Stock Options Journal

[Ejonigboro]

“Thanks for pointing out those Funds that focus on the African mkt. Will certainly look them up.”

I think your search would come up blank as those Mutual Funds I mentioned were fictional e.g. Silverwoman Fachs Sub-Saharan African Fund (exc. South Africa) was a play on GOLDman Sachs and IQ Mirgun on JP Morgan. The point I made was that such funds would be coming out of the wood work in due course.

“Your hunches are well taken. However, I hope your enthusiasim towards the African mkt are not tempered by 'nationalist' sentiments.”

No Nationalist sentiments over here, okay I lied, may be a little. But I did point out the economics to my bullishness and I am sure I made no appeal to sentiment.

And in response to the rest of your post
I read The Economist religiously, and also read the article you mention. Excess liquidity has been one of the main running themes in The Economists for the past five years or so, since the Tech Bubble.

I think any comments on inflation should be split into two, the Consumer Price Index and Asset Price Inflation.

The excess liquidity mentioned above is having more of an effect on Asset Prices rather than CPI. Consumer Price Index’s typically take into account average Household basket of goods e.g. Food, Clothing, Energy and Utilities Costs, etc. These items are by and large necessities, and the demand and supply for them exist irregardless of cheap credit. But an exception would be Energy and Utilities because they’re quite volatile for reasons such as, perceived, supply squeeze. In fact when most Indices are calculated with the exception of such goods or services, CPI is relatively under control i.e. below the target of Central Banks.

Asset Price inflation on the other hand is where the excess liquidity created by cheap credit has kicked in. It’s the reason for the Property Boom witnessed in most developed and popular developing countries; low yield spread between T-Bills and Emerging Mkt Bonds and many more. A browse through past editions of the Economist and you will find a plethora of evidence of what excess liquidity is doing to Asset Price Inflation.

The best one I have read is that of an unremarkable Property Developer in Indonesia, having stated in its bond prospectus the risk it faces i.e. ”social unrest (violent and non-violent); insurrection; earthquakes and active volcanoes; and “various bombing incidents directed towards the government and foreign governments and public and commercial buildings frequented by foreigners”, including the stock exchange and the airport,” and they also stated in this same prospectus that “ creditors might find it “difficult or impossible” to pursue claims” yet this Bond is paying a yield of 12 per cent equivalent to a Single B Rating. The economist describes the issue: “It is a small company in a difficult place selling bonds that have no more protection than a share.”

Is this evidence of a Flood to you!

[Obugi]

Double Post.....

[Obugi]

All,

All the world's a market, it seems. Those in America are fixated on the Nigerian Stock Exchange, while those in Nigeria are excited about the USA stock/forex market. Hmmm. I just thought I'd drop a pebble in the very quiet NVS Money section.

Bad January so far on Wall St, good month for anyone making the right trades. New Year, same old thing. I hope the professional money managers didn't jump out the window today.

I've been posting my trades on ClearStation. Its been eye-opening the way elementary technical analysis has cornered this market - the trends, volatility, and psychology have been a strong validation of the theorems that underpin its practice. The returns have been amazing, especially on options, but one has to know what is what, long or short, it can still hurt.

Here:

Obugi's Portfolio

Those in America live on the banks of the proverbial river......please don't let soap enter your eyes O!

Obugi.

[sheroko]

l wonder why anyone in us will be so interested in nigeria stock exchange with all those hurdle to overcome. l will rather like to see more people in this section of the board. money don't have color or tribe hence we can collectlly aid one another make money.
comfort to know every moth is not going to be like january though.
anyone notice the fertilizer/ agric stock. are they speculative or for real?

[Obugi]

All,

Anyone talking stocks??? Anyone bought GOOG before earnings? Any opinions on oil? It's sad business area of NVS gets so little traffic.

*sigh*

Anyhow, retailers look very weak. I've been reading some alarming reports on that sector. I've shorted ANF, its all on my ClearStation trading posts. I hope it breaks 70.

The one risk is that the market may be bottoming. Oh well.

