Yearly Archives: 2012

no-cover
December 17, 2012
Other

Long-Term Options versus Margin

Richard Croft

Long-term options (or Long Term-Equity AnticiPations or LEAPs as they are known within the industry) are interesting for more than the fact that they provide a demonstrative example of the option industry’s love affair with acronyms. LEAPs are long-term options with expirations that stretch beyond the nine month time line...

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no-cover
December 10, 2012
Other

A Refresher on Calendar Spreads – Just in time!

Richard Croft

Calendar spreads offer an interesting way to play fourth quarter earnings that will heat up in February. It will look even more attractive in February should the US come to some resolution on the fiscal cliff that keeps volatility low. The calendar spread involves the purchase of a longer term option – either calls or...

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no-cover
December 03, 2012
Other

Volatility Skews

Richard Croft

By the third week in November, US volatility futures were trading in backwardation. That is longer term volatility futures expiring in January and February were trading at lower values than the cash market. For traders who look to volatility as a way to gauge investor sentiment, that volatility skew can enhance one’s...

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no-cover
November 26, 2012
Other

The Portfolio Approach

Richard Croft

Avoiding the madness of crowds Usually in this space I discuss specifics related to an option strategy one might use based on a view of the underlying stock, or provide an educational gem related to option pricing, strategy or mechanics. This week I want to step back and address a broader issue related to portfolio building....

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no-cover
November 19, 2012
Other

Never Say Never!

Richard Croft

In October 2010 I penned the following comments: there has “never” been a market anywhere anytime that didn’t revel in the prospect of easy money! Which is to say: one should never fight the Fed. At that time, most of the industrialized world was engaging in massive stimulus programs designed to keep economies from...

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no-cover
November 12, 2012
Other

Is the Door Slightly Ajar?

Richard Croft

Well its official… the US did not fall off a cliff as a result of the recent Presidential election. Despite the socialist rhetoric that preceded the election and the subsequent post-election ostentatious victory claims from both side of the aisle (note: Republicans point to their victory in Congress as evidence that the...

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no-cover
November 05, 2012
Other

Measuring Risk with ESP

Richard Croft

The options market is unique in the sense that it is all about risk modification. Traders can use options to leverage their risk profile or reduce variability within their portfolio. It all comes down to the quantity of options being employed and the strategy being implemented. In my experience traders have little understanding...

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no-cover
October 31, 2012
Other

Straddles for an uncertain environment

Richard Croft

As I see it there are three major and seemingly conflicting factors at play in the financial markets. The domestic macro issues are of course, front and center. In the US, there is uncertainty as to who will win the presidential election and what will that means for consumers, investors, the fiscal cliff and the inner workings...

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no-cover
October 22, 2012
Other

Precisely Defining Entry Points

Richard Croft

The great American humorist Will Rogers was once asked to explain his views on the stock market. His answer: “You buy a stock because it is going up. If it doesn’t go up, don’t buy it.” As was so typical of Mr. Rogers his answer was simple yet contained a hint of truth. We do buy stocks because we think we will be able...

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no-cover
October 17, 2012
Other

The Iron Condor

Richard Croft

Global markets appear to have hit a wall on the upside. And with third quarter earnings expected to reinforce the position that growth is slowing, the markets may well remain in neutral through the end of the year. And perhaps longer if President Obama gets re-elected and carries through with his “tax-the-rich” strategy! On...

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