IPO-Ville

It's rare when a story can hold our attention for more than a single day.

But I'm glad that there's something to take my mind off the fact that I didn't follow through with my strategy to purchase option straddles on Green Mountain Coffee Roasters and MasterCard in advance of their earnings.

There's always next quarter and the next earning's season.

By then, the Facebook story should just about be hitting full stride, as every effort will be made to get shares out at least 6 months prior to year's end, to avoid increased capital gains taxes on newly minted millionaires.

Granted that the Facebook S-1 was released after yesterday's closing bell, but counting the speculation regarding its release, we're well beyond the time limits of our attention, now having surpassed 24 hours.

For me, I knew that the market was beginning to get a bit "frothy" to borrow a phrase from our dear past Chairman of the Federal Reserve, Alan Greenspan, when my son, who had all of a single stock trade under his belt, was beginning to digest the Groupon S-1 offering.

And he offered comments and observations demonstrating that he was no fan of its CEO, Andrew Mason.

Mason had a rocky pre-IPO experience, but has been virtually invisible ever since Groupon came public. Probably a good thing, given Groupon's performance to dtae.

The Facebook S-1 revealed lots of previously inknown information, including the fact that Lee Harvey Oswald had not acted alone in the JFK assasination.

He had friends and they were poking one another with increased frequency before and on that fateful day.

On a potentially positive note, the news that Facebook shares would become the new US currency has already been supported by Congressman Ron Paul and he is preparing to drop his demand for a return to a gold standard and now plans to drop out of the GOP race, having now achieved his ultimate victory.

The news that Facebook would also release a secondary offering of shares, available through an egalitarian Dutch auction, contingent on Zuckerberg's college girl friend coming back to him on hands and knees gave individual investors some hope to share in the process of wealth creation out of nothing at all.

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Rumorville

As a relatively "unsocial" kind of guy, I've been very slow to adopt to social media. In fact, it was only at the advice, suggestion and arm twisting by my kids to use social media as a tool to sell books and get people to read this blog, did I reluctantly agree that they may be right.

Ego is an amazing thing.

Over the past 25 years, the only other things that I was slow to adopt was the one time ubiquitous "PDA" and the "mullet."

Palm, Treo, Handspring. Whatever the names and models were, it's all a blur, I never went that way although I may someday go for the retro look as nostalgia is due for its next generational comeback.

I'll think about that after tonight's Hall and Oates concert.

Today was just another one of those laughable days in the rumor mills. Good thing, because it was an otherwise utterly boring day with no news coming out of the EU and with Herman Cain out of sight.

As trades go, I sold Caterpillar calls, bought some more ProShares UltraSilver ETF and subsequently sold calls and that was all.

Boring.

As much as I took delight in my accurate prediction about retail sales, when it was reported that they were disappointing (in advance of the revised results after Christmas which will indicate that they were better than expected), it was still a tiresome day.

The best rumor and the one that got the most attention was about Netflix.

I own Netflix and have for about a month or so. In that time I've sold lots of weekly calls. Sometimes I've had the shares assigned and other times not.

Sometimes I've bought the shares back and sometimes I haven't.

This week started with a reduced holding due to an assignment of a portion of my shares, but as luck would have it, the rumor mill started early.

And often.

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Anti-Climactic Much?

The past week was all about superlatives. Best of all, the superlatives were all headed in the right direction.

It really didn't matter that so much of that direction was dictated by rumor after rumor. People who were smart enough to do the stupid thing and not take profits when common sense dictated otherwise were well rewarded on paper.

With the close of trading on Friday we were hearing all kinds of statistics centering around the market's performance this October.

By all accounts we had seen the single best performing month since 1618, or in meteorological terms "ever since records have been kept"

It was that good. You actually had to go back to when Native Americans were occupying Wall Street to have had as good a month as we'd just experienced.

Even the old adage "buy on the rumor and sell on the news" couldn't bring the market down after the rumor of breaking an impasse over the Greek financial crisis came into being.

At least to a degree, as today the Greek Prime Minister announced that the final details of the debt agreement will be put to a referendum. So, that certainly makes it a done deal.

What could possibly go wrong?

But in October jut about everything went right, as long as your standard is that you need at least a 17% gain.

Shorts were reportedly being squeezed, talk of IPO's was beginning to burn up the airwaves and people were clicking on the ads on this site.

That final indicator seems to be a very accurate one. People click on financial related ads when they're feeling good about multiplying the wealth. When the market is going down no one in their right mind clicks on an "Open an E*trade Account" ad.

Even Groupon was looking rehabilitated and in some corners was being compared to LinkedIn, with regard to the reception its IPO would be expected to receive.

 

By some measure, those all may be sufficient to mark a near term market top. And so, today, perhaps befitting the fact that it's Halloween, the market just gave a middle finger to those superlatives and proceeded to lose almost 2.3%.

The diagnoses for the drastic response today came quickly.

“Risk aversion is once again taking hold in markets,” said Brown Brothers Harriman & Co. strategists in a market commentary following this anti-climatic end of the month day.

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Careful what you Wish For

What's in the Szelhamos Portfolio?

There was a time, not that long ago, that a curse would visit me once each month. Sometimes those months had 4 weeks and sometimes those months had 5 weeks.

