Fixed Income Strategies

Strategy1: Sell long term covered call on TLT. Instead of Buying 1 Year CD, I propose following strategy:

TLT had a bad year after huge runup in last 5 years, its recovering but hovering between $90-$100.
For TLT, I studied 6month rolling returns, between Oct-Jan highest average perf over last 8 years, peaking in Dec. So it might be good to sell put calls expiring in December. Or sell Jan puts & close them in December.

Price 11/25/09 = 96.04
to reduce risk a lot, I propose selling $90 put for Jan 2011. For 13months, you get 7.9 back. Net returns are way better than 1 year CD (on black friday I am getting 2% promotional CD).

	Per Unit	Net cost
price	96.04	$ 9,604.00
option 90	7.9	$ 790.00
dividend	3.6	$ 360.00
1% price variance	0.9604	$ 96.04
Trading cost	3	$ 30.00
net cost		$ 8,580.04
Sale	90	$ 9,020.00
net return		5.13%

Strategy #2: Sell naked Put & lock in a CD for same maturity time
For same example above, naked put of $90 for Jan2011 can fetch $7.1 - trading costs.
Risk wise, this strategy looks similar to #1 only down side is that if price falls a lot during the year, you might get assigned the option & since your money is locked in CD, you have to break the CD & returns will reduce to 7.25% (you have to give back $180 you'll make).

	Per Unit	Net cost
price	90	$ 9,000.00
Naked option 90	7.1	$ 710.00
variance	1%	$ 702.90
trading costs		$50
cd return	2%	$ 180.00
Net return		$ 832.90
% return		9.25%

Monthly Returns

Last 5 years Monthly Returns (Jan 2004- Nov 2009)
	Sectors
	XLB	xle	xlf	xli	xlk	xlp	xlu	xlv	xly	fsdax	fstcx	fsmex	fsngx
1	-1.16%	0.61%	-5.17%	-3.59%	-3.55%	-1.87%	-0.67%	-0.91%	-2.13%	-0.61%	-1.90%	1.87%	3.95%
2	1.31%	1.29%	-4.63%	-2.78%	-2.24%	-0.59%	-1.00%	-2.03%	-2.26%	-2.22%	0.21%	-2.04%	1.22%
3	2.67%	1.56%	1.49%	2.72%	1.85%	1.55%	0.77%	-0.72%	1.53%	1.15%	1.18%	0.55%	2.48%
4	2.37%	4.11%	5.46%	4.02%	2.13%	1.27%	1.93%	1.94%	2.86%	4.56%	2.73%	2.40%	5.24%
5	2.51%	4.26%	1.72%	2.23%	3.04%	1.89%	1.73%	1.56%	1.69%	1.76%	2.60%	1.12%	4.91%
6	-1.22%	2.22%	-3.67%	-1.72%	-0.83%	-1.16%	1.65%	-1.02%	-2.23%	-1.91%	-0.87%	0.78%	2.38%
7	1.08%	0.49%	1.39%	0.97%	0.43%	1.01%	0.31%	1.34%	0.38%	1.67%	0.83%	1.31%	-1.02%
8	0.11%	0.39%	2.89%	1.07%	1.15%	1.69%	1.48%	1.87%	1.59%	2.22%	0.36%	2.51%	-0.07%
9	0.26%	1.79%	0.35%	1.02%	0.56%	0.90%	-0.39%	-0.75%	0.45%	1.14%	0.98%	1.16%	1.77%
10	-3.02%	-3.00%	-3.94%	-3.51%	-1.00%	-1.27%	-0.96%	-2.77%	-2.00%	-3.44%	-4.87%	-4.08%	-4.22%
11	2.45%	2.27%	-2.73%	1.99%	0.61%	1.52%	2.62%	1.28%	-0.02%	1.91%	1.98%	0.15%	-0.14%
12	0.61%	-0.17%	0.32%	0.77%	0.29%	0.83%	0.14%	2.67%	1.18%	2.05%	1.49%	2.17%	-0.16%
	Allocation			Bonds
	eem	efa	ICF	fsicx	tlt	trrdx	spy	vbr
1	-0.88%	-3.27%	-2.22%	0.42%	-1.95%	-2.00%	-2.52%	-2.22%		Recommendations		try to Have 1 recommendation per month max 2
2	0.37%	-1.02%	-3.81%	0.36%	0.50%	-1.17%	-1.88%	-1.91%		1	EOM Buy Russia
3	2.21%	2.19%	2.68%	0.32%	0.08%	1.25%	1.18%	2.03%		2	EOM buy VT
4	3.99%	3.41%	4.70%	0.98%	-2.34%	3.14%	2.77%	2.54%		3	Start Buying after Jan/ Feb sale
5	2.89%	2.19%	1.56%	0.65%	-1.00%	2.35%	2.11%	2.90%		4	lots of stocks peak in April, good time to start selling
6	-0.62%	-1.24%	-2.25%	0.48%	1.07%	-0.83%	-1.27%	-0.73%		5	EOM sell performers
7	2.10%	0.66%	3.24%	1.05%	0.64%	0.68%	0.75%	1.29%		6	EOM Sell FSNGX
8	-0.02%	1.20%	5.21%	1.30%	2.86%	1.05%	1.33%	2.13%		7
9	3.63%	0.62%	2.02%	0.63%	0.45%	0.48%	0.42%	1.02%		8	Buy RMBS
10	-2.26%	-2.51%	-4.31%	-1.04%	-0.43%	-2.57%	-2.50%	-3.92%		9	good time to protect, as everything falls in Oct
11	1.85%	0.84%	-2.64%	0.48%	3.54%	0.64%	0.97%	0.33%		10
12	5.05%	3.81%	2.33%	1.18%	3.12%	1.83%	0.69%	0.56%		11
										12	EOM sell performers/internationals of year, buy FSNGX; close TLT puts
	Stocks
	goog	intc	fxi	epi	eeb	rsx	mu	rmbs	eric
1	1.26%	-11.07%	-4.37%	-6.36%	-5.55%	-13.85%	4.93%	1.42%	-0.45%
2	-9.43%	-1.02%	0.18%	-9.43%	-1.13%	6.57%	-0.80%	0.30%	1.01%
3	0.39%	2.34%	2.12%	2.81%	2.21%	8.75%	0.54%	7.56%	-0.55%
4	15.21%	5.28%	7.91%	15.78%	12.47%	16.01%	5.86%	-3.67%	7.37%
5	5.60%	2.90%	2.27%	14.95%	11.94%	26.95%	5.90%	-5.33%	2.95%
6	2.95%	1.40%	2.94%	-13.32%	-2.69%	-4.87%	-6.16%	-3.39%	-0.22%
7	-3.46%	3.63%	6.12%	7.80%	1.91%	-0.41%	1.63%	-9.73%	-2.31%
8	0.07%	4.79%	-0.71%	-0.13%	-1.89%	-4.37%	-0.71%	-3.87%	2.63%
9	7.90%	-4.09%	2.47%	-3.11%	4.18%	0.75%	3.43%	6.44%	3.06%
10	17.62%	-2.71%	-1.77%	-18.80%	-0.36%	-7.60%	-4.04%	-3.91%	-9.07%
11	-1.05%	0.15%	3.40%	-0.01%	0.14%	-5.84%	-8.89%	20.09%	-0.96%
12	1.63%	-0.82%	4.33%	12.19%	5.68%	-2.36%	-3.22%	8.65%	1.76%

