Markets. Does not think the fiscal cliff will be an issue.  What we are talking about is a mild slope into a mud pile.  You have to stand back and look from 40,000 feet.  The issue is that consumers are not spending and GDP is simply money supply and continues to grow, but money velocity is low.  People simply aren’t spending.  Markets will react until saner heads prevail.  Then in February there is the debt ceiling.  Investors need to think about whether we are getting near the end of this deleveraging cycle.  If people start spending then you could get an explosive growth in the markets.  Markets are driven by sentiment and headlines.  We have not exactly had a Santa Clause rally.  Thinks people should strategically invest and build a portfolio.

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Deep in the Money Calls. High yielding stock.  Purchase additional shares with premiums so you get more dividends on the same cost base?  Nothing wrong with this strategy but generally he is buying this stock and selling this option in an income portfolio.

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Buy Feb $500 Puts / Sell Feb $520 Puts.  There are very low expectations from the street and he doesn’t think they will do that badly.  Even if they go nowhere you make money with this strategy.

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You could do covered call writing if you are comfortable possibly loosing the stock.  If you are concerned about risk, you could buy a put. 

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Buy Feb $143 Calls / Sell Feb $143 Puts. This is a straddle.  Betting market will move up or down due to the fiscal cliff. 

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Markets. You have 2 sides of the market at play. There is a lot of uncertainty including 1) US election, 2) fiscal cliff (which he doesn’t think is going to be that big an issue), 3) the euro zone (which he thinks could go on for some time), 4) Fed underneath the market providing a lot of liquidity which could change depending on the election, 5) US tax issues depending on who is elected, 6) Mr. Romney would like to simplify the tax code and capping some of the benefits. However, looking at the Options market, which tends to measure risk, there seems to be a great deal of complacency. Expects all of this will result in a “trading range” environment. It will likely be a widening one as we go further down over the next 4-6 months but he doesn’t see any big breakout either up or down. In this scenario, the options strategies work really well. You are getting cash flow and can frame your trading range.

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Cdn ETFs versus US ETFs? US do not hedge their positions because they own the reserve currency of the world and they don’t really look at any other currencies as being an issue for them. If you are comfortable with the currency fluctuations and we do get a significant downturn in the market, the US$ will do quite well because people will move into this in a panic.

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Better to buy Options with a Strike Price above or below the current price of the stock? When you are buying options in general, time is working against you so it is important that you not only have a view about the direction but that you are pretty tight on the timing of that move. An “out of money” option will give you a much better return if you are right about your timing and “at the money” option will act most like an option and an “in the money” option will profit even if you a very small move in the right direction. If you buy “at the money” option, 90% of the time this is the option where there is the most liquidity and the highest open interest.

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