I can haz automated richez b1tchez... eermm, yes | Options

[Typhoon]

, , ,

And as always, remember that one of the most important rules is that 97% of all stocks are untradeable. Keep looking till you find one you can make sense of. Don't waste time forcing it.

. . .

That certainly constrains the candidate pool of tradeable stocks.

So what criteria would one use to decide if a stock is tradeable or not?

[noddy]

, , ,

And as always, remember that one of the most important rules is that 97% of all stocks are untradeable. Keep looking till you find one you can make sense of. Don't waste time forcing it.

. . .

That certainly constrains the candidate pool of tradeable stocks.

So what criteria would one use to decide if a stock is tradeable or not?

+1

[Mr. Perfect]

We'll get to that, there are many ways to pick stocks, you'll gravitate towards some over others, but the rule generally remains, ignore most stocks. More on that later.

[Enki]

Sent this to a friend of mine who models markets in Roman Christian Egypt.

[Azrael]

Sent this to a friend of mine who models markets in Roman Christian Egypt.

Your friend would probably be interested in A History of Interest Rates by Sidney Homer.

[noddy]

im still (a) decoding the glossary and (b) finding and downloading free data sources.. which is a mammoth task.

http://finance.yahoo.com/
http://www.nasdaq.com/screening/company-list.aspxk
http://www.freebase.com/view/user/colin ... /companies
http://kiwitobes.com/industry_mashup/

is a list of some of the data sources ill be a slurpin - the yahoo one has a query interface that can be abused per symbol per timeperiod so the latter lists are the data sources to do that plus some basic industry groupings.

then its on to getting the appropriate extra meta data (exchange rates? inflation rates? industry catagories?......)

not helped by the fact ive also promised todo a private facebook/gplus-alike for some family members who refuse to participate in those yet still want to share pics and messages easily with our mob..

[Typhoon]

We'll get to that, there are many ways to pick stocks, you'll gravitate towards some over others, but the rule generally remains, ignore most stocks. More on that later.

Re the 93% rule of thumb for non-tradeable stocks: a case study



One of the most popular stocks on the planet.

Is it tradeable? If yes, then why? If no, then why?

[Mr. Perfect]

AAPl.

So there are simply different kinds of stocks. There are people who formalize that kind of thing or try to but really there are no hard and fast rules

Before I get into it, the fastest way to bankrupt someone is tell them how to pick stocks. Theyll come back in 3 months with an axe looking for you. So I don't do that. What is more important by far is asset allocation, stop loss/profit taking/position hedging and management, basic valuations and chart reading skill. Once you have that down then we'll start talking stock picking.

For applesauce, which I am in, my characterization is it's a big old company and so would be a blue chip like investment, a buy and hold mostly for a long term thing. There is probably more upside than downside going forward but nothing out there likely to ignite it if you will.

Stocks like this are helfpul to absorb a lot of your portfolio for the purposes diversification, that is the role it plays in my port port.

A note on diversity. A long time ago I looked at my account and saw that one of my positions was up while another was down. I smiled, and felt the pleasure of the benefits of "diversification".

Then a few days later I said to myself: thou retard, divorce thyself from such foolishness. One stock go up, one stock go down, squish, just like grape, no make no money. So be careful of diversity. Crappy stocks can pull you down and you'll keep them in the name of diversification if you aren't careful. Weed 'em out.

As for applepie, I did something pretty cool with it you guys may like. I've been holding pretty much for a few years, in and out before hand, but got most of the rip when it was screaming. It seemed like it was topped out a few months ago, when that happens start writing covered calls. This time, when these go down in a stable way, you can short them but something that is a little more "forgiving" is writing in the money calls. As your stock goes down it acts as a hedge, paying you dollar for dollar. You sell one to two strikes in the money and close them as it goes down, and then write new calls even lower.

What that does is of course offset your loss, but if/as aapl comes back those call debits become profits, cash profits. If it works out then months down the road the gyrations won't matter but the cold hard cash profits will be real. There is even more to it but it is technical in nature and takes a lot of writing. Basically you get time premiums with that which helps with what I call "decision risk", ie making poor buy/sell decisions on short term trades that cc strategies mitigate.

