Stock market anyone?

[Collette]

This might be a stretch, but does anoyone here option trade?

My dad got me into it a few years back. You'll still need a day job, but ever since I started, my bike habit's been covered, and we recently paid off both cars with money left over to help with the mortgage.

You'll need a strong math background though.

[allison]

Wow, that's sweet. I have a few stocks in an IRA account, but I've lost $900. It's clearly not my calling in life

[mntbiker12]

Okay, give me the hot tip

Actually, I've always wanted to dabble in this. Care to share a way to get started?

[roadkillross]

i dont touch it.

[jcampbell]

I do it for a living, but the market has been good lately. Almost every large trading account I have has coverings in place. We had bought some great calls on the financials a while back, and just a month ago reverted and started buying out$ puts for pennies... since came in with the pullback and were sitting pretty. Depending on your strategy, a bad market could put you in a world of hurt of your not careful and as always, bad strippers (naked) can get greedy people in trouble.

jcampbellfinancial.com
Jeff

[JamR]

Can be very lucrative, but you also have to be willing and be able to afford some hits from time to time.

Just start slow and keep the high risk investments to a minimum at first.

I've been pretty lucky over the years but have also taken a couple of very serious hits; but as long as you try to keep the risky investments minimized to an amount you are willing to lose, you should do fine.

It's kind of like going to Vegas with a pre-plan of how much you are willing to blow, and after that; you stop gambling.

[Evil Chocula]

I've done some Black-Shcoles modeling, but I stick mostly to efficient market theory. Except for covered calls/puts for some big guys. If you factor in trading costs, short/long term capital gains, most people trading options can't stay positive for very long. It is fun though.

[ArrrKelly]

glad I found this thread

is there any place on the web to get quotes on options without opening an account?

[VinceM]

Hi. I did options for a few years, but have stopped. Just doing plain stocks for now.

Options are great, when you're right. But they are much tougher. In a straight call or put purchase, you have to be right on the not only the direction, but the magnitude and timing as well.

Also liquidity is sometimes a factor.


Vince

[VinceM]

You can get free delayed quotes at http://www.cboe.com/

[EMrider]

Originally Posted by jcampbell

I do it for a living, but the market has been good lately. Almost every large trading account I have has coverings in place. We had bought some great calls on the financials a while back, and just a month ago reverted and started buying out$ puts for pennies... since came in with the pullback and were sitting pretty. Depending on your strategy, a bad market could put you in a world of hurt of your not careful and as always, bad strippers (naked) can get greedy people in trouble.

jcampbellfinancial.com
Jeff

Agree with that. IMHO, the vast majority of individuals don't have the discipline or knowledge to realize long term success with options. Eventually, they will make a big judgment error and get crushed.

Most everyone can get "rich" with long only investing over long time periods. I've seen many many more "boring and unsophisticated" folks achieve their goals by sticking to a 20+ year gameplan than the hot shots who burn out quickly.

R

[nappyt]

I was just going to ask if anyone played the market with all the fun last week.

[nappyt]

Originally Posted by mechmann

lol, yeah fun!

i have been getting crushed lately. that is what happens when you take risk!

I have time on my side so a bad week or month doesn't bother me. I have another 35 yrs before I will start to draw on any of my investments.

[nappyt]

Since we have this can of worms open... What online brokerage do you like and what is your favorite resource for market research/analysis?

I've been through a couple full service and discount brokers. Currently my main account is through Fidelity since that is where my work IRA is managed. I monitor a few financial blogs but most of my stuff comes from regular media channels IBD, WSJ and a few trade mags. I usually have CNBC on during my work day just to hear about the top news.

[Collette]

Luckily, I manage all my own accounts. This site's pretty awesome:

https://www.interactivebrokers.com/ibg/main.php

[Evil Chocula]

Originally Posted by EMrider

I've seen many many more "boring and unsophisticated" folks achieve their goals by sticking to a 20+ year gameplan than the hot shots who burn out quickly.

R

Thats a good point. Whenever your attempting to time the market, or buy undervalued stocks, look for uptrends, etc. you have to consider that the vast majority of mutual funds with CFAs and huge research teams can't beat the market for any extended period of time. If they can't do it, can you? Most do-it-yourself stock pickers (or options traders) I've worked with find they aren't beating the market on the long term (not even close) when they(I) actually break it down in a gain/loss statement that includes trading costs and taxes. You can still make really good money, but underperform a simple S&P 500 Exchange Traded Fund.

Ill end my preachy rant now, but Modern Portfilio Theory (the theory of asset allocation) won a Noble Prize, and it states 91% of portfolios return is due to Asset Class Selection (large cap, small cap, international, bonds, etc). 5% is due to market timing (options) and 3% to security selection (individual stocks).

[jcampbell]

Originally Posted by Evil Chocula

Thats a good point. Whenever your attempting to time the market, or buy undervalued stocks, look for uptrends, etc. you have to consider that the vast majority of mutual funds with CFAs and huge research teams can't beat the market for any extended period of time. If they can't do it, can you? Most do-it-yourself stock pickers (or options traders) I've worked with find they aren't beating the market on the long term (not even close) when they(I) actually break it down in a gain/loss statement that includes trading costs and taxes. You can still make really good money, but underperform a simple S&P 500 Exchange Traded Fund.

