TSLA: http://finance.yahoo.com/news/tesla-shares-drop-3q-falls-215536737.html http://finance.yahoo.com/news/tesla-falls-most-2-years-211548490.html http://www.mercurynews.com/business...unge-battery-shortage-heavy-research-spending http://blogs.barrons.com/stockstowa...alysts-not-so-much/?mod=yahoobarrons&ru=yahoo http://www.usatoday.com/story/money...tock-price-rebound-earnings-analysts/3451893/ http://www.cnbc.com/id/101177151?__...hoo&doc=101177151%7cWhat+went+wrong+with+Tesl http://www.fool.com/investing/gener...ings-3-crucial-elon-musk-comments-from-t.aspx http://finance.yahoo.com/q/ks?s=TSLA+Key+Statistics http://finance.yahoo.com/q/bc?s=TSLA&t=1y&l=off&z=l&q=l&c= Trade: With TSLA at 151.16 Sell the Jan 2014 100 put and buy the Jan 2014 75 put for a net credit of $93.00 Yield above $100 = 93/2407 = 3.9% in 56 days or 25.2% annualized or Sell the Jan 2014 100 put for $139 Yield above $100 = 139/9861 = 1.4% in 56 days or 9.2% annualized .....................Spread........Short Put Price................P/L..............P/L 160.................$93.............$139 150.................$93.............$139 140.................$93.............$139 130.................$93.............$139 120.................$93.............$139 110.................$93.............$139 100.................$93.............$139 99.07................0 98.61....................................0 90................($907)...........($861) 80...............($1907).........($1861) 75...............($2407).........($2361) 70...............($2407).........($2861) 60...............($2407).........($3861) Buy TSLA at $100
JMBA: http://finance.yahoo.com/news/bear-day-jamba-jmba-055516773.html http://finance.yahoo.com/news/jamba-misses-q3-earnings-rev-133004924.html http://finance.yahoo.com/q/ks?s=JMBA+Key+Statistics http://investing.money.msn.com/investments/financial-statements?symbol=jmba http://finance.yahoo.com/q/is?s=JMBA http://finance.yahoo.com/q/bc?s=JMBA+Basic+Chart Trade: With JMBA at 11.28 Apr 12.50/15 bear call spread for a net credit of $40 Yield = 40/210 = 19% in 163 days or 42.7% annualized Prob = 70%
TSLA: Update http://stockcharts.com/h-sc/ui?s=TSLA I got $58 for my 100/95 bull put spread. TSLA closed at 139.77 down $11.29 and went down another $1.08 after hours to 138.69. My put spread is now at $59... up $1 from when I entered it. So Far so good.
Part 1 of 3 Is the market overvalued or not?? Back on 4/27/2011 CBS interviewed Marten Schiller and Jeremy Siegal, both highly regarded economists, on the valuation issue. http://live.wsj.com/video/the-marke...ed/9CD89413-D734-401F-BE9D-2317049CAF8D.html#!9CD89413-D734-401F-BE9D-2317049CAF8D Shiller said he would be cautious because stock prices are getting pretty high, while Siegal said everything was fine: Party on. http://www.youtube.com/watch?v=1iwC2QljLn4 Since that time two things have happened: 1. The market has advanced another 50% http://finance.yahoo.com/q/bc?s=SPY&t=5y&l=on&z=l&q=l&c= 2. Shiller was awarded the Nobel prize in economics for his work in market valuation. http://www.nytimes.com/2013/10/20/business/robert-shiller-a-skeptic-and-a-nobel-winner.html?_r=0 Both of these events have put increasing attention on the valuation issue. With the S&P 500 hitting new record intraday highs on a regular basis, investors are getting nervous and eventually what has come up will come down. When, how far and how fast we don't know. How to deal with this recurring problem has always been an issue. Bail out? Go short? Buy some puts? Sell Calls? What is the best route?
