Easy money


If you haven’t been keeping up, almost every other story that comes out of Bloomberg or some other finance news agency has a quip about US Dollar bashing and whenever everyone moves to the left side of the ship, I like to move to the right side of the ship knowing that people will have to move back to balance the ship unless the whole thing just rolls over.

Click on the graphic below for a sharper image.    I took a look at all the options volume for UUP which is the US Dollar Index and there is quite a huge open interest and volume on UUP options near or at-the-money on these options.   It looks like someone out there is placing HUGE bets that the US will rally sometime now or March 2010 while June shows modest interest.

UUPCY

There have been many discussions that these are large firms hedging against a drop against the dollar or inversely hedging against the collapse of other currencies.  I think the latter is more likely.  I find it much more plausible that a major currency overseas will fall apart than the US dollar would in the immediate future.     China has so much over capacity that it may not be able to do much about its currency situation.  Brazil’s currency has appreciated greatly but that is mostly predicated on the price of oil which is being artificially sustained.

There was a great article on the Houston Chronicle this Sunday from Exxon’s CEO claiming that the price of oil and demand is out of sync and I agree wholeheartedly.

A “disconnection” exists between demand for crude oil and the current price, according to Exxon Mobil Corp. Chief Executive Officer Rex Tillerson.

Oil prices aren’t reflecting demand fundamentals, just as they didn’t when crude rose to a record above $147 a barrel in July 2008, Tillerson said Friday at an energy round table in Singapore as part of the Asia-Pacific Economic Cooperation meeting.

“There is clearly, and has been in my view for some time, somewhat of a disconnection in the fundamentals of supply and demand and the current day market price, and I can’t really explain that to you,” Tillerson said.

Tillerson said the price of oil would probably be around $55 a barrel if the dollar hadn’t depreciated against the euro during the last 18 months.

“You could say oil is about $20 to $25 a barrel higher simply it’s priced in dollars and there’s a weak dollar,” he said.

Personally, I’m anticipating a huge dollar rally and a huge drop in oil prices so I went out and bought 50 contracts on UUPCY (March 2010 $24) strikes on Friday in the attempt to speculate and profit from my prediction – it is a pure gamble.     I’m usually early to the party and I hope that isn’t the case this time but we’ll see what happens.

This market volatility is great for my ETF Covered Call strategy as it’s been extremely profitable to buy long and simultaneously sell short.  I’ve made $3,000 these past few days and  with the market gyrations, it’s been exceptionally profitable to buy back those contracts on the cheap when the market turns the opposite direction.

I had a feeling that the bailout bill wasn’t going to pass after I read it Sunday night, it just didn’t have anything good in it to solve any real problems.   My guess is that the bill would have simply pushed the problem onto the next administration to deal with it.

I suspect the bill will pass later today or this week with some crazy shenanigans pulled and that may rally the market which would mean more profits to bank 😉

Good hunting.

So much money to be made in this crazy market.   I raked in $2150 yesterday with the usual buy/write etf strategy.  I just hope it doesn’t blow up in my face……check it out at ETFCoveredCalls.com

Happy hunting………

I’ve been receiving more and more credit card balance transfer offers in the mail recently and I had pretty much written off credit card arbitrage a while ago since banks had removed caps on their fees for balance transfers.

With the existing credit crunch and depositors skittish about keeping more than 100k in any FDIC bank, I’m wondering why and how banks are able to loan out so much money at low interest rates when they supposedly don’t have any money to lend out.

In any event, I’ll likely borrow 25k at 0.99% and try to turn a few grand out of it fairly quickly and boost my existing 40k arbitrage up to 60k+ to churn some quick profits and improve my cash flow this next quarter.   The fee is capped at $99 so I’m looking at paying $200 in interest and fee to hopefully churn out 2k in profits.   Not bad for a couple of months worth of work if all things go well…..

UYG is moving up on my list of favorite ETFs. The financial market has been battered by a hurricane of bad news and Uncle Ben has flown in with his helicopter to save the world. If you look at the August in-the-money strikes for UYG, you’ll find that they are trading for 10% premium which is phenomenal (click image below) in an ETF covered call play.

UYG_Aug08.png

The big question is risk as the SEC short selling rules only will be extended about 30 days max (or at least that’s the theory). If more banks have runs then UYG will completely fall apart as it is a leveraged financials ETF.

What to do….what to do!

Taking a look at the top holdings, it looks almost like a sure bet with the SEC covering most of the major players inside the ETF.

UYG_Aug08h.png

(click image)

What to do…..what to do?

The week before options expiry usually yields lower returns but $500 is $500 right?  This brings my return for April up to about $2000 for the month.  Not too shabby for clicking a mouse but I’m still desperate for a phone that can handle true HTTPS/SSL requests so I can click my phone to make money.  Any recommendations out there?

Evidently, the iPhone doesn’t support true secure web connections but maybe the next generation one will!

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As soon as option expiry ends next week, I’ll focus on making money in May.  You know what they say about May…..Sell in May and go away to keep your losses at bay or the foray will decay your profits away…..

You can learn more over at ETF Covered Calls.

Steroids and HGH aren’t just for baseball players, these handy little boosters will work wonders for your investment portfolio.   I’ve hinted in the past about a new mathematical model for the ETF-Cashinator that factors in leveraged index funds with covered call writing to boost returns to superior levels and as always, I put my money where my mouth (blog) is and take action.

Yesterday, I banked about $2700 on top of the $900 I made last week but I’m moving toward using my new leveraged model to rake in more profits as I described here.   This essentially goes back to this original mind blowing article written by Jason Kelly here.  I’m convinced that this model can work with pure options plays as well but that’s for another blog and another time.

So how does this whole thing work?

