Measuring Risk with ESP
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...
Straddles for an uncertain environment
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...
Precisely Defining Entry Points
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...
The Iron Condor
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...
Slowing Growth, Higher Returns?
Another institution has cut its growth outlook for the Asia Pacific basin. In this case the World Bank which believes that China may be headed for a protracted period of slower growth. Although one should put that into perspective as 7% per annum GDP growth is considered slow for China. The concern is that China is feeling the...
Noise and the Naked Put
Like the naked city, there are a thousand horror stories about the naked put. Some traders will tell you that selling put options is the worst strategy to use. Regaling countless stories about investors who have been wiped out because of adverse moves in the market. Too bad really! Naked put writing can be a powerful tool that...
Buying on a Pullback?
Your psyche is torn… Central banks have a plan, and they seem to be implementing it. The ECB is willing to purchase unlimited amounts of sovereign debt to prevent a default / re-structuring / bailout / or insert nomenclature here, which effectively keeps the EU intact. Not to be undone, the US Federal Reserve is providing...
Shifting Sentiment?
Sentiment is fickle. It can change with the wind and it can dramatically impact financial markets in the short term. It can cause panic selling or panic buying. Often with information that taken in context would have very little long-term impact. It is the time of season for sentiment shifts. Aside from the volatility that...
The Synthetic Convertible Security
Consensus wisdom puts forward the position that traders who buy options are speculating. But that is far too general a statement. Long only strategies the synthetic convertible – i.e. the combination of long calls and a fixed income instrument – can actually reduce risk. Traditional convertible debentures or convertible...
Fertilizer Wars!
Are the sum of the parts worth more than the whole? When it comes to Agrium Inc. (AGU, Friday’s close $98.86) the company’s Board and its major shareholder (Jana Partners LLC, an activist hedge fund domiciled in New York which owns 4% of Agrium’s outstanding shares) find themselves at polar ends of a valuation spectrum....
Richard Croft
President, CIO & Portfolio Manager
Croft Financial Group
191 posts
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