Yearly Archives: 2012
Seeking Alpha With Long Straddles
Richard Croft
I’ve been doing some research on the prospects of buying close-to-the-money straddles. Actually I dusted off studies I had done a number of years ago and surprisingly – or perhaps not – the results today were very similar to previous iterations. More to the point, the results seem to be the same in virtually all...
Hedging Canadian Content against a Global Break Down
Richard Croft
First the backdrop… We rarely hear much out of the fringe countries in the eurozone but last week, Finland’s Financial Minister Jutta Urpilainen shared an incisive point of view. She intimated in the Finnish financial daily Kauppalehti, that her country will not be a part of an “integration model in which countries are...
The RIM Death Spiral!
Richard Croft
Last week we bore witness to the final death spiral for what was once an innovative Canadian icon. It was not the fact Research in Motion (TSX: RIM, Friday’s close $7.54) reported its first quarterly loss. That was telegraphed to the market well ahead of time. What was not telegraphed was the size of the loss which was three...
Trading Open Interest
Richard Croft
Open interest is the number of open option contracts in a specific series that must be closed out by the expiration date. A “series” being defined as options with the same underlying stock, type (either a call or a put) same strike and expiration. Open positions can be closed prior to expiration when one executes a closing...
Grease!
Richard Croft
Greece held their national elections on Sunday and the electorate threw their support behind the pro-bailout New Democracy party. Taking 130 of the 300 seats the next step is to put together a “pro-Euro” coalition government. New Democracy leader Antonis Samaras believes that with this vote, Greece has secured its place in...
Dealing with the Summer Heat
Richard Croft
President Obama held a press conference on Friday and spoke about the state of the US economy. Although in reality it looked a lot like a political soap box for Obama to illustrate how the approach taken by his administration differs from the Republican line of attack. Of course with any political showboating there are some...
Gold and Gold Miners Coming Full Circle!
Richard Croft
You may recall at the end of April (see “Gold Miners Tarnished”) I wrote about the sell-off in gold and more importantly the havoc that could wreak on gold mining stocks. In that blog I suggested buying the July 20 puts on iShares S&P/TSX Global Gold Index ETF (TSX: XGD, Friday’s close $19.38). At the time XGD was...
A Moment of Sanity
Richard Croft
In what was the most hyped initial public offering (IPO) of all time, Facebook (NASDAQ: FB, Friday’s close US $38.23) hit the market walking. Trading was delayed by an imbalance of orders until finally, at 11:30 AM eastern standard time, the first trade crossed at US $42.05 which was 10.6% above the IPO price. After an...
Déjà vu all over again?
Richard Croft
Just when you thought the financial sector was stabilizing, we get news of a US$2 billion and counting trading loss at JP Morgan Chase (NYSE: Symbol JPM, Friday’s close US $36.96). More disturbing was the fact that the loss was related to a hedge presumably designed to offload some of the risks associated with the banks...
The Risk in Covered Options
Richard Croft
When assessing the perils associated with covered and uncovered options, the financial industry has always acknowledged the risk reduction benefits of a covered position. You can see it in the risk levels as defined on option application forms where the industry designates uncovered options in the level 4 category (presumably...
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