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Posts Tagged ‘smartstops’

SmartStops.net Teams With TradeKing to Facilitate Risk Management

July 11th, 2012

San Francisco, California, July 11, 2012– SmartStops.net, an online service that helps investors of all levels manage investment risk, announced today that the SmartStops BrokerLink service is now available for clients of online broker Read more…

ETF, Mutual Fund, OPTIONS, Uncategorized

Is The Chinese Consumer A Risky Bet For U.S. Investors And Corporations?

March 12th, 2012

Targeting the Chinese consumer is considered to be a low-risk market bet by many corporations. Wal-Mart (WMT) is one corporation that has been forging into the Chinese marketplace since 1996 and recently showed their continued commitment to Read more…

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Chicken or Egg? Risk Tolerance as a Driver of Financial Success

October 10th, 2011
Many studies have shown that risk tolerance correlates positively with income and wealth. The correlations are not strong, usually around 0.3, but they seem to be Read more…

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Valuations in Free-Fall: S&P 500 Cheapest Since 1957!

October 5th, 2011

The Standard and Poor’s 500 index valuation has hit 25% below the average from the last nine recessions, even as price estimates continue to fall, according to Bloomberg‘s data. These estimates provide a statistically significant outlook on analyst Read more…

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Wall Street Is Already Reacting Negatively To Debt Ceiling Fight

June 7th, 2011

SmartStops reminds everyone that you can benefit by sidestepping periods of risk. The low trading costs in today’s environment warrant the ROI for taking action.

Authored by Stan Collender of CapitalGains & Games blog. Posted at: http://capitalgainsandgames.com/blog/stan-collender/2264/wall-street-already-reacting-negatively-debt-ceiling-fight

Contrary to what the GOP has been saying, financial markets not only will react negatively to the debt ceiling fight happening on Capital Hill, but as I explain in my column from today’s Roll Call, that negative reaction has already begun and it’s not at all ambiguous or tepid.
 
 Negative Market Reaction to Debt Ceiling Fight

Three things are wrong with the continuing insistence by the Republican Congressional leadership and a number of potential GOP presidential candidates that the financial markets will not react negatively if the existing federal debt ceiling is not increased by Aug. 2, the date that the U.S. Treasury says the government’s cash situation will become critical.

First, it’s not at all clear that GOP Congressional leaders really believe what they are saying. One of the back stories to last week’s scam of a debate in the House on a “clean” debt ceiling bill was that the leadership apparently went out of its way to let the financial world know in advance that the vote was nothing more than political theater and shouldn’t be taken seriously. That’s the Washington version of the hedging that’s typical on Wall Street. It’s also ample evidence that the leadership was worried enough about a negative reaction from investors that it needed to reassure them in advance about what was happening and what it meant. That’s not a vote of confidence in the hold-the-debt-ceiling-hostage strategy that we keep being told will not have a negative impact on interest rates, market psychology, stock prices or economic growth.

Second, the leadership and the candidates don’t seem to realize or be able to admit that the White House is in control of many of the levers that will affect the markets. Administration officials, not the Congressional leadership, will determine how to deal with a cash shortage, and Wall Street is much more likely to react to the Treasury’s decisions than to political hyperbole, demagoguery and attempted spin. Try to imagine the virtually immediate impact on the stock price of government contractors if the administration announces on Aug. 2 that money owed to those companies will be paid after 120 days instead of 30, and you start to get a sense of how much the White House rather than Congressional Republicans are in control of the situation.

Third, in spite of all the GOP protestations to the contrary, there are actually a number of important signs that capital markets have already begun to react disapprovingly to the debt ceiling impasse and that the economy is starting to feel the negative effects.

It started in mid-April when Standard & Poor’s, one of the top three credit rating agencies, revised its outlook on the rating for U.S. debt to “negative.” Much of the reporting about S&P’s changed outlook was about the size of the deficit, but a closer look shows that S&P expressed little doubt about the United States’ ability to pay its debts. Its main concern was over the government’s “willingness to pay,” or its ability to reach the political consensus needed to make timely payments. The fight over increasing the debt ceiling, which raises questions about the government’s willingness to pay existing obligations, had to weigh heavily on S&P’s analysis, especially because the United States is having no problem borrowing and could easily meet its obligations by doing so.

The negative market reaction continued last week when Moody’s, another of the three top rating agencies, warned it was considering a downgrade of the federal government’s credit rating. Moody’s explicitly blamed the debt ceiling fight: The rating agency said the nation’s rating could be lowered if the debt ceiling is not raised “in coming weeks,” and it cited “the heightened polarization over the debt limit” as one of the primary reasons for its thinking.

In other words, and completely contrary to what GOP leaders are saying, two major financial market participants are warning that there will be a Wall Street-related price to pay if the debt ceiling is not raised as needed.

The best indication of all that the market has already started reacting negatively is the current trading of credit default swaps on U.S. debt. As of late May, the number of CDS contracts — essentially insurance policies on the possibility of a default — had risen by 82 percent. Equally as important, the cost of a CDS — the best indication of how much riskier U.S. debt has become — rose by more than 35 percent from April to May. Last week I spoke to a number of people who calculate such things for a living, and they said this change means that the interest rate the U.S. government has to pay has already increased by as much as 40 basis points compared with what it otherwise would be. This means higher federal borrowing costs and deficits, and overall higher interest rates on everything from car loans to mortgages to credit cards.

