Author Archive: ValueWalk Contributor
The author of this article is a contributor to ValueWalk.com. ValueWalk is your everyday source of breaking and evergreen news on everything hedge funds and value investing.
Options, Hurricanes And Hedging
We always look at our investment process and ask ourselves, “What can we do better?” How can we increase returns and lower risk? We think we have found a new, sensible way to do both. We can hedge a portion of our market exposure with put options. Put options are contracts that trade on an […]
Options Pricing Predicts Wilder Swings For 2018 – But For Which Asset Classes?
2017 was a year in which markets experienced depressed levels of realised volatility. From an option trader’s point of view 2017 was a selling paradise – a lucrative opportunity to collect favourably priced premiums as volatility drifted steadily lower with time. 2017 saw a gradual climb in major stock markets and related ETFs – a key example is the […]
Is Binary Options Always A Scam?
Binary Options Industry From the outside, it seems as though the binary options industry is going through a torrid time; platforms closing, Securities & Exchange Commission (SEC) warnings, publicly traded companies being forced to delist and a plethora of consumer complaints has caused havoc for the industry in recent months. Is binary options a legitimate industry being […]
VIX Options And Taxes
Like many investors, the nine year bull market has left my fund with a large amount of unrealized capital gains. With prices now very rich, at least in my view, I feel the risk/return trade-off is much less favorable then when those investment were made. I fear there is a reasonable probability of a large […]
5 Attractive Dividend Growth Options
If you’re looking for a source of income in your portfolio, but all of the dividend growth stocks you like seem expensive, then you may want to consider selling put options. It’s a way to collect some extra income now, and if the stock price falls far enough in the future then you get to […]
The Dummies Guide To Option Greeks
There you are in a conversation with a professional trader about their strategy and suddenly the “inside baseball” terms start rolling off their tongue – Delta Hedging, Short Gamma, Theta Burn, and Vega Risk. You smile and nod without perhaps knowing exactly what these terms mean, and just like that, what started as a good […]
Do Buyers Of Options Benefit From High Volatility?
Search “options and volatility” in Google and you’ll get a dozen websites that say the same thing: option buyers want high volatility and option sellers want low volatility. Oddly enough, this old and relied upon rule of thumb isn’t completely correct. In reality, as an option trade plays out, trend has a far more powerful […]
Be Prepared For Increased Volatility
Co-CIO Francis Gannon explains what increasing volatility could mean for investors, and how it could benefit active managers. One of the more interesting aspects of the market I think investors have to recognize going forward is that we are going to see an increase in the volatility of volatility going forward. In the past, we have […]
Target Covered Calls? 3 Better Options For High Income
As income-focused contrarian investors, we like to buy high-yield stocks when they are out of favor. However, this is a guideline, not an absolute rule. Case in point, Target (TGT). Despite this company’s relatively high yield (4.5%) and significant underperformance (see chart below), we are not interested in owning shares, and that includes not owning […]
Don’t Fall Prey To Overpriced Options
I am old enough that I was trading in the markets before decimalization. If an option was trading for a quarter, we called it a “quack.” If it was trading for a sixteenth, we called it a “teeny” or a “stink.” Beware the teeny puts. If you were a market maker on the floor, you […]
Ditch Options And Buy Stocks With “Cheap Optionality” Instead Lessons From David Tepper
It probably didn’t take long after becoming a trader to stumble upon options. Brokerages and websites all over the internet are constantly pitching these complex financial derivatives, claiming things like “defined risk” and “100% returns a month”. But these advertisements only end up luring novices into a game that creates losses rather than stunning returns. […]
Income Investors Should Learn To Love Volatility
Years from now, we may recall 2016 as the year when political risk became a constant presence hovering over the investment landscape. But fear not: there are ways for investors who rely on fickle global credit markets for income to turn the turbulence to their advantage. Investors have always had to account for some degree […]
Market Impact Of A Trump Presidency
Donald Trump emerged as the winner last night of a hotly contested presidential campaign and will be inaugurated as the 45th president of the United States on Friday, January 20, 2017. The transition to a Republican presidency and Trump’s rejection of politics as usual, which drew so many voters, naturally lead to questions about his […]
A Comprehensive Guide On Making Profitable Investments In Times Of Economic Uncertainty And Increased Volatility
Introduction There are probably a thousand and one laws on investing (possibly more) with a view to guiding you on how to make profitable investments. Interestingly, the multiplicity of those investment laws could make them confusing. More so, following all of the laws doesn’t guarantee profitable investments. However, the summation of all the laws of […]
A Guide To Conservative Income Producing Option Strategies For Dividend Stocks
With interest rates at their lowest point in history, once safe income-producing assets such as 10- and 30-year Treasury bonds have seen their yields plunge to pitiful rates that are just high enough to keep up with inflation. And while high-quality, dividend growth blue chips such as Pfizer (PFE), Coca-Cola (KO), Procter & Gamble (PG), […]
Asset Based Analysis: Does It Work?
