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Szelhamos Rules

ProShares UltraShort Silver

Weekend Update

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BuffettvilleThis has been a busy week, but not so much for me.

It figures that on the week that the blog begins its apperance as an offerng by Amazon Kindle Subscription services that I would miss two days worth of blogging.

But only in America can you choose to pay for a subscription service to have a blog delivered directly to your Kindle when you could just as easily opt to not read the blog online.

And for free.

What really doesn't figure is that there are actual subscribers.

First of all, special thanks to Tony Vahl of The Original Daily Skew for authoring a guest blog this week. I had enough foresight to arrange for that, but not enough to consider the fact that I might be somewhat under the weather. So much so, that I barely even made trades for two days and when I did, I think they were through the lens of a Percocet fueled analyst.

As if I ever practiced any form of analysis.

This marks my first weekly update and is intended to give readers an idea of what I am considering as we enter the coming week.

Since I sell covered calls and over the past month have found myself increasingly selling puts, I expect to have assignments each week and as a result typically have cash waiting to be invested Monday morning.

As result of option assignment this week I will find myself having lost shares of Goldman Sachs and picking up shares in Freeport McMoRan, Halliburton, Chesapeake Energy and MolyCorp.

In addition, cash will be freed up by the expiration of put contract sales on British Petroleum, Transocean and Green Mountain Coffee Roasters. In all, about 20% of my portfolio will need to be replaced, but that's actually much less than I'd been faced with each Monday morning for the past month.

As long as I believe that prices for my list of "Old Reliable" stocks is too high, I'll continue looking for opportunities to sell puts, rather than picking up shares and then selling covered calls.

As word comes that there may be a settlement in the British Petroleum Guf oil spill I don't think that I will be selling puts again this week, as the expectation is for a price rise.

Following the ridiculour rumor that Green Mountain would be the next stock entering the S&P 500 its shares reversed course and closed at session highs. I doubt that rumor will come true.

If it does, I may move to North Korea.

If it doesn't, I expect another drop in shares and a good opportunitiy to sell weekly puts again.

Additionally, as volatility heads for hiistorically low levels, the expectation is for a sharp drop in the market, but expectations and reality often have a poor correlation. With volatility being low, options premiums aren't as nice as I'd like, so I've migrated a bit more toward momentum stiocks, that carry the kind of risk that I really don't like, but just like the Percocets, it's easy to get addicted to option premiums.

I am thinking of two Double Dip Dividend plays this week. One in Home Depot (HD), which is on my "Old Reliables" list and the other on Cablevision (CVC), which isn't, but is riding the Jeremy Lin wave.

Home Depot goes ex-dividend on Tuesday and offers weekly options, while Cablevision is ex-dividend on Wednesday and only offers monthly options. Remember, that to capture the dividend, you have to purchase the shares the day before the ex-dividend date.

I'm thinking of the possibility of adding Mosaic back to the portfolio. I had shares assigned a week ago at $57.50 and the shares closed right near that price on Friday. I usually expect a 1% ROI onthe weekly near the money or In the Money call contract.

I'm also looking at repurchasing shares of Boeing (BA) and possibly picking up shares of the energy ETF (XLE)

All of these great ideas are subject to becoming lousy ideas once the market opens.

In the meantime, I'm hopeful that the past couple of days of drops in precious metals continues, as I am inappropriately invested in that concept, still holding large positions in the ProShares UltraSHort Silver ETF, much of which is not hedged this month

If only I could figure out a way to have those shares go up in value along the the rest of the market I'd be in my own version of Buffettville.

