C.D.     OF COURSE you're welcome here.  Like spreadtrader, I too went back to the reviews looking for trolls, but lacking a definitive definition of troll, I couldn't get my gun sights on any.  However, I was looking for trolls amongst the others, because I certainly am not a troll, whatever they may be.   Anyway, I had lots of fun revisiting my old hunting grounds … thanks to you.

Overvalued in early March by what metric? PE ratios? The charts don't lie.

Someone asked earlier what is a contrarian in 2009………it's the same as a contrarian in 909 and 1909. It's merely someone who does what others won't do.

Don't look now but VXO and VIX are flashing buy signals today. Soon it will be time to buy more stock.

It's like Barry Sanders' mama used to say to him……."run where they ain't".

This post over on the reviews seems spot on:

Review by Dave, July 7, 2009

Re Solving the Timing Mystery, ugh. People bitched about the lousy timing in the MCP and kept mentioning Edelson’s better record, so Martin dutifully brings in Edelson and claims to NOW have the timing key. Great, except Edelson is calling for the market to RISE for another month or two (and then fall) while Martin is still screaming his head off about an imminent crash. The difference may be due to Martin’s not wanting (understandably) MCP subscribers to bail out while waiting for the end of the summer, so he has to keep up the bear fear-mongering even while his cohort is bullish. What a mess. Actually, even Claus now seems to say (latest blog) he thinks the market won’t be heading down immediately. If the MCP had been a much more reasonable $199 instead of $1400, I’d probably stay in it.

Another discomforting factor:

Martin Weiss regards a mortgage collapse as ongoing and long term.  Mike Larson calls the bottom as next summer, and Larry Edelson forecasts this summer as the bottom.  Well, that pretty well loads the bases. Someone on the team will be right.  In the future they can say, "We told you so."

C.D.    The timing gizmo available via The Foundation Alliance deserves its very own forum page.  Won't somebody who responded to the 90-day money back guarantee and is therefore currently 'testing' it please do all of us a huge favor and get this subject on the board?  In the meantime …

Something really exciting took place on the MDCP blog this morning. The MDCTeam (who are THEY?) posted an answer to a question that "a large number of subscribers have been asking". WOW!  This is exciting because it has never happened before.  Since inception the blog has been stuffed with complaints that we don't hear from Claus often enough and when we do most member questions are ignored. We pretty much decided that if we wanted answers, we would have to find them ourselves, and fortunately, we have some sharp minds among us who have jumped in to fill the void.  If the Team (just who are these people?) will continue this new and very welcome practice, a major source of member discontent will melt away.  Of course, the censor is one member of the MDCTeam, but who are the others? And what is their connection with Claus?

Speaking of censorship, bloggers are still complaining about their posts being edited and/or dumped.  To them I say, SHUT UP!  Those who signed the blog "T&A" last week surrendered their rights to free speech.  By 'signing' the T&A they gave the censor full authority to determine whether a comment was appropriate and to post or dump as the censor sees fit.  In fact, Martin owns your comments.  I very much like the way The Gumshoe allows the members to 'police' the forum, and I've seen for myself that the members are fully capable of censoring themselves without Big Daddy doing it for them. So to those members who object to MDCP censorship, I say send an email to Martin.  And maybe if he receives enough emails (how many would be enough?  100? 500? More?), he will rethink why he's doing this and throw out the current policy. 

