fundamentalism Can’t be all Bad



FundamentalismIn recent years, “fundamentalism” has gotten a bad rap.


Remember the old days? Back when we had TV dials, rotary phones and believed in the fundamentals in every aspect of our lives.


Eh, not so much anymore.


Maybe it’s the perception that fundamentalism is associated with terrorist bombings or perhaps related to abortion clinic shootings, but whatever, fundamentals are not what they used to be. Neither are the funadamentaists.


Fundamentalists, those that purportedly live a life style based on fundamental principles, are very egalitarian, though. Not only do they come in all colors, religions, nationalities and walks of life, but they hate all (other) colors, religions, nationalities and walks of life. To me, that exemplifies a blanket lack of bias.


It used to be that fundamentals were simply the basic building blocks upon which more complex behaviors, decisions and actions were based.


How can I put this?


Eh, not so much anymore.


It’s almost as if they took the “fun” out of fundamental and instead focused on the “mental.”


I have to credit Dennis Kneale for inspiring today’s theme. Before your mind runs away with you, he did so, not because of the “mental” part.


I can’t say with any certainty that I’ve ever gotten any tangible added value from following Dennis Kneale on Twitter or watching his segments on FOX Business or FOX News, but I’ve definitely received the intangible value of thinking, when I’d ordinarily be drooling.


So, while I may not be grateful, those around me probably will pick up my slack and thank Dennis Kneale for removing the topic of fairness in our tax system from our dinner table.


Enough about Dennis Kneale. Read his tweets and watch his segments.


Rhetorical question: What’s so fundamentally changed that a 4% move in Intel’s stock price following release of earnings move doesn’t propel the rest of the market upward?


Unnecessary answer to the rhetorical question? Fundamentals are irrelevant.


Now the fundamentalists pictured above would know just how to light a fire under the market, but that’s a pretty ugly allegory so I’ll avoid drawing it to spare sensitivities.


Clearly, the focus on fundamentals in the stock markets has gone the way of the Yeti, except that fundamentals once did actually exist, although there’s not much of an archeological record of them having survived into this decade.


I did some carbon dating of some old brokerage house statements from the 90’s and there clearly was an over-riding theme of investing on fundamentals.


There was a time when every stock market and investing primer started with concepts like Price – Earnings ratios. Trading volume, new highs and lows. Even such arcane concepts as profits.


These days?


Eh, not so much anymore.


I’m not really certain what’s focused on these days, besides the closing level of the Finnish stock market. This afternoon, I noticed the new top banner on CNBC, at about 2 PM that now gives the closing prices of the many European markets.


I don’t even think that information is fundamental to Finland.


Now, I probably shouldn’t be the one to harp on and bemoan the loss of fundamentals.


After Wednesday’s bell, Riverbed Technolgy reported earnings.


I don’t know what they were, but in the after hours Riverbed went up about 9%.


I’ve owned Riverbed numerous times over the past 3 years and have made lots of money just selling options on those shares.


Lots of money.


In yesteday’s blog “Put a Condom on your Portfolio” I mentioned that sometimes the protection is worth more than the assets. Riverbed is one such example, thankfully.


Occasionally, I’ve also made some capital gains on the shares as they were assigned. That may end up being the case this Friday, as about 30% of those shares may be assigned at $25.


The fact is that I don’t even know what Riverbed Technology does or makes.


That would be pretty fundamental.


But I do know that its price moves alot in both directions. I also know that the premium people are willing to pay to leverage their investment through the purchase of options is fairly rich.


I don’t need to know any more. As long as there’s no white powder obscuring the flashing geen numbers on my screen, I’m good. And truth be known, even if there was a faint hint of said powder, I’m still good.


A big topic of discussion today was on the unsettling effect of ETF’s on the markets and commodities, especially the leveraged ETF’s.


One of my past favorites, which I don’t currently own, is the ProShares VIX Short-Term Futures.


To put it simply, this vehicle represents purchasing a derivative of a derivative, which itself is based on the implied volatility of the markets over 30 days.


