Archive

Monday, November 16, 2020

    While we're waiting for a vaccine, India reports that, after treating all health workers, hydroxychloroquine is also 90% effective in prevention and treatment.

   Again, because of the negative real interest rates and bloated debt this year, our momentum process overlies value investing. This week, I list the steps of our process to make slow but low risk profits. We will explain each step later.

Look for candidates
    news
    stories
    scan cnbc.com - use buffett method for value stocks
some net profit
pe <= 50    (maybe reduce more later)
price < 500 (maybe reduce more later)
200 day moving average up over 3 weeks
price > upper bollinger band
    (preferably just breaking through)

sell put at spreadsheet indicated price
    next third week closing date
    must indicate profit > 20%/yr

check daily or twice daily
close if option cost <= 10% of option premium
if price < put strike price
    if 200 mov avg down, short stock
    if 200 mov avg up, wait
        if price way below strike price
            sell call at strike price if profit > 20%/yr
if having shorted stock
    if price up to put, buy back short
if having sold call
    price > call, buy stock
    if having bought stock
        sell call at strike price and exp date if profit > 20%/yr

Monday, November 9, 2020

   This election week was a non-event investment wise. The results seem to not have an effect on the markets so far, but we will see. There seems to be strong statistical evidence that the results were very fraudulent so the legal challenge may drag out until February.

   Meanwhile, it looks like we have found the key to sustainable and repeatable profits in the stock market. Dare we say, "It's different this time!"

   Next week, we'll discuss the automation procedure for daily analysis.

   Interestingly, now that they got rid of Trump, the riots stop cold and the vaccine will be released this month.

Monday, November 2, 2020

   We're not making an analysis this week because of the election tomorrow. Volatility is off the charts and the market is unpredictable and unreliable. See you next week!

Monday, October 26, 2020

   Everyone thinks the market will freeze until the election. From past history, that freeze will last for some time past the election. Does a freeze mean lower prices?

   We are now evaluating the proposal that 4 weekly put sales is more profitable than one monthly. We'll keep you posted of the results at they happen in the coming weeks. This will be with specific examples. The earning report season is beginning. Perhaps we shall wait for it to end for the examples.

   We also signed up this weekend for the RockwellTrading.com offer to receive their picks for options to sell. This should also be interesting.

   Meanwhile. we continue to publish our filtered value stock list. It seems to be growing. Is this because of the freeze or price reduction?

Monday, October 19, 2020

   So now we have the spreadsheet. Let us populate it with the prospective stocks, look up the price, top of the Bollinger Band, "high for yr", and "low for yr" for each from finance.yahoo.com.

   If the price is higher than the "higher limit", we can sell puts. Look at the option charts, select a strike price close to the "higher stop", insert the "option premium", and see if the "yearly profit %" is adequate. If so, sell the puts.

   If the price is lower than the highest limit, we can sell calls. Look at the option charts, select a strike price close to the "sell call" price insert the "option premium", and see if the "yearly profit %" is adequate. If so, sell the calls.

   At least once a day, revise the price, "higher limit", and "strike price". The "*" column will show if the limit has been crossed and you should buy back the option. Next week I will show how to automate these numbers.

   If all goes well, you should profit about 20% per month. If the bottom drops out, let's hope you are watching every day and get out.

Monday, October 12, 2020

   This is the spreadsheet we use to evaluate stocks for option trading.

after price: 0 means you have not crossed the limit and all is well

higher limit: from Bollinger Band

new stop: =E3-(E3*((R3-S3)/((R3+S3)/2))*0.14086)

higher stop: =IF(H3>G3, INT(G3*100)/100, INT(H3*100)/100)

For Calls:

sell call: =(E3-I3)+E3

option premium: read from broker option chart

profit per year: =L3/(E3*0.25)*(365/T3)

For Puts:

strike price: not necessary

option premium: read from broker option chart

yearly profit %: =(P3-0.2)/(E3*0.25)*365/T3

high for yr: read from finance.yahoo.com

low for yr: read from finance.yahoo.com

Days to Expiration: from today to the third Friday of the month

Monday, October 5, 2020

   First, remember that we only sell puts out of the money on stocks we don't mind owning for a while. We only sell calls out of the money on stocks we think will not rise in price. When an option becomes in the money, we close it and perhaps sell another out of the money.

   We will pick a strike price that is unlikely to be reached before the option expires. This is determined by finding the highest and lowest range reached over the past year.

   Then, we test for the ROI (return of investment) calculated on a yearly basis. If the ROI is below our required level, say 20%, we don't sell the option. These numbers are calculated on our spreadsheet. Continued next week.