Except when something unexpected occurs, the initial changes in market psychology and behavior start with just a few investors who act either because they are more or less risk averse, have better information, or are smarter. That means there are usually small signs of change before a market tsunami hits. In this case, there is now clear evidence that the uncertainty over the federal debt ceiling is already having the negative impact on financial markets that the Republican leadership has said will not occur. Just because it may not yet be obvious to everyone doesn’t mean it’s not happening.

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Wall Street Is Already Reacting Negatively To Debt Ceiling Fight




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RIMM Risk Alert 6/1/11 – The Option Response

June 1st, 2011

By Michael C. Thomsett , contributing writer


(For those familiar with options trading and authorized to transact the following level of transactions)
 
Research in Motion (RIMM) alert: On June 1, 2011, a SmartStop Was Triggered.
The price of this stock in your SmartStops portfolio has fallen to the point where it’s triggered today’s SmartStop.
 
Note the last two sessions have developed one of two bearish alerts, confirming the SmartStop trigger. The full session was black followed by a downside gap. This may develop into one of two strongly bearish indicators. First is the side-by-side black lines, which will develop if a third session is also black and does not rise to fill the gap. Second is a downside tasuki gap, which develops if the third day is white and moves up and into the gap, but does not close it.
 
In either event, the confirmation of the SmartStops alert in the form of bearish signals may cause traders to take appropriate action. This may consist of one of three recommended options-based trades:
            1. Buy a protective put at 40. This decision makes sense if a trader’s original basis is lower than $40 per share. If the price declines into the money, the put can be closed to offset losses in the stock with increased intrinsic value; or it can be exercise to sell shares at a profit. The profit will be equal to the difference between the strike and original basis, minus the cost of the put. With the stock at $41.16 as of this writing, the June 40 put is valued at 1.41. If traders consider the downside risk short-term, buying this put makes sense. If considered longer term, one of the two following strategies makes more sense.
            2. Open a collar using the 42.50 call and the 40 put. The June collar based on these values involves the long 40 put at 1.41 and the short 42.50 call at 1.36. Net cost of the collar is 0.05 plus trading expenses; but it protects against downside protection just like a protective put but for less cost.
            3. Open a synthetic short stock position using the 42.50 positions. This involves a long put and a short call. The 42.50 put is at 2.70 and the call is at 1.36. The net cost for the synthetic short stock using June contracts is 1.34. The same strategy using September 42.50 contracts combines the long put at 4.50 and the short call at 3.45, for a net cost of 1.05 but a much longer period of downside protection.
 
Keep the probabilities on your side.

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RIMM Risk Alert 6/1/11 – The Option Response




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OPTIONS, Uncategorized

RIMM Risk Alert 6/1/11 – The Option Response

June 1st, 2011

By Michael C. Thomsett , contributing writer


(For those familiar with options trading and authorized to transact the following level of transactions)
 
Research in Motion (RIMM) alert: On June 1, 2011, a SmartStop Was Triggered.
The price of this stock in your SmartStops portfolio has fallen to the point where it’s triggered today’s SmartStop.
 
Note the last two sessions have developed one of two bearish alerts, confirming the SmartStop trigger. The full session was black followed by a downside gap. This may develop into one of two strongly bearish indicators. First is the side-by-side black lines, which will develop if a third session is also black and does not rise to fill the gap. Second is a downside tasuki gap, which develops if the third day is white and moves up and into the gap, but does not close it.
 
In either event, the confirmation of the SmartStops alert in the form of bearish signals may cause traders to take appropriate action. This may consist of one of three recommended options-based trades:
            1. Buy a protective put at 40. This decision makes sense if a trader’s original basis is lower than $40 per share. If the price declines into the money, the put can be closed to offset losses in the stock with increased intrinsic value; or it can be exercise to sell shares at a profit. The profit will be equal to the difference between the strike and original basis, minus the cost of the put. With the stock at $41.16 as of this writing, the June 40 put is valued at 1.41. If traders consider the downside risk short-term, buying this put makes sense. If considered longer term, one of the two following strategies makes more sense.
            2. Open a collar using the 42.50 call and the 40 put. The June collar based on these values involves the long 40 put at 1.41 and the short 42.50 call at 1.36. Net cost of the collar is 0.05 plus trading expenses; but it protects against downside protection just like a protective put but for less cost.
            3. Open a synthetic short stock position using the 42.50 positions. This involves a long put and a short call. The 42.50 put is at 2.70 and the call is at 1.36. The net cost for the synthetic short stock using June contracts is 1.34. The same strategy using September 42.50 contracts combines the long put at 4.50 and the short call at 3.45, for a net cost of 1.05 but a much longer period of downside protection.
 
Keep the probabilities on your side.

Read more here:
RIMM Risk Alert 6/1/11 – The Option Response




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OPTIONS, Uncategorized

Popular Exit Strategies- The Good, The Bad, The Ugly

May 24th, 2011

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