Post edited 2:27 pm – July 10, 2009 by spreadtrader

j.t…….what the heck are you asking? I swear, you "MDCP" members speak a different language.

spreadtrader,  Just googled up a link to a press release from 6.30.09 that is helpful …

http://www.istockanalyst.com/a…..id/3322578

Or you can go to the horse's mouth …

http://foundationforthestudyof…..ycles.org/

Or you can go to the final destination…the sales office…at

http://www.moneyandmarkets.com…..html#order

I've got my doubts that this Cycles Indicator is any better at predicting what will happen in the market than is the horoscope in my local morning paper.  But I'm willing and eager to be proved wrong.   My more important concern, however, is whether there is ANY program(s) that has been user tested for a year or more and has proven it knows what the market is going to do over the short term and that it's going to tell me what to do so I can get rich quick and retire from the daily grind of getting up every morning, putting on my thinking cap, and trying to outfox Mr. Market.

spreadtrader,  I remember you were going to tell me the secret of 'collars' … forgot I was supposed to hold up my hand since I got sidetracked into the mystery of ethics, morals, etiquette, prison terms … but yes, I want to know whatever you know and will be forever in your debt for sharing.

First off, successful trading is all about the ability to assess and control RISK. It’s not about picking stocks, it’s not about market timing, and it’s definitely not about PE ratios or earnings statements. It’s about knowing how to buy and how to sell, as much as it is about knowing what and when to buy and sell. If you know HOW to buy, it doesn’t really matter what you buy or when you buy it. Gurus talk about "preserving wealth". If you really want to preserve wealth then understand that the first rule of trading is "don’t lose money".

Every major asset you own is probably insured………your home, your cars, etc. So when people trade why don’t they insure their investments? When you don’t insure an asset, it is fully exposed to the risk of loss. A "collar" is merely an insurance policy. Here’s how it works using GLD as an example.

Let’s say you bought 1,000 shares of GLD in early March at 92.00 a share with no insurance. You watched a $92,000 investment go to $85,220 by April 17th with probably very little clue where it was going. How were we sleeping in mid-April? Probably not very well. It’s almost an 8% loss at that point, but you know what, as percentage losses go, that’s not too bad. Still, $7,000 is a lot of money, especially when you have little idea how much more money is going down the drain. On April 17th you’re probably asking yourself: "do I walk away from $7,000, do I risk another $7,000, $10,000…..or more? What do I do?" If you’re presently holding GLD, where is it going from here? Do you know?

You wouldn’t have to ask those questions if you had insurance. A "collar" is simply the purchase of an at-the-money put option to cover the position at the time you buy the stock. Typically, I buy a put with at least 30 days to expiration. So if I bought 1,000 GLD today at 89.60, I’d buy 10 August 89 puts for 2.10 ($2,100). If I do that then all I am risking in the stock purchase until the options expire on August 21st is the cost of the option ($2,100) plus the difference between the purchase price (89.60) and the strike price (89.00)…….$2,700. That’s it.

If the price of GLD was at 35.00 on August 21st all you could possibly lose on the trade is $2,700. If you had that kind of protection since March would you be all that concerned about Marty’s inability to time stock purchases? You wouldn’t like it, but you’d be protected to that extent and you could decide whether Marty knows his stuff and whether you want a refund at your leisure and without worry.because you've controlled your risk.

I’m sure you’ll have questions like "what do you do when the options expire and how would I know when to sell ahead of option expiration; and what insurance will I have if I sell the option?" All good questions……and for only $2,999 you can become a charter member of……..j/k. I’ll try to answer any questions you have.

We could call the $2,700 a "deductible". But nobody likes losing anything; and even $2,700 is a lot of money. Suppose I could show you how to reduce or eliminate the cost of the potential loss with another simple option technique? I’ll do that next, but I have another commitment this evening………hell, I ought to start a newsletter.  

Reducing the cost of the "insurance" put option in the collar trade is fairly easy; and there is any number of ways that you can modify your level of risk. The easiest way is to sell fully covered calls. You’d want to take in enough option premium to make the cost reduction worth your while. However, you can choose the same or different calendar months to fit your needs. This is an excellent technique to use when you want the stock, but you are concerned that it is overbought and may retrace within 30 days.
 
Let’s use a different example. In the Biomed/Genetics sector DNDN is a high flyer and if you looked at the chart you’d see why……a solid 5 bagger since early April. What is the upside for this stock now? The downside?

