Crash Market Stocks - Financial Tips On Making Money In The Stock Market

You know times are getting bad when banks are offering trading accounts with free commissions attached. I thought I would never see the day. In my research today, I found Zecco, an online brokerage company, offering free trades for new account sign ups. I think you get 10 free trades every month and then it's only $4.50 per trade, wow. There platform was pretty solid too. I am highly considering switching over from my rip off platform! Anyway, if you're interested you can find more info at Zecco.com


I think it was only two days ago you couldn't go to any financial related site without seeing the words, DEPRESSION, MARKET CRASH, FINANCIAL CRISIS, etc. Today, it seems as if everyone is back to normal, like the past 6 months haven't even existed. Today, we're seeing, THE WORST IS OVER, WE'VE REACHED THE BOTTOM, WELCOME BACK BULLS. Oh how quick we are to forget. I compare this time much like the eye of a hurricane, except that the back part of the storm is a category 5, compared to the category 3 we just weathered. Historically, holiday season is the bull time of the season. So I don't find it that shocking that our markets are holding up relatively stable (only for the past 3 days!). Also, considering that we actually increased in consumer confidence this past month (the market expected a loss), and we still barely made it into the green today, makes me still incredibly skeptical about the market and a strong believer that the worst is still very much to come.

To increase the good fluff, Secretary Paulson discussed the continued efforts of lowering mortgage rates by purchasing mortgage debt, hoping to unfreeze the very frozen financial markets. Obama has also discussed his plans to cut spending to help balance the budget after the spending of the huge expected dollars needed to help fund this multiple trillion dollar effort. I also woke up with a gold nugget under my pillow. Words are words, and although they sound inciting and persuasive (especially out of the mouths of politicians), it is a lot harder than people think to get all these problems fixed. Even if we made the perfect move, every time, it would still take over year to get everything sorted out. Once again, we find ourselves in a false reality with talks of good news to try and over power reality. Holiday cheer helps with keeping spirits high, but I believe we are in for a mess in or even before first quarter '09.

Nobody talks of inflation (in fact everyone talks of deflation worries), however when we bounce from this thing, I see us bouncing right into hyper inflation. I mean the discount rate is almost down to 0! Sure the Fed can quickly meet to tighten money supply, but I still see interest rates heading back toward the teens, at least for a short period. There has also been a severe over correction on commodity prices. We could see a quick jump back up with commodities as we regain some of our footing. This could also lead to a quick inflation. This is why I have been extremely bullish on Gold.

I don't believe, aside from mortgage debt from houses, much of this credit crisis has hit the actual "consumer" yet. Sure, many have lost their jobs and may be living off of severance or unemployment right now, or maybe even an emergency fund. Try being jobless for a year, unable to open any lines of credit, with unemployment checks running out, 3-4 mouths to feed and nowhere to work. I think we are headed for these types of times for Americans. As much as I want to rebound from this crisis, and make some money on the long side again, I just can't find the will to believe the worst is done. So believe what you want to, I personally feel that the worst is still yet to come.

Overall, it was a pretty good day for me. I saw green in almost everything. Both FXP and EEV ended in the green, while UYG and DIG also continued to receive. Even though I remain very bullish on gold, I sold a lot of my GDX options today (more than doubling my investment), only because I think I can catch it again on another dip. Anytime I can double on the long side, I take it! I just think even gold will get brought down with the rest of the market again before it pops good. China continued to show weakness yesterday with doubt creeping in and many feeling like their gains the past few weeks have been a little too optimistic. I believe that perspective will continue for a while.

I am continuing to hold on to my UYG and DIG. Even though I believe our woes with oil is still not over, OPEC meets on Friday to discuss the possibility of maybe yet another cut in supply. This usually causes a nice little pop. What I have noticed, though, is to usually sell out of these "anticipation pops" the day before the news is announced, especially in this market. Usually, after the announcement we are finding a lot of "over anticipation" and correction in value and can sometime eat into your profits anywhere from 3-6%.

SRS was almost in purchasing position. If it gets below $120, my round of buying will begin once more. Also, for you day traders, SRS is a great intra-day trading fund. Today, the spread on SRS was from $125 to $152. That's a 21% spread. Time the bumps right, and you can make a pretty healthy 1 day profit. This goes the same for SKF. It should be interesting to see how the market reacts tomorrow, being a day before a holiday. It's almost like a mini Friday. I think we have been itching for a pretty strong sell off, so don't be surprised if we spend most the day in the red. However, we are in a state of "bailout fluff" again, so more news could still bring some gains. I just think people want to pocket some of these recent gains and go and buy their turkey. So expect to probably see us teeter tottering back in forth from red to green, like we saw today.

I think the resistance we're seeing during this "bull season" is showing that we are definitely not out of the hole yet. Not even close. This year's black Friday has to compete with BK Friday, who are all the retailers liquidating their inventory for Chapter 7. Housing sales got killed today, which was expected, but was barely noted behind all the noise Paulson was making from the podium. While volatility still remains high, and volume is still higher than average, we continue to be in a vulnerable state for market failure. Stay on your toes, and watch out for investing in retailers for the holidays. Their usual holiday bumps they receive, could be replaced with losses this year. Have a good evening everyone and Happy Trading.

