Thursday, May 21, 2009
LIst of hedge funds and other money managers
For those looking for hedge fund lists, the following company has lists of hedge funds and private equity firms in the US.
Tuesday, January 6, 2009
Would You Buy the S&P 500 at 25x Earnings??
Would You Buy the S&P 500 at 25x Earnings?
Certainly markets have seen booms in which the broad indexes sold at PE ratios in the mid-twenties and higher, but those were better times. In early 2007 when the S&P 500 was trading at 1400, analysts estimates for 2008 S&P earnings stood at $92. This created a relatively mild PE (price-to-earnings) ratio of around 15. By early 2008, earnings estimates for the S&P 500 had slipped to $72 while the S&P remained at around 1300, a ratio of about 18. At the end the third quarter 2008, analysts estimates for earnings had fallen all the way to $60 but the PE ratio remained at 18 as the S&P fell to nearly 1100.
But what about 2009 earnings?
Current analyst estimates for 2009 earnings for the S&P 500 have fallen to just $42!!! That is down almost 50% from what analysts predicted as recently of March of last year. So the future PE ratio for the S&P 500 at today's close of 935 is more than 22 and climbing!
In just the last 3 months analysts have slashed their predictions for 2009 earnings by more than 13%. In fact analyst estimates for 2009 have dropped by more than 13% in each of the last 3 quarters. If the first quarter of 2009 stays true to the pattern, look for estimates to drop below 36. At today's price this would represent a PE ratio of 26!
Don't expect a major sustained rally until expectations for earnings improve materially. And that may be a while.
Certainly markets have seen booms in which the broad indexes sold at PE ratios in the mid-twenties and higher, but those were better times. In early 2007 when the S&P 500 was trading at 1400, analysts estimates for 2008 S&P earnings stood at $92. This created a relatively mild PE (price-to-earnings) ratio of around 15. By early 2008, earnings estimates for the S&P 500 had slipped to $72 while the S&P remained at around 1300, a ratio of about 18. At the end the third quarter 2008, analysts estimates for earnings had fallen all the way to $60 but the PE ratio remained at 18 as the S&P fell to nearly 1100.
But what about 2009 earnings?
Current analyst estimates for 2009 earnings for the S&P 500 have fallen to just $42!!! That is down almost 50% from what analysts predicted as recently of March of last year. So the future PE ratio for the S&P 500 at today's close of 935 is more than 22 and climbing!
In just the last 3 months analysts have slashed their predictions for 2009 earnings by more than 13%. In fact analyst estimates for 2009 have dropped by more than 13% in each of the last 3 quarters. If the first quarter of 2009 stays true to the pattern, look for estimates to drop below 36. At today's price this would represent a PE ratio of 26!
Don't expect a major sustained rally until expectations for earnings improve materially. And that may be a while.
Quote of the Day
"As if we did not have enough problems, banks are now more vulnerable to the Black Swan and the ludic fallacy than ever before with “scientists” among their staff taking care of exposures. The giant firm J. P. Morgan put the entire world at risk by introducing in the nineties RiskMetrics, a phony method aiming at managing people’s risks, causing the generalized use of the ludic fallacy, and bringing Dr. Johns into power in place of the skeptical Fat Tonys. (A related method called “Value-at-Risk,” which relies on the quantitative measurement of risk, has been spreading.)"
Nassim Nicholas Taleb
Bearish Trade
With volatility slipping to somewhat more reasonable levels (at least in relative terms), it might be worth buying some OTM puts on an index like SPY or DIA. A 85 Put on SPY with a March 2009 expiration is currently $3.10 If you are bearish on the market's reaction to what could be incredibly dissapointing 4Q numbers this is might be a good play because it is both a directional and volatility play.
Because you are long the put, you are long volatility and a return to the higher levels of volatility we witnessed in December will probably bring about both lower prices and higher volatility.
If the market tanks in the next few weeks, don't be afraid to sell the put early and take profits. I would sell at anything above $5.00.
Will check back in before March to check on this trade.
Because you are long the put, you are long volatility and a return to the higher levels of volatility we witnessed in December will probably bring about both lower prices and higher volatility.
If the market tanks in the next few weeks, don't be afraid to sell the put early and take profits. I would sell at anything above $5.00.
Will check back in before March to check on this trade.
Tuesday, December 2, 2008
Advanced Option Trading Strategies: Bear Put Ladder Strategy
Bear Put Ladder:
A bear put ladder is simply a bear put spread with the additional sale of another put at a lower strike price. This position assumes unlimited risk potential because the trader is short 2 put positions and long 1 put position. However, the maximum reward is capped. This option strategy is neither bullish or bearish, but rather depends on how close the final stock price falls to the middle priced put option. If the price of the stock goes above the higher strike put (the long position), you have a loss on the trade. Additionally, if the stock ends below the lower price put, you also incur a loss. Therefore the trader wants the stock to remain within the outermost strike prices.
Below is the risk profile for a bear put ladder:
A bear put ladder is simply a bear put spread with the additional sale of another put at a lower strike price. This position assumes unlimited risk potential because the trader is short 2 put positions and long 1 put position. However, the maximum reward is capped. This option strategy is neither bullish or bearish, but rather depends on how close the final stock price falls to the middle priced put option. If the price of the stock goes above the higher strike put (the long position), you have a loss on the trade. Additionally, if the stock ends below the lower price put, you also incur a loss. Therefore the trader wants the stock to remain within the outermost strike prices.
Below is the risk profile for a bear put ladder:
Advanced Option Trading Strategies: Bull Put Ladder Strategy
Bull Put Ladder:
A bull put ladder is simply a bull put spread with the additional purchase of put at a lower strike price. The trader is long two puts and short a put option. The maximum risk is capped, but the maximum upside is unlimited. This might be considered a bearish strategy, but it is more accurately an advanced option strategy for income.
Below is the risk profile for a bull put ladder option strategy:
A bull put ladder is simply a bull put spread with the additional purchase of put at a lower strike price. The trader is long two puts and short a put option. The maximum risk is capped, but the maximum upside is unlimited. This might be considered a bearish strategy, but it is more accurately an advanced option strategy for income.
Below is the risk profile for a bull put ladder option strategy:
Advanced Option Trading Strategies: Bear Call Spread
Bear Call Strategy:
A bear call spread is an option trading strategy that is profitable for stocks that are either falling or rangebound. In an bear call spread, the trader protects a naked call position by buying a higher strike call option. Both the lower strike call that is sold, and the purchase of the higher strike call should be out of the money (OTM) to insure profits on rangebound stocks. This strategy works because the trader gets a net credit buy selling a more expensive call option and purchasing a cheaper call option (further OTM). Because both calls are OTM, if the stock falls or remains under the strike price of the short call position, both options expire worthless and the trader pockets the net credit (the difference in strike prices).
Below is the risk profile for a bear call spread:
A bear call spread is an option trading strategy that is profitable for stocks that are either falling or rangebound. In an bear call spread, the trader protects a naked call position by buying a higher strike call option. Both the lower strike call that is sold, and the purchase of the higher strike call should be out of the money (OTM) to insure profits on rangebound stocks. This strategy works because the trader gets a net credit buy selling a more expensive call option and purchasing a cheaper call option (further OTM). Because both calls are OTM, if the stock falls or remains under the strike price of the short call position, both options expire worthless and the trader pockets the net credit (the difference in strike prices).
Below is the risk profile for a bear call spread:
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