Bitcoin Forum

Closed my $33.5 weekly calls on VIX less than an hour ago, for a staggering 85%+ gain.  8)

Want in on this action? Ok, here's the move...

We're going off the Fiscal Cliff... Just accept it... As a result, the banks are going to get pounded. BAC, having just set a new high today before falling back, looks particularly vulnerable... Currently trading at $11.30/share. So let's get em...

Buy the weekly JAN1 13 11 puts which are trading for < $0.15, have 8 days of life till expiry and are only 0.33pt out of the money. You can buy 10 contracts (1000 options) for a mere $140-ish + commission. That will give you $1000 upside for every $1 drop in BAC stock below $11/share.

This is how you speculate with small amounts of money... Enjoy!  8)

--ATC--

Here's a look at the charts with some of my analysis comments (excuse my indicators being a bit out of tune)::

http://sphotos-a.xx.fbcdn.net/hphotos-ash4/471934_468883393149584_1194507084_o.jpg

BAC has fallen through its MA-64 after straddling it for days, and I expect selling to intensify/concentrate around the $11.15 - $11.00 level, which will push it below my strike price. Every $1 BAC loses in the next days equals $1,000.00 profit at a risk of only $140.00 USD.

It was amazing seeing the markets today for the short time it was open, really amazing, there were lots and lots of trades all going around Banks and Telecommunications groups like Vodafone, I'm surprised there are people left in this world who think that these economies are going to last, a gold stock I'm holding jumped 6 or so points in one day but it was rushing up to 12 for awhile, it's going to be insane what comes next year.

http://www.petropavlovsk.net/ - I'm putting my faith in this company myself, yum gold :D

I say stick with Gold and Oil though you always want to be as picky as possible with your choices but I'd stay away from financials altogether.

Edit: Blegh, selling my stocks while I can, guys, take my advice from someone who has magical moments of mathematics every now and then even though he hates it, you should only enter a trade with £1000 - $1000 otherwise you will be waiting until 2020 to break even ( granted exaggeration on the 2020 bit but that's what it will feel like POG is definitely a good pick though )

I don't understand why the "fiscal cliff" should have a direct effect on Bank of America's stock.

If I understand correctly, the "Fiscal Cliff" simply means a slashing of $1.2 trillion in mandatory and discretionary government spending, along with a return to the tax rates the U.S. had in the late 1990's (back when the budget was running a surplus rather than a deficit).

How did BAC fare in 2008? ;)

This has been a rhetorical question.

Politicians cutting spending? Surely you jest. They'll simply decrease the rate of spending growth marginally and pass it off as a spending cut, just as they've done countless times in the past. IOW we're going over the fiscal cliff. The question is when.

Because it does... Financials get slammed anytime the government makes a big fiscal or monetary boo-boo...

And the Fiscal Cliff WILL indeed have a direct, painful impact on the US banking system...

I'm not sure what "fiscal cliff" you are referring to.  The "fiscal cliff" does not in any way involve an increase in spending. "The Fiscal Cliff" is a phrase used to describe a set of events that occur on January 1, 2013 if Congress doesn't change current law.  These events are a combination of 2 laws created in the past that take effect on that date.  

The first (increasing income taxes) is:


The second (cutting spending) is:


This "fiscal cliff" only occurs if Congress fails to change existing law.  It is believed by some that the reduction in private income (due to increased taxes) and the reduction in government spending (due to the $1.2 trillion spending reduction) both happening at the same time will pull so much money out of the economy that we will slide back into a recession involving massive job loss.

I'm not yet convinced that this is a large enough portion of the entire U.S. economy to really have such an adverse effect.

In reality, Congress can pass new laws regarding government spending and tax rates after January 1, and make them retroactive back to the first of the year.  Therefore, Congress has several months yet before any adverse effects of the "fiscal cliff" begin to materialize, and as long as they make changes retroactive and act before any adverse effects are experienced, this whole "fiscal cliff" is mostly just a bunch of smoke and mirrors used to create enough fear to get away with increasing tax rates and cancelling spending cuts with minimal political damage.

I'm not yet convinced that the "fiscal cliff" is a "boo-boo".  If anything, "fixing"/"avoiding" the fiscal cliff is the boo-boo.

In what way will increased income taxes and reduced government spending "have a direct, painful impact on the U.S. banking system"?

Either outcome is a big, fat FAIL... The entire system is screwed and we're in WAY over our heads, bro...