Back to the untradeable thing, new traders often find a stock through some method and it becomes like a baby bunny that they love and protect, often to their dooms. There are thousands of exchange trades stocks to choose from, if the stock doesn't trade in ways that are obvious to you keep looking.

[Mr. Perfect]

So I want to expand on this tradeable stock thinger for a bit.

Some of you know that I came from trading community that no one would believe if I described, but I was around a couple of hundred extremely proficient traders for a period of time, long ago. From what i gather maybe a couple dozen survived, but it was an enriching experience.

Lots of different guys (and gals) with lots of different approaches.

For me, I trade long term, short term, and trade basically option premium and married option positions. So at the end of the day there are only like 4 or 5 things I look for and I ignore the rest, with some exception. It's worked for me.

I've known day traders and long term dudes and all points in between. What I have seen though is the pride element come in, and some of these gunslinger grab a stock and want it to conform to their will. I've nver seen anyone do that successfully, ever.

What I have seen, if people observe the market, hear the theories, hear the screening techniques etc and over time some will start to make more sense to you than others. You'll be observing things and at some point a little voice in your head will say, "I think this stock will do such and such". You gotta listen to that voice, but not give him free reign. Don't bet the farm on that voice, but train him and test him. If you're going to do this he's going to be the one to make or break you.

So when someone says "what do you think of aapl" now I say; what can it do for me? Are we buying or short? Selling premium, buying premium? How long are we in this? What would force the stock to do what we are expecting? How does it react to the broad market/the sector/the analysts/specific economic news? Are people more concerned with long term forecasts or short term forecasts? And so forth. Dozens of questions, and constantly watching and learning. I want the stock to earn my money.

As I said aapl is a traditional blue chip mature company at this point, meaning when it gets a little high I'll sells calls and if it gets a little weak it can sop up excess cash and so forth, and I don't sweat decisions too much until after earnings rather than before. It doesn't have a real obvious chart pattern right now but at a PE of just over 10 falling through the floor is unlikely, although the price swings are a but dramatic for a "blue chip" stock. Again, my definitions are what I'm using.

Often someone will give me a random stock to assess and I see nothing in it at all, but the expectation is that a trader of a certain level should be able to predict anything. I have not met that guy yet.

So as you learn just get used to the idea that you will look at 10 stocks until 1 catches your eye, and of those you may trade 1 out of 3. So it's a speed dating thing.

This is more right brain than people realize. it's not numbers game to master, it's a manifestation of human impulses, and the better you understand those the better you will do.

[Enki]

As for algorithms, before computers could execute them that's how people made decisions in their mind anyway, all this talk about them being nefarious is completely anti-intellectual.

Trading changes, and so the goal is not to come up with a fail safe algorithm (impossible) the goal is to acquire the knowledge to create the best algorithm for the moment, or whatever time period is relevant to you.

I think most people's problem is that this sort of trading, and yes the trading done by humans that preceded it, divorces value from the value of the product or service and just creates trades that place value on the value. Mess around with the minute fluctuations in the price of the equity and make a few pennies profit every couple of seconds on a trade.

[Mr. Perfect]

There is no reason to have a problem with it whatsoever.

[Typhoon]

AAPl.

So there are simply different kinds of stocks. There are people who formalize that kind of thing or try to but really there are no hard and fast rules

Before I get into it, the fastest way to bankrupt someone is tell them how to pick stocks. Theyll come back in 3 months with an axe looking for you. So I don't do that.

Or a katana.

To clarify. Not looking for a "stock tip". I don't plan to buy or trade AAPL, rather I picked it as a case study of tradeability. A specific example helps makes things concrete, at least for me.

Also, thanks for your detailed replies. Appreciated.

What is more important by far is asset allocation, stop loss/profit taking/position hedging and management, basic valuations and chart reading skill. Once you have that down then we'll start talking stock picking.

Fair enough.

For applesauce, which I am in, my characterization is it's a big old company and so would be a blue chip like investment, a buy and hold mostly for a long term thing. There is probably more upside than downside going forward but nothing out there likely to ignite it if you will.