Monday, September 28, 2020

   The question came up, "which stocks to sell options on?" You see we evaluate the best value list on this website but add all the popular ones in the news that are going up, for puts. We want those not going up for selling calls. We exclude those that swing wildly up and down and are not in a steady trend.

   Last week we said we sell a put and a call, both out of the money. To be clear, the put is sold on stocks we think are going higher; above the upper band, and the call on stocks we think are not going higher until the end of the option period. We sell the options that expire on the third Friday of the month to be sure of adequate profit upon expiration.

   So, at which strike price do we sell? Continued next week.

Monday, September 21, 2020

   So as we see, volatility is the name of the game. Turner's band (we use Bollinger Band) is a measure of volatility. Rockwell indicates a buy if the three indicators are positive for three days. Hedgeye.com indicates a risk range based on volatility. Incidentally, we have been following Hedgeye lately and hope to integrate their methods into ours.

   Back to the plan. You have the setup for the chart at finance.yahoo.com. You can also use TradingView.com or any other. Now we want to make a trade. Turner buys or sells stocks evaluated on a weekly basis. Rockwell, stocks or options weekly and evaluated daily.

   We, only sell options from one expiration date to the next evaluated twice daily. We sell a put and a call, both out of the money. If the price drops to meet our put, we will sell a call in the money to maintain a zero balance and not be assigned the stock at option expiration, without buying back an option. Our goal is not to grab a "ten bagger" but to make consistant ROI at 20-30% per year.

   Turner wants large profits on stock growth, but we have had the floor drop out from under us too many times by the stock gods. (And there may be such gods manipulating the prices.)  Rockwell wants a higher ROI but is willing to lose half the trades buy closing options early. Hedgeye buys and sells up and down his volatility risk range.

  The puts and calls we sell are bought mostly by investors hoping to hold on to their long term profits by not selling the stock and paying income tax. But where to sell the "out of the money" puts and calls?

Monday, September 14, 2020

   Volatility rules, value dies. For many years, we selected stocks of companies to buy based on the future prospects of profit. Now it seems we take decisions based on the probability of prices moving either up or down. Yes, new investors are gravitated to the "hot" ideas hyped by the media and celebrities, but the bulk of investors seemed to be stuck in the old methods, described by Hedgeye.com as "Old Wall." Why stuck? Perhaps it is because the income tax system punishes an investor wanting to sell a long held position.

   'Long held' produces profits from growth mostly due to inflation, even though the 'profit' may be less than inflation. What if you could buy and sell without regard to income tax? This what Turner suggests. I once cornered the market in plywood futures and produced a very good profit. However, I tried to hold the positions until the end of the year to delay taxes. You guessed it. The profit was all gone; whipsawed away.

   So now, we profit from options. Is this nibbling at the need of long term investors trying to delay taxes to the future? Imagine what your portfolio would be like if you could free up capital to maximize profit instead of protecting profit.

Monday, September 7, 2020

   As Turner said in his seminar today, the market will continue to go up until it doesn't. That means we coninue to be bullish until the market stops going up. However, with the prices over bought and the election soon will bring high volitility, it's best to keep stops high and even go to cash.

   So, how do we evaluate a stock's price to see if it is in the safe zone and a buy? Go to the web site finance.yahoo.com, click on Finance in the top ribbon of the page. Click on SPY 500, click on 1Y for one year, click on Chart, click on Indicators, click on Bollinger Bands, set Period to 200, set Standard Deviations to 1, and set Top line to green.

   Click on Indicators, click on Moving Average and set Period to 50.

   Click on Indicators, click on Moving Average, Period to 200 and color Orange.

  Click on Indicators, click on RSI and set Period to 7.

   Click on Indicators, click on Stochastics and set Period to 14.

   Click on Indicators, click on MACD and set Fast MA Period to 12,
Slow MA Period to 26, and Signal Period to 9.

   You are not set up to evaluate a stock. If the price is above the top line of the Bollinger Band, it is good to own. Just passing up through the line is a buy. If RSI and Stoch are above 50 and if MACD fast is above Slow, the price is moving up.

Monday, August 31, 2020

   The market prices continue to increase. How long can this go on? Until the election? Until the Fed allows interest rates to increase? Will there be a crash soon?

   This week we will begin to describe our stock option process. With artificial interest rates, the value of companies is being ignored by investors. At least until sanity is restored.