 



 

 

Check out Recent PortfolioTransactions and Transaction Performance 

 

Recent Trades Security Type Action Type
March 3, 2012 BP Puts Expired Weekly
March 3, 2012 FCX Calls Expired Weekly
March 3, 2012 FCX Calls Expired Weekly
March 3, 2012 GMCR Puts Expired Weekly
March 3, 2012 HAL Calls Expired Weekly
March 3, 2012 MS Calls Expired Weekly
March 3, 2012 RIG Puts Expired Crumbs
March 3, 2012 RIMM Call Expired Weekly
March 3, 2012 CHK Puts Assigned Weekly
March 3, 2012 GS Calls Assigned Weekly
March 3, 2012 HAL Puts Assigned Crumbs
March 3, 2012 FCX Puts Assigned Weekly
March 2, 2012 MCP Call STO Weekly
March 2, 2012 MS Call STO Weekly
March 2, 2012 GMCR Call STO Weekly
March 1, 2012 RIG Put STO Crumbs
March 1, 2012 HAL Put STO Crumbs
March 1, 2012 FMCN Put STO Monthly
March 1, 2012 KSS * Call STO Monthly
March 1, 2012 KSS Stock Buy
February 29, 2012 HAL Call STO * Weekly
February 29, 2012 HAL Stock Buy
February 29, 2012 HAL Put STO Weekly
February 29, 2012 AFL Call STO Monthly
February 29, 2012 RIO Call STO Monthly
       




  



 

 

























Hello, My Name is Bernanke


The CNBC morning show, Squawk on the Street, has a daily Tweet prompt asking viewers for their opinion on a wide range of topics.

Most of the time it's an attempt to inject a little bit of humor into the news of the day.

Today's thought surrounded yet another appearance by Ben Bernanke, this time in front of an august collection of elected officials far more genteel than those Philestine Congressman.

Senators. They're the higher and more refined form of elected official. They are usually less likely to be involved in petty scandals or felonies. They very often have better hairthan their counterparts, as well.

What if you were Chairman of the Federal Reserve, Ben Bernanke, what parting words would you like to leave with the Senate committee that you were appearing in front of today?

You just know that he can't always have the highest regard for the questions coming his way and probably even less regard for the lengthy and rambling preambles to each question.

I'm sure there's a cottage industry somewhere that has Cambodian laborers painting thought bubbles over Bernanke's image as some clever humorist then finds the words to make the photo chuckle provoking.

Since I have lots of time on my hands, especially given the boring nature of the markets for the first two days of this week, I responded to the prompt, as I do a couple of times each week and ultimately had my Tweet glow in its 3 seconds of fame.

I guess they won't accept two "winners" on the same day, because I sent a second one while listening to the testimony, questioning and answering:

My Name is Bernanke"Hello, my name is Bernanke. How do you thank me?" I think was actually better than the "winning" submission.

I think that most everything in life can have a parallel drawn to something Johnny Cash sang.

Maybe they just have something against homages to Johnny Cash, who has also inspired my investing philosophy.

Maybe it was the alcohol, maybe the drugs, not likely the adultery, but there's certainly an anti-Cash agenda.

Bernanke himself seems to have an anti-cash agenda, at least as it comes to personal savings.

Bernanke is such a popular whipping boy. There's absolutely no chance of losing political capital by hurling missives at him, as Bernanke has no constituency. He may also not have any pain receptive mechanisms.

He's the city manager in a world of mayors.

The one thing that I've learned over the past two weeks is that when Bernanke speaks, it's time to short the shorts.

At least when it comes to silver.

The past couple of days have been very unusual ones for me.

I feel a bit like RIchard Pryor's character in the film "Brewster's Millions."

It's not always that easy spending money, especially if there are rules attached.

My rules are simple. Try not to lose money that can't be recovered within my lifetime and if paying for a hooker or drugs, never use credit or checks.

For the past two days the money has been burning a hole in my pocket as I've been patiently sitting and awaiting a short term breakdown to start putting the proceeds from all of those past week assignments to work.

But lately, it doesn't matter whether the news is good or bad. Even the lower openings of the past few days are simply preludes to their evaporation and a slow melt upward.

It's not quite clear to me how December 31st marked such a difference in overall market repsonse and volatility, but you can't miss the obvious dfifference in the sense of fear and urgency in the markets.

There is none.

For the third time in the past couple of weeks as the good Chairman spoke, gold and silver, which had been heading downward to offset their recent unbridled rises, abruptly reversed their course.

Holding the ProShares UltraSHort SIlver ETF that hasn't been a good thing. Each time I thought that there was going to be a chance for the price of the underlying ore to give up some of its recent gains there was Bernanke.

