Comments on: Beware of Leveraged ETFs; The Changing Face of Exchange-Traded Funds https://www.thebluecollarinvestor.com/beware-of-leveraged-etfs-the-changing-face-of-exchange-traded-funds/ Learn how to invest by selling stock options. Sat, 07 Apr 2018 10:38:40 +0000 hourly 1 By: Inverse Exchange-Traded Funds versus Shorting Stocks | The Blue Collar Investor https://www.thebluecollarinvestor.com/beware-of-leveraged-etfs-the-changing-face-of-exchange-traded-funds/#comment-162469 Sat, 07 Apr 2018 10:38:40 +0000 /blog/?p=1200#comment-162469 […] expectation of buying them back at lower price thereby generating a credit. We will not focus in on leveraged inverse ETFs because I feel they are not appropriate for most retail investors using these […]

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By: admin https://www.thebluecollarinvestor.com/beware-of-leveraged-etfs-the-changing-face-of-exchange-traded-funds/#comment-506 Sat, 04 Jul 2009 12:05:30 +0000 /blog/?p=1200#comment-506 Is it possible to increase the value of our stocks through careful manipulation of our option positions? There are times when this is possible and we should all know about this. Check out my upcoming journal article and be sure to have pen and paper handy!

HAPPY 4th to all,

Alan

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By: admin https://www.thebluecollarinvestor.com/beware-of-leveraged-etfs-the-changing-face-of-exchange-traded-funds/#comment-505 Thu, 02 Jul 2009 19:45:33 +0000 /blog/?p=1200#comment-505 Email questions from Dave:

Hi Alan, I’m reading your exit strategies book and have two questions.

1) For the 20% rule why not just put in a buy order at that price as soon as you sell the call? I’ve seen cases where the stock and option will just take a dip during the day and if you weren’t watching you would miss it.

2) In several of your examples the stock is trading below the 20d ema. How long do you let a stock do that before you get rid of it?

Thx,
Dave

My responses:

1- Placing a buy-to-close order at the time of the sale of the option is ceratinly one way of handling your exit strategies. This would be placed @ 20% of the sale and later in the contract period changed top 10%. This would be particularly useful if you can’t monitor your positions on a regular basis. Excellent observation and suggestion.

2- The charts in “Exit Strategies for Covered Call Writing” are 30-d charts and NOT APPROPRIATE OR INTENDED FOR TECHNICAL ANALYSIS OF THE STOCK. The charts are used to show the association of the option premium compared to the price movement of the stock. Understanding this relationship will make exit strategies easier to execute.

Thanks for two GREAT questions.

Alan

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By: Susan https://www.thebluecollarinvestor.com/beware-of-leveraged-etfs-the-changing-face-of-exchange-traded-funds/#comment-504 Thu, 02 Jul 2009 00:58:18 +0000 /blog/?p=1200#comment-504 I sold in the money options on these stocks:

netl, ctrp, trlg, cern, ntes, pwrd and wms.

All but one (ntes) are going great. Really excited.

Thanks,
Susan

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By: admin https://www.thebluecollarinvestor.com/beware-of-leveraged-etfs-the-changing-face-of-exchange-traded-funds/#comment-503 Wed, 01 Jul 2009 14:16:08 +0000 /blog/?p=1200#comment-503 With the upcoming extended 3-day weekend, there is a strong probability that we will see a decreased trading volume today and tomorrow as institutional investors either take additional time off or are hesitant to take new positions prior to the long market weekend.

Low trading volume renders changes in technical indicators less vaild. For example, if the share price of your stock breaks slightly below it’s moving average on low volume, I give it less credence than had it done so a strong volume.

You may want to review pages 77-79 in “Cashing in on Covered Calls” where you will find a discusssion of volume as a technical indicator.

Alan

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By: admin https://www.thebluecollarinvestor.com/beware-of-leveraged-etfs-the-changing-face-of-exchange-traded-funds/#comment-502 Tue, 30 Jun 2009 22:18:26 +0000 /blog/?p=1200#comment-502 AIG proposes a reverse stock split:

With the current market value of AIG at an incredible $1.16 per share, the Board of Directors is quite nervous. First, it runs the risk of being de-listed from the NYSE if the price falls below $1 per share and more importantly it is losing the interest of institutional investors who avoid equities trading under $5 per share.

To remedy this situation , the board has proposed a 1 for 20 reverse stock split. This will raise the price of the stock 20 fold and decrease the number of shares by the same denominator. If the split is approved, an investor owning 1000 sharesd @ $1.16 would then own 50 shares @ $23.20. Notice that the market cap of both scenarios are the same : $1160 (price x number of shares).

Conventional stock splits and their impact on your covered call investments are discussed in chapter 17 of “Cashing in on Covered Calls”.

Alan

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By: admin https://www.thebluecollarinvestor.com/beware-of-leveraged-etfs-the-changing-face-of-exchange-traded-funds/#comment-501 Tue, 30 Jun 2009 18:17:04 +0000 /blog/?p=1200#comment-501 Gary,

I curently have LFT on my watchlist. It’s a very strong company. However, because of the recent technical decline in the chart I would either avoid this stock until the chart looked stronger or sell an I-T-M strike. Currently the $22.50 call will generate only about 1% and we can’t go out into August due to the ER.

Generally in situations such as this one, I would look for a stronger financial soldier and perhaps re-evaluate this one for the September contracts.

Alan

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