Then you can compound it a bit more by selling call options, as I did.


Once you get to that point, it’s actually hard to even remember what it is that you want to occur.


The Volatility Index, or VIX tends to go up when the market goes down. Now once you start selling calls on that, you’re actually hoping that….


Never mind. It’s bad enough that I go through that mental exercise with the ProShares UltraShort Silver ETF.


I don’t exactly know what I want to happen, all I know is that whatever has been happening has been good for me.


Why would you want to regulate that? I like being happy. Before you know it, people other than Ron Paul will be clamoring to regulate sex and drugs.


That may explain why only a single Senator showed up for the ETF hearings scheduled on Wednesday.


No, not because it was “Sex and Drugs Hump Day” on The Hill.


Well, it may also be related to the fact that the other committee members thought that this was just another episode of “To Catch a Predator”.


Say what you will about their sincerity and interests in protecting the investing public, but at least our elected officials are capable of learning from their past mistakes. That, and big posters with a bright red “X” over the face of Chris Hansen are plastered everywhere in the Senate corridors.


I still giggle at the close of each committee session when the disclaimer comes on C-SPAN informing the viewers that “no Pages were abused in the hearings of this committee.”


There was some talk about requiring the same kind of documents as are necessary to open margin accounts or trade options.


But as long as the leveraged ETF’s stay in the 3x range, why do so? Since investing is really a zero sum game, where are the profits of the 1% going to come from if the uninformed and incapable hordes are prevented from losing their way?


I certainly understand why it’s necessary for margin accounts. People do stupid things when they invest money that’s not really their own and it’s amazing how quickly equity erodes. I learned that from Bernie Madoff.


Not directly.


Leverage? You want to talk leverage. Just look at the November 2011 premiums for in the money and near the money options. There’s a 40 to 1 ratio.


2 to 1 and 3 to 1 for ETF’s?


So, I don’t really have a problem with uninformed people purchasing ETF’s. I’m informed, or at least have the potential to be so, and I still don’t know what I’m always purchasing, but I do know enough to change course if things aren’t going according to plan.


Sometimes the fact that an investment opportunity just looks good is good enough as far as full disclosure goes.


But what does rankle me a bit is the behind the scenes rebalancing that takes place, particularly in the leveraged ETF’s that in the long run result in an outcome completely counter-intuitive to rational thought processes.


When you have to explain to someone why their leveraged short Oil ETF fell in value, even while the price of oil did just the opposite over the same haul, there’s a fundamental problem.


Although having the right to make a fool of yourself is fundamental, being made a fool of, is not.


 


Full Disclaimer: Some Pages (and two illegal immigrant interns) were harmed in the writing of this blog. Details may be found on a future episode of DateLine.


Spoiler Alert: Kneale’s alibi is filled with holes.


 


 


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Ron Paul Rethinks Strategy



I’m not a really big fan of chart analysis.


I’m really humbled when I see some of the analyses that are performed by chart technicians as they crunch and manipulate data and then lay it out in simple graphic forms for the rest of us to ogle and admire.Coffee charts


I won’t say that I’m amazed by what they do, but I will say that I’m amazed that 2 different people can see the same exact graphs and draw the same lines and come up with different conclusions.


Using the kind of analysis that is better suited to a Rorschach Test, somehow people see incredible details and images from the saw-toothed lines. Best of all, they even give names to the images that they think they see.


I’ve often wondered why the “p” in “psychotic” was psilent.


With that in mind, you might understand why charts don’t show up very often in this blog site and why I pay very little attention to charting and technical analysis in the Option to Profit book.


The fact that I know nothing about the tenets of technical analysis are just incidental to their absence.


I still think of myself as analytical, but most of the time quantitative analysis is best suited for events that are predictable.


Human emotions and the reactions to external events aren’t very predictable. That’s why it’s easy to have a “fair and balanced” discussion on any economic issue.