A frequent question I have been receiving in emails have been dealing with my decision to trade options for my long positions. I understand option trading can be confusing, but I thought I would dedicate a post to give a quick definition of options trading, more particularly call options rather than puts, considering that calls are mostly what I have been doing lately. Hopefully I can shed some light on why I choose to trade them. If you are currently having grief with your trading platform or are looking for a new platform to trade options with, I recommend TradeKing. Good platform, some of the lowest commissions I have seen, and they are running a $50 credit promotion for sign up before December. You can sign up here: Open an account at TradeKing and get $50.


First, an Option is a leveraged contract purchased at a premium, representing the control of 100 shares of a given stock. In other words, when buying an option, you are buying a contract with the "option" to purchase 100 shares per contract at any time within the contract period. Below is an example of a Call Option table for Apple. First notice that this is an option expiring Fri, Dec 19, 2008 as it says in the upper right corner. This means that the terms of this contract are valid until the given date. You can buy contracts years in advance of expiration. We will use this Dec 19 ending contract as an example. Lets brake it down.



Strike - This is the price per share that, if executed, the buyer of the option contract is able to purchase the stock. For example, circled in red is $90. This means no matter how high apple goes before the expiration date, I have the option to execute my contract for $90 per share.

Symbol - Every option contract has a unique symbol, much like a stock ticker. This just identifies the actual contract. You can track these in your portfolio traders much like regular stocks using these ticker symbols.

Last/Chg/Bid/Ask/Vol - These are all symbols that I am sure most of you will recognize, because they are found in the trading of normal stocks. They trade much like normal stocks. However, lets dive into the pricing of options.

Buying Call Options
You will notice on the $90 option, the Bid is $4.90 per contract. Now be careful, because this does not mean that each contract is $4.90 each. This means that your paying a $4.90 premium per every share you buy. Having 1 option contract representing 100 shares, this means that 1 option contract for this contract would cost you (4.90 * 100 shares) or $490. This represents your cost basis, as well as your maximum loss if Apple decides to tank. Remember, this does not give you ownership of 100 shares, just the right to purchase 100 shares at the "strike price." If you do decide to exercise the contract, you will have to pay the additional (100*90) or $9000 to own the shares.

So lets say we purchase this contract and pay our $490+commission. To do this, we select the "Buy to Open", which means we are opening this contract. As Apple stock continues to move, so will its option price. The only difference is that the option price will move with much more volatility, because of it's 100/1 leverage. This gives buyers a good opportunity to receive bigger gains as they choose to buy stocks at the right bumps. From now until the expiration date, we are now able to resell this contract. So if Apple ends up going up to $95, its option price will go up considerably more on a percentage basis. If we were to turn around and sell it, we would select the "Sell to Close." This would then free us from this contract. Many times you are able to flip an option contract within a few days and double your money. This means you are able to make a nice healthy profit without ever having owned the stock! However, this can get you both ways. It can go down just as fast as it goes up.

As time moves closer to the expiration date, demand will go down for the contract, especially if you haven't reached your "strike price." It is best to try and resell your contract with some time left before expiration. Anytime your option is "in the money", this means that the price of the stock is over the strike price you purchased it for. This usually will give you a good profit if you can get your options in the money.

When you buy an option contract, you are not obligated to exercise it. In fact, I rarely exercise an option contract. My goal is always to be able to flip the contract before it even gets close to its expiration date. However, if you wish to control the shares at the strike price, you're more than welcome to. I would just rather make my profits on the option appreciation, rather than forking up more money to purchase the actual shares. It's less of a hassle for me. If you choose never to resell the contract for whatever reason, your contract would then automatically expire (unless it was in the money, where sometimes banks will automatically exercise them) after the expiration date, freeing you from the contract.

The reason I choose to trade options, especially in this market, are for a few reasons. First, I like the volatility. If I time the bumps right, I will be rewarded far more on my options, than if I were to own stock shares for the same cost basis. Second, the ability it gives me to control hundreds of shares for a minimal basis. Options minimize my downside risk considerably rather than if I chose to own the actual shares. This makes me a lot more comfortable, especially in this market. Options have also been in more demand with the uncertainty of the market. On up days, options can be trading considerably higher, just from the premium people are willing to pay for the security.

Another side to trading options, are playing the short side, or Puts. This usually requires margin trading (which essentially means borrowing from your bank) and can be very risky if the market doesn't go the way you want it to. Sure, you can make a lot of money off of naked shorts, but I choose not to play them as often.

Most every Investment Bank allows for option trading. For some banks, a new application is sometimes required to be approved for option trading. Even with that, many times you are limited to what kind of trading you can do, depending on your experience. They will usually start you off of non-margin option trading to help you learn the ropes. If you can't trade options, check with your bank you trade with. I use Zecco.com a lot as I have found they have some of the most competitive prices for commissions.


I hope this helped those of you that have been wondering how to trade options to see if it's something for you. I have found options to be very profitable for me in this market and a great hedge for my short position. Covered calls can also be a great way to make extra profits on a long position you may be holding. By doing so, you can continue to lower your cost basis.

I hope everyone has a good week and holiday. See you tomorrow.