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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Mattyice who wrote (55450)	6/12/2015 9:26:15 PM
From: E_K_S	1 Recommendation Recommended By Mattyice Read Replies (2) \| Respond to of 78748

An interesting hedging strategy buying long term out of the money Puts targeted to selected over valued securities. That's one of the better strategies rather than using a short ETF and/or just going to cash because of a eventual market crash. I know that this thread does not like to use options when looking at the value proposition but buying long out of the money Puts is a better approach than out right shorting an overvalued security. You limit your capital risk/loss. The value (or over valued) proposition can be done buying out of the money Puts if/when the risk/reward becomes a profitable investment hedge. I have not studied this but have seen enough overvalued stocks on my watch list that maybe some of my cash can/should be deployed using a long term Put hedge strategy. If you discover other candidate Put buys that you feel are in the over valued price area, please post. Those candidate stocks that have large leverage positions are ones that I like as well as other future catalysts for future price destruction. You can make money in both an up and down market. We know that the Fed will begin to normalize rates and that will hurt some stocks more than others. EKS P.S. Disregard this post and the investment strategy if you do not buy/sell options as an investment option.

To: Mattyice who wrote (55450)	6/12/2015 10:00:31 PM
From: Graham Osborn	1 Recommendation Recommended By Mattyice Read Replies (1) \| Respond to of 78748

Hey Mattyice, Thanks for the post, I for one can sympathize with your sector bets although I've tended to focus on individual companies that exemplify the discrepancies of which you speak. In terms of shorting vs. long-term puts I tend toward the former just because there is more short-term control of the degree of hedging and I can use TA. I also dislike volatility in my portfolio as a whole. But everyone has their preference and clearly there are those (thread's founder included) who have had success with a put-hedged portfolio. I do think his application was unique in that (1) the timing problem was structural rather than market-driven (2) the premiums for bonds are much cheaper (3) he was trading in an effectively new market where the risk/ reward was appreciated by few, and hence not priced into the premiums. It will take a very special situation where I have that level of foresight. Theses that don't solve the timing problem have stumped many a fundamentalist e.g. Robertson, Einhorn. In term of sector vs company focus, my thesis has been that there are certain companies that lead each credit bubble and typify its excesses. Names that come to mind are Worldcom, Enron, Tyco in the 1990s/ 00s and Lehman Brothers in the mid-2000s. These were companies so benefited by the excess of the time that they actively concealed credit risk from their shareholders, leading to a predictable ultimate implosion. My view is VRX will be the next. I will try and detail this out at some point. That of course does not solve the timing problem. So senza a thesis on when they can no longer re-fi, I'll be stuck shorting their dead cat bounce. FWIW one of their largest shareholders just dumped $1B worth. Here's waiting for the value, Graham