Whatever thoughts I may have had of finally selling calls on the remaining unhedged shares also evaporated.

At some point you learn. I think that's what they mean when they say "Don't fight the Fed."

This time, I decided to sell puts on the current month. Short the shorts.

I mentioned that the past couple of days have been unusual ones for me, but selling puts isn't entirely unusual. I even have a short chapter (no pun inteneded) in the Option to Profit book on the occasional use of that strategy.

But there was more.

Today marked the second day that I was really hard pressed to find anything to buy. Prices just seemed too high, and unfortunately that also applied to the shares of the stocks that I had recently been assigned.

That's a problem since I justify my staying at home by buying stocks and then selling calls to generate income.

Income equals money for things like mortagage payments, food and the like.

What was unusual was that I strayed from my script of "Old Reliables." I rarely wing it, only on special occasions letting a new stock enter the portfolio.

It's not that I have high standards, it's just that I'm not very capable of knowing who to let in or when, so instead, I just try to keep the gate closed.

Doing so is entirely consistent with my overall philosophy of maintaining an anti-social personna.

Yesterday I let in MolyCorp. Not only wasn't it an Old Reliable, but it's also a lot more speculative of an invetsment than I ordinarily prefer.

The hope by the close on Monday was that Tuesday would be different. Maybe Tuesday would see the fall in prices that was justified, to me at least.

Well, that didn't happen, despite the fact that it looked promising for a while, with the Dow down as much as about 50 points and silver actually down nicely, as well.

And then along came Bernanke and it all turned around.

With the heat building up in that pocket of mine something had to give.

Turned out that it was my principles.

I purchased shares of Research in Motion and Boeing. The last time I held RIMM, its shares were assigned away from me at $62.50, right before its one way trip to the abyss.

I thanked anyone in the vicinity for my good fortune in not getting stuck with RIMM and swore that I'd never buy it back.

But desperate times cause a man to do desperate things.

And Boeing? Well, I guess I could justify its purchase as part of a Double Dip Dividend strategy as it goes ex-dividend tomorrow, but the news that there may be a problem with the composite skins of its delayed Dream Liner would probably cause someone with common sense to look elsewhere for a stock prurchase.

Not me, I needed and craved the cash.

Then I replaced assigned shares of British Petroleum and Morgan Stanley and added more Mosaic shares.

All of that made a dent, but not much. Yet the prices were so unwelcoming elsewhere.

But that's where selling puts came into play.

I eventually sold puts on the ProShares UltraShort Silver and Chesepeake Energy, as I tried to further rationalize that I wouldn't mind owning shares if they were assigned at their strike prices of $10 and $22, respectively.

I'll get back to you on that.

I've learned that my principles are wavering and my faith can be easily shaken.

After the past two days, I'm not even certain that I know who I am.

In the meantime, I least I can gain some sense of security knowing that Ben Bernanke is a constant and predictable part of our lives and that he won't let anything bad happen to us.

Maybe those up for election wouldn't deign to thank you, but even when I see my assets withering in reposnse to your words, I know you have our back.

When it's all said and done, we'll all be the better for it and I can see my holdings as "The Portfolio in Black."

 



 

 

Check out Recent PortfolioTransactions and Transaction Performance 

 

Recent Trades Security Type Action Type
February 7, 2012 CHK Option STOP Weekly
February 7, 2012 MOS Option STO Weekly
February 7, 2012 MOS Stock Added
February 7, 2012 ZSL Option STOP Monthly
February 7, 2012 MS Option STO Weekly
February 7, 2012 MS Stock Buy
February 7, 2012 BP Option STO Weekly
February 7, 2012 BP Stock Added
February 7, 2012 BA Option STO * Weekly
February 7, 2012 BA Stock Buy
February 7, 2012 RIMM Option STO Weekly
February 7, 2012 RIMM Stock Buy
February 6, 2012 MCP Option STO Weekly
February 6, 2012 MCP Stock Buy
February 6, 2012 MOS Option STO Weekly
February 6, 2012 HAL Option STO Weekly
February 4, 2012 AXP Option Assigned Weekly
February 4, 2012 BP Option Assigned Weekly
February 4, 2012 GS Option Assigned Monthly
February 4, 2012 MS Option Assigned Weekly
February 4, 2012 XLF Option Assigned Monthly
February 4, 2012 HAL Option Expired Weekly
February 4, 2012 MOS Option Expired Weekly
February 4, 2012 V Option Assigned Weekly
February 2, 2012 GOOG Option STO Weekly
February 2, 2012 CHK Option STO Weekly
February 2, 2012 S Option STO Monthly
         
