Becoming an Independent Equity Trader – I (GS)

Becoming an Independent Equity Trader – I (GS)

Becoming an Independent Equity Trader – I (GS2)

While the advantages of a life of financial independence cannot be gainsaid by anyone, there are certainly ‘headwinds’ that anyone who aspires to such a lifestyle should be aware of.  Indeed, folks who aspire to any sort of independence – be it energy or nutritive or potable independence – should be aware that they’re likely to encounter someone in some government office somewhere who will take umbrage at the very gall involved in not wanting to be reliant on their political overlords.


There are countless examples.


Not so long ago we read a story of a family whose wood stove was rendered illegal by county officials who insisted that the family be connected to an electric source for their heat and electricity needs.  There could be no ‘going it alone’ – no warming thyself with a bit of burning wood when temperatures dip toward freezing.


Oh no.  That may be fine for campers at government approved tent sites.  Or if you’re lost in the woods and have no other choice, well, maybe…


But the powers that be will not abide someone – anyone – being warm in their own home courtesy of chopped wood product when the rest of the ignorant masses are having to go without power and are in need of blankets aplenty to keep warm.

Then there’s the recent story of an Oregon family who bought a property with a pond on it, only to be informed that they couldn’t use the water contained therein, as ‘all rainwater is property of the county’.  It would therefore be illegal to drink or otherwise play in or profit from said H2O.


You’ve no doubt heard other such stories of rainwater being diverted from rooftops into catch basins or barrels without the appropriate departmental certification, rendering it illegal to either possess or reap enjoyment from.


There’s no end to it.


It’s still fine, by the way, in most parts of the country, if you have a goat or cow from whom you draw raw milk to drink or make cheese or yogurt with it.  But if you have a neighbor or friend who wants a little, watch out!  Because there are small farm owners today all across this great country of ours who are getting slapped with debilitating fines and even jail sentences for offering a quart of the white stuff to Jimmy down the road.


Failure to pasteurize is not yet a felony, to be sure, but what the hell happened to letting people sell each other whatever they please?  This is not cocaine, friends.  It’s milk.  I can sell my neighbor a rusty knife dipped in e.coli bacteria and wrapped in an asbestos sheath.  I can even sell it to his pimply fourteen year old son.  But a freshly strained quart straight from the source gets me jail time?  What in the name of Beelzebub has happened here…?


Government has become the grand owner and bestower of all things.  Forget the Creator.  Forget even Mother Nature.  Just government.  Your matronly nanny and babysitter.


Because you don’t know enough to get it done by yourself.

Should you want to claim, by the way, that natural law dictates that you can drink from local rivers and streams and harness them for your milling or energy needs, or that trees were meant for heating as well as building and decorating, and that’s the way nature intended it, or should you choose to live off the plantings of your fields and pickings of your trees, go ahead.


But beware that you’re going to come across not a few resentful bureaucrats in a lot of local offices who want nothing to do with independence or even the idea of it, and who find the very concept bizarre and even question the legitimacy of anything but a desk job with a pension at 55 as being straight and honorable.


Gawd help us.


Independence is good and ought to be striven after and achieved in whatever measure it’s offered.  Just remember that it also gets a lot of people p.o.’d and that you should expect a few abrasive encounters – if not outright institutional hostility – should you begin to move meaningfully in that direction.


Trading for a Living


We’re going to have more to say in coming weeks on the topic of trading securities for a living.  It’s not an impossible thing to do, and for those who are interested, we’d only repeat that the biggest obstacle is maintaining your belief in the importance of being independent – regardless the flak, criticism or ridicule you might encounter.


That said, we’re going to close a trade before we get on with this week’s action.


It was opened on the 1st of December, in a letter called Financial Sector Mayhem: Buying Panic! Selling Panic!  There, we urged you to buy the Goldman Sachs December 31st 220 PUT for $5.30 and sell the GS December 31st 220 CALL for $5.55.  Total credit on the trade was $0.25.


Last Friday, however, our CALL ended in-the-money, and we now find ourselves short one lot of Goldman Sachs at 220, and with the stock at $243.13, we’re also deep underwater.


In order to protect against further losses, we’re now going to reverse the trade and recommend you buy the GS January 27th 245 CALL for $6.25 and sell the GS June 16th 215 PUT for $6.90. 


That leaves you with a credit of $0.65 and both upside and downside protection on the short.  Should GS climb higher than 245 or drop below 215, the short will be closed automatically.

As for this week’s initiative, we’re piggybacking on the above GS fix and adding another PUT sale to pull in some premium.

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That’s right at the long term support line.


Many happy returns,


Matt McAbby

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