Ill end my preachy rant now, but Modern Portfilio Theory (the theory of asset allocation) won a Noble Prize, and it states 91% of portfolios return is due to Asset Class Selection (large cap, small cap, international, bonds, etc). 5% is due to market timing (options) and 3% to security selection (individual stocks).

Didn't Al Gore just win a Noble Prize as well yet he still flys in a corporate jet?

Plain and simple... some people have it, some people don't. Don't believe the traditional complaint that most traders don't beat the market, by the way, which market are we talking about. Dow, S&P, maybe one of the Russells... or a combination of three or 4. Yes a lot don't beat their respective indices but many do. And most larger money is not with Mutual Funds, its direct with Money Managers or a similar form. They don;t really give much information on those guys... also something you don't get from a discount broker.

How's the last 15 years with no negative return, not a one, and a 17+ percent average annual over those years for a Moderate/Aggressive Balanced Portfolio. Also you have to remember who is preaching the Modern Portfolio Theory, is it Wall Street's traders (I think not) or is it a Theory that has been embraced by rather large institutions and their lawyers to sell managed money.

Please don't take this the wrong way its just I always get hit with this load of crud. In Theory it works, but there are times you don't want to have anything to do with an asset class. Sticking to the Theory and not making a strategic move would be a detractor to the portfolio. In the last few years my portfolio has ran a 20% allocation to Euro stocks alone. International has been 35% to 40%, sounds like a lot, but with the falling dollar, its a calculated risk that gave me a rather large cushion on Losses.

Also, every Money Manager out there doesn't practice Modern Portoflio, they invest in their asset class and sector only. Balanced Funds usually use a combinations of Money Managers so they are still only investing in their own asset class. Its something the Marketing Firms use to sell sell sell, and to diminish risk and major losses with average investors.

A large portion of my business is managed money so I don't completely knock the Theory, its a great starting point for new investors, or investors you would have to have discretionary account to make moves cause you can never get a hold of them.

By your comments you sound like you have been in the business or still are. If so, think about your largest clients, they don't have anything to do with this Theory. How many long term positions do they have... usually at the least 5. I have a clients that kills it with Junk secured Muni's. the guy ends up owning property all over the place and pulled 15% tax free last year. The guy is good, I have a hard time even keeping up with him. In fact I think I learn more from him than he does from me. Great relationship.

Anyway, don't get caught up on how cheap the trade is, be careful not to get pinched by the discounts either with their third parties little fingers. It could end up costing you more money than you realize. Always use Limits unless you just have to have it, and have fun. Don't get to caught up with gains, or what you left on the table when you sold too early. You'll end up getting greedy and Wall Street will kick your ass back home. Sell off half and let the rest ride with a stop loss in place. Then forget about it. Don't forget to limit all your positions. If you get stopped out, forget about it and move on.

[EMrider]

Originally Posted by jcampbell

Didn't Al Gore just win a Noble Prize as well yet he still flys in a corporate jet?

Plain and simple... some people have it, some people don't. Don't believe the traditional complaint that most traders don't beat the market, by the way, which market are we talking about. Dow, S&P, maybe one of the Russells... or a combination of three or 4. Yes a lot don't beat their respective indices but many do. And most larger money is not with Mutual Funds, its direct with Money Managers or a similar form. They don;t really give much information on those guys... also something you don't get from a discount broker.

How's the last 15 years with no negative return, not a one, and a 17+ percent average annual over those years for a Moderate/Aggressive Balanced Portfolio. Also you have to remember who is preaching the Modern Portfolio Theory, is it Wall Street's traders (I think not) or is it a Theory that has been embraced by rather large institutions and their lawyers to sell managed money.

Please don't take this the wrong way its just I always get hit with this load of crud. In Theory it works, but there are times you don't want to have anything to do with an asset class. Sticking to the Theory and not making a strategic move would be a detractor to the portfolio. In the last few years my portfolio has ran a 20% allocation to Euro stocks alone. International has been 35% to 40%, sounds like a lot, but with the falling dollar, its a calculated risk that gave me a rather large cushion on Losses.

Also, every Money Manager out there doesn't practice Modern Portoflio, they invest in their asset class and sector only. Balanced Funds usually use a combinations of Money Managers so they are still only investing in their own asset class. Its something the Marketing Firms use to sell sell sell, and to diminish risk and major losses with average investors.

A large portion of my business is managed money so I don't completely knock the Theory, its a great starting point for new investors, or investors you would have to have discretionary account to make moves cause you can never get a hold of them.

By your comments you sound like you have been in the business or still are. If so, think about your largest clients, they don't have anything to do with this Theory. How many long term positions do they have... usually at the least 5. I have a clients that kills it with Junk secured Muni's. the guy ends up owning property all over the place and pulled 15% tax free last year. The guy is good, I have a hard time even keeping up with him. In fact I think I learn more from him than he does from me. Great relationship.

