3SOF

David, I agree with the above posters, I know each morning I look at your instructions email and I will read the updates when I have time.  Sometimes that isn't until the weekend!  I consider this a positive development in my trading development and in the development of 3SOF as I don't feel that i have to monitor the stock every day and watch every move.  Now, I can get your update, if I need to sell I have the information immediately, but if not I usually end up reading the updates every few days or on the weekends.  Keep up the great work, we all appreciate it!

I have to agree with realcoolhead, while I appreciate the sharing of ideas I think that this option strategy has not been presented fairly.  To say that you could make 2000 percent in a year is misleading because if any 1 of your trades fails you lose everything under the same assumptions (compounding the gains)  30% times 11 months times one month of -100% = -100% for the year. 

Also, the risk/reward of $1800 gain versus $3200 loss represents the fact that when you executed the trade when FSLR was over $210 the market assigned a 36% chance it would finish under 200 (or 195, I'm not going to take the time to figure that out as i am making a general point here) and a 64% chance that your trade will be over that point.  Most of the time you win.  But when you lose, you lose 100%.  And with FSLR at 202 right now I could execute the same 200/195 trade for a credit of about $2.3 which means  there is now a 46% chance of failure and a 54% chance of success.   That would be an 85% return in only 4 1/2 weeks.  But almost as likely is a -100 percent return. 

Just my 2 cents and I am the first to admit I am no expert.   I for one appreciate the ideas and generated and the discussions that follow on this site.  I would love for Leaira to continue to post trades so we can follow and see if incorporating stops using trendlines can mitigate the potential losses.  Keep up the good work!

Quote from: realcoolhead on November 20, 2007, 09:07:20 PM
I have to give some words to keep it balanced. Yes, it may have worked for you; Yes, your bull put spread in FSLR may work out again. But to say that you "already made 38%" just after you put on the spread is VERY MISLEADING!

The assumption is that FSLR does not drop below 200 when it expires, and that is a big assupmtion. How can you say that you just made "38% return for 5 weeks of trading"? In fact, if FSLR drops below $195, you will LOSE $360 per contract.

NO OPTION STRATEGY WORKS ALL THE TIME, pure and simple. I may not be a big option trader, but I know all the theories behind it.

Quote from: Leaira on November 19, 2007, 03:55:52 PM
A better stock in this sector is FSLR.  I just did a 200/195 bull put spread for $1.40 credit, or a 38% return for 5 weeks of trading!  I doubt the stock will go below 200 again.  It's up today despite a weak market.

I too use IB and opened an account at TDAmeritrade to handle these situations.  It is very frustrating to say the least.  I love the $1 and $2 trades but they seem to have a lot of problems finding shares to short and allowing purchases of OTC stocks.  At least IB started allowing CHME (Probably thanks to Dracull)!

Nevermind, earnings are out!

Jakks Pacific 3rd-quarter net up 17% on 7.6% higher sales:

JAKK 26.55, -0.19, -0.7%) the Malibu, Calif., maker of toys and consumer products, reported third-quarter earnings rose 17% on 7.6% higher sales. Net income reached $47.3 million, or $1.45 a share, from $40.5 million, or $1.28, in the year-earlier period. Sales rose to $318.4 million from $295.8 million. A survey of analysts by Thomson Financial produced a consensus estimate of $1.30 of profit on sales of $301 million for the quarter. The company affirmed that it would at least match its 2007 estimate of earnings of $2.39 a share on sales of $800 million. Thomson's survey is looking for earnings of $2.38 and sales of $802 million

I wonder if JAKK will still be able to release earnings tomorrow as their Corporate Headquarters is on the PCH in Malibu and the fires down there are pretty bad... http://www.cnn.com/2007/US/10/21/wildfire.ca/index.html

David, what I think could really shoot up the solar stocks (well the undervalued ones since the high fliers already have rich valuations) is that the US Congress is considering removing the cap on the federal income tax credit currently available for residential solar installations. 