Until the least 2 hours of trading on Tuesday, when word came out that there would be a permanent oversight “troika” in Greece and that the EU was prepared to assemble a $2 Trillion bail out fund, the day’s big story was Green Mountain Coffee Roasters.


David Einhorn, who is legend for his early and dismissed warnings about Lehman Brothers, has some concerns about the K-Cup Kings. (See his 110 slide PowerPoint presentation, GAAP-uccino)


He was fairly universally atacked.by the 99% and at least some of the remaining 1%.


GMCR has been one of those “mo-mo” stocks. Not only did it have “mo”, but it had a double dose of momentum.


After a 3 for 1 split, it’s current $80 per share price would have been $240. Not bad, but just a 2 months ago GMCR was at about $110.


There have been lots of questions swirling around GMCR. Accounting issues, patent issues and whether their alliance with Starbucks is really a good deal.


But look at the above graph. Just look at the performance of the Coffee Kings compared to SPDR Gold Trust Shares.


As a disclaimer. I’ve owned both GMCR and Starbucks in the past year and we drink lots of Peets at home, as it reminds Sugar Momma of her care free days in Berkeley.


By comparison, Gold has been a piker. It doesn’t come close to even the laggard performance of Starbucks.


Gold, the basis of all that we hold valuable, the cornerstone of Ron Paul’s economic theory has been, at best, an also-ran, three times removed.


Here’s the thing. It’s repeatedly been ;pointed out that gold is just a rock. James Altucher was the first person that I heard to come right out and say so, at the very peak of gold’s price run higher. But he has also predicted that Apple will be the first $2 Trillion company, making its liquidation a possible solution to the money needed for the EU banking bailout. Although in his blogs he talks abouty a $1 Trillion level, during a CNBC interview he hiked it to double that amount. Either way. enough to buy a few months of banking calm overseas.


The rock part makes it hard to eat.


Without doing the research, I’m certain that point has been made prior to Altucher pithy “It’s just a rock” comments.


Ron PaulI don’t know if Ron Paul has considered that shortcoming. It’s no surprise that you don’t find Godfather’s Pizza offering a gold topping. It may have as much to do with the fact that would be a price buster for the 9-9-9 special, as much as it has to do with its inedible state.


If the eventual GOP nominated team turns out to be Paul-Cain, they’ll have to work that out.


In the meantime, not only can coffee be ingested and help to sustain life, but it also helps to nourish and give life to another useful currency.


Tulips.


Just spread those coffee grounds around the tulip bed and you’ll have an energized bounty of flowering fools.


The next step is Ron Paul’s. I don’t see how he can keep his ground, especially after mentioning that children’s health care wouldn’t be on the chopping block in a Paul administration.


At least not until other areas were eliminated first, since he explained, “we wouldn’t be able to do everything all at once”.


If Green Mountain continues its fast fade, Paul may be spared the painful decision of switching from Gold to Grounds


In the meantime, once the EU news was reported, the market took a decent 90 point gain and quickly turned it in 250, before giving up a little.


Simon Hobbs, of CNBC, who if you didn’t know, was British, has been a consistent voice of reaonable interpretation of European actions during their banking crisis.


His skepticism has, thus far, been consistently appropriate.


His critique of the report in the U.K’s Guardian newspaper seems to have been well placed, as the market began to recognize that the reports were more paper tiger-like than a real full frontal assault.


For the most part, I was a bystander during the day’s trading.


I did sell some JP Morgan Chase calls, but did so prematurely, as the shares went quite higher later in the day as the EU news came out.


No matter. There are still 3 days for more earth-shattering news to hit.


Once the EU news was digested and GMCR was ancient history, all ears and eyes turned to the after hours earnings reports of Intel, Yahoo and Apple.


The big news was that Apple, which always “underpromises and over-delivers”, had its first EPS miss since 2004.


The inital reaction was pretty brutal, with Apple taking a quick $30 hit, which represented a 7% hit.


Cooler heads prevailed and those losses were quickly pared back to about 4%.Certainly those cooler heads prevailed in Goldman Sach’s case, as it reported  poor earnins, but saw its inital 5% drop turn into a 5% gain.