Because the US now has to pay the piper, and austerity hurts... equity markets are going to get slammed, and we will experience a recession...

When the economy is hurting the banks are hurting... people spend less, employment numbers recede/drop, less loans are made, people spend less on credit cards, et cetera... The very basis of bank revenues will be under fire: loans, credit cards and investment...

Just tune your TV into CNBC and listen... this is no secret... The bank executives don't even try to hide it... they know what's coming...

Sounds like a bunch of FUD to me.  "The sky is falling! the sky is falling! Cries Chicken Little, as a fox leads them all into his lair for a tasty meal".

So what? I am the fox... The stocks will go down, and that's all I care about...

Anyway, looks like a relief rally coming before the next plunge... When you drop a dead cat it bounces... People placing their hopes on the senate reconvening Sunday evening. But expect nothing out of it...

To make a long story short, the financials are like the middle-men in the economy, they receive money from central banks and that all trickles down to average person, be it through banks, lending or stocks, so if they start losing money the whole system collapses and groups like the federal reserve and their supporters think they can keep them running just by simply printing more money which isn't possible because aside from money management etc. these guys really don't do anything. They're going to have an automatic increase in taxes next year but that isn't going to solve anything either because these guys don't actually have any real money that the other countries recognise so in the end the U.S Dollar will probably collapse.

Oh and believe me, we've been here before you get the people in denial come along and saying we're all talking bullshit, instead of arguing about whether it's a recession or not we're going to be arguing about whether the whole economy will collapse until the bitter end.

https://www.youtube.com/watch?v=Z0YTY5TWtmU

Down BOA cRash and BURN!

Anyway to use BTC for puts options? Wont this affect the other big banks the same way?

https://i.imgur.com/YgQCe.png

 :D :D :D

Short 1000 BAC?  8)

The more interesting question is what impact will the "Fiscal Cliff" politically manufactured fiscal crisis have on the BTC / USD rate. Even if the Biden-McConnell deal passes the US House of Representatives the US still has to deal with the debt ceiling and spending cuts. The last time the US went through this manufactured fiscal crisis was in April to August of 2011 and well all know what happened to the BTC / USD rate during that period of time. http://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis (http://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis)

My take is that they will eventually muddle through this mess with some sort of deal that solves little and pushes the hard political choices into the future. In the meantime there will be a lot of uncertainty regarding the US economy while these politicians play their little games. I see a significant risk of a BTC buying panic similar to that of the spring of 2011, and consequently  I would not want to be caught short BTC while this unravels.

over the next few months?

I would say two months as the US has about two months before a default if they do not raise the debt ceiling. Furthermore the spending cuts are only blocked for two months in the Biden-McConnell deal. So on this level alone were are back to April of 2011 at best. and all of this is assuming the Biden-McConnell deal passes the US House of Representatives.

Bitcoin is still minuscule in the whole scheme of things and, it would only take a minuscule amount of the hot money in the markets to find its way into Bitcoin in order to trigger a buying panic similar to the one in 2011. So I see the risk for a BTC short to be very high at this time.

Where can one learn the background knowledge behind the things discussed in this thread?

I wish I knew what was going on.

Here is a good starting point http://en.wikipedia.org/wiki/United_States_fiscal_cliff (http://en.wikipedia.org/wiki/United_States_fiscal_cliff) in addition to http://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis (http://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis)

and if you're totally unfamiliar with us and the crisis here's a short documentary from that debt ceiling crisis of 2011: http://www.youtube.com/watch?v=LL99b7_golQ

Well the Biden-McConnell deal passed the US House of Representatives so now the real fun begins over the next two months with the debt ceiling and spending cuts.

Here's an insanely long documentary about all the history etc. behind the idea of money.

https://www.youtube.com/watch?v=HfpO-WBz_mw

My suggestion: start by considering what the state, or government is. Can it be viewed as some entiy, like a company, but with some special treats (tax power, control over the money system). At least around here, folks believe that when the state is rich, they are rich.

Then, search the net for what the market can do, and the meaning of sound money.

I could say more, but this will get you hooked.

10 contracts gives you the OPTION to sell 1,000 shares of stock, not 1,000 options.  I'm sure it was a typo but just to clarify for those unfamiliar.  Also, you should probably disclose that your 85% gain will be wiped out by your 100% loss on this position come next Friday.  There is no free lunch people.

