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American Capital Agency Corp. Message Board

  • raybans2 raybans2 Nov 26, 2012 11:51 AM Flag

    I get emails from yahoo telling me I have replies to a post however ...

    Sometimes they are to post that I thought never got posted because after I posted them I could not see them. Then I go to the board to reply to the post and my post and the post that replied to mine are not visible. It's pretty frustrating. However this is in reply to a post about TA by Doc.

    I use TA for short term trends, not for anything that is more than say 3 months. For that I use fundamentals. I look at short term trends as being associated with market sentiment as stocks become over bought or oversold because of sector rotations or in response to news events that may or may not be relevant to the stock in question.

    What people were doing here for some time, where they were betting on cyclical predictable behavior, I do not consider this to be classical TA because it is based on understandable events and the chart is only used as a means to confirm that a repeatable pattern exit. I would not call that a trend but more of recognition of a pattern caused by large spikes in prices due to large dividend payouts and SPOs. For years this pattern seemed to dominate over the market volatility but that was before non dividend investors started to flock toward dividend stocks including mREITs. And I think that these new investors have increased the volatility of mREITs which makes these repeatable patterns harder to exploit, so it seems. My guess is that those trying to repeat past performance using a strategy that worked well when volatility was low will find that the hit to miss ratio is not as good as it used to be. That said, if the volatility returns to what it used to be then I would be inclined to use this strategy myself but not now. I just don’t think the current volatility makes it certain enough to justify the risk.

    I’m new to dividend stocks myself and frankly I was quite surprised to see that options pretty much ignore these predictable events allowing one to use calls and puts to profit by them. I thought the market was more efficient than that. But I came too late to this knowledge to profit by it as it seems the now higher volatility has killed the golden goose. All I can do is collect the dividend on as portion of my portfolio and watch out for the Fed and what their actions may mean for the future stock price. I'll buy when price to book value is one or less and sell when it gets too high to keep from getting slaughtered.

    There seems to be a general consensus market wide that investing in stocks for growth only isn’t working like it used to in the past. At least it has not for the last 10 years. The long term buy and hold strategy is dead for now, at least to those who recognize the futility of it. There will always be the Warren Buffet followers who never say die and probably would being doing better with simple interest but are too stubborn to change.

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    • RayB,

      Agree with everything you said. I, myself have noticed now, for the past 18 months, that even the option market is getting harder and that, indeed, it is a rigged game, in favor of the Short option trader.

      Hence, I changed my MO and now have 80-90% of my option "in plays" in Short Spread positions. I am on the other side of the Longs who are paying that higher premium, due to that increased volatility you mentioned.

      I am wrangling, as I type, to get filled on some short Dec37Puts. They are priced just right and the MM's expect the EX to be B4 OPEX, which gives me great opportunity if management makes the EX date post OPEX. They will automatically reduce in premium by over 1 dollar, at any PPS lower than 35.00.

      Evolution on a micro scale. I used to be 99% long options. Mutations, in this lone case, are not, so far, deleterious.....;-)

      Good luck,

      DocReits

 
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