I came across some investment quotes while I was killing time at home/work today. Who ever said the best investors don’t have a sense of humor?
- Wall Street people learn nothing and forget everything. – Benjamin Graham
- Wide diversification is only required when investors do not understand what they are doing. – Warren Buffett
- The four most dangerous words in investing are ‘This time it’s different.’ – Sir John Templeton
- What’s the quickest way to become a millionaire? Borrow fivers off everyone you meet. – Richard Branson
- You learn in this business: It you want a friend, get a dog. – Carl Icahn
- Well, you know, I was a human being before I became a businessman. – George Soros
- The stock market is filled with individuals who know the price of everything, but the value of nothing. – Philip Fisher
And finally, if you’re in the market and you don’t have this mantra memorized, you’re probably not doing very well:
- Rule No.1: Never lose money. Rule No.2: Never forget rule No.1. – Warren Buffett
I don’t know about you, but this is becoming one wild ride. After dropping 200 points, rising 200 points, rising another 300 points, I can’t take much more of it! So I asked myself, “Self, what can I do in order to take advantage of these wild swings?” I came across a strategy that’s pretty risky but might just pay off in a market like this.
Options Strategy: The Straddle
The straddle consists of purchasing a call and a put at the same strike price in the same month. Here’s a graphical interpretation from Investopedia:
Here’s the issue with a straddle. If there’s very little movement in your target, you’ll lose out on both the call and the put. Lately, the market’s been either up triple digits or down triple digits. What I’ve been doing is playing a modified SPY straddle, that is, where the calls and puts are on different strikes but in the same month. I’ve been doing this primarily to lower the overall cost of the straddle. My profits will be much smaller, but I’ll have less capital tied up. So far it’s worked well with the put side bringing in a 30% profit on Monday and the call side bringing in a 25% profit on Wednesday. I’ve been extremely quick to lock in gains because, as you’ve noticed, the markets are still fairly volatile. The last thing I’d want is to lose out on a nice gain by wanting to squeeze out another few points of profit. I’ve learned from my mistakes trust me!
Looks like we’re somewhat flat this morning. How long the markets stay flat is anyone’s guess. I think we’ll see some profit taking, at least in the early morning after the huge run up the past couple of days. It’s only natural. Good luck!
After the hype I warned you about on Black Friday, the S&P, and the market as a whole, ramped up into this morning’s trade. As we’ve seen in the past, the market has been unable to sustain any sort of rally for an extended period of time. As a result, the market has been deteriorating over the course of the trading day. I’m going to attempt to show you what folks on Option Addict dot net have shown me in regards to support and resistance levels and different types of indicators and studies.
If you look at the chart, you’ll see these blue lines with percentages tagging the lines. These lines are called Fibonacci Lines. For more information, take a visit to Investopedia’s description of Fibonacci Lines. While not a completely accurate way of predicting trends, take a look at the past couple of months. You’ll notice, with a couple of exceptions, how the S&P tends to bounce off the lines almost as if they’re resistance/support lines. Couple these lines with the lows from August and April, if the S&P violates the 1415 level, expect a quick drop to 1370. If we violate 1400, I think we can officially call this the start of the bear market. Bear markets, from what I’ve heard, are volatile, make no sense, and are extremely hard to trade in. More of a challenge for us I guess!
Thanks to the Option Addict for the information. As a result, I purchased some OTM (3 strikes out) SPY puts around the 1440 level. With the S&P closing under 1415, the put gained approximately 40% in value and landed in the money. I’ve begun to define my trading rules a bit more and as a result closed the position out, resulting in burning one of my four daytrade credits (since my account is under $25k). In any event, passing up a 40% gain is not something I was going to take lightly after the rough couple of months I’ve had.
Be careful tomorrow. If we drop below 1400, 1370’s next. Protect yourself accordingly!
It’s back! Prija at Blogging the Movie has started his contest again for a chance to have your website featured in his movie! So far, myself and Susan at SusanSuarez have signed a copy of The 4-Hour Workweek which will be featured in Prija’s movie. Pretty cool eh? So here’s your chance to be a part of history!
***** Start Here ******
Prize
1. Free 4-Hour Workweek Book.
2. A chance to have a permanent link on front page of Blogging The Movie dot com.
3. Sign the Records Book as it travels to 10 different winners.
Contest
This contest is sponsored by BloggingTheMovie – A featured documentary about Bloggers. This contest contains no-follow links. So it is Google friendly and by creating an original introduction you won’t be dinged for duplicate content. This is an ongoing marketing campaign. There will be 10 winners at which each winner will be able to host their own contest which will be sponsored by Blogging The Movie. 1st Winner: Susan Suarez | 2nd Winner: Investing Adventures | 3rd Winner: Can be you!
Rules
1. Write an original short snippet introduction to avoid duplicate content.
2. Just copy the section between the start and end.
3. Add your 3 favorite blogs with rel=”nofollow” in between the link on the code page. i.e. <a href=”http://www.url.com/” rel=”nofollow” target=”_blank” title=”url name”>URL.com</a>. This is extremely important to ensure that Google won’t ding us. Make sure you contact the bloggers and insist they participate so they can keep this going.
4. Email your URL of your blog post to Free4hourWorkweek@gmail.com
[Deadline: 12/31/07 ]
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If you were not tagged, you can still copy the list and add yourself on. No worries, it’s a win-win for everyone. So lets get ready. Get on the list to become the 3rd winner on the Train Contest
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So what are you waiting for? Hurry up and enter! You have until the end of the year! Still reading? Stop reading and enter already!
I’m in the process of changing themes to something a bit more Web 2.0 friendly until I can raise enough capital to pursue a custom blog design. Until then, go ahead and visit The Sandbox and let me know what you think!
