Using Veritas to Construct the "Per…

29-04-2017 Hits:49184 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

Read more

The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:49522 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

Read more

What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:48840 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

Read more

Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:50711 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

Read more

This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:50137 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

Read more

What is the Value Proposition For Verita…

01-04-2017 Hits:52705 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

Read more

This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:33729 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

Read more

Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:51361 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

Read more

Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:51249 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

Read more

The Country's First Newly Elected Lame D…

27-03-2017 Hits:51559 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

Read more

Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:54004 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

Read more

The Transformation of Television in Amer…

21-03-2017 Hits:53018 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

Read more

The second quarter + has been a hard time for fundamental investors. The market has literally disengaged itself from all fundamentals (and apparently even technicals). Although I clearly anticipated a strong bear market rally in March, the last 4 months or so have been ridiculous, bringing to mind all sorts of market manipulation theories (and some not so theoretical explanations).

I have decided to supplement both my proprietary trading regimen and consequently the research and opinion offered via subscription, since this site is basically a digital diary of my investment opinion and actions. Please keep in mind that this site's contents and offerings are NOT investment advice and should not be considered as such. With that in mind, I am going to post some empirically derived, direction neutral strategies that I either have used or plan on using, wrapped around the forensic and fundamental research. This is a lot of work, and goes considerably beyond the scope that I planned to offer via subscription, but these are very difficult times from an investment perspective and since I am putting the resources in to generate the material, I am (for the time being) going to share it with professional subscribers. I will post the initial introductions to all subscribers, though.  

To determine the best market neutral option strategy during periods of increased volatility (and by volaitility, I mean significant price movement in either direction) for the time being we have considered 3 option strategies – straddle, strangle and put ratio back spread with different strike prices. We have empirically back tested these strategies for the period January 2009 – March 2009 assuming an investor enters an option strategy on January 2, 2009 based on 3 month expiration schedule and closes out his position at the end of the trading day on expiry (in reality, this may not be the optimal method but it was simplified for backtesting purposes).  Currently, we have analyzed these strategies for the period January-March 2009 as historical volatility of S&P 500 index in 1Q09 was nearly 40% compared with long term historical volatility of approximately 20%.

The table below shows option trades for each of the three strategies at various strike prices, the initial investment, theoretical maximum gain and loss for each of the strategy, maximum and minimum payoff at any point during the three month frame under analysis (Jan-March 2009) and payoff at expiry.

 

 

 

ATM Long Straddle

OTM Call Long Straddle

ITM Call Long Straddle

ATM Long Strangle

OTM Long Strangle

ITM Long Strangle

Zero cost Put ratio back spread

Net credit Put ratio backspread

Net debit Put ratio backspread

Ratio

             

1.48 : 1

1.30 : 1

1.75 : 1

 

                 

 

 

                 

 

Underlying (Jan 02)

 

931.8

931.8

931.8

931.8

931.8

931.8

931.8

931.8

931.8

 

                 

 

Long Put Strike price

 

930.0

950.0

920.0

930.0

900.0

970.0

925.0

925.0

925.0

Long Call Price Price

 

930.0

950.0

920.0

930.0

1,000.0

900.0

na

na

na

 

                 

 

Long put value

 

27.8

37.7

23.5

27.6

16.1

49.3

25.4

25.4

25.4

Long call value

 

40.9

31.1

46.5

40.6

13.8

58.8

na

na

na

 

                 

 

Short Put Strike price

             

950.0

950.0

950.0

Short put value

             

37.6

37.6

37.6

 

                 

 

Breakeven point above

 

998.7

1,018.8

990.0

998.3

1,030.0

1,008.1

955.0

949.4

n/a

 

 

7.2%

9.3%

6.2%

7.1%

10.5%

8.2%

2.5%

1.9%

 

 

                 

 

Breakeven point below

 

861.3

881.2

850.0

861.7

870.0

861.9

872.7

856.7

882.4

 

 

-7.6%

-5.4%

-8.8%

-7.5%

-6.6%

-7.5%

-6.3%

-8.1%

-5.3%

 

                 

 

Theoretical maximum gain

 

Unlimited

Unlimited

Unlimited

Unlimited

Unlimited

Unlimited

Unlimited

Unlimited

Unlimited

Theoretical Maximum loss

 

(6,870)

(6,881)

(7,001)

(6,825)

(2,997)

(10,809)

(2,500)

(2,048)

(3,192)

 

                 

 

Maximum profit during the period

 

18,316

20,301

17,187

18,361

19,194

18,370

9,300

5,362

15,328

Maximum loss during the period

 

(417)

(221)

(1,075)

(373)

(150)

(251)

(54)

(23)

(102)

Payoff at expiration (March 20, 09)

 

9,276

11,265

8,145

9,321

10,149

9,337

4,976

2,646

8,543

 

                 

 

Initial Investment

 

(6,870)

(6,881)

(7,001)

(6,825)

(2,997)

(10,809)

0

452

(692)

 

We shall extend the analysis for other strategies and extend the time horizon (staring October 2007, or, 3Q-07) in our subsequent subscription reports.