Part 2 of 3 Given that the market is overvalued how do we best proceed to hedge our long positions and/or benefit from the overvaluation?? There are 3 major strategies that I will explore and compare to deal with market overvaluation: Short the market Buy SPY Puts Sell SPY Calls 1: Short the market In this comparison we will short SPY as a proxy for the market as a whole. Buy SPY Puts In this comparison we will test : ......2: buying puts outright and ......3: initiating a bear put spread. Sell SPY Calls In this comparison we will test: ......4: Selling calls naked and ......5: Initiating a bear call spread Trades: With SPY at 174.93 and using closing prices on Friday we will test the following trades: 1. Short 100 shares of SPY for an initial debit of $26,240 (Reg T) 2. Buy one Jan '15 185 put for $1,834 3. Initiate one Jan '15 185/180 bear put spread for a net outlay of $301 4. Sell one Jan '15 180 Call for an outlay of $4,181 (margin cost) 5. Initiate one Jan '15 180/185 bear call spread for a net outlay of $290 Trade.........1............2.............3.............4...............5 Cost:.....26,240......1,834........301.........4,181.........290 Price................................P/L....................................... 200.......(2507)......(1834).....(301)........(1180).......(290) 190.......(1507)......(1834).....(301).........(157)........(290) 180........(507).......(1396)......199............903..........210 170.........493.........(403).......199............903..........210 160........1493.........589.........199............903..........210 150........2493........1582........199............903..........210 140........3493........2575........199............903..........210
3 of 3 The same table in percentages: Percentage Table Trade.........1.............2...............3.................4................5 Cost:.....26,240......1,834..........301.............4,181...........290 Price................................P/L................................................ 200.......(9.6%)......(100%).....(100%).........(28%)..........(100%) 190.......(5.7%)......(100%).....(100%).........(3.8%).........(100%) 180........(1.9%).....(76%)..........66%............22%.............72% 170.........1.9%.......(22%)..........66%............22%.............72% 160.........5.7%........32%............66%............22%.............72% 150.........9.5%........86%............66%............22%.............72% 140........13.3%......140%............66%............22%.............72% The highest percentage return is obtained with trade #2: A single long put. The lowest loss and smallest initial cost is with trade #5: A bear call spread Ignoring commissions one could get the best dollar performance by using multiples of the bear call spread. e.g. one could buy 86 of the bear call spreads for $25,000 (roughly the original cost of the short stock) and get a yield of 86(210) = $18,000....and putting the entire $25,000 at substantial risk of complete loss. A rational portfolio should combine elements with different outcomes.
BAX: http://www.marketwatch.com/story/what-to-buy-as-the-market-tops-2013-11-08 http://finance.yahoo.com/q/ks?s=BAX+Key+Statistics http://investing.money.msn.com/investments/financial-statements?symbol=bax http://finance.yahoo.com/q/co?s=BAX+Competitors http://finance.yahoo.com/q/bc?t=my&s=BAX&l=off&z=l&q=l&c=&ql=1&c=^GSPC http://finance.yahoo.com/q/bc?t=1y&s=BAX&l=on&z=l&q=l&c=&ql=1&c=^GSPC http://finance.yahoo.com/q/bc?s=BAX&t=5y&l=off&z=l&q=l&c= Trade: Jan '16 45/40 bull put spread for a net credit of $80 Yield = 80/420 = 19% in 793 days or 8.8% annualized Prob = 97% Expectation = .96(80) - .01(420) - .03(210) = 76.8 - 4.2 - 6.3 = 66.3
CREE: http://seekingalpha.com/article/1788792-bear-of-the-day-cree?source=yahoo http://www.forbes.com/sites/peterde...art-brought-low-cost-leds-to-the-mass-market/ http://seekingalpha.com/article/1837962-factors-driving-our-61-estimate-for-cree?source=yahoo http://finance.yahoo.com/q/ks?s=CREE+Key+Statistics http://finance.yahoo.com/q/bc?s=CREE+Basic+Chart Trade: With CREE at 57.11 Jan '15 82.5/85 bear call spread for a net credit of $36 Yield = 36/214 = 16.8% in 418 days or 14.7% annualized Prob = 87% Expectation = .87(36) - .12(214) - .01(107) = 31.3 - 25.7 - 1.1 = 4.5
LIT: http://www.zacks.com/stock/news/110483/Play-Surging-Electric-Car-Demand-with-the-Lithium-ETF http://finance.yahoo.com/q/bc?t=2y&s=LIT&l=on&z=l&q=l&c=&ql=1 Trade: with LIT at 12.96 Buy LIT and sell Apr '14 LIT 12.00 call for a net debit of 11.25 Yield if called: .75/11.25 = 6.7% in 154 days or 15.9% annualized http://seekingalpha.com/article/183...energy-and-emissions-abomination?source=yahoo
TSLA update: http://finance.yahoo.com/news/tesla-tanking-173520052.html http://finance.yahoo.com/news/tesla-faces-safety-lawsuit-172005971.html http://stockcharts.com/h-sc/ui?s=tsla Closed my 100/95 bull put spread for a net $95 loss. I'll look into reentry later... maybe.