Stocks like this are helpful to absorb a lot of your portfolio for the purposes diversification, that is the role it plays in my port port.

Understood.

A note on diversity. A long time ago I looked at my account and saw that one of my positions was up while another was down. I smiled, and felt the pleasure of the benefits of "diversification".

Then a few days later I said to myself: thou retard, divorce thyself from such foolishness. One stock go up, one stock go down, squish, just like grape, no make no money. So be careful of diversity. Crappy stocks can pull you down and you'll keep them in the name of diversification if you aren't careful. Weed 'em out.

Keep the winners and lose the losers. Makes sense.

As for applepie, I did something pretty cool with it you guys may like. I've been holding pretty much for a few years, in and out before hand, but got most of the rip when it was screaming. It seemed like it was topped out a few months ago, when that happens start writing covered calls. This time, when these go down in a stable way, you can short them but something that is a little more "forgiving" is writing in the money calls. As your stock goes down it acts as a hedge, paying you dollar for dollar. You sell one to two strikes in the money and close them as it goes down, and then write new calls even lower.

What that does is of course offset your loss, but if/as aapl comes back those call debits become profits, cash profits. If it works out then months down the road the gyrations won't matter but the cold hard cash profits will be real. There is even more to it but it is technical in nature and takes a lot of writing. Basically you get time premiums with that which helps with what I call "decision risk", ie making poor buy/sell decisions on short term trades that cc strategies mitigate.

Understood.

Back to the untradeable thing, new traders often find a stock through some method and it becomes like a baby bunny that they love and protect, often to their dooms. There are thousands of exchange trades stocks to choose from, if the stock doesn't trade in ways that are obvious to you keep looking.

Indeed.

[Mr. Perfect]

I need to add that for something "buy and hold" like apple I will still go in and out, sell calls or puts, manage the position and so forth.

Buy and hold to many means that you just hold it for x years, but often I see that a stock looks like it' due for a correction of 10 or 20% which is significant for this kind of stock, so I'll take profit and go back in later. A lot of people don't do that. So as I said, you have to think flexible to a degree.

[Juggernaut Nihilism]

Great stuff in this thread, Mr. P.

I am a very unsophisticated investor, but the strategy that has worked for me is:

Own some cheap and mid-priced blue chip tech stocks with a dividend like MSFT, INTC, CSCO, and sell slightly out of the money calls on them for income. Use any profits from the calls, dividends, or gains resulting from shares getting called away into a few high-dividend, low-volatility resource stocks like PWE and PGH, both of which have paid me 8%+ dividends for years and helped me weather the financial crisis. And every month I buy a little more physical gold and silver, though I have slowed with that lately because I have quite a bit. I always have 1% or so of my portfolio holding SDS calls to hedge against a catastrophe.

It doesn't provide explosive upside, but it has been a nice supplement for years.

I should also mention, that I have only been doing this with about 20% of my assets, the rest being in cash or land because the market is too confusing for me these days.

[Enki]

Great stuff in this thread, Mr. P.

I am a very unsophisticated investor, but the strategy that has worked for me is:

Own some cheap and mid-priced blue chip tech stocks with a dividend like MSFT, INTC, CSCO, and sell slightly out of the money calls on them for income. Use any profits from the calls, dividends, or gains resulting from shares getting called away into a few high-dividend, low-volatility resource stocks like PWE and PGH, both of which have paid me 8%+ dividends for years and helped me weather the financial crisis. And every month I buy a little more physical gold and silver, though I have slowed with that lately because I have quite a bit. I always have 1% or so of my portfolio holding SDS calls to hedge against a catastrophe.

It doesn't provide explosive upside, but it has been a nice supplement for years.

I should also mention, that I have only been doing this with about 20% of my assets, the rest being in cash or land because the market is too confusing for me these days.

I hope your gold and silver is in a hole somewhere that nobody knows about but you. If it comes to the point where gold and silver become necessary for currency then I don't think you'll be able to trust the safe deposit box at the bank.

[Juggernaut Nihilism]

It's at my house and up at the ranch in Montana. It's to the point now where I can't feel comfortable adding to it though.

