Saturday, January 31, 2015

psar psearch makes AMaZiNg call

in the last half hour of the day the psar indicator, working on psar-psearch optimized settings, reversed a short position and went long on amzn. take a look:

Saturday, January 24, 2015

thinkscript included: sdi_seasonalStgy revision 1.3.0

this release of sdi_seasonalStgy includes two improvements to the statistics label. 


  • previously, the stats label omitted the first trade from the accounting when it coincided with the first bar on the chart. the reported win/loss ratio and average g/l were correct they just, sometimes, included one fewer data point than was available. 
  • the second improvement is a report of the standard deviation of the gains and losses. this is shown as a +/- number following the average g/l as you can see from the image below:

SPY with sdi_seasonalStgy rev 1.3.0 showing average g/l over last 15 years of a 10 trading-day hold.
this is probably why some pundits are suggesting not trading over the next two weeks.

Wednesday, January 21, 2015

thinkscript included: %bid custom watchlist-column

one of the bits of thinkscript that i use every morning in the premarket is a custom column in my watch list called '%bid', here's the picture:
a watchlist with the %bid custom column
%bid compares the the current market bid to the last closing price expressed as a percentage. very simple, but it has helped me enhance profits many times. how? i sort my watchlist by %bid and that allows me to rapidly identify one of my positions that is gapping up before the market opens. this affords me the opportunity to cancel whatever exit trade i have in place and follow the equity in question during the opening hours. maybe it is one of the rare gap-and-go stocks and runs up all day. here's the code:

Tuesday, January 13, 2015

thinkscript included: sdi_impvol - yet another implied volatility script

sdi_impvol plots implied volatility in a chart subgraph like the tos impVolatility study does but with some additional stuff that I think you will find is an improvement. here is an image of sdi_impvol at work:
spy with sdi_impvol showing the high, low and mid levels and the rank.
the green plot line is the implied volatility and the blue lines are the high, low and mid levels. the rank label indicates where the current implied volatility is with respect to the range between high and low. the rank and range lines contain a correction for equities that have discontinuous or infinite values for implied volatility and will display values for rank even when the tos iv percentile (same as iv-rank) does not. the label text and color are adjustable from the customize study dialogue as are the plot properties. in fact, the plots can be hidden, leaving only the rank label showing, and the study moved to the upper chart graph to replace my previous sdi_ivp study with an improved rank label.

here's the code: (how to install)

Monday, January 12, 2015

using options to make that com-free etf work harder

i've been eating my own cooking on these commission-free etf's. rsx, the russian etf, is one of the etf's that i started accumulating because it was sporting a 5% yield. the yield has now moved down to the 4% handle so i have slowed my accumulation of rsx but i have accumulated 19 shares with all the up and down in that product. 

so now i want to show how the strategic use of options can make those measly 19 shares work harder. the action i took today was to sell a call vertical spread on rsx. here's the picture of what i'm talking about:
rsx bear-call vertical
if rsx is trading under 16 (14.80 at the time of this writing) in 39 days then these two options expire worthless and i will have lowered the cost basis on my 19 shares by $1.26/share because i collected $24 (net of commissions) up front against 19 shares. 

as the price of rsx moves above 16.24 at feb expiration then the vertical starts to be worth more than what i collected up front and detracts from the net-liquidating value of the total position. however, the shares will have improved in price by $1.44 or more in that case. the actual break-even price is at $16.54. here's a picture of the p&l analysis:
p&l graph for long 19 rsx shares and short call vertical
there is an excellent 72% chance that this position finishes in the under 16.54 price area, where i am better-off for selling the spread. there is a worse-off price area between $16.55 and $19 that has a slim 15% chance of occurring. above 19 the p&l starts to improve again and the upside-profit is actually unlimited, just diminished by the $80 it will take to buy back the spread.  if you are building wealth from scratch and choose to copy me on this strategy then stop buying the underlying. on the slim chance that rsx does take off to the upside you could then sell 5 or fewer shares, commission-free, to cover the spread repurchase cost.

Sunday, January 4, 2015

commission free etf's on tos

previously, one couldn't participate in the commission-free etf program from a thinkorswim account. i don't know when that changed but its no longer true. i do it all the time now.

there's an advantage to trading the com-free's from tos because one can utilize advanced order types that are only available on tos. for example, trailing buy-stops are rejected by the tda web accounts but work on tos. also, you can make use of tos's advanced order-triggering mechanisms. i recently found utility for the advanced order called 1rst triggers sequence. this order type creates a queue of orders that are sent to the market in sequence as each one is filled. here's a screen shot of one of my sequenced orders:
commission-free etf, ewu, with queue of single share buy orders
each of these orders is a duplicated 20 cent trailing buy-stop-limit to purchase a single share. the trailing buy-stop is a wonderful tool that will defer buying into a falling market. as the price moves down, the stop price will move down with it but 20 cents higher. when price moves up by 20 cents the stop is triggered and the order converts into a limit-order at wherever the stop price has migrated to. regular stop orders convert into market orders, which is great for exiting trades, but i like stop-limits for trade entry to help prevent unfavorable fills on a gap-up in price. the 18.50 price is the current ask price and controls where the initial stop sets up, at 18.70. once the market is open the stop will shift down to 20 cents over the mid-bid-ask price (or mark-price) and maintain that relationship thereafter. 

the basic idea here is to accumulate shares when the market is rising. choppy markets may trigger buys without trending price movement but that's mitigated by the small number of orders in the queue. once the queue is empty one can re-evaluate the trend and adjust the parameters for the orders. for example, a bigger trailing-stop will throttle back the fills in a choppy market. in general, i like a 1% trailing stop on etf's yielding above 5%, 2% trailing stop on 4% yield and 3% on 3% yield. when an etf gets under 3% yield i don't refill the order queue. that's my plan to accumulate a small number of shares in a diverse number of temporarily high-yielding etf's. alas, dividend payouts may vary and not always to the upside.


Friday, January 2, 2015

on-again referral offer

the tda referral promotion is back and so is my referral offer: let me refer you to tda when you are opening a new funded account and i will email you a distribution of the import files of my thinkscript suite.

here's how this works: there are three pieces of information i need to initiate the referral - your first name, last name and the email address you will provide when you open the account. then, you open the account and fund it with at least $2,000 within 90 days. when i receive the referral reward i will email the suite for you. tda is offering you up to a $600 reward to open a new account so its a win/win. 

best and make 2015 a good one.
-allen



Thursday, January 1, 2015

commission-free dogs

this time of year you will hear about the dogs-of-the-dow strategy for investing. this is because dotd strategy revises its list of dogs on jan 1.  dotd picks the top-10 yielding dow stocks on jan 1 and invests equal dollar amounts into each. at the end of the year one sells the stocks that are no longer dogs and buys the new dogs. 

the simple concept behind dotd is that since price and yield move inversely to each other, then, the highest yielding stocks are in some sense priced cheaply and will eventually get bid up to an average yield for the dow ... in theory. in practice, this strategy has a checkered past, with some years of outperformance and others of underperformance and thus represents no particular investing magic but as an engagement tool is still valid, except that you need some money to start with.  you will need to deploy a minimum of a $1000 for every stock to reduce the impact of commissions to 1% or 2% to even have a fighting chance of making money. so implicit in this strategy is that one already has $10,000 sitting idle in a brokerage account.

at smalldog investor i like to show how one might start with almost nothing and methodically build up invested wealth by application of investing knowledge and technique. at tdameritrade (my brokerage and the one that is friendliest to small investors) there is a list of etf's (exchange traded funds) that can be traded for zero commissions, provided one holds shares for at least 30 days (there is an online agreement that must be signed in order to participate; signup is free.) some of these commission-free etf's pay a substantial dividend, like between 5% and 7%. so one could apply the same dotd logic to this list of commission-free etf's - list them in decreasing order of yield and invest in the highest yielding ones. this looks like:
tda commission-free dogs
the difference now is that one can buy these etf's efficiently in sizes as small as 1 share (and i have.) why not? there's no commission. so if one has an extra $20 a week to spare, one can start buying ewu, the etf that represents ownership of british stocks, and make almost 8% in dividends.

what's more, one can scale-into these etf's 1 share at a time. the biggest fear that a yield chaser has is that a decline in share-price will offset the dividends collected, but, one could simply buy additional shares to efficiently dollar-cost average. 

if price increases, the yield will drop for additional shares purchased but your original shares purchased at high yield will continue to yield that original rate, so long as the dividend remains the same. thus, one could stop buying the etf's that have declined in yield and maybe start purchasing new etf's that have increased in yield. i recommend revisiting this frequently, preferably weekly but monthly or quarterly will do.

as dividends start coming in they will increasingly offset the cost of shares being acquired. eventually, one will get to the point where the incoming dividends pay the whole cost purchasing shares and the process becomes self-sustaining. with the ewu, for example, yielding 7.8% and a share price of $18, owning 231 (=18/.078) shares will pay for 1 additional share per year. 52x that (~12,000 shares) will pay for an additional share per week.

this is a kind of a diy drip (dividend re-investment program) the difference being that you control when the re-investment occurs and you can cross pollinate. that is, use the dividends from the old high-priced ex-dogs to help pay for the new dogs.