!!!Get Yours !!!
Obugi

[Multioption]

Originally Posted by Obugi

All,

Anyone talking stocks??? Anyone bought GOOG before earnings? Any opinions on oil? It's sad business area of NVS gets so little traffic.

*sigh*

Anyhow, retailers look very weak. I've been reading some alarming reports on that sector. I've shorted ANF, its all on my ClearStation trading posts. I hope it breaks 70.

The one risk is that the market may be bottoming. Oh well.

!!!Get Yours !!!
Obugi

Do you still trade Options?

[Obugi]

multioption,

Originally Posted by Multioption

Do you still trade Options?

Yep, that's 90% of my trades. See my link on post #24, I post my REAL trades on ClearStation.

It tedious posting them here, my portfolio is public so we can all see it and exchange ideas.

!!! Get Yours !!!

Obugi.

[Multioption]

Originally Posted by Obugi

multioption,



Yep, that's 90% of my trades. See my link on post #24, I post my REAL trades on ClearStation.

It tedious posting them here, my portfolio is public so we can all see it and exchange ideas.

!!! Get Yours !!!

Obugi.

You have no current options position.

I might start posting my Options trades here, starting from tomorrow...will see how it goes.

[Obugi]

Multioption

Originally Posted by Multioption

You have no current options position.

I might start posting my Options trades here, starting from tomorrow...will see how it goes.

Ummmm, ClearStation shows only the shares, that is true, but I mostly trade the underlying options. I don't know of any site where one can post option trades that can be publicly viewed.

In any case, shares or options, the important thing is to exchange views on trades that are readily accessible and tradeable for Villagers who want to learn. Some of what we post on economics, market trends and investments while we discuss the market will also be of help to those who want to learn.

There's too much money being made not to share, abeg.

!!! Get Yours !!!
Obugi.

[busanga]

FMD long term call options is looking attractive right now, the Congress won't let student loan fail without offering bail out in an election year. I think the risk of bankruptcy is well priced in already- I wanna take a bite on Jan 2009, any takers?

[Multioption]

Originally Posted by busanga

FMD long term call options is looking attractive right now, the Congress won't let student loan fail without offering bail out in an election year. I think the risk of bankruptcy is well priced in already- I wanna take a bite on Jan 2009, any takers?

What strike are you looking at; and for how long do you intend to hold the position?

FMD is not looking good, bro! Wish I could upload the 1 yr chart for technical analysis outlook.

[busanga]

Originally Posted by Multioption

What strike are you looking at; and for how long do you intend to hold the position?

FMD is not looking good, bro! wish I could upload the 1 yr chart for technical analysis outlook.

Multi, what you have up there is conventional wisdom. Let me make my case for it...Contrarian considerations

Congress will rather shut down than shut out baby boomer's kids from schools this fall. FMD is down on revenue dry out since its insurer bankrupted. A bill is now working its way thru the house to make government back (insure) private loaners too..at least their existing loans, freeing up capital to finance new loans. FMD do not make loans by the way- they securitize, and have no peer. They are more like the Visa, and Master Card of student loans..they process them.

Based on prospect, I will stock up on long term options now. And get out when the law is out when I expect the stock to pop in the near term. Long term options buy you time, and is even cheaper since conventional wisdom is betting against them. I like the 7.50, it is more reasonably priced than the 5.00 strike. Imagine if you bought Citi's 2010 option at its February lows, you will be on cool 300-400% gain now.

My case against it? You already know..mutual funds are selling now..most won't hold anything below $5 and hedge funds are short all the way as indicated by its rising short position reported last week and this pressure on the commons will likely continue. I suspect these will disappear as soon as the law passes...imagine a short squeeze.

Caveat: I will advice to buy this option, when a series of expected bad news (like lawsuits and downgrades) push the common stock below $3 sometimes before next friday. If it moves below $2 then it is more risky then I might consider a more complex trade..combo that is. A two up, one down.