Yeah... my trade is pretty much sour at this point. It happens. That's why I only risk small amounts on these highly risky plays in weeklies, and I speculate with "bundles" of options on various securities. That way if I take a 100% loss on a trade like this, which looks like a possibility, I just write it off and charge it to the game.

Anyhow... We didn't "solve" the Fiscal Cliff, we just pushed it back several weeks and created a BIGGER problem. But markets aren't always rational. This big rally is just a happy-go-lucky reaction to the sense of impending doom being put off a few weeks. It will top out, in which case I'll be ready with an even better trade and we will probably get some extreme volatility at some point in the next 2 months. Playing options on VXX will then become quite attractive.

Might have been nice if you would have shared with people your thoughts that there was nothing definite about your "predictions" a bit earlier.  Clearly you went into this knowing that "it happens", and that you "just write it off and charge it to the game", but you didn't say anything about that when you were telling everyone that "The stocks will go down", and "banks are going to get pounded".

Perhaps a little more caution and a willingness to consider the possibility of a downside would add some perspective to your opinions about the directions of various markets.

there will probably a significant crash this year

short term is harder to predict

True... but I made all of my statements on the basis of "IF x, then y". Had we not had the postponement of the Fiscal Cliff and "fell off" it certainly would've caused chaos in the markets and the "predictions" I made would've panned out almost instantly. And there's still a very high likelihood that it will end up happening, just not right away...the date has been pushed back.


Well, that's why I often trade options, as in this case. I knew my downside from the start: a couple hundred bucks gone if I lost a full 100%. Anytime I trade weeklies I don't put in more than I can afford to burn in full.


I agree. We didn't "avert" anything, just changed the date. And what the market isn't considering yet is that if we do get the "grand bargain" everyone is hoping for that means huge tax increases and other changes which will result in a net loss to economic activity. So no matter which way it goes it's bad news for the economy.

Risk is definitely to the downside and the market, in general, feels very toppy. But it's times like these I love to trade. As soon as we start to break down I'm going to be there on the short side again, as I have been in every market crisis... :-)

I saw a lot of definitive statements from you, but I don't think I saw a single conditional statement.  Please point out for me ANYWHERE in this conversation where you used the word "If".  Here is what I saw:

suggestion: "here is one possible move"
suggestion: "we could be going off the Fiscal Cliff"
suggestion: "the banks may get pounded"
suggestion: "consider the possibility of buying the weekly JAN1 13 11 puts"
suggestion: "That could give you a chance at"
suggestion: "The Fiscal Cliff might have a direct, painful impact"
suggestion: "Either outcome has potential to be a big, fat FAIL"
suggestion: The entire system could end up screwed"
suggestion: "we seem to be in WAY over our heads"
suggestion: "the US will eventually have to pay the piper"
suggestion: "equity markets might get slammed"
suggestion: "we have a significant risk of a possible recession"
suggestion: "The very basis of bank revenues could come under fire"
suggestion: "The stocks might go down"
suggestion: "But I personally expect nothing out of it"

No, I understand your position I just think like DannyHamilton, it may have attracted the inexperienced investor with the lure of big gains.  Options are complex for the average investor and due to their leverage, you can make fantastic gains but that pendulum also swings in the other direction.  I'm not knocking you for the bad call, it happens, I just wanted to throw out some disclaimers.

As for the "Cliff" I do agree with you, the can has just been kicked further down the road.  However, I've also learned two frequently used sayings through my career, "the market can stay irrational longer than you can stay solvent" and "don't fight the Fed."  The problem with options is you not only have to be right about the direction of the stock, you also have to be dead on about the timing.  That's the tough part.  BAC could plummet on the 14th but by then your options are already expired.  Options certainly serve a purpose, and I use them often, but people also need to be cautious and aware of the downsides.   

Danny, why exactly do you have a problem with what I do with my own money in a personal brokerage account?  ???

The outcome I expected was Congress failing to do anything and going off the cliff... so every statement I made I was talking about what was going to happen IF we did go off the Fiscal Cliff, as I expected. I think you know this, but choose anyway to commit an act of contextomy?

We didn't go "off the cliff", though we came very close and are still in danger of it. So the market rallied in my face. I'm a big boy and I accept my loss. That's how trading works.