Asset based analysis is one of the oldest and most fundamental ways to determine the intrinsic value of a stock. Benjamin Graham strongly advocated for this approach in his 1934 book, Security Analysis. Furthermore, Graham consistently invested in stocks using asset-based analysis throughout his six decade career. The question is, does it still work? Relevant […]
Mean Reversion: What Stocks And NFL Teams Have In Common
By studying the long-term performance of professional sports teams, investors can gain a sense of a stock’s future returns. Mean reversion controls stock market returns as much as the outcome of sports competitions. It’s easy for sports fans to assume a championship team will continue its stellar performance into the next season. It’s equally easy for investors to extrapolate a […]
3 Pitfalls Of Options Trading
Let’s discuss the downsides to options no one ever mentions. The reason no one talks about these pitfalls is that it’s against the system’s best interest. The system wants retail traders churning their accounts at brokerages with tons of options trades. The more trades the better. Brokers earn fat commission fees and their affiliates that […]
What, Me Worry?
As we contemplate the upcoming U.S. presidential election one of our chief investment related concerns is the potential for the election results to roil markets. Strangely, the equity markets trade as if the election results, be it a Clinton or Trump victory, are inconsequential for share prices. That stance is greatly at odds with what […]
Be A Contrarian Investor: 3 Ways To Think Differently In The Stock Market
In a previous post, I discussed five steps investors must take in order to buy low and sell high in the stock market. Those five steps boiled down to this simple fact: You must be a contrarian investor in order to profit in the stock market. So what is a contrarian investor and how do […]
The Death Of Alternatives Has Been Greatly Exaggerated
Is the bell tolling for alternatives? Investors seem to think so. But despite recent poor performance, alternatives have a long life ahead and will be vitally important in the years to come, in our view. It’s clear from our conversations with clients that many people are losing faith in alternative investments. “I tried alternatives,” they […]
2 Common Misconceptions That Will Ruin Your Options Strategy
Options. They’re supposed to deliver you 1000% returns overnight, week after week right? That’s what a lot of these internet trading “gurus” will tell you anyway… But the reality is far different. Options are a zero-sum game. When one person wins, another loses. The winners are few. First you have the highly efficient market makers. […]
Key Metrics: Price To Sales Ratio
Today I want to take an in-depth look at what James O’Shaughnessy, author of What Works on Wall Street, found to be the best historical value metric… the price to sales ratio. I’ll discuss how to calculate it, what it tells us, and how you can incorporate the metric in your investing approach. What Is Price To […]
Stocks Are Cheap… Compared To Bonds
Despite the recent S&P 500 rally, stocks are still cheap relative to bonds, that’s the key takeaway from a research note out today from Bank of America Merrill Lynch, which looks at the Fed Model of equity valuation. In Year of “Improbable” Events, Stock Rally Is A Valuation Fairy Tale The Fed Model is based on […]
BAML: Excess Demand For Risk
With an excess demand for risk in the air and stocks continuing to climb a Brexit wall of worry higher, Bank of America Merrill Lynch (in a note titled “Excess demand for risk”) has a relative value trade it thinks institutional investors should consider. Significant credit / equity spread dispersion as panic is subsiding Fear, […]
The Value Of “Growth Options”
Financial economists divide the value of a company’s equity into two components: the value of “assets in place” and the value of “growth options.” Although unfamiliar to many investors, the division is a highly useful tool. To see why, both components must be defined clearly. The first component, assets in place, has two parts. The […]
When To Sell Stocks
Selling stocks is not easy. In fact it’s quite difficult if you ask me. While most of the investing world focuses on finding the right stock and buying at the right price, very few articles or strategies discuss selling stocks. Probably because most people, including me, have a very hard time with it. Greed, pride, […]
Consider Options
Options are typically seen as complex and risky. They may be complex, but they need not be risky. In fact, options are a great tool for making the risk/return menu more complete. In that regard, I think they deserve a close look now. The reason is that given the immense run-up in the market since […]
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