April 3, 2020
Global Market Comments
April 3, 2020
Fiat Lux
Featured Trade:
(THE CODER BOOM)
(HOW TO EXECUTE A VERTICAL BULL CALL SPREAD)
(AAPL)
How to Execute a Vertical Bull Call Spread on Apple
For those readers looking to improve their trading results and create the unfair advantage they deserve, I have posted a training video on How to Execute a Vertical Bull Call Spread.
This is a matched pair of positions in the options market that will be profitable when the underlying security goes up, sideways or down a small amount in price over a defined limited period of time.
It is the perfect position to have onboard during markets that have declining or low volatility, much like we experienced in 2014, and will almost certainly see again.
I have strapped on quite a few of these across many asset classes this year, and they are a major reason why I am showing positive performance numbers for 2016.
To understand this trade, I will use the example of an Apple trade, which I executed on July 10, 2014. I then felt very strongly that Apple shares would rally into the release of its new iPhone 6 on September 9, 2014.
The same play has just started to kick in for the iPhone 7 released September of that year.
So followers of my Trade Alert service received text messages and emails to add the following position:
Buy the Apple (AAPL) August 2014 $85-$90 in-the-money bull call spread at $4.00 or best
To accomplish this, they had to execute the following trades:
Buy 25 August 2014 (AAPL) $85 calls at……………$9.60
Sell short 25 August 2014 (AAPL) $90 calls at……$5.60
Net Cost:………………………………………………………$4.00
This gets traders into the position at $4.00, which cost them $10,000 ($4.00 per option X 100 shares per option contract X 25 contracts).
The vertical part of the description of this trade refers to the fact that both options have the same underlying security (AAPL), the same expiration date (August 15, 2014) and only different strike prices ($85 and $90).
The breakeven point can be calculated as follows:
$85.00 – Lower strike price
+$4.00 – Price paid for the vertical call spread
$89.00 – Break even Apple share price
Another way of explaining this is that the call spread you bought for $4.00 is worth $5.00 at expiration on August 15, giving you a total return of 25% in 26 trading days. Not bad!
The great thing about these positions is that your risk is defined. You can’t lose any more than the amount of capital you put up, in this case, $10,000.
If Apple goes bankrupt, we get a flash crash or suffer another 9/11 type event, you will never get a margin call from your broker in the middle of the night asking for more money. This is why hedge funds like spreads so much.
As long as Apple traded at or above $89 on the August 14 expiration date, you would have made a profit on this trade.
As it turns out, my read on Apple shares proved dead-on, and the shares closed at $97.98 on expiration day or a healthy $8.98 above my breakeven point.
The total profit on the trade came to:
($1.00 profit X 100 shares X 25 contracts) = $2,500
This means that the position earned a 25% profit on your $10,000 investment in a little more than a month. Now you know why I like Vertical Bull Call Spreads so much. So do my followers.
Occasionally, these things don’t work and wheels fall off. As hard as it may be to believe, I am not infallible.
So, if I’m wrong and I tell you to buy a vertical bull call spread, and the shares fall not a little, but a lot, you will lose money. On those rare occasions when that happens, I’ll shoot out a Trade Alert to you with stop-loss instructions before the damage gets out of control.
That stop loss is usually at the lower strike price when there is still a lot of time to run to expiration, as the position still has a lot of time value remaining, and the upper strike price when there are only a few days left until expiration.
To watch the video edition of How to Execute a Vertical Bull Call Spread, complete with more detailed instructions on how to execute the position with your own online platform, please click here.
Vertical Bull Call Spreads Are the Way to Go in a Flat to Rising Market
The Coder Boom
There is a new boom going on in Northern California.
It is not another gold rush, even though this winter’s heavy rains have flushed out a new supply of the yellow metal in High Sierra rivers and streams.
And I am not referring to the marijuana boom triggered by the recent legalization of the evil weed in the November election.
No, I am talking about the coder boom, the stampede by young job seekers to cash in on the overwhelming demand for computer programmers.
I’m hearing about this everywhere.
Kids are quitting their jobs driving trucks, running farms, or working as baristas at Starbucks.
They blow their entire life savings on a three-month crash course at a coding school. The schools then promise them dream jobs on graduation.
Schools like this are popping up like mushrooms on the green California hills in winter, charging up to $20,000 per course.
Don’t think you’ll just walk into these places either. All of these schools have waiting lists and only the most qualified and ambitious get in.
They’re almost as hard to get into as my….tennis club.
It’s worth it because it sets you up to move into a six-figure job almost immediately. At least, it’s supposed to.
