UK Stockmarket 2009 and beyond

sabretoothtigger

I'd rate them over spreadbetting in terms of risk and complexity but I'm a learner on the subject more then anything.

I was reading a rough guide that states they dont always work out the best hedge for people, ie. can sometimes contribute towards risk rather alleviate it

http://www.learnmoney.co.uk/options/hedging.html
Option Strategies - Put spread | LearnMoney.co.uk



Some discussion of forth coming american earnings and how it might effect the general market, in the videos below
It does seem likely that 'sell the news' will be the conclusion by the end, is there a good link listing all the big results. I think theres one in this thread somewhere

Putting Off the Risk: Google - CNBC.com


OPTIONS Goldman



With vix at a low, now could be a 'cheap' time to buy options , presuming volatility does rise that would give odds in the favour of buying now I guess


Which brokers would allow covered calls to be written by retail investors?





http://img200.imageshack.us/img200/3916/earni7862764.jpg

tradetime

Yes with volatility as expressed by the VIX dropping the premium on options is quite low, but in reality the significance of that depends a lot on what you are using them for. If for example you are hedging a stock position, then yes you are buying fairly cheap protection, the essence being you are simply protecting against something that might happen, something unforeseen.

If however you are using them in a speculative capacity, then it really doesn't make that much difference, yes you can buy at cheap premium, but the reason the premium is low is because the expectation for the stock to move is low.

What people interested in the speculative side of options need to consider is that simple betting on a stock can be difficult enough, (once we exit this "buy anything and it goes up phase") in that instance you are simply betting it will go up, if it goes up you win, if it goes down you lose.

When you place a simple long option bet you add two further parameters, time and magnitude. You now need to be right, not only on direction, but also the timeframe in which this will happen and the magnitude of the move, enough to cover the premium. It is quite possible to be absolutely right on the directional movement of a stock, and still lose because it didn't go up enough before the expiry.
That can be limited to a degree by buying deep in the money, but then you increase your risk if wrong on direction.

Another way to look at it is that a stock can do one of three things, rise, fall, or stay about the same (trade sideways) With a simple stock bet you will win, lose or draw.
A simple option bet in the same circumstances will win, lose, and lose. Now I know this is a very simplistic way to look at it, though deliberately so, because most retail players entering the space are playing very simply. If you fully understand complex strategies, then this would be of no interest to you anyway.

I use options in all basic capacities at certain times, but for the most part I am an options writer. Essentially you are selling time, time is your friend. For an option buyer time is your enemy.

As for brokers, I've never really examined what you can do with the numpty broker as far as anything advanced goes, they are pretty poor in simple stock terms so why bother.
Interactive Brokers will allow you to do pretty much anything I can think of offhand that a retail client is allowed to do.

[Deleted User]

I see a rising wedge formation on the s&p500, from nov 1st to now. imo if it remains longer term under 1132 then something nasty will happen early in 2010. imo please dyor

I am staying out of the stock market

tradetime

Can't say I blame you sidelining at the moment, you seem to have had a great run Kittie and upside is likely limited from here, certainly we will not see last years returns this year. We are now well into my projected target area of 1121 - 1158 from a few months back (obviously a break above that would require further analysis)
Agree on the rising wedge formation, to me it's a pattern to be aware of, but I'm too short term for it to be of much use, there is a vast range of support below that level, 1115/18 is very important, we spent much of Nov and Dec trying to get above there. Therefore from a market psychology perspective that should hold as support now. There is also a trendline which comes in there. If you extend your view back to mid August then you have a trendline that comes in around 1090 currently, this can also be incorporated into a rising wedge.
Fridays down day was a counter trend move into a long weekend, such countertrend moves are often (but of course not always) reversed when trading resumes after the holiday. Most technical indicators I watch are bearish on both Nas and S&P on dailies and weeklies. S&P held short term support on Fri in the 1130 area, 1150 is proving major overhead resistance. Let's see what they want to do.

