Overlords Investment Conclave [OIC] Recruitment Thread

LawBeefaroni · Post by **LawBeefaroni** » Mon Apr 07, 2014 10:59 am

Sold some SQQQ calls I bought Friday. Taking short positions a lot more now, but not long term ones.

SQQQ is intriguing because it highly specialized and designed for the short term (3x short NASDAQ-100 on a daily basis). Made the decision to sell calls this morning much easier when it was up around 2%.

Nothing makes me learn about an equity/fund like putting a little skin in the game. Spent a few hours over the weekend studying the prospectus:

Important Information About the Fund

ProShares UltraPro Short QQQ (the “Fund”) seeks investment results for a single day only, not for longer periods. A “single day” is measured from the time the Fund calculates its net asset value (“NAV”) to the time of the Fund’s next NAV calculation. The return of the Fund for periods longer than a single day will be the result of each day’s returns compounded over the period, which will very likely differ from three times the inverse (-3x) of the return of the NASDAQ-100 Index® (the “Index”) for that period. For periods longer than a single day, the Fund will lose money when the level of the Index is flat over time, and it is possible that the Fund will lose money over time even if the level of the Index falls. Longer holding periods, higher index volatility, inverse exposure and greater leverage each exacerbate the impact of compounding on a fund’s returns. During periods of higher Index volatility, the volatility of the Index may affect the Fund’s return as much as or more than the return of the Index.

The Fund is different from most exchange-traded funds in that it seeks inverse leveraged returns relative to the Index and only on a daily basis. The Fund also is riskier than similarly benchmarked exchange-traded funds that do not use leverage. Accordingly, the Fund may not be suitable for all investors and should be used only by knowledgeable investors who understand the potential consequences of seeking daily inverse leveraged investment results. Shareholders should actively manage and monitor their investments, as frequently as daily.

The holdings list is interesting too. Such a strange world.

Note: I'm not recommending buying/selling SQQQ, just an interesting product to look at.

Carpet_pissr · Post by **Carpet_pissr** » Mon Apr 07, 2014 12:43 pm

Has anyone read "Flash Boys" by Michael Lewis? Just saw an interview with him on the Daily Show the other night...seems like a fascinating read about people who are trading (legally) milliseconds before your trades go through, and make money off that knowledge.

I'm going to pick it up at some point when I catch up on my reading backlog a bit.

LawBeefaroni · Post by **LawBeefaroni** » Mon Apr 07, 2014 1:05 pm

Carpet_pissr wrote:Has anyone read "Flash Boys" by Michael Lewis? Just saw an interview with him on the Daily Show the other night...seems like a fascinating read about people who are trading (legally) milliseconds before your trades go through, and make money off that knowledge.

I'm going to pick it up at some point when I catch up on my reading backlog a bit.

Haven't read it yet but I'll probably get it soon.

High frequency ("flash") trading is another money syphon of the financial markets. They print free money off the backs of investors. But it's kind of a necessary evil if we all want real time trading.

It's the era of black boxes. Some of the guys who make them, besides being insanely well compensated, are guarded as closely as nuclear scientists during the Cold War.

LawBeefaroni · Post by **LawBeefaroni** » Mon Apr 07, 2014 2:22 pm

And there goes SQQQ. My calls would be up another 35% if I still had them. Ahh well.

On to the next one.

noxiousdog · Post by **noxiousdog** » Mon Apr 07, 2014 2:54 pm

LawBeefaroni wrote: Haven't read it yet but I'll probably get it soon.

High frequency ("flash") trading is another money syphon of the financial markets. They print free money off the backs of investors. But it's kind of a necessary evil if we all want real time trading.

It's the era of black boxes. Some of the guys who make them, besides being insanely well compensated, are guarded as closely as nuclear scientists during the Cold War.

By the same token, it's pretty easy to avoid being taken. Just put in a limit order and an "all or nothing". It's really just billionaires taking money from millionaires.

And I do think there's a good argument to be made that it significantly increases liquidity. The 12 cent spreads of 20 years ago are gone.

LawBeefaroni · Post by **LawBeefaroni** » Mon Apr 07, 2014 3:14 pm

noxiousdog wrote: By the same token, it's pretty easy to avoid being taken. Just put in a limit order and an "all or nothing". It's really just billionaires taking money from millionaires.

Well, billion dollar companies and million dollar traders taking money away from retail investors. And from everyone if you belive the Flash Crash stuff. Limit orders don't do much to stop it, limit orders just give them more data.

