FNMA is pretty goofy - it was basically flat until 3 months ago. That makes it hard to predict which way it’s going to go hen it doesn’t move at all.
Sure, but that’s an optimization problem rather than a risk factor.
Yes, but you wouldn’t have been buying FNMA for the volatility. You’d buy it for the long term hold. It was over $70 in 2007 (and even higher in years previous), it isn’t going anywhere anytime soon, the housing market was bound to rebound, rates won’t stay this low forever and it was inevitable the profits would return. So when it was selling for a quarter, it stood a good chance of going up.
For the most part that is true, but that is assuming it rebounds somewhat close to its previous value (or at least what you my have purchased it for on its way down).
Arise! Markets have been awesomely volatile the last week. Bought GOOG, NFLX and SPY last week. They were down artificially becuase of fears over the furlough/default. They are now back up. Sold.
If we go another week, they will likely drop again. If they go up, you can keep some to dollar cost average out.
Another one today: TDC (Terradata). They are doing great, revenues great, leadership great… they almost met their projected dividend today, announcing 2.70 - 2.80 with a projection of 2.80. The stupid markets thought the dividend might be 2.85 and so punished them. Badly, they are down almost 11%. Good buy! Markets are stupid, they will recover in a month.
The VIX is also behaving interestingly. Anyone ever trade on market volatility indicators like that?
I made a killer trade on Facebook options this past week. I’m out of the trade for now. Almost all the rest of my money is in bonds and bond like instruments to counter act the huge risk that my 2 years left of vesting at LinkedIn.
Options are interesting. I’ve been very successful with some and others are a disaster. Like anything you have to spread your risk by cost averaging and spreading the margins. Did you do Puts on Facebook? What was your strike price? Haven’t been paying much attention to them.
The SPY is up like 3% this week alone. Interesting week this week and totally confirms how fragile the markets are and how interdependent they are to our federal government’s financial health and especially debt.
I did calls on them, bought when they were at 47 then sold at 54 (underlying). I generally hate options, they are a fast track to losing money.
I’ve always wanted to make them work, at least covered calls or something. However I don’t have the personality for it.
Options are gambling. Not because they’re derivatives, but because they have expiration dates. It doesn’t matter how right you are about the correct future value of a stock if the market doesn’t align with your prediction within the timeframe of the option.
Correct. All stocks are gambling. Options are gambling where you get no principle back. But returns can be 100% in a few days. It seems to have been invented by gamblers. It’s awesome!
Google up 13% Friday on earning reports. Hope everyone bought some! Hope it keeps it’s value next week!
False equivalence. Holding stocks long is a very different proposition from buying or selling options. While there’s certainly uncertainty there, you own a chunk of something that has assets and produces income. Options expire, and stocks don’t. If you’re stupid, you can find stocks to trade that have as little margin of safety as options, but I’m referring to more sensible investments.
That you can make a lot of money in the short term is akin to suggesting that you should buy lottery tickets because you can get a 1000% or more return if you choose the right numbers. Talking about the potential benefit without also discussing the odds of getting that benefit is misleading.
If you must pretend that all stock transactions are gambling, then buying stocks is poker, and options are roulette. The former is a game of skill, there are good players who make money consistently, some of whom are highly visible like Buffett and Lynch. There are also the mugs who lose money consistently, often because they think it’s all chance.
Options, on the other hand, will make you a lot of money if your number comes up, but it’s difficult to make money consistently because you’re playing with the unpredictable short-term movements of the market instead of the far more predictable way the market values stocks in the long term. Like roulette, you can generally expect to lose money if you play long enough due to the house edge, though you can fool yourself into thinking you’re some sort of genius if you get lucky.
The roulette analogy is imperfect since valuing the fundamentals of a stock has some effect on the outcome of an options trade, but as I said before, the limited time frame can and will screw you up even if you’re absolutely right otherwise.
Alrighty then.
The time frame issue is the big sticking point for me. Get the direction right but the timing wrong, and you’re screwed. Or what often happens with me, I buy the option and then stock initially drops like a stone. So I panic fearful that I’ll lose everything and sell to get something. The stock then subsequently goes up to hit new highs.
I’m very close to just putting all my assets into Wealthfront and not touching it ever again.
Wealthfront seems like a cool idea. However, right on their front page they proclaim their love for and use of tax loss harvesting. While claiming your losses against returns is a great idea, you have to be very careful about avoid the pitfalls of that system. It can get illegal fast if they are not careful. In my opinion this exposes them to risk. Someone is going to push the envelope of wash sale rules and get that company in hot water.
Are you going to play the Facebook earnings release next week?
I expect there to be huge volatility in the stock, not sure if up or down. I’m thinking of some cheap calls and puts, just not sure on the optimal set up.
Not planning on it. If I see volatility in a stock I need to know which way it will swing first.
I’m also of the Warren Buffett school where I need to really have researched the company well and believe in it (or think its absolutely terribad) before investing. I don’t believe in Facebook’s long term prospects. They are bleeding users who are leaving not because of an alternative, but because of Facebook.
Short term? Will probably go up on strong earnings. Not sure after that.
FB closed at under 52 today. That’s about where it was a month ago, but it’s lost about 3-4 points in tje last week.
I’ve noticed this ridiculous trend where stocks fluctuate aggressively after earnings reports, even if they met their expectations or even exceeded them by a few percent, they get punished. Similarly, when earnings exceed by even as little as a few percent, the stock swings wildly up due to high volume irrational exuberance. If they miss their earnings, forget about it… the stock is dumped.
I think you can leverage these swings about within 30 days post ER if you call it right.
FYI, the indexes are going up and up and up. Hope everyone is invested!
Consensus is this will last until at least near the end of the year. Get in while you can! After all, making 2-3% over the next couple of months is much better than the .1% average that banks are offering as interest rates now.
Don’t be fooled by the banks! Invest in the stock market. It always goes up in the long term.
I just ran my numbers the other day and found out over the last 10 years, I’ve averaged a return of 13% per year by investing myself and managing my own money. At this point I think I can safely say I know what I’m talking about.
Another tip: Buy Twitter about 35 days after the IPO. Or get in if you can. It’s gonna do better than Facebook, I think, but we’ll how many people dump after the IPO freeze. They plan on launching at $26/share, which seems reasonable. 50 by Q4 2014? That would be a 100% return in a year. We’ll see.
Twitter did well, they went up to 70 on speculation and are now trading at around 40.
I may have mentioned CYNAF somewhere as a pure speculation penny stock. I bought at .49 and it’s trading at around 1.05 today. I expect one they are acquired the price will go to about 2.50. I have dollar costed out as it rose and cashed my earnings. Still have about 50% of my initial investment waiting for news later this year, probably q3 or q4.
“I won the lottery, therefore I know what I’m talking about.”