Currently, a 30% tax credit, up to $2,000, is available for installing a system.  This is after all state rebates (I am thinking of putting in a solar PV system and the system itself costs $30,000, California will rebate me $7,000 and the Federal tax credit makes the system cost for me $21,000).  What could make this sector explode and make solar available to so many more would be if the cap were eliminated.  The same system would then cost me the same $23,000 before federal tax credits of $6900  making my cost $16,100.  This is for an average sized system, a smaller system could be had for closer to $10,000-$12,000, and a really large system would benefit even more as you would get massive tax credits for your system.  With the immediate increase in property value, it becomes fairly obvious that if you can have 50% of your system paid for by the government you have found great deal.  Of course the bill may pass and remove any credit to residential projects effectively killing solar growth among US households.  Anyways, here is an article from a solar lobbying group discussing the bill in Congress.  They will probably decide this thing before the end of the year.  I am hoping they remove the tax credit cap so I can get a system!
http://www.solar-nation.org/

Thanks David, you would have already been up 10% on this and I for one appreciate the integrity you have by eliminating it from the portfolio and from your yearly return calculation.  Very nice move, and much appreciated.  Great stock pick too, by the way!

I use IB too and cannot short - their message says that they are looking for shares.  I'll give them a call if I don't have my order filled in an hour or so.

Yes, take care of yourself first, one of the things you have really helped a lot of us with is not worrying so much about the day to day markets volatility - the stocks you are holding don't need to be watched and monitored every day because they are strong fundamentally so this allows you to take a break when needed to stay strong.  You're doing a great job and we appreciate it!

You can find the vix at yahoo: enter ticker symbol ^vix.  It is a delayed quote but will tell you what you need to know.  You can also see historical charts.  Anyways, here it is, currently at 34.50:

http://finance.yahoo.com/q/bc?s=%5EVIX&t=1y

David, applying an exit analysis is a fantastic idea.  It's said that a professional trader thinks as much about his exit strategy as his entry.  I love the direction 3SOF is taking.  Keep it up and don't forget us if you ever start your own fund!

Feels odd to be up on a day when the markets are getting crushed again.  I still have my old 3SOF main picks in my watch list and  .  SYX down 10% BFLY down 11%, and on and on.  Feels like 2000 all over again

I would prefer to see the portfolios develop a long/short percentage target, similar to the invested/cash targets that brokerages have.  For example, during a bull market we may be 90% long and 10% short meaning we look for 9 stocks that you like long and 1 stock that is likely to drop. 

Maybe now we should be 30/70 where we only take the best of the longs and are more willing to short weak stocks.  I don't like the all or nothing approach, but hey, I'm here to learn and maybe my thinking needs adjusting.  David has a great track record so I will give him the benefit of the doubt!

Quote from: tireslinger on February 23, 2007, 08:27:26 PM
Hey everybody!!! What would have CPNE have earned in net income if not for the expense of retiring that 5 million in debt?  Now thats worth talking about!!!!!

Quote from: David Randolph
Absolutely tireslinger, you're right. Without paying that $4.31 M in long term debt, CPNE's 2006 net income would have been not $8.7 M but $13 M, and then the trailing earnings multiple would be 10.6. Now there's no more long term debt, so just by this effect probably the 2007 number will be a lot higher than the 2006 net income.

No, paying off long term debt does not reduce net income, it is strictly a balance sheet item, much as if you issue long term debt for cash flow purposes you do not report the proceeds as net income.  They will benefit from not having any more interest expense as a result of this, so net income will be higher in the future as interest expense decreases net income, but the payment of the debt itself did not have any impact on net income. 

David, I would like to request SGTL.

SGTL is a $135 million cap stock that is a potential longer term turnaround play.  I would love to see what you think of it, used to be quite profitable, losing money now, but may swing back to profitability in a couple of years.  Sales had grown 10 fold over over the past few years.  Dilution over the past couple of years is minimal.  Now selling for less than book value, the current ratio looks great, the long term stochastics are rising, and the macd is positive showing a negative divergence with the price.  All I need is your analysis to know if it is worth while!  Is this a potential gem or a piece of garbage that will keep going lower?