Take my option orders today. B/A was like $3.8/$4.70 (a fairly deep ITM call, so bigger spread). I put in a $4.50 ask limit order for 3 contracts and instantly there were 70 at the ask. I went to $4.50 and instantly there were 110 at the ask. I went to $4.40 and they all moved with me again. All with the underlying issue not moving more than a few pennies both ways. That's just computers running code. I'm not saying it cost me anything, but it's crazy to see them move like that, all triggered by 3 puny contracts.

noxiousdog wrote:And I do think there's a good argument to be made that it significantly increases liquidity. The 12 cent spreads of 20 years ago are gone.

Like I said, a necessary evil.

noxiousdog · Post by **noxiousdog** » Mon Apr 07, 2014 3:31 pm

LawBeefaroni wrote: Take my option orders today. B/A was like $3.8/$4.70 (a fairly deep ITM call, so bigger spread). I put in a $4.50 ask limit order for 3 contracts and instantly there were 70 at the ask. I went to $4.50 and instantly there were 110 at the ask. I went to $4.40 and they all moved with me again. All with the underlying issue not moving more than a few pennies both ways. That's just computers running code. I'm not saying it cost me anything, but it's crazy to see them move like that, all triggered by 3 puny contracts.

They could just as easily be day traders watching real time data, especially in that set up. I'm not sure the flash traders would waste their time with that and their money is at risk in the process.

But I think what Flash Boys is talking about is more of the following:
Seller wants to buy 200,000 shares @ $25 for example. The Flash guys see it come in and immediately buy 10,000 @ $25.015, and that gets the order filled. Seller has to reprice his limit to $25.02. Rinse, wash, repeat, until Flash guy leaves the price alone and starts selling the shares he bought. The algorithms in play can determine risk/reward relationships.

LawBeefaroni · Post by **LawBeefaroni** » Mon Apr 07, 2014 3:50 pm

noxiousdog wrote:
LawBeefaroni wrote: Take my option orders today. B/A was like $3.8/$4.70 (a fairly deep ITM call, so bigger spread). I put in a $4.50 ask limit order for 3 contracts and instantly there were 70 at the ask. I went to $4.50 and instantly there were 110 at the ask. I went to $4.40 and they all moved with me again. All with the underlying issue not moving more than a few pennies both ways. That's just computers running code. I'm not saying it cost me anything, but it's crazy to see them move like that, all triggered by 3 puny contracts.
They could just as easily be day traders watching real time data, especially in that set up. I'm not sure the flash traders would waste their time with that and their money is at risk in the process.

It's computers. It's different with options since they trade on mutliple exchanges at once but you can watch limit orders trigger other bids/asks. Not saying it was flashtrading there specifically, but the black boxes (which also do flash trading) are everywhere.

noxiousdog wrote: But I think what Flash Boys is talking about is more of the following:
Seller wants to buy 200,000 shares @ $25 for example. The Flash guys see it come in and immediately buy 10,000 @ $25.015, and that gets the order filled. Seller has to reprice his limit to $25.02. Rinse, wash, repeat, until Flash guy leaves the price alone and starts selling the shares he bought. The algorithms in play can determine risk/reward relationships.

Yeah, that's my understanding too.

I just ordered the book since the 100 or so copies at the library are all out or on hold.

Carpet_pissr · Post by **Carpet_pissr** » Mon Apr 07, 2014 4:54 pm

LawBeefaroni wrote:I just ordered the book since the 100 or so copies at the library are all out or on hold.

Excellent. Let us know how it is after you finish if you don't mind...it's currently on my wishlist. Usually when Stewart raves about how well-written a book is like he did for this one, I generally pay attention.

Here's the interview if interested...the author breaks it down pretty simply:

http://blogs.wsj.com/speakeasy/2014/04/ ... aily-show/

noxiousdog · Post by **noxiousdog** » Mon Apr 07, 2014 4:58 pm

I saw the 60 minutes episode. But this isn't really new news. It's just gone mainstream.

I think it's a much much smaller issue than Congress can legally insider trade.

El Guapo · Post by **El Guapo** » Mon Apr 07, 2014 5:11 pm

noxiousdog wrote:I saw the 60 minutes episode. But this isn't really new news. It's just gone mainstream.

I think it's a much much smaller issue than Congress can legally insider trade.

Didn't Congress pass a law recently prohibiting congressional insider trading?

Looks like they at least partially repealed that law.

LawBeefaroni · Post by **LawBeefaroni** » Mon Apr 07, 2014 6:53 pm

El Guapo wrote:
noxiousdog wrote:I saw the 60 minutes episode. But this isn't really new news. It's just gone mainstream.

I think it's a much much smaller issue than Congress can legally insider trade.
Didn't Congress pass a law recently prohibiting congressional insider trading?

Looks like they at least partially repealed that law.

It never really banned insider trading anyway, it just required more detailed and timely reporting.

Isgrimnur · Post by **Isgrimnur** » Mon Apr 07, 2014 7:01 pm

Iirc, Jack Ryan was an inside trader in the book version of Patriot Games.

noxiousdog · Post by **noxiousdog** » Wed Apr 09, 2014 12:52 pm

This post by mungofitch on The Motley Fool puts it in perspective:

HFT industry gross revenues are around a billion a year, maybe less now, down from $5 billion a few years ago.
As of 2012 it was running around a twentieth of a cent per share they traded.
That's "revenue" in the investment bank sense: the gross profit they
made on trades, sells minus buys, before all expenses and taxes.
They have a lot of expenses and taxes.

US annual stock market volume is on the rough order of $30 trillion a year.
Since this is a small envelope we're using, let's assume that essentially all the HFT is in that US pool.

So, their haul is around 0.0035% of the face value of each trade on average.
For it to cost you $100 you'd have to trade about $3m in stock, but only
if you further assume that this drag due to HFT was entirely in addition
to the losses you were already sustaining from market makers.
I imagine some of it is displacement: barracudas eating some of the sharks' food.

Carpet_pissr · Post by **Carpet_pissr** » Wed Apr 09, 2014 1:40 pm

FWIW, HFT is not the same as flash trading, from the limited amount of reading I have done on the subject.

It certainly is a polarizing topic though, with reputable sources on both sides of the issue arguing that it's either extremely helpful, or a danger to the financial world as we know it.

Sheesh. Stupid internet, with its opposing opinions! Just give me the facts, dammit (and preferably a well-reasoned conclusion)!

noxiousdog · Post by **noxiousdog** » Wed Apr 09, 2014 2:29 pm

Carpet_pissr wrote:FWIW, HFT is not the same as flash trading, from the limited amount of reading I have done on the subject.

It certainly is a polarizing topic though, with reputable sources on both sides of the issue arguing that it's either extremely helpful, or a danger to the financial world as we know it.

Sheesh. Stupid internet, with its opposing opinions! Just give me the facts, dammit (and preferably a well-reasoned conclusion)!

For the numbers above, flash trading would be a subset of HFT. Lewis's source (can't remember his name) cited the same number.

LawBeefaroni · Post by **LawBeefaroni** » Wed Apr 09, 2014 2:32 pm

I sprang [the extra $8] for a signed copy of Flash Boys from a shop in Washington state, rather than kindle or 2-day, so it might be a week or so before I can read it. Proving to be a bit harder to wait than I expected.

noxiousdog · Post by **noxiousdog** » Wed Apr 09, 2014 3:01 pm

I'm sure it will be good. I've read a number of Lewis's books and they have all been very enjoyable.

LawBeefaroni · Post by **LawBeefaroni** » Mon Apr 14, 2014 3:03 pm

Long SQQQ again with calls, midday around $59.50. [EDIT: Well, that worked out OK.]

Book still hasn't arrived.

LawBeefaroni · Post by **LawBeefaroni** » Tue Apr 15, 2014 12:36 pm

Closed the SQQQs from yesterday, here's the quick postmortem. May 2014 $60 calls bought at $3.80 (SQQQ was around $59.50), sold at $5.20 (SQQQ was around $62.15). Last sale was at $5.60 ($4.60x$5.90), when the SQQQ was around $62.60.

Looking for a new entry point in SQQQ or TQQQ but probably not today, too busy.

LawBeefaroni · Post by **LawBeefaroni** » Wed Apr 16, 2014 9:38 am

Right idea, right timing, not enough follow through. Got out of the short side just in time but didn't go long. TQQQ was around $52 at the time, opened today at $57.20.

Flash Boys marked as shipped!

LawBeefaroni · Post by **LawBeefaroni** » Fri Apr 18, 2014 10:58 am

Got the book in yesterday. I sat down to read the introduction before bed and the next thing I knew I was 55 pages in. I think it's going to be a very fast read.

It's what I expected, detailed but fast paced and a good overview of the concepts. I'm familiar with most of the ideas and principals mentioned so that's helped. But it also means that nothing has surprised me yet thus far, though I'm admittedly only through chapter 2. It's just at the point where Katsuyama and the RBC crew are figuring out what's going on and develop Thor.

A friend of mine who is a Lewis fan, and who also happens to run IT for a trading firm, has already read it and called it a giant commercial for IEX. Thus far, Brad Katsuyama has been portrayed as a sort of wonderkund so I can see that. But I'm confident it will have more to offer.

His sig is pretty bad but it looks like 1st/1st so another one for the bookshelf.

Carpet_pissr · Post by **Carpet_pissr** » Sat Apr 19, 2014 10:27 am

LawBeefaroni wrote:A friend of mine who is a Lewis fan, and who also happens to run IT for a trading firm, has already read it and called it a giant commercial for IEX.

This is exactly what I was worried about. Just got a vibe from the various interviews I saw...gut feeling if you will.

Carpet_pissr · Post by **Carpet_pissr** » Fri Apr 25, 2014 10:35 am

AMZN sale! I picked up some at $319 a couple weeks ago.

Got hit this morning (-9%), but for the best possible reasons, IMO. Downgraded on continued high spending on investment in technology, content, etc (basically growth).

It worries me less than the analysts I guess (for the long term play I am expecting it to be still)...buying more here.

LawBeefaroni · Post by **LawBeefaroni** » Fri Apr 25, 2014 10:54 am

Lots of things on "sale" today. CVLT is getting slaughtered.

Really bad day for tech, picked the wrong time to play an IGT bounce (May $14 calls at $0.10 yesterday).

I'll look at AMZN around $280. I think the overall tech market fundamentals are weak and it won't take too much to go down another 10+% for a lot of these high P/E stocks.

I still like TSM.

LawBeefaroni · Post by **LawBeefaroni** » Fri Apr 25, 2014 10:58 am

Oh, and by the way, totally irrelevant factoid, the DOW closed yesterday exactly unchanged. First time in like 12 years.

Pyperkub · Post by **Pyperkub** » Fri Apr 25, 2014 11:08 am

Carpet_pissr wrote:AMZN sale! I picked up some at $319 a couple weeks ago.

Got hit this morning (-9%), but for the best possible reasons, IMO. Downgraded on continued high spending on investment in technology, content, etc (basically growth).

It worries me less than the analysts I guess (for the long term play I am expecting it to be still)...buying more here.

Got in at about 175, went to 400, now it's wherever it is. Wish I could have got more when I bought though

Definitely a long term play, but I love how they became a monster IT player with their storefront, cloud and web services. Their market penetration ( ownership?) of those b2b segments was what really sold me.

Pyperkub · Post by **Pyperkub** » Fri Apr 25, 2014 11:09 am

I'm torn between more Amazon or Comcast, given the net neutrality fate...

Carpet_pissr · Post by **Carpet_pissr** » Fri Apr 25, 2014 12:45 pm

I'm still waiting on Tesla to get really knackered so I can buy.

52 wk range: $50.62 - $265.00

Doh!

Zaxxon · Post by **Zaxxon** » Fri Apr 25, 2014 1:01 pm

Carpet_pissr wrote:I'm still waiting on Tesla to get really knackered so I can buy.

52 wk range: $50.62 - $265.00

Doh!

Methinks the recent drop to $185 might have been your window.

Carpet_pissr · Post by **Carpet_pissr** » Fri Apr 25, 2014 2:23 pm

At almost 10% down after great results, I have no choice but to double my position in Amazon. Good night.

Tesla will have to wait...

noxiousdog · Post by **noxiousdog** » Fri Apr 25, 2014 2:32 pm

Carpet_pissr wrote:At almost 10% down after great results, I have no choice but to double my position in Amazon. Good night.

Tesla will have to wait...

What kind of margins will Amazon ever be able to manage?

Carpet_pissr · Post by **Carpet_pissr** » Fri Apr 25, 2014 3:11 pm

noxiousdog wrote:
Carpet_pissr wrote:At almost 10% down after great results, I have no choice but to double my position in Amazon. Good night.

Tesla will have to wait...
What kind of margins will Amazon ever be able to manage?

Low margins have always been part of their strategy - and they've done ok with it to date.