Based on “technicals” one talking head on CNBC posited that Apple was exhibiting “bubble” behavior and that it’s price momentum was indicating that the bubble was about to burst.


He might be right, but we’ll probably never know if he was wrong.


Yahoo and Intel had nice numbers, so hopefully there will be some follow through in Wednesday’s market.


The problem with that line of thought is that it puts too much emphasis on rational market action. Events driven by events and data, rather than tangentially related rumors.


Based on where we seeem to be going, the likelihood of the market responding to real economic news is as likely as Ron Paul burying his gold around Ben Bernanke’s tulip beds.


More likely is that in a Ron Paul administration he would just plant a big kiss on Bernanke’s two lips in preparation for a literal fitting of cement shoes, and then peacefully sip away on some fine Green Mountain espresso brew


 


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See a sneak preview of Chapter 1.  hoco blogs


More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.


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Put a Condom on your Portfolio

 

Nobody ever got giddy over practicing caution.

The other day I was looking through a “new feature” being offered by E*Trade, their “Online Advisor”. It”s not terribly different from the myriad of other such tools in that essentially the same questions are asked, particularly with regard to your tolerance for risk, the number of years until retirement and other seemingly important questions.

Single ply or two ply, I believe is a proxy assessing your spending habits.

When it’s all said and done, there’s nothing more exciting than having “Fixed Income” recommended for your stage in life.

You know the stage. Respirators, catheters and orderlies that don’t know how to use any of them.

Caution is pretty boring and I really don’t want to be reminded that I’m at that stage of life.

I may be ready for Depends, but  I’ll fight until the end to avoid those Fixed Income investments.

CondomsI had a friend in college who always thought that he was the desire of every woman’s dreams. He used to proudly show me the condom that he kept in his wallet, as he always needed to carry “protection.”

After a while, I recognized the crease in the foil of that condom and realized that for years he was showing off the very same one. he was taking the exercise of caution to an extreme that really wasn’t terribly appealing, but he was behaving otherwise.

He had a business card that read something to this effect:

“My name is Harold. I want to sleep with you. If you want to do the same, please call my number. If not, please return the card, as I’m running low”.

In this instance no names were changed to protect anyone.

He also used to talk about how he was going to go to the “free clinic to get “tested.” It seemed that he needed to be tested everyweek. Whenever I would hint that I might want to go with him to get tested, he would always come up with a reason why he wasn’t able to go at that particular time.

Somehow, I don’t think he was quite as accomplished as he had been inferring. I don’t think he really needed much protection, except perhaps from reality.

I made no such pretense and was never a big fan of “protection”.

To be clear, I’m still talking about FIxed Income investments. I like protection in most other aspects of life.

Although I’ve never been a big fan of reckless behavior, especially when it comes to investments, I’m not a big believer in living a life of over-caution, either.

The problem is that when giddiness does set in, caution is thrown to the wind.

Certainly there has to be a graph somewhere that shows the association between alcohol and unwanted pregnancy, just as their has to be a graph someplace showing the association between a rapid rise in the stock market and stupid decisions. Greed will do that, as will the fear of missing out.

Unless you were in FIxed Incomes or in cash, which are essentially the same, you’ve been very happy the past couple of weeks. Surprisingly, that feeling would have alternated with having been very sad the previous few weeks.

So happy, that you probably think that everything is just going to keep going unchecked in the same direction. One of these days, the “this time it’s going to be different” feeling is going to come true, but that’s not likely to happen this time or the next.

And then, along come days like today.

After a couple of weeks when grasping at rumors of good news was all that it took to drive the market higher, today was the day that Germany’s pessimism on an EU solution came back to haunt.

Pissing in the wind, punching a whole in a condom and buying high are all reckless behaviors. Pinning your hopes on a promise to resolve a crisis is probably not a good strategy.

But from my perspective, not having downside protection is every bit as reckless, especially when the market goes up and down in completely unexpected spasms.