[Egun Mogaji]

Originally Posted by Ejonigboro

FX

Japanses Yen and the Carry Trade
An Analyst mentioned recently on BloomBerg(BBG) that the story of the year (2006) has not been the Imbalances of a Double Deficit in US, but the near Zero Interest rates in Japan (this as existed for some time now). I buy his arguement that this cheap credit has contributed to a large dergee, along with other variables e.g. China’s Foreign Reserves and PetroDollars, to the excess liquidity in the Markets and further fuelled the Carry Trade – where investors sell low yielding currency i.e. those with low interest rate thus low borrowing costs e.g. Japanese Yen (JPY), and buy higher yielding currency i.e. with higher interest rates thus higher return e.g. Australian Dollar (AUD).

With the Federal Reserve’s key rate at 5.25%, European Central Bank’s main rate at 3.5%, Bank of England 5%, there are many higher yielding assests than the Bank of Japan’s 0.25%. So long as the rates in Japan remain Ultra low, those that can borrow Yen would do so and invest it elsewhere for better yields.

The Forex effect of this is the Yen falling against those currencies where the borrowed yen is going to e.g. ideally Countries with similar risk profile to Japan with better yields, i.e. most of the G8. Quite simply the Yen falls as supply increases, and those currencies rise as demand increases.

To benefit from this I have placed spread BUY bets on the AUD/JPY, since the 2 year Govt. Bond in Australia is 6%, I imagine its a good destination for the carry trade.

The risk of this trade are the decisions of the BoJ and Austarialian Central Bank (ACB) re Interest Rates.

Its widely expected that the BoJ would increase interest rates in th 1st Quarter of 2007. With forecasted GDP growth for ’07 at 2.0% do I think that they’ll increase! I really do not know, but if market expectation is an increase and that this would led to the unwinding of some carry trade and appreciation of the Yen, who am I to budge the trend, after all I am only taking the last puff of a dead cigar.

Would the ACB cut rates? The forecasted Inflation rate is 2.7%, and forecasted GDP growth rate 3%. With YTD inflation at 3.9%, the forecasted rate infers that monetary policy is working well i.e. controlling inflation, so one can expect the current rates of interests to be maintained for now.

Since the trade is an ongoing one, the eyes are wide open for any changes in the status quo.

Pure high vs low yielding Currency Trade
In thesame light of high vs. low yielding currency I have also placed a BUY AUD/CHF (Swiss Francs) , with the latter at yields of circa 2.39%.

The risk, with excpected rising inflation in Switzerland, this trade is risky since the difference between the yields would narrow should the Swiss increase interest rates.

China to use more of Foreign Reserves to buy Energy Supplies
Large chunk of China’s $987.9 bn Foreign reserves is invested in the USD. If the press release with the same title as above is to be believed, we could see a further weakening on the Dollar. If the Chinese govt. finance some of their purchases with theirUSD assets the dollar would decline further.

Coupled with expectations of the Fed cutting rates in 2007, making US yields less attractive, a weaker dollar looks highly likely.

Trade 1: BUY GBP/USD, its expected that the cable would reach £1:$2 in 2007. If USD supply increases due to Chinese diversification and Fed’s rate cut, it will fall against the Pound.

Trade 2: SELL USD/ Thailand Baht, Korean Won, Hong Kong Dollar, Singapore Dollar, all these currencies are usually pegged to the dollar. A falling dollar essentially means their Central Banks would have to sell more of their local currency to sustain the peg. This sort of protectionist policies have failed in the past and I expect the same if attempted again, they are simply too costly. Also these economies are also the toast of the Investment community, and the increasing capital inflow could make such protectionist doubly costly. The recent attempt of Thailand Govt. to portect the Baht ended up in a reversal. Baht was 41:$1 a year ago, it was 35.9:$1 as at the 18th Dec. I expect further slide as the Dollar declines.

Commodities

With the Chinese Press release, perhaps its time we all got invested in some Commodity Index Tracker Fund, be it directly or via a Derivative product. Personally, once I find a broker that does I’ll be Spread Betting on the available Index.

Here is another perspective on this...FX that is...reading through this, I wonder if you use Technical Analysis at all.
In my experience, everything is clearer without all the noise from Bloomberg and the like. If those analysts could trade, they won't be analysts would they?
I trade FX for a living, and believe me too much analysis can blow your account.