You don’t really care…..you just want in on the action. (Darrell, are you listening?) Here’s what you do. You buy 2,000 shares of DNDN at 23.05, a $46,100 investment. If that’s all you do, are you worried that the stock may drop back to 10.00? You bet you are.

So here’s what else you do. You buy 20 August 22.50 puts for 1.85 each ($3,700). At the same time (and after looking at the DNDN chart, you sell 20 DNDN November 30 calls for 1.85 each ($3,700). 

Question: What is your risk in this trade until August 21st? 
Answer: $1,100, give or take a few bucks.

Why is that? If the price of DNDN falls below 22.50 by August 21st you are protected dollar for dollar by the 22.50 puts on all but .55 cents per share (23.05 – 22.50) on your investment. As the price of DNDN falls, the price and time value component of the short call also erodes, as well as the odds that the price of DNDN will hit 30 by November option expiration. Meanwhile, you sell the puts and the selling price becomes your new break even point for the DNDN stock you are holding. In other words, if DNDN falls to 16.00 and you sell the puts there, it is as if you BOUGHT the DNDN stock you’re holding for 16.00 a share. Do you see that?

So what have you lost in this trade? $1,100…..that’s it. (If you simply bought the stock and set a stop at 22.05, risking a mere 1.00 per share, you’d lose $2,000 if the stock price hit your stop.) Meanwhile, using the put and call "collar" instead, you’ve been holding a lot of stock that you thought had the potential to continue to the moon…..and may still have. This is the "staying power" of options. You can’t win if you don’t play. But if you play, you had better protect yourself.

So what happens if the stock goes up? Best case scenario, the stock goes to just below 30.00 by November, you’re up almost $14,000 (remember, the options transaction cost you nothing), the calls expire worthless and now you have to decide how you will continue to protect the position, or exit the trade. Without getting into a lot of detail, it’s easier to protect a position in profit than it is at break even, but you must be jealous of profits and not let too much get away.

There are a number of different ways to deal with the short calls as the protective puts expire and I won’t go into that now, because it is a bit off topic. If the theme is protecting your investment at the beginning of the trade, this is an excellent way to do it.

Enjoy the weekend. 

Wow Darrell, that's a hell of a return on DNDN!!  Good job.

I would subscribe to SpreadTraders site or Newsletter too if he had one!!! If you ever want to set a website/newsletter up let me know. I could have you up and running with your own website/blog in about 2-3 days for less then $15, really just the cost of the domain registration. I would host your site for free since you help me so much. Such a great assest and teacher on this site!

Seriously though, if you want your own website I'll set it up and build it for you. Here's the last site I setup:

http://www.RivalryFootball.com

Late Friday we got a 48-hour alert to buy Claus new reco.  Some members followed instructions and placed their buy order first thing this morning.  This afternoon they blogged about how this was the biggest one-day loss suffered to date. Members want to know if Claus is using the Cycles Indicator timing whizbang.    Don't the members ever read Claus bulletins?  Yes, he's using the Oracle.  He's consulting it right along with all the other whatnots and gizmos in his toolbox.  And this is the result.  Friday is the deadline for getting our subscription cost back…all 100% of it.  Future profits are uncertain at best, but a full refund by Friday is guaranteed.  And Martin sure is making it easy for the undecided to reach a decision.

An up week?

We're going to get a couple of big down days before this correction on the correction ends. The S&P is off less than 30% of its range since March, the NASDAQ even less. I'd like to see another 10% move down from here, with the VIX over 40.

I'll be buying stock then……..probably for the last time this year.

Darrell said:

Thank you spread, and I am listening and I hold a bunch of DNDN at a price of about $2.55 per share, so I should increase my holding by purchasing options and increasing my venture into DNDN. i'm thinkling on it.  Maybe will try this strategy on GOOGLE.

Hey, Darrell, where did you get the DNDN idea?  Not from Weiss, I'll bet.