Comments on: Modern Portfolio Theory (MPT)- How Financial Advisors Invest Your Money https://www.thebluecollarinvestor.com/modern-portfolio-theory-mpt-how-financial-advisors-invest-your-money/ Learn how to invest by selling stock options. Tue, 16 Oct 2012 21:21:19 +0000 hourly 1 By: Alan Ellman https://www.thebluecollarinvestor.com/modern-portfolio-theory-mpt-how-financial-advisors-invest-your-money/#comment-7204 Tue, 16 Oct 2012 21:21:19 +0000 /?p=6896#comment-7204 In reply to Joe.

Joe,

MLNX is due to report after market close tomorrow. When a report is moved up and I’ve already taken a position, I will close my short position and either hold or sell the underlying depending on the confidence I have in the ER. If you look at the premium credit and the premium debit to close as well as the entry and possible exit price for the equity, the deal may turn out to be profitable despite the surprise. For example, if the option was sold for $3 and due to time value erosion can be bought back for $2 and the share price is the same, you’ve made some money.

Alan

]]>
By: Joe https://www.thebluecollarinvestor.com/modern-portfolio-theory-mpt-how-financial-advisors-invest-your-money/#comment-7203 Tue, 16 Oct 2012 20:48:29 +0000 /?p=6896#comment-7203 Alan, It may work out – but it may not. Just want to get your thoughts. I purchased and sold a covered call on MLNX based upon the 9/21 report that reflected an ER date of 10/24 – so I thought I was safe. I guess I should have checked with Whisper to see that the ER date was confirmed – because within this period, the ER date was announced as 10/17 – so I’m stuck. In the future, what should I do if an earnings date surprisingly pops up in the period. Thanks. Joe

]]>
By: Alan Ellman https://www.thebluecollarinvestor.com/modern-portfolio-theory-mpt-how-financial-advisors-invest-your-money/#comment-7198 Tue, 16 Oct 2012 12:13:56 +0000 /?p=6896#comment-7198 Running list stocks in the news: BCOR:

Blucora Inc. (formerly Infospace Inc.), a maker of tax preparation software reported its 3rd consecutive positive earnings surprise on July 26th beating consensus estimates by 240%. Earnings were up 200% and revenues rose by 85.8%. The company gave positive guidance for the upcoming November 7th ER. Consensus estimates for 2012 is for growth of 65.6% and for 2013, 35.4%. BCOR trades at a PEG of 1.1 more favorable than its industry average of 1.5. Our premium running list shows an industry rank of “A” and a beta of 1.36.

Alan

]]>
By: Alan Ellman https://www.thebluecollarinvestor.com/modern-portfolio-theory-mpt-how-financial-advisors-invest-your-money/#comment-7191 Mon, 15 Oct 2012 20:27:59 +0000 /?p=6896#comment-7191 Oilprice.com:

I have accepted an invitation to write periodic articles for this OIL&Gas website. Here is a link to my first article published today:

http://oilprice.com/Finance/investing-and-trading-reports/Using-Oil-Gas-Securities-Plus-Stock-Options-to-Generate-Monthly-Cash-Flow.html

Alan

]]>
By: Alan Ellman https://www.thebluecollarinvestor.com/modern-portfolio-theory-mpt-how-financial-advisors-invest-your-money/#comment-7190 Mon, 15 Oct 2012 20:25:45 +0000 /?p=6896#comment-7190 In reply to Fran.

Fran,

Since the share holder, not the option holder, receives the dividend distribution, the call premium is less valuable than for an equity without a dividend distribution, all other paramaters being equal.

Alan

]]>
By: Fran https://www.thebluecollarinvestor.com/modern-portfolio-theory-mpt-how-financial-advisors-invest-your-money/#comment-7182 Sun, 14 Oct 2012 18:38:46 +0000 /?p=6896#comment-7182 Alan,

If a stock has a dividend is the call premium affected either way? Thanks as always.

Fran

]]>
By: Alan Ellman https://www.thebluecollarinvestor.com/modern-portfolio-theory-mpt-how-financial-advisors-invest-your-money/#comment-7179 Sun, 14 Oct 2012 16:42:26 +0000 /?p=6896#comment-7179 In reply to Dave.

Dave,

As far as cash vs. margin, this will depend to a great extent on your personal risk-tolerance. My feeling is that cash accounts are more appropriate for most retail investors. In margin accounts, the broker will lend up to 50% of the stock price or strike price whichever is less. You are leveraging your trades which can be very good or magnified negatively if the trades turn against you. You are also paying interest to your broker.

Roth IRA vs. Traditional: Best answered by your financial advisor who knows your specific information.

Alan

]]>