[Azrael]

It's at my house and up at the ranch in Montana. It's to the point now where I can't feel comfortable adding to it though.

At $1700 per ounce, I wouldn't feel too comfortable adding to it, either.

[Juggernaut Nihilism]

It's at my house and up at the ranch in Montana. It's to the point now where I can't feel comfortable adding to it though.

At $1700 per ounce, I wouldn't feel too comfortable adding to it, either.

I'm not particularly concerned with the price. I use the gold and silver ETFs for trading, and I take price into account there, but I accumulate physical with intention of passing it on to my great grandchildren, preferably in a wooden chest. It's insurance against serious problems and i expect to hold it either forever or until I exchange it for more land. At whatever price, I always feel pleased when someone trades me a stack of gold coins or silver bars for a handful of dirty paper.

[Azrael]

It's at my house and up at the ranch in Montana. It's to the point now where I can't feel comfortable adding to it though.

At $1700 per ounce, I wouldn't feel too comfortable adding to it, either.

I'm not particularly concerned with the price. I use the gold and silver ETFs for trading, and I take price into account there, but I accumulate physical with intention of passing it on to my great grandchildren, preferably in a wooden chest.

I hope you bought most of it before 2006. For most of the quarter century between 1981 and 2006, gold sold for less than $400/oz, sometimes for much less.

It's insurance against serious problems and i expect to hold it either forever or until I exchange it for more land. At whatever price, I always feel pleased when someone trades me a stack of gold coins or silver bars for a handful of dirty paper.

I know what you mean.

It's likely that the price of gold will go down considerably. Take a look at this.

Here's the money quote: "South African miners, which exhibit the highest-cost structure in the industry, they can pull gold out of the ground at total costs of say $1,100 to $1,200 an ounce, and in most commodities, you should think that long-term price of the commodity will converge with the marginal cost of production."

[Juggernaut Nihilism]

Mr. P

Any advice on how to profit from the upcoming student debt collapse? I have rolling out of the money puts on Sallie Mae and a few of the for profit schools with the highest defaulf rates and greatest dependence on government backed loans. I don't have access to buying CDS on specific securities.

[Mr. Perfect]

No advice really, collapsing balance sheets is a fundamentals play, I wait for the chart to start speaking.

I am considering getting into some of these markets directly though, having missed out on the subprime collapse. I made a whale load shorting banks but missed the big stuff, not being in position. Won't make that mistake again. Will keep you posted.

I'm studying the repo (not the cars) market, that could be apocalyptic.

[Typhoon]

No advice really, collapsing balance sheets is a fundamentals play, I wait for the chart to start speaking.

I am considering getting into some of these markets directly though, having missed out on the subprime collapse. I made a whale load shorting banks but missed the big stuff, not being in position. Won't make that mistake again. Will keep you posted.

I'm studying the repo (not the cars) market, that could be apocalyptic.

I assume that you're referring to the following

Repurchase agreement - repo

What would be the trigger for this particular apocalypse? Rising interest rates? Why?

How would one short this market? It's not an OTC market, is it?

[Enki]

How does one make money buy selling and repurchasing the same stock?

[Zack Morris]

How does one make money buy selling and repurchasing the same stock?

I'm guessing this is possible if you are holding stock already and betting that it will fall. You could amplify your profit with options. You could buy a put option, giving you the right to sell at near the high price, then sell off your stock, earning $X. When it falls, buy it again (at $X - $Y) and then exercise the option (selling it again at the high price to the writer of the put), selling it for another $X. Your profit is $X+$X-$Y-$P = $2X-$Y-$P, where $P is how much you paid for the put options. Actually, it's a bit less because presumably, you purchased the stock a long time ago for some original price, say $B. Profit = $2X-$Y-$P-$B.

Or something like that.

[Typhoon]

How does one make money buy selling and repurchasing the same stock?

Borrow the stock at, say, $100 and sell it.

The stock drops to, say, $80.

Buy it at $80 and return to the lender. Profit is $20 before transaction costs [commissions, etc].

This is called shorting a stock.

Of course, if the stock instead goes to, say, $120, then you might be facing a margin call on your account.