options

Insider

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Off The Cuff: A Financial Adviser's View Of The Recent Market Turbulence

New Harbor weighs in
Friday, August 28, 2015, 2:26 AM

In this week's Off The Cuff podcast, Chris and New Harbor Financial discuss the recent gyrations of the market.

  • Are we witnessing a secular trend reversal?
  • What's likely to happen next?
  • How can prudent investors position themselves now?
  • Where can shelter best be taken?
  • Is it time for risk-seekers to place bets?

All these questions and more are addressed in this podcast. Needless to say, this is one of the most challenging times to protect capital in living memory.  » Read more

Blog

Gravity Returns - The Market Drops Nearly 5% in 3 Days

Years-long trends are finally breaking
Monday, October 13, 2014, 7:14 PM

A month ago, in an analysis titled Defying Gravity, I wrote about the unsustainable state of the stock market's high prices.

In it, I noted how the stock market had risen for an aberrantly-long time time without a correction, and that it hadn't even tested its 200-daily moving average price once since the beginning of 2012: » Read more

Blog

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Defying Gravity

The case for hedging against a market downturn
Wednesday, September 10, 2014, 12:05 AM

Today's markets exist in an Oz-like, fantasy world. For 5 years now, stock and bond prices have risen like Dorothy's balloon, without so much as a puff of downdraft to spoil the fun.

Everybody likes higher prices, so let's have them always go up! Forever!

Whether that can happen is a topic of current hot debate, though few think corrections have been permanently banished from the financial markets. » Read more

Insider

Dreamstime

How to Hedge Against A Market Correction

Reducing the vulnerability of your portfolio
Wednesday, September 10, 2014, 12:04 AM

Executive Summary

  • What you need to know about hedging with
    • Stops
    • Inverse and leveraged ETFs
    • Shorts
    • Options
    • Futures
  • Deciding which hedging instruments are appropriate for your portfolio

If you have not yet read Part 1: Hedge, Dammit! available free to all readers, please click here to read it first.

OK - hedging sounds prudent. But how do you do it?

Our focus here in Part 2 of this report is to cover the most common vehicles used in hedging strategies. Each one merits its own dedicated report (a series we'll likely create in the future) to truly understand how and when to best deploy, so this report will focus on providing you with a good introduction to each, with guidance on how to further explore the ones that strike you as appropriate for your needs and personal risk tolerance.

Before continuing further though, let me make a few things absolutely clear. This is NOT personal financial advice. This material is for educational purposes only, and as an aid for you to discuss these options more intelligently with your professional financial adviser(s) before taking any action. (If you do not have a financial adviser or do not feel comfortable with your current adviser's expertise with these hedging vehicles, we'll be happy to refer you to our endorsed adviser)

Suffice it to say, everything discussed in this report (even the % cash component mentioned in Part 1) should be reviewed with your financial adviser before taking any action. Am I being excessively repetitive here in order to drive this point home? Good... » Read more

Blog

The Approaching Inevitable Market Reversal

Closer every day...
Wednesday, July 2, 2014, 8:06 AM

Though we’re constantly reassured by financial pundits and the Federal Reserve that the stock market is not a bubble and that valuations are fair, there is substantial evidence that suggests the contrary.

The market is dangerously stretched in terms of valuation and sentiment, and it does not accurately reflect fundamentals such as earnings and sales growth. » Read more

Insider

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The Signals That Will Tell Us A Stock Market Reversal Is Imminent

The "Get out now!" warning signs
Tuesday, July 1, 2014, 10:38 AM

Executive Summary

  • Understanding the importance of the 'Smith Market Uncertainty Principle'
  • Technical analysis techniques for identifying the arrival of a market reversal
    • Bollinger bands
    • volatility
    • moving averages
  • Using the above indicators to know when to sell

If you have not yet read The Approaching Inevitable Market Reversal, available free to all readers, please click here to read it first.

In Part 1, we reviewed the case for the Fed-enforced New Normal of “no more downturns” and the case for a trend reversal in the stock market.

In this Part 2, we consider signs that a trend reversal has taken hold.

The Mechanics of Manipulation

Let’s briefly review the mechanics of stock market manipulation.  It’s easiest to manipulate a low-volatility, low-volume market, as low volatility (i.e. complacency) lowers the risk premium in index options, and a low-volume market is influenced by the purchase of relatively modest blocks of index options.  As a result, the Fed or its proxies can prop up the markets with large purchases of index options that cost very little in comparison to the overall size of the market.  (Recall each option leverages 100 shares of the index or stock.)

The other way to manipulate the market is to intervene at the critical technical levels that money managers and trading computers are watching.  Every well-known technical system has been programmed into the trading bots, the majority of which appear to be trend-followers: if the market reverses at key technical levels (due to massive blocks of index options buying, for example), then the bots start buying the uptrend.

Since the vast majority of trading is now done by machines, this greatly simplifies the process of manipulation:  the manipulator need only defend key technical levels with mass purchases of leveraged index options and the trading bots will jump in and buy the uptick.

Experienced traders have seen this sort of activity countless times in the past five years. It has become predictable that... » Read more

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Podcast

Ask the Adviser: Risk-Managed Investing

Over the long term, the best offense is a good defense
Saturday, January 12, 2013, 7:48 PM

If you have money in the financial system (stocks, bonds, retirement funds, etc.) and you share the same skepticism most of our readers have about the markets' future stability, how should you invest those funds?

Most of the folks who inquire about our endorsed financial advisers are far more interested in preserving the purchasing power of their wealth vs. aggressively trying to beat the market average each year. But how exactly does one do that?

In this week's podcast, Chris sits down again with Mike Preston and John Llodra to discuss risk-managed investing. » Read more