The Freedom Factory

If you want spectacular gains, like Buffett used to make back in the day, you may be out of luck using Buffett methods.  I believe that back in the day, markets were less efficient and more stocks were incorrectly valued.  Finding stocks that catapult 100′s of percent in value in a year or two is very hard to do.  It is hard to find stocks that will grow 50% in 3 yrs.  And that isn’t even crazy growth.  That was normal 20 yrs ago.  Maybe it is just the last decade which has me pessimistic?  (It’s the only one I’ve invested in though.)

Anyways, if you think you know which way the market is going to move there are ways to boost your returns besides options (and probably less expensive than options).  My friend who trades options (his closest friends know him as “The Horse”) told me that “right now options are selling at a very high premium because we are in a market of never before seen levels of volatility.”  Continue Reading

Natural gas has been absolutely destroyed since early July, falling nearly 60% from its high. There are certainly good reasons for the decline – US dollar appreciation, bursting of a commodities bubble, and realization that world supply and demand are not in as critical a situation as doomsayers had earlier proclaimed. Volatility is a scary thing, but it is the bread and butter of the savvy option investor. There are several ways to play natural gas that can more than pay for your winter heating bills. Continue Reading

The Fund’s position strengthened slightly over the course of the week, posting a 3.9% gain. Overall, the Fund is up 12.84% since inception. July options contracts expire this coming Friday, the 18th. We currently hold two positions that are in-the-money (ITM), with several others whose prices are relatively close to short strikes. This coming week should contain a high level of volatility as contracts approach expiration, but the Fund is positioned reasonbly well to capitalize on favorable to neutral price movements. Continue Reading

I must humbly apologize for miscalculating last week’s (and June’s) performance figures. However, this mistake is sort of like getting a “Community Chest” card in the board game Monopoly that says “Bank error in your favor.”  VPAG actually earned 3.18% last week, rather than the previously stated 0.15%. This brings June performance up to 17.31%, rather than the previously stated 13.87%. Total portfolio return since inception is now 13.59%. Updated figures are as follows:

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June results are in, with VPAG earning 13.87% for the month. We closed out the week with a flat gain of 0.15%, while the overall Fund’s return since inception is 10.26%. Two-thirds of our portfolio is currently allocated in July ’08 contracts, written on U.S. small cap stocks, long term bonds, real estate sector stocks, oil, and natural gas. One-third of the portfolio is in cash, to be partially allocated over the next couple weeks. Continue Reading

June contracts expired today after a tumultuous run, with the Fund earning 8.82% for the week. Overall, the Fund is up 10% since inception in March, with a 19.3% gain since the expiration of May contracts. Those patient enough to suffer through March and early April losses have been rewarded with a 47.4% gain since our low.

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Iron condor credit spread strategies are particularly vulnerable to severe market movements, either up or down. For a portfolio predominantly allocated towards this trading strategy there are certain steps one should consider to protect against potentially catastrophic events.

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I’ve been hearing some glum news of late, many a bloke predicting the imminence of a severe market crash. The bad news seems to come in daily: round two of credit crisis, global inflation exceeding expectations, and real estate prices and sales volume spiraling lower.  Throghout this mess U.S. stocks, as measured by the S&P 500, are down roughly 14.5% since last October, and long term bonds, as measured by the Lehman 20+ Year Treasury ETF (TLT) have dropped 7.5% off March highs. Just as markets seem to be hanging precariously on edge, central banks are whispering about potential rate hikes to stem inflation. Regardless of the direction markets take, there are definite steps prudent investors should take to protect themselves.

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The Fund earned a 13.04% return this week, finally breaking into positive territory with an overall return of 1.17% since inception. Our portfolio is entirely positioned in June ’08 contracts, which are set to expire next Friday. There is $10.1K, or 20%, of potential value remaining on contracts that can be earned if our positions all expire favorably. Continue Reading

The first week in June has proved difficult for the fund. Gyrating oil, natural gas, and currency markets necessitated loss-realizing risk reduction trades, resulting in a 7.57% loss. Overall, the fund is down 10.5% since inception. Despite the short term losses, VPAG is in a fundamentally stronger position and set to gain significantly over the next two weeks as June ’08 contracts near expiration.
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