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An ETF that shorts the yen? ProShares Ultra Short Yen ETF (YCS-N) will do this. This is leveraged 2-for-1. Japan is taking the quantitative easing that is going on in the US and putting it on steroids. He thinks Japan has a lot of fundamental problems. They don’t have a lot of immigration and the population is aging. Demographics is making it extremely difficult for them to get out of the disinflationary environment. In many of the industrialized countries, including Canada and the US, we have immigration to help support some of that. This is a short-term ETF and you shouldn’t be holding it for a long-term, use it as a trade.
In the event of Keystone getting approved or rejected, is it a worthwhile strategy to take a straddle position 9 months down the road? A straddle involves buying a Call Option and you will make money if the stock goes up. This also involves buying a Put Option, which will make money if the stock goes down. When you are buying both of these, you don’t care which direction the stock goes. You simply believe that it will go a greater distance than the cost of both of the options. 9 months out, you add the price of the Call and the Put to the strike price that you are willing to buy or sell the stock. That will be the trading range implied by the options. If you think the stock will reach either end of that range, based on the outcome of Keystone, then by all means, do the straddle. Your maximum risk is that it closes exactly at the midpoint, in which case both the Call and the Put will expire worthless. Chances of this happening are very small.
Sold a Feb $65 Put and collected $2 in premium. Wants to reinvest the $2 in buying an upside Call with the same Feb expiry. What price would you recommend? With the $65 Put, the caller has taken on an obligation to buy the stock at $65. The stock is above that price, so he won’t have to buy, because no one is going to make him buy it at a price higher than what they can sell it at in the market. To leverage the $2, he would probably buy an $80 Feb Call.
A 3 time leveraged ETF has got an enormous cost borne just to keep rebalancing the portfolio every night. If you are going to trade these, they are a 1, 2 or 3 day trade. Why not just buy a Call option on the index or a couple of Call option on a couple of gold miners that you like. It’s the same leverage and at least you have limited risks.
The amount of money sitting in the banking system in the US today opens up a lot of potential. US banks are probably some of the strongest in the world because they have had so much money pumped into them. He likes the US banks and if he is going to be in the US economy, that is the safest place to be. The problem they are going to have is that if the regulations are kept the way they are, lending will be slowed down, which means there will be 2%-2.5% GDP nominal growth. That is not going to happen, and eventually US banks are going to take off. He prefers just buying Bank of America (BAC-N) stock.
(A Top Pick Oct 29/12. Up 26.32%.) Bought April $80 Calls at $4.75. This is a strong bank and is going to do really well. He would just hang onto these. You have until January 2015 so there is lots of time. He expects the stock will be over $100, which would give you a double on the original position.
If you believe that the European union has started to come out of their problems, this is certainly a good ETF to play. This holds the big mega-companies in Europe. As an alternative, you could look at a broader one such as iShares MSCI EAFE (EFA-N) which covers Europe, Australia and the Far East.
Your opinion of the Iron Condor Option strategy? To reverse the Straddle (see Past Picks) instead of buying a Call and a Put, you sell a Call and Put. Rather than saying that the underlying security is going to breach either end of the trading range, it is probably going to stay within that trading range. To do that, you sell a Call above where the stock is trading now and you sell a Put below where the stock is trading now and that becomes your trading channel. The risk is if the stock pops or drops. If it pops through the top you have unlimited risk. An Iron Condor is where you buy another Call further up and another Put further down, which is hedging your position. If you can get the 4 trades on at a reasonable commission, fine but this can eat you alive with costs.
Instead of buying a Straddle could I just as well Short the stock and buy a Call or, if the stock is paying a dividend, Buy the stock and Buy a Put? This is not the same strategy. A long Call and a long Put is simply a non-directional trade. If I’m shorting a stock and buying a Call, I’m taking a short bet and hedging my risks. If I go long a stock and Buy a Put to protect myself, I’m actually bullish. A Straddle is not a bullish trade, it is not a directional trade at all.
BMO Canadian Dividend ETF (ZDV-T) or iShares 1-5 Yr Ladder Corp Bond ETF (CBO-T) for income, not so much increase, but also for a big downturn? He would go half and half. However this one is not a utility index, but the largest Canadian companies that are paying dividends and have a tendency to grow. This is good and a defensive position on the Canadian markets.