         




  



 

 









































A Test of Faith


You often hear stories about deathbed conversions or returns to faith near the moment when there's not much left to lose by professing one's faith.

So what if an unexpected profession of faith leaves your followers and fans behind in a world of even greater uncertainty?

Screw them. When you see the white light, it's every man for himself and the adoption of the Captain Schettino rules applies, whereby woman and children have to fend for themselves while the captain of the ship trips his way past those pearly gates ahead of the rest.

Who knows, there may be limited seating.

A Test of FaithMany famous and infamous people have purportedly had deathbed conversions, including Darwin and Stalin, but the reports of other such conversions may just be wishful thinking or generated for proganda purposes alone.

Based on the appearance of the term "ProShares UltraShort Silver ETF" in the word cloud that accompanies this blog you might be lead to believe that I worship at the feet of some silver idol.

Not really, but you would be right to have that suspicion, as it does seem to appear with great frequency.

By the same token, the constant "God Damn" refrain doesn't necessarily reflect belief in a diety.

I'm not particularly religious, although I don't know if I'll be one of those undergoing the end of life "seeing of the light" experience.

At the moment, there is a 24 hour "Yahrtzeit" candle burning in our household, as is the Jewish tradition to mark the anniversary of a close relative's passing. Still, nothing really religious, just adherence to tradition and maybe trying to keep my options open in case "The Big Man" chooses to exercise an option over whether those last minute attempts to enter the Kingdom will be honored.

Szelhamos, who wasn't particularly religious would probably be pleased that he's remembered. In the slight chance that such a possibility exists, then "why not?"

My sister started a Facebook page for our elementary school, a Yeshivah in The Bronx.

If you're not familiar with the term "Yeshivah," apparently based upon the remembrances of those sharing on Facebook, it is alternatively a wonderful place of learning and a wonderful place for the expression of sadistic and irrational behavior by Rabbis.

I went to grade school when corporal punishment was still permitted and even encouraged by parents.

Other than one particular Rabbi in the third grade, whom I credit for teaching me to behave myself in class, I don't really have the same kind of memories. I learned to behave because I valued not having my knuckles pounded by the edge of a wooden ruler.

My sister recently asked the group of about 100 alumni of the now defunct school a question regarding faith. She asked how they would currently describe themselves in that regard.

The response covered the gamut from atheist, to converted to orthodox.

Faith undulates, as well. Look at Bob Dylan. It can run hot or cold as the moment sees fit.

Look at me.

Even among the Amish, there's an expectation that thre will be a time to explore and to question the path set out for their lives. The ultimate expectation is that they flock will return home and forever stay on the righteous path.

Which gets me back to silver, the lesser of the precious metals.

Remember, no one of any repute staked his life and reputation on trying to turn lead into silver. The Golden Calf was gold, wasn't it?

Right now, despite the relatively small position that silver has in my portfolio, in the form of an inversely leveraged ETF. it's taken an unduly prominent position in my writing and fretting.

Silver has been like the devil or the snake in the Garden of Eden.

One of my very basic tenets has always been to avoid speculation. Nothing defines speculation like precious metals and leveraging on top of that.

Yet, Silver has also tested my other core tenet.

Avoid greed.

All throughout history the precious metals have done that to mankind.

In the case of the ProShares UltraShort Silver ETF, the rich call option premiums are snake-like enticing and have been part of a core strategy for me the past 6 months.

Just grab those premiums and sit back in the faith that silver will undulate.

But over the past two weeks my faith has been tested as silver keeps going up and up and the ETF, as result, keeps going down and down. That's in real distinction to its pattern over those previous six months when it was up and down and then up and down againa nad again.

