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Markets still falling like whoa

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19 hours ago, jimmyjazz said:

I haven't looked up the chains -- what's the net theta?  What's the theta on each call & put?

-0.01 for calls and 0 for puts.

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19 minutes ago, hornhorn said:

-0.01 for calls and 0 for puts.

So essentially it's synthetic long VIX.  I like it.

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Welcome to the party pal. I’m proportionally way too heavy in AAPL (for any single stock) but only because I’ve been in it so long. The risk remains palatable.

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On 1/12/2020 at 9:28 AM, Texas Jeff said:

Yesterday, I set out to discover exactly how the DJIA is calculated.  Turns out that it is pretty simple; it actually is an average.  They take 30 stocks, add up the price of all of the stocks, and divide by a "Dow divisor".  The value of the divisor is determined by the Wall Street Journal.  It's actually less than one, which means that the sum of all of the stock prices is actually multiplied by about seven to get the number you see.

So, the Dow changes if the company stock prices go up or down ... or if the folks at the WSJ decide to adjust the Dow divisor.  They are suppose to adjust the divisor to account for stock splits, dividends and other events that affect stock prices, but I couldn't figure out who or what exactly goes into this.  If the WSJ folks fail to take something into account, for example stock buybacks, the DJIA could rise or fall even though a company's value did not change.

Consider two Dow stocks, Boeing and Pfizer.  Boeing has the top price in the Dow today, around $330.  Pfizer is dead last around $40.  So a drop in Boeing of around $40 would do the same damage to the DJIA that Pfizer would do if it dropped to zero.  But Pfizer's market cap is actually higher than Boeing.  A $40 drop in Boeing would destroy about $22 billion in wealth, but a $40 drop in Pfizer would wipe out $220 billion.

It seems crazy to base a well known index on stock prices rather than market cap.  The top six Dow companies by price (Boeing, Apple, UnitedHealth, Goldman Sachs, Home Depot and McDonalds) combine for more than a third of the value of the DJIA.  The bottom six (Intel, Coca-Cola, Walgreens, Dow Chemical, Cisco and Pfizer) have less combined influence than either Boeing or Apple do alone.

 

congratulation, you discovered that it's the "dow jones industrial average"

Edited by elfenix

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20 minutes ago, Celery Man said:

Welcome to the party pal. I’m proportionally way too heavy in AAPL (for any single stock) but only because I’ve been in it so long. The risk remains palatable.

i should have bought shares instead of ipods.

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9 hours ago, Celery Man said:

Welcome to the party pal. I’m proportionally way too heavy in AAPL (for any single stock) but only because I’ve been in it so long. The risk remains palatable.

Same...been in since 2000 but not selling. It’s gone down before....always climbs back up.

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On 1/12/2020 at 12:10 PM, Nice Guy Eddie said:

Complete investing amateur here but the Dow Jones 30 average doesn’t seem like the best index to focus on.  Do 30 companies really indicate short or long term trends?  

Well, the 30 companies in the DJIA are worth about $6.6 trillion.  The largest 500 companies are worth about $25.6 trillion.  So those 30 companies are a big fraction of the market. The original idea behind the DJIA was to look at the biggest companies and see how they were doing and project that out to the entire market.  Back before we had calculators this easy measure was nice to have.  Add up the stock price of 12 big companies and divide by 12.

But today the DJIA is still the number you see on the news the most.  It's flawed because it is not based on market cap, just on the stock price for each company.

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So I was thinking about throwing a few dollars into the Tesla earning release that happens in the next 10 days or so. My plan was to buy $1,000 in out of the money put and call options, with the idea that TSLA moves in big steps and this way I really wouldn't care if it is up or down as long as it moves a lot. 
Then I looked at their option prices and let me just say WOW, the spreads on this is astounding.

