MWS Capital

Retail investors flocking to 'one of the all-time suckers' bets'

2010-05-25T16:56:00.000-07:00

"David Siniapkin, a postal worker in York, Pennsylvania, uses some of his retirement money to trade options. After three years and being down as much as $10,000, he's broken even.The numbers of trades by individuals rather than institutional investors aren't available, said Jim Binder, a spokesman for Chicago-based Options Clearing Corp., which settles all trading of exchange-listed contracts.

Siniapkin was one of about 100 non-professionals who attended an all-day training class last month provided by online options brokerage Thinkorswim Group Inc., which Omaha, Nebraska- based TD Ameritrade acquired last year for $749 million.

Participants traveled as many as three hours to a windowless Radisson hotel ballroom near Philadelphia and scribbled notes as Bob Groves, a former Standard & Poor's 100 Index options trader on the floor of the Chicago Board Options Exchange, waved a laser pointer at a projection screen to explain advanced trades.

“I'll do the iron condors, I'll do calendars, I like double diagonals,” said Siniapkin, who said he has had “mixed success” with these strategies, known as multi-leg transactions, which involve buying or selling multiple contracts on the same underlying security.

Siniapkin, 46, said he tries to profit from strategies such as the “iron condor,” which requires placing four different bets on the same security, risking $38 to make as much as $204 on one trade. It takes its name from the payout diagram resembling a bird with outstretched wings. Investors use options to improve returns, hedge risks or speculate on market performance.

Volume in the U.S. has tripled since 2004 to a record 3.61 billion contracts in 2009, while trading by individual investors in the same period has increased fivefold at Fidelity Investments, the world's largest mutual-fund firm. Sophisticated online software and the growth in training offered by industry groups and brokerages, such as Charles Schwab Corp. and TD Ameritrade Holding Corp., are enabling individuals to execute advanced techniques on home computers that had once been the province of professionals.

“Trading options is one of the all-time suckers' bets,” said Whitney Tilson, founder of hedge fund T2 Partners LLC, based in New York. “Most experienced professionals lose money doing it. It's virtually certain that inexperienced, individual retail investors will lose money doing this.”

About half of options investors earn less than $100,000 and 70 percent trade to increase income and for short-term gains, according to an April survey by the Options Industry Council, an industry education group based in Chicago. Retail traders can access professional-level analytics and trading tools that “weren't even available to institutional investors five years ago,” said Andy Nybo, head of derivatives research at Tabb Group LLC in New York."
~ Source: InvestmentNews.com

For more stock advice, please visit MWS Capital, Chicago's finest investment advisors.

Latest Investment News... What Does May Hold?

2010-04-29T16:35:00.000-07:00

"Markets could be in store for another dose of positive U.S. economic data Friday, as the Greek debt crisis seems contained for now.

Stocks Thursday rallied as it appeared Greece would get an agreement for a multi-year bailout from the European Union and IMF by next week. The Dow jumped 122 to 11166, and the S&P 500 was up 15 at 1206.

The key economic report Friday is first quarter GDP, released at 8:30 a.m., along with the employment cost index. Chicago purchasing manager's data is released at 9:45 a.m., and consumer sentiment is at 9:55 a.m. There are also some major earnings reports, including Chevron [CVX 82.29 1.67 (+2.07%) ], Nasdaq, Simon Property, Allergan, Constellation Energy and DR Horton.

Markets will also be watching the progress of the financial regulatory reform legislation. Financial stocks jumped 2.5 percent Thursday. Energy stocks, meanwhile, were up just 0.1 percent, and the sector was a laggard despite some strong earnings gains. The oil spill in the Gulf of Mexico is being monitored for its impact on companies involved and the Louisiana coastline. British Petroleum [BP 52.56 -4.78 (-8.34%) ] shares fell sharply, as did rig operator Transocean [RIG 78.51 -6.32 (-7.45%) ], after BP said the damaged well was gushing five times more oil than originally thought.

US Economy
Pierpont Securities economist Stephen Stanley said he expects first quarter GDP of about 3 percent, below the 5.6 percent of fourth quarter.

"I think the data have been very encouraging over the last month or two," said Stanley. "It feels like we have good momentum on the consumer side. Chain stores sales have been good. Car sales have been good. I think the business side as well. Durable goods orders have been strong, ISM has been strong. I think we're building momentum."

FOR INVESTORS
* An Inflation Investment Opportunity
* Reform May Hurt More Than Just Banks
* HP Is a 'Buy': Traders
* Your Shield Against Greece, Goldman
* Watch Out for China

Stanley expects GDP to accelerate in the second quarter. "Even though the headline (Q1) GDP number is slowing down quite a bit from quarter four, the part we like the most, domestic demand, is picking up," he said. Consumer spending was up 1.6 in the fourth quarter, and he expects it to be 3.4 percent in first quarter.

Sell in May?

"You're going to hear that a lot in the next couple of days," said John O'Donoghue of Cowen.

"There's the old axiom—sell in May and go away," said O'Donoghue, head of equities trading at Cowen. "I don't see a ton of upside from here and if anything, just more consolidation."

O'Donoghue said he thinks the near term top on the S&P 500 is about 1225. "I do think the market's fine. I'm not an uber bear," he adds." ~ Source: CNBC.com

Contact Matt Shapiro, a Chicago Investment Advisor, for more news, and how to play the stocks right in May.

Our Investment Process

2010-03-28T09:24:00.000-07:00

Our Investment Process is focused on obtaining the best possible results for our client’s needs. We work closely with our clients to evaluate their financial situation and goals. Personalized investment portfolios are tailored to each client. The goal of MWS Capital is to provide our clients with prudent growth while preserving assets. Ongoing contact and communication ensures that clients are always informed and comfortable with their portfolios.

Modern Tactics for Classic Investing –

Our Core Strategy capitalizes on the underlying productivity of the economy with a sound portfolio of stocks and bonds. We maintain a stock picking approach and thoroughly investigate the best tactics to use in changing markets.

Our fundamental stock selection process seeks attractive business fundamentals that include firm competitive advantages, differentiation, profitability, and long term appreciation. Each company is selected as an appropriate component of a diversified portfolio.

Our fixed income investment process seeks to maximize yield and safety of principle. We analyze each issuer’s fundamentals and business conditions while maintaining a high degree of diversification among bond classes.

We welcome you to consider how we can be the investment advisor for you and have the confidence that our firm will align with your goals and needs.