No this isn't that monthly curse that mothers must instruct their daughters upon, although many would call it a miracle, rather than a curse.

But in my case this was the curse of wishes and hopes.

Now, by my own choice, I've invited that one time monthly curse into my life every week.

The problem with selling call options is that you often find yourself wishing for stock movements that are inconsistent with human hopes and desires.

Unless you're a short seller.

But most normal people want to see an unabated rise in the stock market.

Up, up and away.

Although I'm an inveterate believer in covered call strategies, I certainly understand the flip side, particularly since I've lived through the agony of losing a stock to assignment after an unexpectedly large run-up in price.

My wounds are still fresh from having lost Green Mountain Coffee Roasters at $45 when it shot up to $65.

Did I mention that it was about $80 now? Although the cynic in me believes that there's still another accounting issue on the horizon and it's a much steeper drop from $80, than it was from $35 when Herb Greenberg first caught our attention with the peculiarities of their numbering system.

So when the unthinkable happens, there's only one thing that you can do, since ranting and breath holding isn't very adult-like.

Instead, you wish and hope for the price to fall. That's much more adult like.

Even though you don't really think of it in such terms, what you are really doing is wishing for financial pain to be inflicted on others so that you don't suffer the pain of missed opportunities.

To explain that in terms a child could understand, when you get to the window to order your ice cream cone and are told that they're all out of your favorite flavor, you secretly hope that the person next to you who got the last scoop suddenly drops theirs to the ground below.

Granted, that puts you at odds with everyone else and if your the kind the craves human acceptance, you really don't want to be lumped in with short sellers in the eyes of society, or the type of people that wish to see ice cream cones littering the floor.

Now that there are far more stocks that have weekly options available the wishing and hoping comes far more often and societal scorn just gets heaped on and on.

This week just so happens to be the end of the June options cycle, but these days, the third Friday of the month just doesn't carry the same cache as it once did.

Remember when triple and quadruple witching hours threw the fear of God into even the most hardened of traders?

Those too are just yawners these days.

Lots of people still talk about unusual price swings near the close of trading on options expiration, but really they're just rehashing memories of a time long ago. They can't face the reality of what their high school sweet-heart looks like at the reunion, so instead they remember the good old days, when men were men, screaming buy and sell orders at one another as the seconds were ticking away toward the close of another month's options cycle.

Those days are gone, too. There's not that much screaming anymore. Someone probably wished that away too, tired of all the noise and chaos, and ultimately ushered in electronic trading and settlement.

On Tuesday, after that beautiful day of gains across the board, I looked at where my holdings were standing relative to  their options' strike prices and I saw that I was now on track to lose many of them to assignment if they stayed at those levels.

Granted, I had purchased some of those stocks on Monday, with the express intention of holding the shares for just a few days. But now I had come to think of them as my own and really didn't want to lose them.

I bought Home Depot for the next day dividend. I also bought shares of Transocean, Google and JP Morgan and sold in the money options after they rose beyond their initial purchase prices.

So I did what the god foresaken short sellers do.

I hoped and wished for the market to fall.

Why not just my stocks? Why the whole market?

Because I have a well diversified portfolio. Unfortuntely, as smart as I was to diversify the holdings, I wasn't smart enough to foresee that I'd be at risk for losing most of my shares.

So I hoped for a nice little drop in prices. The key word here was "little".

In my ideal world, prices would drop just to the point that all of the holdings closed just below their strike prices and then we'd do the same thing over again.

Well, I got what I had hoped for, except a whole lot more than hoped for.

I just wasn't being careful.

Even poor Pandora suffered in it's IPO. Imagine pricing $4 above the high end of the expected range and then going as high as 60% above the IPO price, only to end up the day about 9%.

All in all, most people would be happy with with a one day 9% gain, but I don't think that was the case today.

I didn't wish that on Pandora and all the poor folks that got suckered into buying at at pre-debacle prices. The newly issued shares changed hands nearly three times. There are probably some very happy people and lots of very unhappy people.

Since I didn't hold shares in Pandora, I found today's minute by minute trading chart amusing. The rapidity of its fall from $26 was impressive and it just deteriorated through the day.

When the dust settled the day was just a mirror image of Tuesday. This time, it was a sea of red for all of my positions, no different from everyone else out there. Of course, the options sales offset some of those losses, just as they cut some of the gains on Tuesday.

I did get off a single trade yesterday. The same one that I had tried to do on Tuesday. I finally found enough buyers for the Sirius - XM Satellite Radio January 2012 puts that I had wanted to sell.

Puts are another strange universe, again hoping for market setbacks.

Since I sold puts I was actually banking on Sirius' stock price to rise between now and January. Wouldn't you know it, but Sirius actually went up yesterday.

Finally a position that went in the right direction, if only for a day.

So today, I'm hoping for a market climb nearly equivalent to Wednesday's loss.

And then as long as I'm hoping, Friday would just roll over and flatline.

Isn't that an uplifting image? But that's just part of the curse.

The power of hope is pretty amazing. I just wish I could make up my mind and know exactly what I should be wishing for. That would make me a better person, one much more in tune with society.

Nah. Maybe next month.

Invest like TheAcsMan

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