TSLA is around $535 today (open)
$515 puts are $25 (1/31 expire) and $31 (2/7 expire)
$555 calls are $26 (1/31 expire) and $32 (2/7 expire)

to get to a $10 price you get
- puts priced at $470 (1/31) or $450 (2/7) 
- calls priced at $620 (1/31) or $650 (2/7)

and to get a $10 option that is 6 months out (7/17 expire) the strike prices are $850 call or a $330 put....a $500 spread on a $10 option. 

 

tl;dr - just go to Vegas to gamble, it is too expensive to gamble on TSLA
 

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8 minutes ago, workswithseed said:

Is it a coincidence that it's SPCE dealing with rockets skyrocketing.

spacer.png

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46 minutes ago, Parliament said:

Chicken

Hell I'd rather be a chicken than an idiot; I can't figure which way it's going to go and based on options pricing neither can anyone else. 
If I buy the 6 month expiration for $10 - the stock can go up 59% or down 38% and the option has expires with no value.

Is there any other large cap company with this type of option pricing?
I ask because it seems crazy to me, but I'm a very small option player/investor who looks at them as a way to hedge (which has meant make less in an up market)

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3 hours ago, Wally Fairway said:

Hell I'd rather be a chicken than an idiot; I can't figure which way it's going to go and based on options pricing neither can anyone else. 
If I buy the 6 month expiration for $10 - the stock can go up 59% or down 38% and the option has expires with no value.

Is there any other large cap company with this type of option pricing?
I ask because it seems crazy to me, but I'm a very small option player/investor who looks at them as a way to hedge (which has meant make less in an up market)

That's why I would sell the option instead of buying it  - the implied volatility for TSLA  is pretty high right now, and will likely contract fairly soon. The higher the implied volatility, the more expensive it is to insure.

So, if I was interested in this trade right now, I would sell a vertical put spread however wide I was comfortable with, get paid about $1000, and then wait for volatility to contract and become less valuable, and then I'd go buy the spread back to close the trade and profit. 

Edited by Bozo_Casanova

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I have a question for the really smart folks on this board. I’m trying to figure out why preferred stock mutual funds drop so badly when interest rates rise.

Most preferred stock is redeemable at par value only at some point in the future. So the fact that preferred stock becomes less attractive as rates rise is almost irrelevant. The stock will eventually get redeemed at par. Obviously I’m missing something here.

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2 hours ago, Dbeasy said:

I have a question for the really smart folks on this board. I’m trying to figure out why preferred stock mutual funds drop so badly when interest rates rise.

Most preferred stock is redeemable at par value only at some point in the future. So the fact that preferred stock becomes less attractive as rates rise is almost irrelevant. The stock will eventually get redeemed at par. Obviously I’m missing something here.

further, what is the baseline logic behind a preferred stock mutual fund? 

Mitigate the risk that the issuer doesn't pay the dividend on a single issue?  That seems like a pretty low risk with highly rated companies.

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On 1/20/2020 at 7:06 AM, Dbeasy said:

I have a question for the really smart folks on this board. I’m trying to figure out why preferred stock mutual funds drop so badly when interest rates rise.

Most preferred stock is redeemable at par value only at some point in the future. So the fact that preferred stock becomes less attractive as rates rise is almost irrelevant. The stock will eventually get redeemed at par. Obviously I’m missing something here.

Pfd stocks are a proxy for debt, as interest rates rise the value of fixed interest/dividends streams decline

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On 1/20/2020 at 8:42 AM, Incredulity said:

That seems like a pretty low risk with highly rated companies.

Do highly-rated companies issue a lot of preferred stock?  I thought preferreds were for the dodgy co's that are trying to dress up their balance sheet by issuing debt without really calling it debt.

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Just now, Fudge Nuggets said:

Do highly-rated companies issue a lot of preferred stock?  I thought preferreds were for the dodgy co's that are trying to dress up their balance sheet by issuing debt without really calling it debt.

I'm not an expert.   

FWIW, all the major banks have preferreds yielding 5-6%

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On 1/14/2020 at 11:15 AM, workswithseed said:

SPCE is netting me some nice capital.

