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| | | Holiday Party Humor | | | | | | With no real progress on the fiscal cliff and little other substantive news, the markets moved lower Monday on small participation and little volume, a veritable snooze fest.
The talking heads and pundits on the financial news had to resort to hours of filler, including coverage of Hugh Hefner’s announced engagement to a woman 60 years his junior. So in honor of Hugh, I thought I too, would turn to humor and give you a few Wall Street jokes to tell at holiday parties or whenever things get dull.
- Q: What’s the difference between an investor and a pigeon?
A: The pigeon can still make a deposit on a house. - Q: What’s the difference between a guy who just lost everything in Vegas and an investment banker?
A: A tie. - Q: How many stock brokers does it take to change a light bulb?
A: Two … one to change the bulb, the other to sell off the old one at the highest price possible before CNBC reports that it’s burned out. - Q: What’s the difference between a bond and a bond trader?
A: A bond matures - Q. What's the difference between an economist and a befuddled old man with Alzheimer's?
A. The economist is the one with the calculator. - The First Law of Economics: For every economist, there exists an equal and opposite economist.
The Second Law of Economics: They're both wrong. Let’s hope the market action picks up Tuesday so we all aren’t competing for the stage at a low rent strip mall comedy club or an open mike night at an airport Holiday Inn.
Trade well and follow the trend, not the perma-bull OR perma-bear “experts.” | | Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia. | | | | | | | | | |  | | | | is a leading investment education firm that empowers traders to achieve and surpass their financial goals. More than 50,000 students have used Larry Levin's proven techniques for powerful results. | | | | | |  | | | | Congratulations to Celeste Leme
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| | | | NOTICE: Testimonials are believed to be true based on the representations of the persons providing the testimonials, but facts stated in testimonials have not been independently audited or verified. Nor has there been any attempt to determine whether any testimonials are representative of the experiences of all persons using the methods described herein or to compare the experiences of the persons giving the testimonials after the testimonials were given. The average reader should not necessarily expect the same or similar results. Past performance is not necessarily indicative of future results. No person was compensated for providing a testimonial. | | | |  | | |  | | | | Volatility Commentary | | | Vix Calendar Put Butterfly Calendar Spreads are complex spreads when it comes to VIX options. The reason for this is because VIX options are priced based on its underlying, which is not the spot VIX, but rather the corresponding VIX futures. For example, VIX December futures closed at 16.35, while VIX January futures closed at 17.65 and spot VIX at 16.64. As you can see the respective closing values are quite different from each other. The VIX Jan 17/ Dec15/ Jan 13 Calendar Put Butterfly spread tries to take advantage of all the idiosyncracies of VIX and VIX futures prices, as well as, the current market situation. For instance, if fiscal cliff issue is left hanging as it is now, there would likely be a floor and a ceiling to the spot VIX. I estimate that range to be 15-18. Of course should the fiscal cliff issue be resolved to the market's liking then VIX could very well fall below 14 level, whereas if the talks totally break down, then VIX could rise above 20 level. Today in class, we analyzed the expected value of buying the VIX Jan17/Dec15/Jan13 Put Butterfly and calculated that as long as VIX does not spike above 19 by December VIX expiration (on the 18th), the butterfly spread would be expected to profit as much as 0.60 to 0.70 (the value of the spread went out at 0.70). But should VIX rise to 20 level, the spread would lose 1/2 its value or 0.35, with maximum risk of losing the entire premium paid for the butterfly spread should VIX spike higher than 20.
| | |  | | | | Currency Spotlight | | | | During World War II, the International Monetary Fund (IMF) was created to stabilize world economies and currencies. Its goal of multilateral governance required it to help a country in trouble and to jointly prevent countries from imposing policies that would hurt the global economy. The IMF’s role changed greatly, after the 2008 Davos Annual Meeting. Managing Director at the time DSK hinted toward a united global response. As the global markets braced themselves for the financial crisis, the IMF was correct in its assessment of the dire situation at hand. It also knew it would eventually have to impose change for the infrastructure of how debt is handled globally. A collective response was needed and delivered. The IMF successfully dealt with the initial shock of a worldwide collapse, but now they have a difficult task in providing advice for individual countries. In due time, the austerity measures will heighten arguments both politically and socially from indebted countries like Greece and Spain. The outcome is a departure from the eurozone common currency. In an effort to meet the required debt reductions, Greece kicked off a debt buyback program today. If this works out, Greece may reduce about half of its debt to the private sector. With no economic growth to show for and no signs of improvement in Athens, this unfortunately, might only be positive event for short-term risk appetite, but not so much the long-term outlook for Greece and the euro. Yesterday, the streak of EUR/USD bullishness reached three consecutive days, but if you take a closer look at the charts, that only yielded approximately 100 pips.
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|  | | | | Watch List | | | The market action early was slow, but then a swift down slide brought the market imto negative territory after we had seen a strong ramp in premarket action. Weak ISM numbers was the cause of the fast slide since they came out with the weakest numbers of the year. A slow grind with lighter volume and volatility followed, that was only interrupted when Boehner again spoke out midday..Now he has been speaking on the regular as off late, and everytime he speaks he is causing great volatility in the markets. In a longer term position it won't affect you nearly as much as the intra day trader, but nevertheless it's something to keep in mind until the Fiscal Cliff issue is resolved.
Dell(DELL) had some activity today as Goldman Sachs raised the stock to a "Buy" rating, and the stock responded with a little more then a 4% gain. It was definitely the strongest stock of the Tech sector which remains very weak.
Research in Motion(RIMM) was downgraded today due to "fundamental flaws" in the company, but the fact that the stock closed UNCH showcases that retail investors and the big money are still bullish on this stock. This week will be very telling leading into earnings as far as public sentiment goes.
Now if the volume remains light and the volatility remains down like today, then I would be extremely cautious of being overly active in these market conditions. You're more likely to lose a great deal out money, then to find a great deal of success. Open Position: IBM Stocks to Watch: IBM AAPL PCLN GOOG FSLR FB GMCR NFLX RIMM DELL BAC C GS CAT | | |  | | | | Futures Data | | | ES 1417.50 / 1409.00
POC… 1415.50
YM 13017 / 12963
NQ 2691.50 / 2673.50
Notes from the Pit
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Keep a civil tongue.