Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
North Korea loudly proclaimed it was making a nuclear weapon to be fired at the United States. The largest company on the planet has lost one-third of its market value, destroying hundreds of billions of dollars of wealth in the span of a few months. And, based on this, the market on a number of measures reached the highest levels ever in world history.
Well, Apple has been talked to death, and frankly, I think in the weeks ahead, people are going to realize it's basically a company past its prime and not really worth yacking about. No one has given me a medal (or a chest to pin it on) for my oh-so-right prediction about Apple, but I'll say what I've said before: you will never see this stock again at $700, and you can expect it to fart around in the 400s (and, occasionally, lower 500s) in the months ahead. As the chart shows below, we are close to major support, and a retard-o-bounce is a strong possibility.
If you are interested in investing but you don’t like the long wait that
traditional investments require, binary options trading might be a good option
for you. So, what do you need to know about binary options and what are the
Binary options is an interesting type of investment because there is no
fixed buyer and seller, and no traded assets. This is different than every
other type of investment. So, you make contracts based on your foresight about
whether certain assets will move up in value or down. You then get a payout
based on whether your prediction was right or not. Brokers make money from both
sets of traders making the contracts.
Are the Regulations?
Binary options is still a relatively new idea, so there are no regulations
yet. That leads to a lot of confusion because binary options fall under
different categories, depending on which country you ask. For instance, the UK
says binary options are part of the gaming industry because it is essentially
fixed rate betting. Other countries view binary options as a short-term
investment. That’s why regulations are probably on the way—to define binary
options and create rules to protect people and investors.
Some people say there will never be regulations while others say it is
inevitable. The most probably cause that regulations are on the way is that
NADEX (North America Derivatives Exchange) and CBOE (Chicago Board of Exchange)
recently added binary options to their offerings. Additionally, regulations
would allow countries to tax binary options and make money off of it, which has
obvious benefits for them.
So, when regulations on binary options finally do come around, it will
probably be a slow process. If you remember back to when FOREX trading was a
new trend, the regulations were slow to come in. But just because there are no
regulations, does that mean you shouldn’t participate?—no.
You Invest in Binary Options?
Just because there are no regulations doesn’t mean you shouldn’t participate
in binary options. As a matter of fact, it makes it one of the best times to
get involved because the government is not interfering with your options or
taking taxes—that gives you a lot of power.
Future regulations, however, probably will be a good thing because it will
ensure brokers are licensed and not able to take more than their fair share.
It’s probably going to be a long road to regulations, though, so get prepared
for lots of changes.
Binary options aren’t for everyone, but if you know how to do good research
on stocks, you will probably be good at binary options, too. It isn’t
rocket science, and there is a bit of luck involved, but the risks are
calculated and many people have already been pretty successful.
Have you experimented with binary options yet? What has your experience
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It may seem hard to believe, but when I was in college, I was interested in being a securities analyst at an investment bank. I naively thought they did something similar to what I do now, which is know an industry deeply, study a lot of charts, and write earnest, thoughtful ideas about what they saw. Instead, experience has taught me that analysts are either overpaid shills for the investment bank or shameless attention-whores.
As an example of that second type, let us turn our attention to the following news item, published just days ago:
For some reason, these geniuses thought the Big Round Number of 1,000 wasn't sufficient, so they upped the ante to a series of repeating digits (I suppose $2222 struck even them as questionable). This morning, I read that they have "tweaked" their model and given the price target a "haircut" (yes, these are the actual wordss they used) and the figure is now…………$888 (which should surely appeal to Chinese investors).
Of course, while these guys are cashing in huge paychecks, I'm here in my corner of the blogosphere castigating you good people to click a freakin' advertisement once in a blue moon and writing stuff like How Apple Became Japan last year which stated, in no uncertain terms:
I imagine AAPL will be in the low 400s next year and will meander around relatively trendlessly for years to come. Its multi-thousand percent gain will be a part of financial history, just like similar gains enjoyed many years ago by RIMM, CSCO, and YHOO.
I think the $701.86 high we saw last year won't just be the highest price Apple reaches in the near term; it'll be the highet price it reaches in our lifetimes. This once is past its peak, folks. Steve is gone. Look for the next shiny object.
Late-breaking Bonus image, posted within days of Apple's all-time high:
Low Implied Volatility For the S&P 500; Lower For SPY
On Wednesday, Bloomberg TV reporter Adam Johnson noted that, while the S&P 500 Volatility Index (VIX) is near a 6 year low, hovering near 12.5, the volatility measure of the SPDR S&P 500 index tracking ETF SPY is even lower — at about 5. Consequently, Johnson noted, puts on SPY were cheap. In the link in his tweet below, he suggests that long equity investors consider hedging now, with the market near five and a half year highs, and the price of downside protection cheap.
Johnson suggested investors look at the at-the-money March SPY puts, which, as of Wednesday's close, would cost about 1.8% of position value.
Cheaper Ways to Hedge SPY
Adam Johnson is right that SPY puts are cheap now, but there are less expensive ways to hedge, over a longer time frame, depending on how much of a downside you are willing to risk. The screen captures below show the optimal puts* to hedge 100 shares of SPY against, respectively, a greater-than-10% drop, and a greater-than-15% drop between now and June.
Unlike the March expiration put Johnson mentioned, the optimal puts above would provide protection until late June.
Effect Of Low Volatility On SPY Collars
In a previous post ("Two Ways Of Hedging Apple and Research In Motion"), we saw an example of a security that was expensive to hedge with optimal puts, but had a negative hedging cost with an optimal collar: the cost of buying its expensive put options were more than offset, in that case, by the income from selling its expensive out-of-the-money calls. The opposite is the case with SPY today: its put options are cheap and its call options are cheap too, so the income from selling those call options doesn't reduce the already-low hedging cost much. The screen capture below shows an example of this, with an optimal collar on SPY using a 10% cap and a 15% threshold (i.e., an investor opening this collar would be willing to limit his potential upside between now and June to 10%, in order to reduce the cost of hedging against a greater-than-15% drop in SPY between now and then).
Given the low cost of SPY puts now, I doubt many investors would be willing to cap their upside at 10% over the next five months just to shave 20 basis points (0.20%) off of the cost of their downside protection, but I've included the optimal collar screen capture above for illustration purposes.
are the ones that will give you the level of protection you
want at the lowest possible cost. Portfolio Armor (available on the web and as an Apple iOS app),
uses an algorithm developed by a finance Ph.D to sort
through and analyze all of the available puts for your
stocks and ETFs, scanning for the optimal ones.
**Optimal collars are the ones that will give you the level of
protection you want at the lowest net cost, while not limiting your
potential upside by more than you specify. The extension to the
Portfolio Armor algorithm to find optimal collars was developed by a
post-doctoral fellow in the financial engineering department at
Princeton University. This capability is currently available on the web version of Portfolio Armor, and will be available soon as an in-app subscription for the iOS app.
AAPL beat on profits but disappointed on revenues last night. There was a big reaction and I read of AAPL trading as low as 461 in the after market last night. It may have gone lower. Some of this seems likely to persist into trading hours so we may shortly see the test of the main rising support trendline from early 2009. Will it hold? Depending on what happens on the daily RSI today that currently looks promising for a reversal at this support trendline:
Well, now that the world's largest company (by market cap) is getting absolutely torpedoed and has lost an entire THIRD of its value in just the past few months, the markets are barely even noticing (the NQ notwithstanding, but that's only because the NQ=AAPL). This can't be a surprise to Slopers, though; from last night: