Stocks and Trading Thread - Channeling your inner Mono

[Tonitrus]

I swear, I either need to learn this shit better, or hire you as my financial manager. 

I'm that punk who buys/sells at market price. 

[Admiral Yi]

I work with a guy who used to do that full time for Shearson-Lehman. Sell the put until it strikes, then you own the stock.  Then you sell the covered call until it strikes, then rinse and repeat.

He claims he makes a 15% return doing that.

Course, you do miss out on 30% market appreciations, and you can end up owning $30 stock you paid $45 for.

[MadImmortalMan]

I work with a guy who used to do that full time for Shearson-Lehman. Sell the put until it strikes, then you own the stock.  Then you sell the covered call until it strikes, then rinse and repeat.

He claims he makes a 15% return doing that.

Course, you do miss out on 30% market appreciations, and you can end up owning $30 stock you paid $45 for.

You understand it exactly. That's the risk.

[Admiral Yi]

Just put on a sell order for 100 McGraw-Hill at 91.  105% runup since I bought in.  Holding the other 49 shares.

[Caliga]

I'm that punk who buys/sells at market price. 

Do you at least use limit orders?  I haven't put in a straight market order since like 1998 or so.

[Admiral Yi]

I don't see limit orders as being necessities.

[Caliga]

I don't see limit orders as being necessities.

  Why not?  If I want a stock, I always want it at a certain price.  I stopped placing basic market orders when I ended up paying almost a buck more than I wanted for a stock back in the 90s because the price was spiking.  I'd rather not have position at all than have one at a higher price than I was anticipating opening it at.

[Admiral Yi]

Because if I want a stock, I don't always want it at a certain price. :p

If I buy a stock I think is undervalued, I could miss out if the price rises above my limit.  If I want to sell a stock I think is overvalued, I could miss out if the price falls below my limit.

[MadImmortalMan]

The main problem I've had with limit orders tend to be when the price gaps up or down after hours and skips right over my limit. I hate that. I still use them though.

[alfred russel]

Because if I want a stock, I don't always want it at a certain price. :p

If I buy a stock I think is undervalued, I could miss out if the price rises above my limit.  If I want to sell a stock I think is overvalued, I could miss out if the price falls below my limit.

It sounds like a problem with your limit setting, not with the limit.

If a stock is trading at $10, you are willing to buy it up to $20, and you set your limit at $12, you really shouldn't be mad if you don't get it when it gets to $13. Just set the limit to $20.

[Admiral Yi]

Fair enough.  Entering the realm of meaningless though.

[Admiral Yi]

Just put on a sell order for 100 McGraw-Hill at 91.  105% runup since I bought in.  Holding the other 49 shares.

Executed!

[MadImmortalMan]

A little banking fun this evening.

Senate Report Says Banks Gained Unfair Advantages in Commodity Markets
Report Notes Deals Between Goldman, Deutsche and Others Drove Up Aluminum Prices

WASHINGTON -- A two-year U.S. Senate investigation of commodity-market activities at big Wall Street banks like Goldman Sachs Group Inc. GS -0.73% and J.P. Morgan Chase JPM -0.31% & Co. found the firms compromised market integrity and put the broader financial system at risk.

The firms did so by influencing prices, gaining trading advantages with non-public information and entering risky businesses like uranium trading and coal production, according to the investigation.

The findings from the U.S. Senate Permanent Subcommittee on Investigations shed new light on how banks built up voluminous inventories of aluminum, copper and other commodities, often exceeding regulatory limits. It portrays banks straying far beyond their traditional business lines to dabble in lucrative but risky activities that posed legal and financial threats to the firms.

The Senate report also depicts the Federal Reserve as failing to stop the bank buildup of commodities, allowing firms like J.P. Morgan to hold assets well in excess of allowable limits. At times, the report said, the Fed was simply unaware of how much oil, aluminum and copper banks were stockpiling.

Investigators found J.P. Morgan exceeded restrictions on copper holdings by defining it as a precious metal despite its widespread use in industrial applications and exceeded aluminum limits by holding it as an asset of a subsidiary instead of the parent company. Morgan Stanley MS -0.20% held 55 million barrels of oil storage capacity, enough supply for nearly three days' worth of U.S. consumption. The report found that Goldman engaged in "merry-go-round" transactions involving aluminum for its own financial gain.

The banks say they adequately manage the risks of the activities and don't use their commodities business to gain an unfair advantage. All three firms have moved to reduce their commodities holdings amid congressional and regulatory scrutiny.

The findings are likely to put additional pressure on the Fed as it considers whether to restrict or reduce Wall Street banks' role in physical commodity markets. Fed Gov. Daniel Tarullo is expected to testify at a Senate hearing on the report on Friday.

Democrat and Republican lawmakers said the evidence showed new reforms and restrictions are needed to rein in Wall Street's role in raw materials markets. The report recommended a series of actions that could shrink bank trading and strengthen oversight. While none of the activities highlighted in the report appear to be illegal, officials said they had not yet decided whether to refer certain matters to enforcement agencies.

"We found substantial evidence that these activities expose major banks to catastrophic risks that are poorly understood," said Sen Carl Levin, (D., Mich.), who chairs the subcommittee and will hold the two-day hearing. Executives from Goldman, J.P. Morgan, and Morgan Stanley are set to testify. "They are raising costs and uncertainty for the end users of commodities, which hurts American manufacturers and consumers."

It's time for minimal slap on the wrist #9862583. If banks are your thing, they might get a temporary pop lower at the open tomorrow.

[alfred russel]

I don't trust the source of the report. Do you really think a senate subcommittee was going investigate large investment banks and not say anything negative?

[The Minsky Moment]

Sounds very dog bites man.
Use of non-public info can be legal.  The regulatory allegations sounds like standard exploiting loophole kind of stuff.  And of course bank trading activities can "influence prices." Uranium is radioactive, but is trading it more "risky" than trading bonds or gold?

Commodities markets are where big boys go to play, it is a zero-sum game, and any sane individual investor shouldn't be anywhere near there in the first place.