Strategies:
* For TLT, I studied 6month rolling returns, between Oct-Jan highest average perf over last 8 years, peaking in Dec. So it might be good to sell put calls expiring in December. Or sell Jan puts & close them in December.

Bottom for UNG?

Fibonacci is telling me that UNG could fall to $4.5 range.

Wave theory telling me that we are in last leg down:

Based on Wave theory & Fibonacci retracement: I could buy small lots at 9, 8, 7.5, 7, 6.5 & stock could rise back to 20 in next 6 months

8.94 diff 3.28
12.22 0% 0 8.94
38.20% 1.25296 10.19296 0.618061486
61.80% 2.02704 10.96704 0.78612976
100% 3.28 12.22
138.20% 4.53296 7.68704
161.80% 5.30704 6.91296
178.61% 5.858408 6.361592

Price1	17.55
Price2	4.80130628
	Delta	Price
0%	-	$ 17.55
21.39%	(2.73)	$ 14.82
38.20%	(4.87)	$ 12.68
61.80%	(7.88)	$ 9.67
78.61%	(10.02)	$ 7.53
100.00%	(12.75)	$ 4.80

Business Cycle & Stock Performance

Following chart is pretty good to show economic cycle & stock market cycle.

Stock market is usually ahead of business cycle. You could track "smart" money gushing into particular sectors to detect which phase you are in.

e.g. in 2009 recovery of stocks, I saw similar trends of recovery prices. In november I find Monsanto / Exxon as great value who haven't participated in rally yet. Gold is starting to run again. etc.... By January may be energy will also run up & we'd reach peak of bull market

On Shorting stocks

Naked short selling is robbing buy & hold investors. We “deposit” money in stocks of companies for “long term” investments. Short sellers take money out by crashing the stocks. Short sellers are blamed for “clobbering”, “carpet bombing” to take all money out of stock prices. In wallstreet failed trades result in “lost money” for ever for long term buy and holders. Companies as big as Intel suffered huge stock price drops due to short selling. This phenomenon peaked in 2000 crash & 2007 crash.

This news says, trend is your friend, follow the trends & get out when there is reversal happening. Trends let you make money only for “very” short duration till others figure out what’s going on & trend breaks.