Anyway, don't get caught up on how cheap the trade is, be careful not to get pinched by the discounts either with their third parties little fingers. It could end up costing you more money than you realize. Always use Limits unless you just have to have it, and have fun. Don't get to caught up with gains, or what you left on the table when you sold too early. You'll end up getting greedy and Wall Street will kick your ass back home. Sell off half and let the rest ride with a stop loss in place. Then forget about it. Don't forget to limit all your positions. If you get stopped out, forget about it and move on.

I think that MPT is quite useful, but agree with you that it has its limits and can overshadow other important issues like asset allocation. And for individuals, asset allocation is critical. Most are grossly overallocated to low risk and low return assets (within any structure, 401k, IRA, etc.....). The folks I've seen do very well over long time periods, with little or no sophistication, did so largely by assuming an appropriate degree of risk and sticking to their plan. "Appropriate" is a subjective term, but IMHO that means having 65% or more in equities during your working years, with a generous exposure to non-US assets. Sadly, I've also seen many realize in their mid to late 50s that they are way behind on saving for their retirement and panic. They often swing for a grand slam, with little or no knowledge. Sometimes this ends badly. My point is simply that you don't have to be an expert or sophisticated investor to accumulate plenty of wealth to retire comfortably. You just need to start early, take some risks and stick to a plan.

Also, I'd never suggest that it is easy to beat a broad market index in any asset class. It is difficult and most can't over the long term. Most professional investors are specialists within a given asset class and in that arena, the competition is brutal. But that is good for those who want solid returns over time. The weak are knocked out pretty fast.

And last item while I'm on the soapbox, fees can hurt your realized returns badly over time. This is often where individuals get slammed the hardest and unfortunately, they usually have no idea it is happening. A lot of advisors are solid and looking after their client's best interests. But many are simply pushing whatever will generate the highest fee or what is on their firms shelf that day. Good advisors learn this is a road to ruin for their careers, because it hurts their client. I've seen advisors charge between 1.5%-2.0% per annum just for putting client assets into some "wrap" structure. The actual day to day management of the assets is done by professional managers, who usually get paid another 0.3% to 0.7% on top of what the advisor skims. Yes, the advisor gets paid 3-5 times more than the person actually managing the money. If you are paying more than 1% per annum for advise or money managmenet, do yourself a favor and ask some pointed questions and/or shop around. A 1.5% per annum headwind over 20 years will take a HUGE bite out of your assets.

Rob

[jcampbell]

Originally Posted by EMrider

I think that MPT is quite useful, but agree with you that it has its limits and can overshadow other important issues like asset allocation. And for individuals, asset allocation is critical. Most are grossly overallocated to low risk and low return assets (within any structure, 401k, IRA, etc.....). The folks I've seen do very well over long time periods, with little or no sophistication, did so largely by assuming an appropriate degree of risk and sticking to their plan. "Appropriate" is a subjective term, but IMHO that means having 65% or more in equities during your working years, with a generous exposure to non-US assets. Sadly, I've also seen many realize in their mid to late 50s that they are way behind on saving for their retirement and panic. They often swing for a grand slam, with little or no knowledge. Sometimes this ends badly. My point is simply that you don't have to be an expert or sophisticated investor to accumulate plenty of wealth to retire comfortably. You just need to start early, take some risks and stick to a plan.

Also, I'd never suggest that it is easy to beat a broad market index in any asset class. It is difficult and most can't over the long term. Most professional investors are specialists within a given asset class and in that arena, the competition is brutal. But that is good for those who want solid returns over time. The weak are knocked out pretty fast.

And last item while I'm on the soapbox, fees can hurt your realized returns badly over time. This is often where individuals get slammed the hardest and unfortunately, they usually have no idea it is happening. A lot of advisors are solid and looking after their client's best interests. But many are simply pushing whatever will generate the highest fee or what is on their firms shelf that day. Good advisors learn this is a road to ruin for their careers, because it hurts their client. I've seen advisors charge between 1.5%-2.0% per annum just for putting client assets into some "wrap" structure. The actual day to day management of the assets is done by professional managers, who usually get paid another 0.3% to 0.7% on top of what the advisor skims. Yes, the advisor gets paid 3-5 times more than the person actually managing the money. If you are paying more than 1% per annum for advise or money managmenet, do yourself a favor and ask some pointed questions and/or shop around. A 1.5% per annum headwind over 20 years will take a HUGE bite out of your assets.

Rob

About beating the Market, I wouldn't say its easy or always attainable.

You are right on fees... people seem to forget what they get in Wrap accounts.

Good luck this week. If anyone is interested, I do have an investment club that has one slot open (the members are very advanced though and seem to like stochastics and the group wants to interview with whoever is interested). I manage the money on this one due to the account setup but I was thinking of starting another one for a younger group where it would start with ideas and grow from there and I would not be the manager of the money. The one spot does have investment fees, the group hired me.... but the new one has no adviser fees unless they want to.

[EMrider]

Originally Posted by jcampbell

You are right on fees... people seem to forget what they get in Wrap acco