The Freedom Factory

For everyone that has a Facebook account, the status updates can be a powerful tool to get your opinions across to your friends-sometimes I just can’t believe what some people say! A closet socialist friend of mine posted a congratulatory post about Obama’s Nobel Peace Prize… Continue Reading

The stock market hit and then furiously bounced off a low on March 9th. Since then it has shot up about 30% nearly uninterrupted. Hope abounds that we may be emerging from one of the worst economic disasters in 20+ years. By many measures the frantic chaos of the last year appears to be subsiding, particularly when looking at the resurgence of corporate earnings, stock prices, and declining value of the CBOE Volatility Index (VIX). Yet it is at times like these when it makes most sense to buy insurance, and it just happens to be cheaper than it has been in a long time. Continue Reading

Government detention camps cover up deaths-does America have a human rights problem? Congress passes unprecedented $3.6 trillion budget with $1.2 trillion deficit, official unemployment rates his 8.5%-some economists claiming they are really upwards of 20%, government mortgage giants Fannie and Freddie to pay $159 billion in new bonuses, Obama calls end to ‘Pax Americana’, world leaders pledge $1.1 trillion to IMF, Russia refuses to remove troops from Georgia, NY protesters call for government to ‘Bail out the People’, Hugo Chavez declares that ‘Capitalism must end,’ and Treasuries drop with announcement of next week’s $59 billion note issue and Goldman Sachs estimate that government will need to borrow another $3.25 trillion this year… Continue Reading

Obama rejects Gov. Sanford’s plan to use stimulus money to pay down South Carolina debt, Russia planning ‘large-scale’ rearming, Obama’s health care plans will cost at least $1.5 trillion, companies fight back against Obama’s economic plans saying they are hurtful, Obama tries to overrule Congress and stifle whistle-blowing, Argentina moves to nationalize factory owned by Lockheed Martin, and big changes stirrup up at the U.N…just the latest in your Freedom Under Fire Report! Continue Reading

Obama considers taxing health benefits-could be “the largest middle-class tax increase in history”, A.I.G. finally releases names of beneficiaries of taxpayer money, and Hugo Chavez sends troops and warships to seize Venezuela’s transportation nodes…just the latest in your Freedom Under Fire Report! Continue Reading

Senate planning another half trillion dollar bailout, tough times but that doesn’t stop the American consumer, unemployment up to 8.1%…or is it 19%? Germany refuses to play bailout game, says it’s best for automaker to go bankrupt, 7,000 Mexican troops deployed to border to fight drug war, Army Captain steals $690K from government,  hedge fund sees inflation as next step of crisis…just the latest in your Freedom Under Fire Report! Continue Reading

The Wall Street Journal reports today that $694 million has been returned to the Medicare trust funds over the last three years, found by contracted audit agencies. The Medicare and Medicaid Services agency has contracted with private auditors to review a total of $317 billion in claims just from the states of New York, California, and Florida. The auditors were looking for improper payments, of which they discovered 0.22% of were incorrect. That percentage doesn’t sound like much, but returning $694 million to the trust funds is an accomplishment for which government should be praised.

Government policy drives markets. With trillions of dollars being spent by Congress and doled out by the Federal Reserve in one bailout plan after another, we all need to think about how these programs will affect our financial positions.

Will we experience hyperinflation, the kind that can wipe out our life savings? Or will these targeted bailouts stimulate tremendous growth in certain industries?

In one of my favorite movies, Rounders, Matt Damon relates that in poker “if you can’t spot the sucker in the first half hour at the table…you are the sucker.” Read my book, Obamanomics: How To Invest Over the Next Administration to make sure government policies don’t make you the sucker!

Spread strategies are the cornerstone of writing options for income. The following wikipedia link offers a nice overview. The spreads I advocate and actively trade are vertical spreads that involve simultaneously buying and selling contracts with varying strike prices on the same underlying security, with the same time to expiration. Furthermore, I strongly advocate constructing net credit positions in which you exploit the time decaying nature of option prices. There are three strategies that fall into this category:

Bear Call Spread

Bear call spreads involve constructing a call spread that makes money if the underlying asset does not settle above a set strike price at expiration. For instance, I currently have a Sep07 520/530 call spread on GOOG. I sold 520′s and bought 530′s, netting a credit to my account since the 520′s are more valuable than the 530′s. I have a 100% win if GOOG settles below 520 on the 21st of the month, so keep your fingers crossed!

Bull Put Spread

Bull put spreads are constructed by simulatanously selling and buying puts with varying strikes on the same underlying security with the same time to expiration. The position earns maximum profit when the asset’s price settles above the strike of the put you sold. A current example in my portoflio is a Sep07 470/480 bull put spread on GOOG, in which I sold 480′s and bought 470′s.

Condor Spread

The condor spread is my personal favorite. This position is constructed by simultanously implementing the previous two strategies. The 520/530 call and 470/480 put spreads on GOOG are two legs of a condor. The above profit-loss diagram shows that maximum profit occurs if GOOG settles between 480 and 520 on the 21st of September.

The margin requirement for a spread is the difference between strikes (the spread) minus the credit received. In each condor leg there is a spread of 10, which is multipled by 100 shares per contract, for a total margin requirement of $1,000 minus the credit received. This adjusted figure is the amount of collateral my broker requires I keep in cash to cover my trades.

The most you can lose in any of these trades is the margin requirment.

The great thing about condor’s is that credit from both legs is subtracted from the same per-leg margin requirement, which can significantly lower the figure. Rather than adding each $1,000 leg, the total requirement for both legs is that amount. This is because the legs are perfectly negatively correlated and the underlying security can only assume one value at expiration (It cannot be both below 480 and above 520!) This is a great way to maximize ROIC and bound risk.

Getting Started With Iron Condors.: With real estate prices still falling, stocks whipping around like crazy, and even U.S. Treasury bonds becoming increasingly risky, it pays to investigate alternative forms of investing. One method I use regularly is selling market insurance.

Every investment involves risk and everyone has their own objectives. Some people want low risk and are OK with low returns. Iron Condor trading strategies turn these people into your clients.

Learn how to use options to start your own insurance business, having the market pay you to insure its risks. Get paid regular premiums every month! This Iron Condor trading system will teach you how to become your own insurance company, managing the market risks you assume. Don’t go into this blindly! Learn how the experts use options to generate steady income.

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