That's a pattern that I could live with.

So while the market has been doing very well in 2012, I'm finding myself in an uncharacteristic position ever since I adopted the aggressive call option writing stratgey so beautifully described in wannabe Award winning book, Option to Profit.

That position is one that's trailing the S&P 500's performance for the past three weeks.

That will cause a crisis in faith.Scratch that. Ha caused. Make that "has caused."

As anyone who follows trends and popular opinion, you will know that once something appears on the radar screen, that tends to be the kiss of death.

In the case of precious metals, everytime a gold bar has found its way onto the front cover of TIME magazine, that spelled the end of the bull market.

Crocs? Same.

Last years' winning mutual fund sector is pretty much always this years' dog, and not in a good way.

In the case of the covered call writing strategy, the proclamation by Barrons Magazine that it was the only winning strategy may have just been the kiss of death.

The problem with getting older is that it's a bad time to lose faith, especially if you are by nature one who sees a role for faith in all aspects of life.

The difficulty comes in the fact that it's hard to put faith into something new, unless you happen to be a at death's door, in which case there's not that much time to mull over the options.

So it's very distressing to think that an aggressive covered call strategy has run its course, or is just not the right strategy for the moment.I've always understood "I want a new drug," but not "I want a new faith."

Mind you, questioning faith is not a very good thing to do while enrolled in Yeshivah or any other religious organization.

Faith requires faith.

Not questions and certainly not doubt.

As far as the covered call strategy goes, the potential for underperformance during an unbridled bull market isn't surprising. That's just the trade off that you make for accepting the options premiums. You have to give up something, especially if you;'re selling near the money options.

I get that and that can't shake my faith. Despite the fact that the premiums may be the Devil, a dalliance doesn't undermine faith. It may actually enhance it.

But still....

It is about the money and the bottom line.

In the case of the ProShares UltraShort Silver ETF the problem really hasn't been its sustained drop. Sure, its been distressing, but it hasn't been the root cause, because there have been plenty of sustained drops over the past few years and those have been weathered pretty well.

The problem has been that since the new option cycle began this past Monday its done nothing but go down and I haven't found the opportunity to hedge the positions.

The last time I owned a naked stock for more than a day or two was during circumcision and maybe during college streaking days.

How convenient. I can blame timing and circumstance for the failing and concurrently help to sustain my faith.

But in reality, it was greed that came into play.

Yesterday, before the Ben Bernanke press conference, both gold and silver were giving back some of their gains and I was getting ready to sell call options on a portion of my shares, which were all purchased at varying price points.

But greed convinced me to wait for an even greater drop in silver prices before making the hedges come to life.

Greed is the Devil. The time never came.

Greed is what destroys faith, if allowed.

The only way to fight evil is with faith and in this case, avoiding the use of margin by usury loving bastards.

Check and check.

Crisis averted.

 


 

Check out Recent PortfolioTransactions and Transaction Performance 

 

Recent Trades Security Type Action Type
January 26, 2012 FMCN Option STO Monthly
January 26, 2012 FMCN Stock Added
January 26, 2012 MS Option STO* Weekly
January 26, 2012 MS Stock Added
January 25, 2012 ZSL Option STO Monthly
January 25, 2012 AXP Option STO Weekly
January 25, 2012 ZSL Stock Added
         
         
         




  



 

 









Stunning Reversals


I've never made any secret of the fact that I don't read very much.

My daily ritual of reading DIlbert and The New York Times Obituaries was recently complemented with James Altucher's blog. I actually thought long and hard about whether to refer to it as being in "complement" to or in "supplement" of my daily activities and realized that there really wasn't a word to convey both impacts.

I've linked to it a couple of times and bored readers of this blog have clicked on that link, which has also activated a small hidden webcam near their laptops, in addition to any resident webcams you they already have.

I like my fuzzy clandestine streaming to be in 3-D.

For those who read this blog on a regular basis it doesn't come as a surprise that I don't read much. In fact, there's really not a strong body of evidence that I even read my own blog, much less proof-read it.

And forget about reading for the sake of getting my information right.