Sure, I was saddened to see Halliburton drop $3 after announcing earnings before Monday’s opening, but the $38 call options that I sold on Friday for $1.02, that happen to expire this coming Friday soften the pain.

Of course, the downside is pointed out by those that believe that stocks are all poised to make spectacular climbs at any given moment in time.

There’s no shortage of examples where that’s happened.

This year, I can look back at shares of Green Mountain Coffee Roasters and VIsa among others, that I’d lost to assignment after unexpected run-ups.

Those are easy to remember and hard to forget.

But I’ll also remember that last week I didn’t bank any option income on my downbeaten shares of Mosaic because there were rumors of a buy-out and I didn’t want to get caught flat-footed.

I’ve thought of alternatives to selling covered calls, but that would require picking better stocks and making their purchase and sale at just the right time.

That solution would require effort and skill, so that makes it a “no go”. Although I’d be willing to use insider information to help arrive at the same end point, I don’t appear to yet have those kind of connections.

The reality is that there are very few surprise break-outs of a stock’s price. For every Visa that gaps from $80 to $90, or very Green Mountain that goes form $45 to $60, there are a couple of thousand each day that don’t.

Today, El Paso did, but space doesn’t allow me the opportunity to list those that didn’t.

The fear of missing out on one of those great moves is unfounded. They just don’t happen that often.

What does happen often is that stocks go up, they go down and they go up again, right before going down and then up again.

After that has all happened, you can reliably predict that cycle will repeat itself.

On Monday, I started the day with cash coming from the assignment of British Petroleum, Freeport McMoRan and Alcoa and was looking for a quick bang for my investment buck. For the day, at least, I got it by picking up additional shares of Riverbed Technology, DuPont, Sallie Mae and ProShares UltraShort Silver ETF.

I immediately sold in the money calls on all three of those purchases. After all, when do you put protection on? After the proverbial horse has left the barn?

For my trouble of selling near the money and in the money calls expiring on this Friday, if assigned, I’ll net a 3.4% return on the options income alone

Sometimes the protection is worth more than the asset it’s protecting.

I’m not exactly certain how that same analogy can be applied to condoms, but at least in my world of investing, it seems to be true.

For the shares that I picked up today, I don’t have very many high hopes of an El Paso like surge.

Whatever surge there may be will be restrained by the protection, but enjoyable nonetheless.

As the markets have been evolving I’m looking forward to even more variety in the protection available.

As we begin selling derivatives on derivatives, such as options on the VIX or short options on the VIX, I’m looking forward to the inevitable appearance of some of those UltraSheer options to help make the experience that much more enjoyable.

And what investor wouldn’t want to be long in UltraSheers? 

 

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See a sneak preview of Chapter 1.   hoco blogs

More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.

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Groundhog Day Revisited



Groundhog DayGroundhog Day, the Bill Murray movie, is reportedly the most played movie on television and basic cable. I know that I’ve done my fair share of viewing that movie over the years, first starting with it’s original theatrical release and then seeing it ad nauseum during that bizarre commuting phase of my life, spent in many a hotel room.


Given the movie’s storyline, it’s only appropriate that the movie keeps getting repeated.


If you’re one of those very few people that hasn’t seen the movie, or just doesn’t know the story, you’ve likely spent the greater part of your life in Slovakia, focusing on far more important things than light romantic comedies taking place in obscure Pennsylvania towns, starring a now obscure actress.


You certainly wouldn’t understand the connection between Groundhog Day and unending repeating, or as I like to call it; “Life”.


Personally, I don’t understand thow I could have two consecutive days when a Pennsylvania city is mentioned in my blog.


Some things just are out of your control.


I can’t really tell you how the Groundhog Day movie ends. It’s not that I don’t wanty to spoil it for you, it’s just that I don’t remember, but I do remember all of the intervening details.


In the movie the predictabilty of reliving each day first proves to be maddening, almost driving the Bill Murray character to the brink of suicide, until he realizes that he can step out of the pre-deteremined actions of his character.