[Multioption]

Originally Posted by busanga

Multi, what you have up there is conventional wisdom. Let me make my case for it...Contrarian considerations

Congress will rather shut down than shut out baby boomer's kids from schools this fall. FMD is down on revenue dry out since its insurer bankrupted. A bill is now working its way thru the house to make government back (insure) private loaners too..at least their existing loans, freeing up capital to finance new loans. FMD do not make loans by the way- they securitize, and have no peer. They are more like the Visa, and Master Card of student loans..they process them.

Based on prospect, I will stock up on long term options now. And get out when the law is out when I expect the stock to pop in the near term. Long term options buy you time, and is even cheaper since conventional wisdom is betting against them. I like the 7.50, it is more reasonably priced than the 5.00 strike. Imagine if you bought Citi's 2010 option at its February lows, you will be on cool 300-400% gain now.

My case against it? You already know..mutual funds are selling now..most won't hold anything below $5 and hedge funds are short all the way as indicated by its rising short position reported last week and this pressure on the commons will likely continue. I suspect these will disappear as soon as the law passes...imagine a short squeeze.

Caveat: I will advice to buy this option, when a series of expected bad news (like lawsuits and downgrades) push the common stock below $3 sometimes before next friday. If it moves below $2 then it is more risky then I might consider a more complex trade..combo that is. A two up, one down.

Valid fundamental analysis. But the issue of holding period is still a factor. If you buy options in excess of 100-200 contracts like I do, you can not but consider the buying-selling pressure (technical aspect) of the market. However, I do believe the stock will spike soon, thus the call options will be worthwhile; but the question is: how soon?

[busanga]

Originally Posted by Multioption

Valid fundamental analysis. But the issue of holding period is still a factor. If buy options in excess of 100-200 contracts like I do, you can not but consider the buying-selling pressure (technical aspect) of the market. However, I do believe the stock will spike soon, thus the call options will be worthwhile; but the question is: how soon?

I agree with you. It is dangerous to load up on these options. I won't bite more than 50. At most 100. On the question of time, that is why long term contracts are probably the most appropriately priced at the moment. But better be play money tho- gotta admit, it is some serious risk regardless however with potential bountiful reward.

[Ejonigboro]

Originally Posted by Egun Mogaji

Here is another perspective on this...FX that is...reading through this, I wonder if you use Technical Analysis at all.
In my experience, everything is clearer without all the noise from Bloomberg and the like. If those analysts could trade, they won't be analysts would they?
I trade FX for a living, and believe me too much analysis can blow your account.

I believe the post you refer to was made in Dec '06, and the trades I highlighted e.g. LONG AUD/JPY, AUD/CHF, GBP/USD, were all good plays in that period.

I do agree that technical analysis work very well in FX Trading because these markets trends well and are large enough for purely technical plays for the small sized investors. However, its never harmful to understand the issues underpinning such trends.

And for someone that trades FX for living pls tell us why we should believe your bold assertion i.e. "I trade FX for a living, and believe me too much analysis can blow your account", elucidate with examples!

[Egun Mogaji]

Originally Posted by Ejonigboro

I believe the post you refer to was made in Dec '06, and the trades I highlighted e.g. LONG AUD/JPY, AUD/CHF, GBP/USD, were all good plays in that period.

I do agree that technical analysis work very well in FX Trading because these markets trends well and are large enough for purely technical plays for the small sized investors. However, its never harmful to understand the issues underpinning such trends.

And for someone that trades FX for living pls tell us why we should believe your bold assertion i.e. "I trade FX for a living, and believe me too much analysis can blow your account", elucidate with examples!

Hmmm......Elucidate with examples I hear you say....
Well.....how long is a piece of string?
In the first instance, I might have missed the dates of the thread, but my position, that too much analysis can blow you out still stands.
I don't want to go in to long discourse about this. We can be here all day.
As with life, as with trading, there is more than one way to skin a cat.
Small sized investors, Big sized investors.....
It's a dick thing that one. How long is a piece of string. Mine is bigger than yours and all that palaver. Tick by tick, or candlestick, or is it a trend? Or where is price?
Why do you need the underpinning issues? Price is up or down no more no less.
It's like trying too much that one. To make it seem more complicated than it is really!!!