OxymoronsWhen I was younger, I was horrified to find some ham in our refrigerator since it's not Kosher, as you may be aware.

My mother, in response to my pointing this out to her, said "if it tastes good, it's Kosher."

What a great philosophy.

I use that philosophy with my supportive facts. If I believe them to be true and accurate, then they're true and accurate.

A "Kosher pig" is an example of an "oxymoron" until some moron ruined it about a decade ago with the discovery of a species of pig in some god-foresaken rainforest that might just satisfy all of the criteria necessary to be considered Kosher.

I wrote about Oxymorons a few months ago, but with an emphasis on the "moron." The thought was rekindled a few days ago reading one of Altucher's blog entries.

He was asking whether there could really be anything such as an amicable divorce.

In a world of delusion there probably exists such an entity, but then again delusion and the real world are themselves mutually exclusive.

In the real world you end up in "divorce court," which, wouldn't you know it, is itself an oxymoron. Just for fun, see if you can find all of the highlighted and hidden oxymorons in today's blog'

Today, I watched what was called by many a "stunning reversal" in the price of silver.

In fact, they were correct as silver one upped gold and not only cut its earlier steep losses, but ultimately had a nice gain at the end of the day.

One of the things that I've come to like are "tag clouds."

For someone who doesn't like to read, tag clouds are just great, unless you get bogged down by the concrete concept of tagging a cloud. Or having physical contact with an etheral concept.

Thinking too much isn't an oxymoron, it's just an impediment sometimes.

Through the tag cloud by simple virtue of font size, boldness or color, you can immediately know what's important to the author. You may not know whether it's love or hate, but at least you know about the intensity of the apathy.

In my case, the tag cloud lets you know that I have some recent passion about silver, more specifically in the prospects of silver prices doing poorly, as I own the leveraged silver ETF that appreciates in value as silver prices drop.

Before I owned the shares my interest in silver was neglible, other than as an historically important treatment for gonorrhea and vampires, as well as syphilitic vampires. You would have known that as the words silver, gonorrhea, syphilitic and vampires never appeared in the blog's tag cloud.

During the course of the day as the Dow closed up 135, at its high for the day, the ProShares UltraShort Silver ETF closed down $2 from its intra-day high. That drop represented about a 12% move, which was of course exaggerated compared to the actual movement of the underlying metal, due to the leverage.

Think of leverage as being a financial tag cloud, only in reverse. The less you put on the line, the bigger the potential risk or reward.

In that way, think of Jon Corzine as being about 13 times larger than the most leveraged ETF currently approved for trading. The difference being that the leveraged ETF is typically highly sector focused and doesn't require much in the way of thought process.

Math? Yes.

Thought?

Well as Dennis Gartman might say. Thought on and thought off.

Moron.

On the other hand, under Corzine the focus was placed on an aspect of finance for which resident expertise at MF Global Financial was missing. Yes, that's right. Your local MF Global Financial knew nothing of international currencies and swaps.

Moron.

Actually, to be totally fair, both are exceptionally intelligent morons, based on my archival research.

"Stunning reversal" doesn't really qualify as an oxymoron in the classic sense, although there are many variety of "Oxymora," but just like doing a treatise on what makes something funny is immediately not funny, so too is an encyclopedic look at Oxymora less than intellectually amusing.

No one should ever be surprised by "stunning reversals."

Have you ever been to a 25 year high school reunion? Just look at the gut of the guy that was on an athletic scholarship.

Have you ever looked at every stock chart ever?

Unlike last month and the one before that, so far during this entirely unsatisfying January options cycle, I haven't had the opportunity to benefit from the recurrent big spikes in silver prices.

In those months, just as today, the stunning reversals were predictable. What was certainly unpredictable was the inability of thr talking heads to portend the past.

And so here we are, about to enter the last trading day of 2011 and very possibly having survived the single most roller coaster year ever in trading.

True, we didn't have a "flash crash" nor did we have any memorable declines or rises, but that's only because there were so many.

And just like a roller coaster you end up exactly where you started, just feeling a bit more queasy for having been intimately involved in the sausage making process.

But man, is that sausage "damned good" or what?

 

 

 

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