I can't control what other people do with their money. I just talked about what I was doing with mine and why I thought it was a good trade. If an inexperienced investor tried to follow me into a trade like that then I feel sorry for them but they should've read the standard options disclosure packet from their broker and did their homework. Inexperienced investors shouldn't be toying around with options, and no one should make a trade based on what I (or anyone else...be it Jim Cramer or David Einhorn) says. :)


You're absolutely right. I'm actually eyeing this big gap up in S&P 500 futures from 1424 to 1441... gaps in futures prices tend to almost always get filled back in quickly. So let's keep an eye on that. Definitely expecting some volatility sometime soon, but it's too early for me to get back in just yet.

Very true, i bought a lot of Apple september 660$ puts in late august. Should have paid the extra premiums for october or "doubled down" in september, but didn't.

I don't care what you do with your money in your account.  Get rich, go broke, doesn't matter to me.  My issue is with someone creating a post on a public forum telling others what they should do, while hyping up the idea as a sure thing, and avoiding any suggestion that it could go sour.

The outcome you declared would happen is going off the cliff.  Every statement you made was talking about what was going to happen WHEN (not if) we went off the cliff on January 1.

Furthermore, when I suggested that going off the cliff wasn't necessarily a bad thing, you claimed that "Either outcome is a big, fat FAIL" creating an impression that your advice was good regardless of what happened with the Fiscal Cliff, demonstrating further that your statements weren't based on "IF we did go off the Fiscal Cliff".

As I said earlier, perhaps a little more caution and a willingness to consider the possibility of a downside would add some perspective to your opinions about the directions of various markets.  If you are going to say something "will happen", be sure that it "will happen", otherwise you're better off saying that it "might happen".

Note, if you were paying attention you'd see there was no "contextomy".  In every instance you'll find that I offered a suggestion on an improvement to what you said.  Plug my suggestions back into your original statements (in their original context) and you'll find that they all fit very well with the context and offer a more realistic statement of the situation.  Furthermore, I included the link back to the original post with every single quote so anyone can see the complete context if they care to.  I only shortened the quotes because there were so darned many of them and it would have been a mess for others to read through if I hadn't.

Nothing is a "sure thing"... I think we all know better than that. You're essentially scolding me for serving coffee without a sticker saying "Hot coffee can burn you".


I'm not selling anyone investment advice so I don't feel like I need to provide a legal disclaimer to share my opinions on the market and describe how to speculate... There's a reason it's called speculation, and why I said "this is how you speculate"... I did not say "this is how you win every time, guaranteed, so do this and you can never lose"... I remember learning in the 3rd grade that the stock market had risks...


I did say either outcome is a fail, and it is... the outcome which ultimately came to be was yet another failure of government. I hope you don't think they "saved" America by moving the date back... I also did not say that the trade was going to work no matter what...


I believe readers are a bit more intelligent than that... I don't see why we should argue about what might happen if the dumbest/most naive person possible read my thread and decided to use it as some form of "absolute" investment advice. If such a person is among us I hope they don't have a brokerage account because it won't be long before they find one of those penny stock websites...  :-\

Which, in America, can make you liable for millions of dollars in damages.


In spite of my interjection, I completely agree that DannyHamilton is off base here.  Unfortunately, he seems to hold the position that is held by the majority of nanny-state dependent Americans who want to blame others when things they do go wrong.

Really?

Flies are flocking to this dead horse... I'm putting down the baseball bat.  :D

No, seriously, let's just stop guys lol...

bottom line is this is the Speculation Forum, aka, Wild West.

we're all guilty of saying "this is going to happen" or "that is going to happen".

let it rest.

Agreed.  I've made my point.  You've made yours. Neither of us are going to see it the way the other does.  The information is here for anyone else to make their own decisions on the matter in the future.  It's been an interesting conversation if nothing else.

I agree. And everyone should already be aware that speculation is inherently dangerous and not for the feint of heart. If you want some clear-cut advice on making money speculating, here it is:

• Don't put all your eggs in one basket
• Don't think that if you lose 10 times in a row the odds of winning are higher next time -- that's the gambler's fallacy
• Manage your risk by choosing an appropriate R-factor (max acceptable loss per trade); I suggest 3-5%
• Never assume something that worked in the past will necessarily work again (past performance not indicative of future gains)

Don't think your point was totally lost on me. It wasn't. Next time I write something which might be taken as trading/investment advice I'll be a bit more selective in wording. But here in the speculator's forums I hope people realize it's dangerous to "chase" after other traders.