Futures market already pointing decidedly negative . It seems the bloodletting will continue from last week. This idea of a V shaped recovery always was a pipe dream. 2020 is going to down as one helluva difficult year for society as a whole.
I just read that the average loss (peak to trough) in previous bear markets is 33%. I think this bear market clocked in at 36 %. Not too shabby, considering the circumstances, thanks to the FED .
Now Down almost 1k points. Looks like those circuit breakers are going to trip again.
I think last Monday marked a euphoria when Davy "day trader" Portnoy called day trading an easy game, and ridiculed Warren Buffet as a washed up investor. Being an arrogant investor/ trader rarely works out for one's finances. What's the old expression about a fool and his money ?...
No way on SDOW... I don't play the "shorting" game on anything ; just too risky IMO,... much more than playing the "long" game. There are times when I will trim a small exposure to stocks, such as I did a couple of weeks ago w/ oil. I'll plan on going back in when/if those stocks come down -20% from my selling price..
Also, Very interesting bounce back today on the markets (compared to what the futures were telling us). I went and looked at our recent high on June 7 in the DJIA, and compared it to the trough last night on the futures.. It came awfully close to a -10% drop. Makes you wonder how much buying the algos were doing at that drawdown..
I'm back!
I will offer my insights on the markets accordingly, although I profess to understand absolutely none of what has gone on with the markets over the past month when I was placed in rehab.
I am currently sitting on 180k in cash and have not made a single trade over the past month. One of my golf buddies made a 50% return over the past 5 weeks and cashed out before the big down day. That's a job well done but one I currently lack the knowledge to pull off without strictly gambling.
WMT is approaching my buy point but I'm hesitant to pull the trigger. I would like to see Covid19 cases falling with more positive news on treatments and a vaccine but I'm seeing neither. This remains the most difficult period I can recall in predicting market movements. As of today's close, I would expect more see-saw action towards the downside with new market highs a pipe dream.
Good to see you back. 
Sometimes it is not about understanding the market. Like your buddy you can gamble with the dips knowing it has always gone back up. If it was as easy as understanding the markets and then doing what we think they should do — everyone would be an investor and rich. Sometimes you just have to play the longterm averages. 
A better plan if that’s what you want to do is to really key in on a handful of stocks and learn them inside and outside.
Maybe WMT is one of them for you. I know I saw on one of my sheets this week that the consensus is a strong buy and the average target is around 136-140 I think. One of the concerns is retail sales may fade as the stimulus money runs out. They passed eBay for the first time in online sales. Still behind Amazon of course. Allying with Shopify and beefing up their digital health platform look good as well.
But to me people have to eat. And they are still the best deal for one-stop shopping — for all goods, not just food.
I’m on here every day following your opinions. I just wish there were a lot more people talking about stocks in here. Obviously with sports gone I’m trying to get into this and have a very newbie question about option calls. There are 4,000 ROKU 7/17 $240calls for .23 The stock is half of that now. What does this mean?
if the stock basically doubles in a month the payout is ... 240 -120-.23 x 4000= 479,080?
i’m trying to learn all these damn options every single day but know this cannot be correct. You’re paying $920 for the calls yet you can hit almost a half a mil if this somehow hits and they get acquired which is the rumor. Someone tell me the math or the pay out in this situation I would appreciate it. Thanks
Not sure how detailed an answer you are looking for here. Maybe I can help or at least get you pointed in the right direction.
In Economic Theory there is what is known as ‘a frictionless market’. Using this theory, in part, there have been formulas dedicated to pricing a stock option. The most famous is the Black-Scholes formula. Therefore, the Black-Scholes model is the most famous model. There are derivatives of this as well. For example, there is a binomial model and even a trinomial model. I tried to post it in the link above. But couldn’t get it to stay, mainly because it has a lot of Greek letters in the formula.
These formulas consider a few key things. Mainly, intrinsic value, volatility and time. All of these are very important and coupled with the stock price are used in the formulas to derive the call (or put) price.