Because of this post and some minimal online research, as mentioned, I jumped in yesterday. Great day today. I like to stay really long and feel good about this stocks potential. I’ll be researching a lot more now as I may add to my current position. So, thank you! \m/

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57 minutes ago, Tailgate said:

Because of this post and some minimal online research, as mentioned, I jumped in yesterday. Great day today. I like to stay really long and feel good about this stocks potential. I’ll be researching a lot more now as I may add to my current position. So, thank you! \m/

Yeah, I felt like it was doing me good so I figured to let y'all know.

Hook'em

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On 3/26/2018 at 8:39 AM, Yarbr said:

Figure page one needs a reference point.

Dow 23,530

S&P 2,590

Nasdaq 6,990

At open today-

Dow 29,111

S&P 3,315

Nasdaq 9,377

 

The run will come to the end eventually but this thread is pretty damn funny looking back at some of the posts in the early pages. Yes, we all know it's easy to Monday morning QB after the fact but it's still funny.

Oh and Buy low sell high still applies.....  

Edited by JimmyHoffa

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A pretty solid indicator of market movements is when there are more buyers than sellers prices tend to go up, when there are more who what to sell than buy, markets go down.

Edited by gecko

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1 hour ago, JimmyHoffa said:

At open today-

Dow 29,111

S&P 3,315

Nasdaq 9,377

 

The run will come to the end eventually but this thread is pretty damn funny looking back at some of the posts in the early pages. Yes, we all know it's easy to Monday morning QB after the fact but it's still funny.

Oh and Buy low sell high still applies.....  

in fairness, i believe the thread title was a carryover from one on tos. 

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9 hours ago, gecko said:

A pretty solid indicator of market movements is when there are more buyers than sellers prices tend to go up, when there are more who what to sell than buy, markets go down.

seems simple.  what's typical buying season in March when most corporations hand out bonuses?  any correlation?  been wondering if there is a strategy to buy now or soon before bonus season, then sell out sometime later.  

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18 minutes ago, Rusty Shackelford said:


Central Banks print money, money is used to buy stonks.

And they keep interest rates at zero so the money has nowhere else to go.

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Quote

...
The Federal Reserve’s low interest rates, the perception that there is a high bar to future increases and expansion of its balance sheet are helping to lift asset prices, Federal Reserve Bank of Dallas President Robert Kaplan said.

“All three of those actions are contributing to elevated risk-asset valuations,” Kaplan told Michael McKee in an interview Wednesday on Bloomberg Television. “And I think we ought to be sensitive to that.”
...
“My own view is it’s having some effect on risk assets,” Kaplan said. “It’s a derivative of QE when we buy bills and we inject more liquidity; it affects risk assets. This is why I say growth in the balance sheet is not free. There is a cost to it.”
...

https://www.bloomberg.com/news/articles/2020-01-15/fed-fuels-rise-in-risk-assets-with-balance-sheet-kaplan-says

That was from roughly a week ago.  A rare moment of honesty from a central banker. 

The bubble is going to keep bubbling until something breaks.  Then the party will be over.

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1 minute ago, bernorange said:

The bubble is going to keep bubbling until something breaks.  Then the party will be over.

For those who are too young to have been through a bubble, print our what bernorange said save it, then read it regulary - this is exactly how bubbles work. 

The second part is that you never know when that party will be over; bet against them at great financial peril
(if you guess right there can be significant gain, but guess wrong and it will eat your lunch)

 

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30 minutes ago, bernorange said:

https://www.bloomberg.com/news/articles/2020-01-15/fed-fuels-rise-in-risk-assets-with-balance-sheet-kaplan-says

That was from roughly a week ago.  A rare moment of honesty from a central banker. 

The bubble is going to keep bubbling until something breaks.  Then the party will be over.

Last year was odd in that it was really good for bonds too.  When that 12-15% correction comes take the pop you get with the bonds and pour even more in to equities.  It’s been said a million times here, unless you’re 55+ just keep investing.  If over a 10 year period stocks are down, we have much bigger issues than money.  

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