Who knows what the future will bring, but they are an innovator like Apple, and I expect them to continue to shake the market up and move new products. The argument about razor thin profit margins has been around since before their IPO. I wonder what the analysts that doubted they would be able to make it on such low margins, say about it today? Just a matter of time?

Don't get met wrong, I completely get the argument, and it's logical. It's just proven to be wrong...so far.

Also see: content (media)

noxiousdog · Post by **noxiousdog** » Fri Apr 25, 2014 5:27 pm

Carpet_pissr wrote: Low margins have always been part of their strategy - and they've done ok with it to date.

...

Who knows what the future will bring, but they are an innovator like Apple, and I expect them to continue to shake the market up and move new products. The argument about razor thin profit margins has been around since before their IPO. I wonder what the analysts that doubted they would be able to make it on such low margins, say about it today? Just a matter of time?

Don't get met wrong, I completely get the argument, and it's logical. It's just proven to be wrong...so far.

Also see: content (media)

I don't think it has been proven wrong, I just don't think shareholders seem to care. If they increase earnings 22.7 times over 2013 by 2018 and the stock price goes nowhere, they will still have a PE of 22.

And just for historical sake, they've increased earning by 1.4 times since 2004 and sales only by 10, so I'll take the under.

Pyperkub · Post by **Pyperkub** » Mon Apr 28, 2014 11:42 am

Here's the rosy picture:

However, although Bezos is worth a lot of money on paper and Amazon is one of Wall Street’s most beloved stocks, the company does not actually clear that much money. Rather than pocketing a massive profit, Amazon invests the vast majority of the money it makes back into the business.

“In the long run, if you take care of customers, that is taking care of investors,” Bezos said when pressed on why he doesn’t concentrate on profits. He also said that he won’t raise prices even when market analysts tell him to because it “erodes trust.”
3. Amazon wants to take over the world

“Anything you want on Earth, you’re going to get from us,” an Amazon vice president told Charlie Rose. And they mean it.

All that money Amazon is putting back into their business is going toward building distribution centers all over the world in an effort to achieve their goal of same-day delivery. Being able to deliver on the same day an order is placed will allow Amazon to expand their selection of products. They’ve even started delivering groceries in select cities. Amazon now uses more trucks than planes because they’ve built so many distribution facilities.

Picked up a few more shares this morning.

noxiousdog · Post by **noxiousdog** » Mon Apr 28, 2014 12:03 pm

That still doesn't mean he can increase margins, but good luck.

ed: I'm not even sure he wants to.

LawBeefaroni · Post by **LawBeefaroni** » Mon Apr 28, 2014 12:15 pm

And it's off another 4% (-$12.80 to $291). Like I said, $280 and I start looking but I don't see any reason to rush to add/buy right now.

Pyperkub · Post by **Pyperkub** » Mon Apr 28, 2014 12:24 pm

noxiousdog wrote:That still doesn't mean he can increase margins, but good luck.

ed: I'm not even sure he wants to.

I was looking for an article I'd read about someone who had left Amazon (I think) a few months back who really corroborated the investment vs margins thesis most of the investors buy into, but I couldn't find it.

For me, it's a very long term position (and not a particularly huge one either ~ 25 shares currently). I also love what they've done in the B2B Cloud space with AWS - their dominance of that market was what really pushed me to buy in the first time. I probably still have a larger position in Costco however (been DRIP'ing, so I haven't tabulated the entire position lately)...

noxiousdog · Post by **noxiousdog** » Mon Apr 28, 2014 1:02 pm

Pyperkub wrote:
noxiousdog wrote:That still doesn't mean he can increase margins, but good luck.

ed: I'm not even sure he wants to.
I was looking for an article I'd read about someone who had left Amazon (I think) a few months back who really corroborated the investment vs margins thesis most of the investors buy into, but I couldn't find it.

For me, it's a very long term position (and not a particularly huge one either ~ 25 shares currently). I also love what they've done in the B2B Cloud space with AWS - their dominance of that market was what really pushed me to buy in the first time. I probably still have a larger position in Costco however (been DRIP'ing, so I haven't tabulated the entire position lately)...

FWIW, our company has considered Cloud and favors Microsoft to Amazon by a wide margin.

Pyperkub · Post by **Pyperkub** » Mon Apr 28, 2014 6:31 pm

LawBeefaroni wrote:And it's off another 4% (-$12.80 to $291). Like I said, $280 and I start looking but I don't see any reason to rush to add/buy right now.

Closed @ $296. Had my order @ $293, so, yippee!