I am not sure you were actually asking for a way to figure this out for yourself. But if you are, you can look the formulas up online or I can post a few links for you. But there should be no need to do it yourself, unless you are just interested in doing it. Whatever stock option trading platform you use will have the Black-Scholes model and others in there and you can plug in numbers and play around with it as you see fit.
There are lots of things to consider with options. Whether it is European-style options (which are usually options on indexes) and American-style options (which are usually options on individual stocks). This basically helps out with your timing as American options (usually stocks) can be exercised before the expiration date.
But because of all of these variables there is a correlation in the movement of stock price and option price. But to make a very, very long story somewhat shorter — it is not like a solid ratio where a stock goes up 10% and, therefore, you can easily predict the call option to go up 50%. Time, intrinsic value, and volatility all play a huge part in this.
For example, I have seen call options that actually would go down when the stock went up AND the call options on either side would go up. Rare, but it can happen if, for example, expiration is right around the corner or there is not much volatility, etc.
In other words, if you are going to make a big play on this, I highly encourage you to really study up and have a very good understanding of what you are doing. I am not saying that you don’t — I am saying that options can be very volatile. If the stock moves the wrong way at first or if there is no demand or if expiration time is coming soon — then you can be in a bad situation quickly. But if you are right on the movement, give yourself plenty of time, and pick a call that has lots of demand — you can make a lot of money very quickly.
The obvious benefit is there is ‘unlimited’ upside and ‘limited’ downside. You already know the absolute most you can lose in the trade going in and the sky is the limit on what you can make.
You never forget the good days or the bad days. I have had to bail out of a lot of trades at a big loss or even rode some all the way down to zero. But on the other hand I have had some fantastic days with options.
My best trade ever I made over 1100% on one trade. I put in a trade in the afternoon right before the market closed. The next morning it had closed out before I even woke up. Amazingly, caught lightning in a bottle with that trade. Was the most I ever made on one trade and for sure the quickest.
But you can easily double or triple your money on a trade — if you are right about the movement of the stock, have time on your option and it has the volatility you need. But you really have to know what you are doing and limit your potential losses by always, always, always, always, having stops in place on a position. If your position moves in your favor move the stops up, etc. Never forget to lock in your profits.
The Black Scholes Calculator uses the following formulas:
C = SP e-dt N(d1) - ST e-rt N(d2)
P = ST e-rt N(-d2) - SP e-dt N(-d1)
d1 = ( ln(SP/ST) + (r - d + (s2/2)) t ) / s vt
d2 = ( ln(SP/ST) + (r - d - (s2/2)) t ) / s vt = d1 - s vt
Where:
C is the value of the call option,
P is the value of the put option,
N (.) is the cumulative standard normal distribution function,
SP is the current stock price (spot price),
ST is the strike price (exercise price),
e is the exponential constant (2.7182818),
ln is the natural logarithm,
r is the current risk-free interest rate (as a decimal),
t is the time to expiration in years,
s is the annualized volatilityof the stock (as a decimal),
d is the dividend yield (as a decimal).
Okay went back and reread your post.
Stock:
Opened at 107.49. Closed at 120.81
So was up 12% today.
Call option:
Opened at .10 Ranged from .10 to 1.19 Closed at .75.
So was up 650% today.
So, you can see that the price of the calls went up WAY more, percentage-wise, than the stock price itself did.
Remember these are lots of 100 shares of stock.
So, at .23 price it would cost $92,000 to buy 4000 calls NOT $920.
So, yes, you could buy 40 calls at that price for $920. Then if the stock doubled in price in a month you would make a tremendous amount of money on your options. Even if you worked it as a ratio — which as I said, it is not — could be 5400% increase. For sure, you could make the money you say — IF you were right and the stock shot up for a month. But there are a lot of variables in it.
Maybe some of that helps answer what you were asking?