Ah, now it’s coming back to me.


Only when he realizes that he can capitalize on the mundane and predictable, does he realize the key to his happiness. To top it off, he brings out the best in those around him, as well. As soon as he starts behaving in a manner that conflicts with the expected reality, he changes everyone’s reality.


For some people, in the market’s after hours, today was as if the movie featured Google.


Talk about a replay.


Google came out with great earnings after the closing bell and shot up about 9%. That’s not much of a surprise. They always come out with great earnings and then fall prey to the spin.


Google has a habit of making big moves on its earnings reports that in absolute dollars are magnified by its $500 per share price. It did precisely the same last quarter, making its move to $600, before heading down back below $500 just a short 2 weeks ago.


Unfortunately, you just can’t predict in which directions those moves are going to be. Although I don’t currently hold any shares, I have in the past and have been blown away by some of the downdrafts in price, even after great earnings reports. Hedges helped soften the falls, but dampened the rises.


It goes both ways.


On the other hand, even though you can’t predict direction, you sure can predict that there will be movement.


Today I felt as if I were in my own personal Groundhog Day scene.


It was just another day that happened to have JP Morgan report its earnings as part of the ordinary landscape.


I’ve owned JP Morgan on and off for about 2 years and have especially been going through my own personal Groundhog Day with the shares ever since the weekly options became available.


On Monday I added onto my position and sold $32 calls, for nearly a 3% premium.


As it just seems to do on a predictable basis it went up and then down. They don’t need to report earnings to make significant price movements. The only difference was that today at least there was something going on that could be called a reason for the move.


Everyone was expecting disappointing numbers, which of course is why share price went up admirably from Monday through Wednesday.


Of course?


As luck would have it, it went down sharply today and is now below the strike price, with expiration on Friday. Why ot went down when everyone was expecting bad news and why it first went up in advance of the expected bad news earnings?


Yeah, as if that scene’s never been played out before.


You just have to get used to it and go with it.


I could do these kind of weekly trades every week.


In fact, I do.


On the other hand, the ProShares UltraShort Silver doesn’t come with a weekly ETF, but it really doesn’t matter. Silver goes up big on one day and goes down big the next.


I sell the call options, buy them back, sell them again, buy them back again.


You get the idea.


The share price of the ETF is virtually unchanged from where I bought it, but that volatility brings a great premium. Actually, whereas I usually sell near the money options, the volatility and resultant premiums for this ETF were so nice, that I’ve been selling well out of the money options, balanced with some at the money options, so that I could benefit from the stock’s capital gains, receive options premiums with less risk of being assigned and also receive heightened premiums that are very responsive to the stocks moves.


Huh?


Today, for example, with silver falling and the ETF share price rising, when it hit $14, I sold $16 calls expiring next Friday for $0.34 per share net. That’s on top of the $0.62 and $0.57 per share netted the past 2 weeks on those same shares.


But I also sold some $14 calls on Monday, when the share price was $14 for a $1.19 premium.


The last month’s options cycle was the same.


And the one before that?


The same.


I guess that’s why some people like annuities. They’re so predictable, just like groundhogs.


As an investment, I’d rather not have an annuity, but I don’t mind if my shares throw off predictable options income and start annuitizing themselves.


Now if life really was like portrayed in Groundhog Day, I would certainly banish my lack of nerve that popped up yesterday and I would have sold calls on Sallie Mae and Mosaic.


As it turned out, Sallie Mae gave up most of the gain that it made on Wednesday.


Mosaic on the othre hand went up a bit more, but each day that no new rumors pop up is just another day of lost opportunities to bank some premiums.


But, the one thing I know is that the opportunity will return and I’ll never tire of doing the same thing over and over.


As opposed to the personal hell that Bill Murray found himself in until he found the key to navigating through hell, I feel as if I’m in heaven.


What may be going on is that the market represents the inverse of the Groundhog Day experience.


While everything changes around you, the best way to thrive is to keep doing the same thing.


Inertia is a terrible thing to waste.


 


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