Morning Update: June 04, 2014

1-855-RWT-0008

Random Walk’s Mission:

To help 1% of the population learn that they do NOT have to be wiped out in an economic catastrophe and/or market crash, and make it as easy as sending an email. Whether we teach them or they learn elsewhere we are happy.

NEXT MINI-CLASS

Half “What Month To Trade” and Half Time Spreads. June 8^th (Sunday) 4:00pm eastern Since announcing it is a “two-fer” we are almost sold out. Probably will be closed on Friday.

THIS SUNDAY at 4:00pm

Check with the office. I think it might be closed.

Yesterday

You have to be kidding. Day 61 of no movement.

AAPL did bounce almost 9 and that is significant for POT people and the education of the split. The day of record for the split was yesterday.

In POT we tonight we will talk about stock splits and the impact on options. We are long a $17.5 call spread bought for about a $1 credit (big leg) in POT that I will use as an example.

Today

I have no idea if it will be an up 20 point Dow day, or a down 20 point Dow day. Who knows, maybe it will be a day where we actually break through a range that gets ever tighter. Most traders are weighting for Friday’s unemployment number for further direction, but I believe this has people so far on pins and needles that today’s numbers could create a false start on the next move. 

POT is held each Wednesday night at 7:00pm eastern.

TLT was down 1.39 again today. Love being long a $7 put spread there. Thank you Maui Finishing Touches for the risk reversal.

AAPL We are still long the 17 ½ wide call spread.

So our longs are going up. Our shorts are going down. 

Contract the office at 1- 855 – RWT – 0008 for more details.

Interesting Side Note – OPTION GENIUS

Russel Sage

a.k.a. “The Money King”

18^th Richest Person EVER When Adjusted For Inflation

According to CNN Money (Link Below)

I am not totally sure they did their math right. I know Benjamin Franklin was likely in the top 5, and probably number 1, but he didn’t even make the list.

http://money.cnn.com/gallery/luxury/2014/06/01/richest-americans-in-history/18.html

Adjusted wealth*: $53.6 billion

Lived: 1816-1906

“Born poor in upstate New York, Sage started out as a grocery store clerk. But he was a prodigious worker, saver and trader, and soon had enough money for his own shop. From there, he expanded into horse brokering, shipping and making loans to friends.

Sage hit his stride in New York City, trading stocks and pioneering the system of puts and calls still used on Wall Street today. These gave Sage the ability to buy or sell stock at predetermined prices. He was a friend of Jay Gould (No. 10), and the two often teamed up to manipulate share prices.

Famously stingy (he was once caught stealing a cheap fan from the boardroom of Western Union), Sage’s wife gave away most of his fortune after his death. One of the main organizations she founded — the Russell Sage Foundation — specifically works to improve living conditions in the United States.”

(Black ink above is CNN’s article)

My Comments:

Russell was a hard working genius that survived bomb attacks by his rivals. In the middle 1800’s people speculated in the stock market with a product that we would recognize as a “call option”, though different in its pricing. An investor wanting to purchase stock without putting a lot of money into the position could purchase the right to buy the stock for exactly 10% of the value of the shares.

Russell was fond of selling premium, but also risk averse. He would sell the call and buy the actual shares to hedge (a covered call). The markets at the time were a lot more volatile than they are now because of the lack of liquidity. The market could appear to be crashing one day, only to reverse and melt up the next. Since Russell liked his 5 hours a night sleep uninterrupted he would buy a type of insurance they had back then that we would call a put option. Russell therefore essentially created the first CONVERSION SPREAD (See conversions and reversals in our material) and made a fortune at it.

Keep in mind that Warren Buffett was 14^th on the list, but he is using other people’s money and is public. Being public makes the company many more times more valuable (about 15 times) than if done outside a company. In other words, had Russell Sages gone public he would have torn EVERYONE apart on the list.

Attorney Stuff

DISCLAIMER (Seriously!)

Trading is almost as much fun as black jack in Vegas, but without all the annoying distractions of free drinks, Broadway shows, gorgeous people with low morals, and free buffets. It also has about the same odds of success, so when you lose all your money you wont have to walk past a smiling pit boss. Even Bruce Wayne lost everything with options in The Dark Knight Rises, and Superman keeps his day job at the DailyPlanet newspaper.

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