We all know index funds tend to be the better bets on the stock market.  Less than 20% of funds ever beat indexes so it makes index funds a very seductive investment play but how can you make it better?

In a single word: leverage.   If index  funds are good then why can’t leveraged index funds be better?  If you’re dollar cost averaging anyway, why not buy leveraged index funds.  Sure you’ll lose twice as much during down turns but as long as you keep buying you’ll make twice as much on the way back up right?  I like to think of these leveraged index funds as index funds on steroids.

Index funds on steroids can be rewarding but why not add in something a little extra for a little insurance and extra kick!   Mixing leveraged index funds with covered call strategy is exactly that extra kick I’m famous for at this point!  I like to think of the covered calls as HGH so that leveraged index funds with covered calls acts and feels like steroids with HGH enhancement!

So what are the main tactical components.   Well leveraged index ETFs are the ones I like the most right now:

DXD – Double Short Dow

DDM – Double Long Dow

SSO – Double Long S&P 500

SDS – Double Short S&P 500.

I like all of these because they are leveraged up/down and they all trade options with healthy volume.    So my most recent trade was to go double short on the dow (DXD) and sell calls (DXDCI) to be inverse long.  Using this strategy, I banked ~ $2,000 in my power account yesterday.   I then went on to go double long on the Dow (DDM) and sell calls short DDMCT to bank another $700 in my mini account.

So whether the Dow goes up or down from here it should be a profitable move -in theory.  The DDM will be valuable if the market recovers short term or long term and DXD will be profitable if the market tanks or recovers (options).

We’ll see how March expiry plays out.

This headline might as well read, “Bush, Bernanke support using buckets to bail water out of the Titanic” because that’s what any stimulus package will look like on the USS Titanic Economy at this point.    The chorus is finally gotten loud enough for people to understand what’s going on; it’s a total market meltdown in slow motion that started back in August of 2007.

Fortunately, I’m short as I picked up shares of SDS and will likely get called tomorrow to rake in some additional profit.  My EEB play will expire worthless and I’m looking at selling June or July options for 6% return in this depressing market.

Hope you’re making money today 😉 .

A few weeks ago, Trent over at the Simple Dollar had a fascinating discussion about whether it’s cheaper to buy a $0.99 double cheeseburger or cook some burgers at home. The fundamental question seemed to boil down to what the total real cost of grilling your own burgers by picking up food at the grocery store vs. driving to Mickey D’s and picking up a double cheeseburger.

I’m not really sure what the final answer is to that complex question but I would suggest to the 80+ people or so that participated in the article via comments and perhaps the thousands that read it that perhaps if they spent as much time researching stocks, options, currencies, precious metals, ETFs, bonds or other investment opportunities as they do over trivial matters like a $0.99 double cheeseburger then perhaps they could earn enough money to not have to worry about spending $0.99.

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A couple of weeks ago, I wrote that I bought almost 60k worth of ETFs shorting the Dow and S&P 500 after spending a couple hours analyzing the markets movements the past 30 days and determining that it was the time to short the market. Yesterday it paid off with a handsome profit of $750 for a couple of hours of work and a few weeks wait.

The profit making didn’t stop there though, I also bought UNG in late Sepetember for $39.25 and sold October $40 Calls for a cool $645 in profit and it looks like I’ll be forced to sell at $40.00 on Friday which will bring up my total profit to $870.

“Aww but you need money to make those trades”, you say. Well there’s more! I borrowed 50k in credit card arbitrage (0%) and bought 900 shares of an ETF for $43.85 and sold October $44 calls for $1.35 to rake in $1200.00 in profit. It looks like my Calls will be assigned at $44 so I’ll make another $135 as I’m forced to sell off.

This will bring my total profit over the past three weeks to about $2800.

So the new debate question becomes, “Do you want to grill your own burger to save $0.99 or would you rather have $2800 in cash?”

Opportunity costs mean you can’t have both 😉

If you didn’t request a credit limit increase yesterday, you should have. After I read this article, I got online on all my credit accounts and requested a credit limit increase on most of them!

Here’s a quote from the article:

“It is impossible to price assets in the funds because there is a lack of liquidity,” BNP’s spokesman Jonathan Mullen added. Which meant there was no market for the assets in the funds.

The German Xetra Dax Index ($DE:DAX) fell 2% to just under 7,454. The FTSE 100 Index ($UK:UKX) in London was off nearly 2% to 6,271. The CAC-40 Index ($FR:PX1) in France was down 2.2% to 5,625.

The panic was so bad that the European Central Bank injected more than $130 billion into the continental banking system. Standard & Poor’s said that move was unprecedented. The Federal Reserve was also putting extra cash into the U.S. banking system.

Did you catch that bold part? “The federal reserve was also putting extra cash into the U.S. Banking System” translates into “Plenty of more 0% APR offers for credit cards, cars, and maybe houses.”

And sure enough, my credit line on my AMEX card went from 12k to 30k just by asking!

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Other credit cards weren’t so quick but I suspect they’ll all be approved by tomorrow. Of course, I also noted a funny thing. Bank of America had been repeatedly sending me offers for 3.99% APR for the past 12 months on balance transfers and I noticed today that the new rate was 0.99% APR for balance transfers. Good times are here again baby! The Feds opened the spigot to easy money and I’m getting ready to profit from it!

UPDATE: This is so funny….Overall, I received $26,000 in credit line increases on my top 3 cards. This represents a 28% average increase from my old lines. ALL of the banks that I asked for an increase gave them to me; very nice of them 😉

I probably could have gotten more but I didn’t really need the increases so I didn’t ask for much. I’m curious how my FICO will be affected. Technically speaking, I now have lower debt levels because of increased available credit. I’m still waiting to see how my last 25k arbitrage pay back will impact my score. I should know that next week.

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