   First, you need to find prospects of which you will sell options. This strategy does not buy options. Some call it "The Wheel". As Turner describes, first notice if the main indexes, SPY and QQQ are going up or down. If down, reverse the following. By "going up" we mean the price is above the bollinger band set at period: 200, standard deviations: 1, moving average type: simple. Turner suggests not investing if the main indexes are not above the band. You may consider it a prediction. Then test stocks for the same.

   Test all the stocks you find interesting, the major ETFs, suggestions in the news, and those in the news reported as going up. Also look for those about to rise abive. They are most ripe when just moving above.

Monday, August 24, 2020

   So, here's the scoop. Putting aside value for a while, let's run a stock through the Turner analisys to see if it should keep going up. Then, let's use the Rockwell indicators to see if it is a buy. I so, sell a put out of the money by the Turner stop, if it creates a yearly ROI of 30%-60% based on the Rockwell wheel strategy. Then, to sweeten the pot, sell an out of the money call using the Turner highest stop.

   Here's the hedge. If the price drops to the put price, either close the option or sell a call in the money that produces the maximum yearly ROI. If the price rises to the first call, either close the call or sell a put in the money that produces the maximum yearly ROI. In this way you may wind up with several options before the due date but you will wind up with neither a long nor short position. Then do it again.

   If you do wind up with a position cover it with an in the money option at the maximum yearly ROI, or close it. Just don't run out of available funds before the expiration!

   You will miss out on the explosive gains with this strategy, but also the unexpected drops. Just watch it every day and act fast. Next week, details.

Monday, August 17, 2020

   Steady as she goes. We are only selling out of the money puts and calls for 30% yearly ROI. The days are filled with virtual conferences and seminars; MoneyShow, varius tech, etc. Some five at the same time. Value company stocks are deep asleep until inflation ceases. Follow Schiffradio.com for analysis.

Monday, August 10, 2020

   Second verse, same as the first. Nothing new. Come back next week.

Monday, August 3, 2020

   We continue to publish our findings on the best stocks to own based on the value principles of Benjamin Graham and Warren Buffet, but these are being ignored in favor of momentum based on whim alone.

   As published in The Credit Strategist August 1, Michael Every of Rabobank piles on: “[A]s repeatedly stressed of late, markets are, almost across the board, totally divorced from reality. Facts no longer matter to them as if t hey were not facts.”... may think we can all hide from fundamentals, but fundamentals are nothing more or less than truth, and in the end everything comes down to truth.

   So what to do? Go with momentum strategies until the economic bubble pops, the nationalization of industry subsides, and the currency manipulation ends. It may take a while.

Monday, July 27, 2020  

   We have made an analysis of the methods and strategies described in the books "Rule 1 of Investing"¹, "The PowerX Strategy"², and Hedgeye.com. With the demise of value investing, we must investigate the new paradigm of momentum investing. In future weekly commentairies, we will explain what is going on and what to do about it, with a strategy combining all these inputs.

(¹)   https://www.turnercapitalinvestments.com/

(²)   https://www.rockwelltrading.com/

Monday, July 20, 2020  

   We are holding comments while investigating the implications of the economy being distorted by governments worldwide. It may be impossible to predict stock market trends with certenty.

Monday, July 13, 2020  

    We are holding comments while investigating the implications of the economy being distorted by governments worldwide. It may be impossible to predict stock market trends with certenty.

Monday, July 6, 2020  

   We are holding comments while investigating the implications of the economy being distorted by governments worldwide. It may be impossible to predict stock market trends with certenty.

Monday, June 29, 2020  

   You know, these value stocks represent the few companies that have retained their financial balance through all the chaos of this year. As others have said, investors have thrown investing to the winds and are gambling with momentum and buying the latest craze. Well, we can't fight the market and have to stay with the herd for now. But, when you're ready to invest for the long run, consider value.

   For now, we are moving to Very Cautious; selling puts and calls out of the market as we near the giant drop many are predicting. However, a new trillion dollar paper money gorge before the election would boost prices even further. Keep on your toes in the daily ping pong game.

Monday, June 22, 2020  

   OK, here is the list of value stocks. But, it seems that nobody wants to invest for the long run. After all, the future is unpredictable and without confidence. If you want to invest in solid companies, look no further. If you want to speculate and go for quick profits, good luck!

Monday, June 15, 2020  

   Once again, we take a hiatus this week. Flying blind, we hesitate to make an observation or a prediction. We are studying the principals of RockwellTrading.com

Monday, June 8, 2020  

   You know, our List is that of the most balanced companies and therefore are Value stocks. So far this year, only Momemtum stocks are gaining price because of te extreme volitility. What to do? Wait and let your portfolio shrink? Or, go with the flow? The Rule 1 of Investing book we recommended is for Momentum investing, albeit one week at a time. Of course, we try to apply Momentum primcipals to Value, but you would still have to sit out the market because there are so few stocks to own.