There is no doubt that there is an absolutely mammoth demand for computer programmers right now. There is NO part of the US economy that isn’t attempting to grow its online presence as rapidly as possible.
Salaries are through the roof as can be seen by the interactive map of current programming jobs around the country published by Cyber Coders, please click here.
Headhunter Robert Half (click here) wants to charge you 30% of a first year’s salary for their service in finding developers.
Ouch!!
Click here for a map from the Bureau of Labor Statistics on where all the developer jobs are going at.
The problem is that as soon as a coder gets good, they go freelance, charging up to $200 an hour. Who can blame them? Raking the money in while working anywhere, anytime sounds like a great gig to me.
Hiring a developer can be the most challenging task for a small rapidly growing business. Stories are rife of dummy developers wiping out business overnight because of incompetent coding. And Heaven help you if you thought you could save money and outsource this job to India.
Marquee names like Google and Apple soak up the few out there with actual college degrees in computer science, leaving the rest of use to hire hobbyists who went full time. Sounds familiar.
Coder Camp (www.codercamp.com) invites you to “Reprogram your Career” with a series of immersive camps on Java, JavaScript, and Ruby on Rails for $14,200 each.
Udemy (www.udemy.com) offers dozens of courses ranging from $49 on up for online tutorials on every programming topic under the sun. They boast 20,000 online instructors and 10 million hungry students in 190 countries.
Learning Tree International (https://www.learningtree.com), the veteran in the space has a four-course training passport for $6,790.
Devbootcamp (http://devbootcamp.com/) pioneered the short-term immersive “web development boot camp,” a model that transforms beginners into full-stack web developers. Their 19-week $13,900 program offers three-year low-interest financing.
Hack Reactor (http://www.hackreactor.com) is the high-end Cadillac operation and promises a 99% job placement rate with a $105,000 initial salary.
I hear that production grade iPhone apps are the hot skill to learn. And if you are able to learn anything about cyber security you can write your own ticket.
As is so often the case with these Internet schemes, the hype may exceed actual results (mine excluded). Developer friends tell me that it takes a year of full-time study before you can land an actual regular job. It really takes as much time to learn coding as it does to speak a new foreign language fluently.
Many new coders start with limited part-time assignments and work their way up from there as their skills build.
If you are good at math, you have a definite advantage as much of good coding involves problem-solving of a mathematical nature.
Still, you can’t argue with people abandoning old economy jobs and training for new economy ones, whatever the cost. I’m told there has been a recent influx of new students freshly laid off in the oil patch.
If you still have a Millennial living in the basement awaiting their calling, this is a big chance to turf them out. All you need is a cheap computer, broadband, and motivation.
Oh, and by the way, the Mad Hedge Fund Trader is looking to hire a developer with a specialty in API and Infusionsoft, click here for their link.
Thanks to last year’s blowout double-digit performance numbers, my firm has entered hyper-growth mode, and everyone is working pedal to the metal.
Please send your resume to support@madhedgefundtrader.com and specify “DEVELOPER” in the subject line.
So What is This “DEL” Key For Anyway?
April 3, 2020 – Quote of the Day
“If Carnival Cruise Lines (CCL) can raise $4 billion in the debt markets, why can’t American (AA) or United (UAL) do the same? Why stick it to the taxpayer?” asked my old friend, famed short-seller Jim Chanos.
April 2, 2020
Global Market Comments
April 2, 2020
Fiat Lux
Featured Trade:
(THE DEATH OF PASSIVE INVESTING)
(SPY), (SPX), (INDU)
(NOTICE TO MILITARY SUBSCRIBERS)
Quote of the Day – April 2, 2020
“Since 9-11, the government knows a lot more about you than you know about them, and the government likes that. But that’s not what the American people want,” said California Republican Congressman, Daryl Issa.
April 1, 2020
Global Market Comments
Apri1, 2020
Fiat Lux
Featured Trade:
(DINNER WITH DAVID POGUE)
(TSLA)
(WHY DOCTORS MAKE TERRIBLE TRADERS)
Quote of the Day – April 1, 2020
“Only losers average losers,” said my friend and former client, trading legend Paul Tudor Jones.
March 31, 2020
Global Market Comments
March 31, 2020
Fiat Lux
Featured Trade:
(MORE PLAYERS ENTER THE RACE FOR A CORONA CURE)
(MRNA), (ARCT), (JNJ), (SNY), (GOVX), (ALT), (NVAX), (GSK), (GNBT), (VXL.V), (INO), (APDN), (CADILAHC)
March 31, 2020 – Quote of the Day
“The government doesn’t set the timeline, the virus does” said Dr. Antony Fauci, the Director of the National Institute of Allergy and Infectious Diseases.