There is fundamental analysis, and there is technical analysis. And within those two groups are a plethora of different systems trying to do the same thing...determine Price.
But PRICE is KING.
Fundamentals is using a humbug of reports, news and whatever else to come to a conclusion. What is price going to be.
Technical Analysis on the other hand, using indicators, and price to tell what the market is doing.
Traders then take whatever position they deem fit.
Remember one thing. There is only ever three things certain about price. It is buying,or it is selling and the other when it is undecided.
Elucidate with examples....
Forecasters, Analysts and all the baloney that is the financial press....only do one thing. tell you what has happened after it has happened. Sometimes they tell you what they 'think' is going to happen, but may or may not happen. But price would always tell you what is happening.
As the thread was dated, I couldn't use that period to tell you anything we don't already know. It has happened. It's in the past.
But would you be going long on the GBP/USD now? Unless you have deep pockets....
That it rained yesterday is not an indication that it will rain tomorrow, though it might.
But it might not. You could argue that it depends where you are and whatever else....it is still the same thing. You would use a few indicators...the clouds, the wind, what the meterologists say to come to a conclusion, which may or may not be right.
Now with trading, you could be a scalper, a swing trader, or an intraday trader or a trend follower. Everyone is trying to do the same thing. Tell what price is going to be. But the fun part is you cannot tell what price is going to be until AFTER it has happened.
As with everything in life, there is more than one way to achieve the same thing. It is one of preference. Whatever works for you is fine. But too much analysis can cause paralysis.
Breakout trading, Breakout fading, trend riding, decreased volatility greakout, carry trade, news straddling......it is all the same thing. Trying to tell what price is going to be before it happens.
And there are those two afflictions of man...fear and greed.
Price never goes in one direction for ever.
Like I said, we can be here all day.
And anything else would be a red-herring.
Fundamentals might work sometimes, but as the credit crunch crisis has shown, PRICE is the king. Bear Stearns thought they had the market cornered, but they realised too late that whatever you have is only worth as much as anyone else is willing to pay for it.
Nothing that is happening today has not happened before. The markets have been there as long as year dot. It would be there long after i'm not here anymore.
It is how we deal with what we are confronted with that determines everything else.
'Welcome to Hell' comes from trying to make sense of all the nonsense.
You don't have to believe anything I say at all, just think it through.
Just follow the market and don't try to beat it.



I rest my case.

[JuliaEverett]

Thank you for the info!

[Obugi]

All,

Where is this oil thing going to end biko nu?

I logged on this afternoon and the call options I bought just a few days ago on this Continental whatever company are up 200% !!!! Even the shares are up >15% !!!

Chineke !!!

The trade:

Hitting a Gusher.....


My Portfolio: 90-day track record.

Obugi's Portfolio

On the other hand, why are retail stocks holding up? Those rebate cheques?

Those in America live on the banks of the proverbial river......please don't let soap enter your eyes O!

!!! Get Yours !!!
Obugi.

[Obugi]

All,

I should have held on to those CLR call options.

Anyhow, after a few weeks waiting, I'm now jollying. I just knew the economy wasn't as good as the figures purpoted to show. Even if it were, confidence was ebbing. I lost 50% with puts on BBY. How come that thing kept going up and holding up with all the bad news out there? Then there was that spike up yesterday, I almost thought Jesus himself was stacking the market maker desks against me.

Anyway, when the market got overbought days ago, I added some more puts on retailers and some on a big bank, WFC. I even wish I'd held on to my Best Buy putsk, the stock is down >5% today. Needless to say, I'm all giddy.

Unemployment is rising again.....5.5%. Long time since we've seen numbers like that. Who's going shopping when they've got no paycheck? Employers should please keep cutting costs so that America can better compete with India & China. More layoffs, please!!!!!!!

The trade:

Made 30% on this today, took partial profit, so everything from now on is a risk free ride.

The Trade

The portfolio: 90-day performance.

Obugi's Portfolio

!!! Get Yours !!!

Obugi.