Warren Buffett's Daring Derivative Deal Does Well - How You Can Too!

philsworld — Sun, 28 Feb 2010 16:09:31 -0700

Berkshire’s 4th quarter results were propped up by Buffett’s $1.05Bn gains in derivatives betting (something Buffett himself once called "weapons of mass financial destruction" but, as we well know - if you can’t beat them…), which accounted for 1/3 of Berkshire’s $3.06Bn profits.

Buffett’s biggest bet was selling a put against the S&P 500 back in March - a move I said at the time was BRILLIANT and Buffett himself now says about his own options trading: "We are delighted that we hold the derivatives contracts that we do. To date, we have significantly profited from the float they provide. We expect also to earn further investment income over the life of our contracts."

What did Buffett do? Exactly what we teach you to do here at PSW - he took advantage of an irrational move in the markets and SOLD INTO THE EXCITEMENT, getting a fat premium from some sucker that bet the S&P would not hold 666 5 years from now. Buffett effectively sold $5Bn worth of puts that expires worthless at S&P 700 between 2019 and 2027, putting $5Bn in his pocket and holding aside $1Bn in margin, which is how much he’s already ahead on the bet. Like a good options trader, he has a plan and he’s trading his plan, making sure his investment is on track and patiently letting time do it’s work as it eats away at the put-holder’s premium.

Read on to learn how trading like Buffett helped us pick 49 winners in 56 trades last week.

Refining Margins for Valero (VLO) and Tesoro (TSO) Looking Better for Q1

greenfaucet.com — Mon, 07 Dec 2009 11:36:48 -0700

Real-time Monetary Inflation (last 12 months): 5.0%

Consumers have little sympathy for oil companies. A lot of the ill will stems from the sheer size of their earnings figures. In a word, huge. Peel back a layer or two of an earnings release, however, and you find a smaller, more telling number-the refining margin.

Why Leveraged ETFs Are Bound to Deteriorate

optionmaestro — Mon, 13 Jul 2009 15:47:04 -0600

After reading a lot of blog posts, tweets on twitter, Facebook comments, and emails, I decided it was time to figure out the real decay behind the leveraged ETF's, both long and short. As I wrote about this in one of my previous blog posts, I wanted to revisit this issue of the double and triple leveraged ETF's, and why investor's should stay away from them, and to clear up some confusion. With the popularity of ETF's came these funds which use 200% and 300% leverage. Yes in any steady trend they can grow like weeds, but in a correction they will give back much of their gains. This is simple, and basic math.

First of all, these are extremely risky, and investor's shouldn't hold on to any leveraged ETF(s) for the "long run", they are almost sure to lose money. These instruments are ideal for traders not investors! http://optionmaestro.blogspot.com

Alternate Short Strategy: Purchasing Put Protection for Less Part 3

optionmaestro — Mon, 13 Jul 2009 00:06:38 -0600

As promised in my last two posts, Alternate Short Strategy: Purchasing Put Protection for Less, and Alternate Short Strategy: Purchasing Put Protection for Less Part 2 I will be continuing my list of alternate ways to hedge your portfolio without shorting the stock. To conclude my list, in this post (part 3) I will be covering the stocks ranked from 36 to 50 on the list of 50 (ranked from greatest to least by market cap).

To reiterate my two previous posts: I believe the market is due for a pull back, so it may be a good time to purchase put protection on some of your long positions. I decided to write about the 50 largest stocks (by market cap) in the S&P 500 and give a put protection strategy for each of them. To get a detailed spreadsheet of all 500 stocks, which will allow you to rank them based on their market cap minute by minute with the click of a mouse check out my blog post here. http://optionmaestro.blogspot.com

Alternate Short Strategy: Purchasing Put Protection for Less Part 2

optionmaestro — Sun, 12 Jul 2009 01:22:53 -0600

As promised in Alternate Short Strategy: Purchasing Put Protection for Less, I will be continuing my list of alternate ways to hedge your portfolio without shorting the stock. In this post (part 2) I will be covering the stocks from 21 to 35 on the list of 50 (ranked by market cap). To reiterate my previous post: I believe the market is due for a pull back, so it may be a good time to purchase protection on some of your long positions. I decided to write about the 50 largest stocks (by market cap) in the S&P 500 and give a put protection strategy for each of them. To get a detailed spreadsheet of all 500 stocks, which will allow you to rank them based on their market cap minute by minute with the click of a mouse check out my blog post here.

If you're coming across this post you most likely hold or at least have interest in a stock I'll be talking about shortly. In this article I will lay out 15 option ideas, which will help hedge your portfolio against the downside. These ideas all require using the Bear Put Option Spread Strategy.... http://optionmaestro.blogspot.com

Leveraged ETF's Giving Big Premiuns for Short Trade

optionmaestro — Sat, 11 Jul 2009 01:45:38 -0600

With just 10 days left until the option expiration, I have crunched the numbers on some of the most popular leveraged ETF's and it looks as if they're getting some summer heat. I am the first to admit that I think these ETF's are only for traders (and are an investor's nightmare), but they are so volatile, and bring such great premiums, it is hard for a trader of options like me to resist. A very short hold of 10 days could yield you a nice return considering it is only for ten days (crunch the numbers on an annual basis). I have developed several strategies with these leveraged ETF's which seem to return steady profits month after month, and I usually wait to implement them within the 2 week expiration period.

This analysis requires the knowledge of options. These would be returns based on the buy/write option strategy (as of market close Monday July 6, 2009). To gain a better understanding of the buy/write option strategy and options in general check out my stock options trading E-Books for sale on this blog... http://optionmaestro.blogspot.com

Current Interest in Natural Gas Seems Premature

greenfaucet.com — Thu, 09 Jul 2009 11:04:52 -0600

We've been marveling at the surging investment interest in natural gas recently (see "(Natural) Gas Pains?"), most especially manifested through the United States Natural Gas Fund (NYSE: UNG).