Yeah, Artdb... I checked out the ticker of NK and saw they were biotech. I don't know how you've done w/ biotechs in the past, but personally, I hate them. I think I may have discussed them briefly before in this thread... In short, my experience with the biotech companies is that they have binary outcomes. They either get the FDA approval AND must have successful clinical trials, etc and rocket higher,.... or they only get one of the two, and their stock plummets. So, I have a bias against small biotech companies.
That being said, the JAGLX fund you referenced from Janus looks like a great fund in the Healthcare sector. I am a fan on these types of Healthcare sector funds/ETFs, most notably because they include much larger diversified healthcare companies (eg. J&J, Merck, Pfizer, etc.). Their stock price won't go to $0 if they miss out on a new drug.. The same can't be said for smaller biotechs like NK. Personally, I own the sector ETF "XLV" . It looks to performs equally as well as the JAGLX, with a lower expense ratio of 0.13% (compared to 0.92% in the JAGLX). I plan to buy and hold this sector for a long period of time, so that small difference in expense ratio can add up to thousands of dollars over longer periods of time..
I think in summary, for your interest in the healthcare arena, you'll do really well if you bought and held the JAGLX over a longer period of time, and slightly better if you held the XLV.
Rush. You made the most important point on JAGLX and its .92% expense ratio. I have denounced financial "advisors" in many threads here and it is a point that deserves to be brought up again and again and again. Consider the case of my ex-gf whom had an advisor charging her 1.5% as a % of assets and had her in multiple high fee funds (.92 to over 1%). I have seen so called advisors use this strategy as it is common knowledge that "advisors" recieve regular kick backs from mutual fund companies as compensation for putting their clients in these high fee funds.
Here is some quick math on a million dollar portfolio over 3 decades with a 1.5% of assets fee and a 1% mutual fund expense fee.
Year 1 fees: $25,000....account grows to $1,070,000 based on a long term average 7% annual gain. $1,045,000 remaining after fees.
It is important to note that the 1% mutual fund fee will be "invisible" as it is taken out of the daily share price quarterly while the broker fee will show up as a deduction on your quarterly statement.
In year 2, the fees will grow to $26,125. Over decades, again assuming a 7% yearly return, over the first decade the fees will steadily increase and result in fees well over $300,000. Compound these results over an investing lifetime of 3 or 4 or 5 decades and your "advisor and fund companies" will walk away with millions of dollars. Run the math for yourself if you are skeptical of how damaging fees can be to your portfolio.
Also, while this example is extreme, I have seen it in action with multiple people that I have helped over the years with their investments. Unfortunately, the people that go to financial advisors for help are the ones with the least knowledge and thus become the most vulnerable to fee abuse by the people they are supposed to trust.
We talk a lot here about buying GOOG, HD, BAC or some other random stock or fund, but we rarely get into discussions on fees. IMO, fee abuse by advisors is the single biggest RISK TO YOUR PORTFOLIO.
Don't let it happen. Pay attention to broker and mutual fund fees!
Your portfolio will thank you!
Gamble, I may join you and have added WMT to my "shopping list" if stocks get obliterated again. I have set a pretty low price target of $100, so I fully realize that it may never come in... which is just fine. I am plenty invested in the market and will not miss it if it never comes in.
That being said, as big as WMT is, this company still has a lot of upside potential in its online business. On line sales make up only around 5% of their overall sales. I think it has a good , defensible , position against Amazon, too, as more people order on line and pick up in store. WMT has that in spades that AMZN cannot compete with with their tiny Whole Foods presence. I owned WMT years before (as a trade) when AMZN announced they were buying Whole Foods. KR, TFT, and WMT each dropped significantly and I bought them all and did well. This time around, I would be happy owning WMT as a long term play because they have moat.
Well said, Gamble. I'm a BIG proponent of index funds. It makes up the bulk of my investing.. For this (cost) reason AND for the fact that they perform better than just about any active manager over long periods of time. 
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