Masomnia

Took the plunge today and put some money in Aberdeen Emerging Markets, I'm a bit nervous about it!

Just curious for your opinions, I also have an equal holding in Jupiter International Financials and noticed today that 26% of the Aberdeen fund is in financials. I'm a bit worried now that I'm over-exposed to the financials sector, any thoughts? Should I be overly worried? The whole point of me going with the Emerging Markets was to diversify a bit (I also have a media stock and a FTSE all share tracker), and I'm worried I've fluffed it up!

[Deleted User]

masomnia, forgive me being mumsy here but what on earth are you doing by `gambling` on risky funds when you have a debt of 15k?

Masomnia

kittie wrote: »

masomnia, forgive me being mumsy here but what on earth are you doing by `gambling` on risky funds when you have a debt of 15k?

No no it's a fair question.

The thing about the debt is that it's currently 0% APR, and I won't 'have' to pay it off until I'm working, where it'll just come out of my wages each month. It's something like 9% of everything I earn over £15,000 per year I have to pay. I have a few grand in cash savings, and have enough to live on for a year, so I want to make it work a bit harder and make some long term gains. It doesn't affect my credit score and gets written off if it isn't paid in 25 years.

I don't like the fact that I have the debt, and I could pay a lot of it off, but at the same time it just doesn't make sense to do it.

sabretoothtigger

There is an argument for investment vs stable debt. Like people who invest while holding a mortgage.
I would suggest trying to get a fixed rate of interest on any major debt because we have such massive risk of government policy failure ie. 10% rates, etc

I believe student debt is linked to RPI like state pensions ? It is does seem to be significantly cheaper then most commercial debt would cost luckily


Market went to plan for me this week so far. I tried to post last night but the forum was closed, market is rebounding off a long term trend line after showing some positives friday close.

The danger in this is that we are so close to breaking that july trend and obviously things would get negative or at least look that way if that happened. Right now the bigger trend is still positive amazingly, it has not really faltered but surely some of the earnings will do this ?

USA EARNINGS


My general thoughts are sell on the news for this earnings season. In july we has outperformance and a fair dip just beforehand in June but december wasnt really that negative so we arent setup for a bounce from here imo.

I think this time we see consolidation after earnings not before due to reports coming in as expected, gains are in the price already so profit taking afterwards

I hope to be out of the market at some stage of this but Im opting not to switch some funds over to bonds, corporate and gilt as I dont really like bonds at all personally. I will be in cash at some point though through reorganisation necessities.

Separately I was thinking of selling Ved shares, I dont have much (same as anything) but I figured they've had a good run. However questor reconfirmed a few reasons why their worth and prospects are improving, since I was already in two minds about not selling overseas and commodity assets Ive decided not to sell. They are a kind of hedge to me.


Generally holding most shares but looking to sell /rebalance anything at the top of its cycle just not sure which as I dont especially trust cash or bonds like ive said


I think this is a bit like the wedge referred to -




Longer term trend

tradetime

Holiday reversal played out much as expected, and we find ourselves testing the 1148-1150 level once again, let's see what we make of it this time.

[Deleted User]

It is definitely not easy going at the moment but I had a bit of a sort out today re the portfolio. I decided that the best way to wrap up profits now was to `invest` rather than use the cash for share trading as I have been doing. I made 209k profit since sept 2007 (a vested pension in a sipp and drawdown starts this summer, hence the reason for it being large). It was all too easy to just keep on buying and selling shares but I need to head for income too, in order to support drawdown. I have added to two of my current pibs and bought another pib and also a perp bond in a bs. I also went big on rdsb and bp., managing to get more shares for the money, in spite of big amounts of stamp duty. They were big amounts because I have been scraping profits and reinvesting in them for two years. I have just done the sums and the yields on the pibs prefs and oils will cover my drawdown each year. Now that leaves me free to work on the cash that is left but I am biding my time and will probably start again in feb, depending of course on world events