   Lately, we are looking at the RockwellTrading.com PowerX Momentum strategy. It looks very promising and we shall have an analysis in the near future.

   Meanwhile, the New Orleans Investment Conference, the premier educational gathering of Qualified Investors, may or may not be held again this year at the end of October. We will keep you posted.

Monday, June 1, 2020  

    We are going to take a psss on this week. The riots, virus, feds, and wild economy make it difficult to draw any conclusions. Let's just wait it out.

Monday, May 25, 2020  

   Another fearful week in a sick economy. Thankfully, the volitility is taking a breather. The commentaries generally agree that a big drop is coming, so keep you finger on the trigger and sleep with one eye open. The Fed seems to want to keep the stock prices up at January levels, but when the free money to the unemployed and small businesses run out in another month, confidence might drop hard. For now, we are more long than short.

   Our list of balanced companies has grown this week These are, of course, value companies, and many think value is moving ahead of momentum.

Monday, May 18, 2020  

   The list of the most balanced companies is back! Notice that the list of companies with good financials is getting very small. But. we feel a bit more optimistic this week because the economy and the market is more stable. Teetering, but stable. That means we can better predict which stock prices will increase or decrease.

   Our equity in the last two weeks got well squeezed because we were trying to stay ahead of the ups and downs by selling calls and puts, trying to maintain a neutral position. If the stability holds, that will not be a problem. We will also be more conservative by staying further "out of the money".

Monday, May 11, 2020  

   The market continues to rise for no reason beyone sentiment and hope. This makes our value analysis moot until the ignorant volitility calms down. Therefore, we do not update the analysis this week. You may observe the figures from last week. That may be after the enevitable crash of assets and the dollar. One can only guess whether the market goes up or down each day.

   That being said, we are making slight profits through selling options, staying neutral on each stock by covering with another option if the stock rises or falls. This soaks up capital but makes a profit nibble on each transaction.

Monday, May 4, 2020   

   Don't take Buffett's advice! His message Saturday was to hold and wait for the price to come back up, but he is doing just the opposite. By selling a lot of stock, he is gaining capital for a big buy when companies go broke for need of loans. You should do the same.

   We took his same advice at the Great Recession, holding leveraged value stocks as they dropped. Can you say "value trap?" Having to cover at the lows, we were not in a position to ride the recovery. He made very profitable loans to distressed companies in the form of warrents. Keep in mind that he is going to eat well no matter what the market does. "Trick me once, shame on you. Trick me twice, shame on me."

Monday, April 27, 2020  

   Sure, stock prices are up and everyone is optimistic. "We'll soon be open again!" On the other hand... The big bad news is yet to hit. Remember people, the bubble is burst. The debt is a lead weight on the leg of production. More pundants are predicting another Great Depression than renewed prosperity. Stay agile.

   However, my 94 year old aunt said today that America always prevails. Did they say that about Rome?

Monday, April 20, 2020  

   Still, our analysis is meaningless because stock selection and price are motivated only by the uncertain future and government interference. What do do? Again by the book, be long what's going up. In that light, we include in the List, stocks that show green in the Safe Zone as well as those we find solid. Curiously, those solid have none in the green Safe Zone.

Monday, April 13, 2020  

   We still cannot predict up or down. Some   analysts believe we will recover as we come out of the virus danger and some that a Great Recession or Depression is imminent. For out strategy we try to maintain a neutral balance; selling puts and calls as the market and individual stocks rise and fall, each producing a premium. We can't give you a recommendation on trades because they must be done each day. However, maintaining long gold (GLD) has been a winner.

Monday, April 6, 2020  

   I am very sorry. This stock analysis is not useful while the markets flail wildly on panic fears. We must wait until normal trends and emotions allow superior company management to be rewarded.

   Stay tuned for next week

Monday, March 30, 2020  

   I am very sorry. This stock analysis is not useful while the markets flail wildly on panic fears. We must wait until normal trends and emotions allow superior company management to be rewarded.

   Stay tuned for next week

Monday, March 23, 2020  
   What a week! Almost all our options expired Friday leaving almost no stocks in the portfolio. There remains 3 month treasuries (VGSH); British Pound (POU.AX); gold (GLD), and silver (SLV). Some stocks skipped the liquidation, but they will be sold today with options. I know, these were not part of the plan, but they were profitable. Our list of worthy stocks, by the way, is invalid during this turmoil; everything is down and the new quarter's report will probably re-classify them all.