A Prayer to a Lost Soul

People change. You wish them to change for the better. But it seems that is rarely the case. What's important is how you react when their life has gone astray. Do you let them live their own life or do you intervene and guide them through the one you thought they deserve? It is at this crossroad that brings to light the kind of friend they are to you and you are to them.

I rarely discuss topics unrelated to money on this blog, but friends laugh with you, create memories with you, and endure with you. I decided to write about my thoughts on friendship because I've started to see a friend of mine, one I thought I really cared about, drift away from me and into a life that I don't much respect. What's worse is that I've been able to do nothing as she changed and it made me question who I am. I try to meddle as little as possible and let people learn from their own mistakes. It is how people grow, but it's hard and frustrating having to witness someone you really care about lead down the wrong moral path.

Most of us are afraid to confront our friends because we lack the courage to face the issue head on and we lack the knowledge to tackle the problem. The reality is that confronting your friend often results in conflict and the end of a friendship, but I pose myself the question, "What friendship is left when the transformation is complete?" A non-existent relationship and the wasted life of an awesome person that made my world brighter.

People will tell you that they mean a lot to you and when you lent all those ears and let them lean on all your shoulders, you learn that it was all for naught, all in vain if you will, as their life unfolds and withers away into what it potentially will or has become. We are all given an equal chance to make our lives positive and to be role models to others, but people are greedy and selfish and they crave money, power, drugs, and lust. Why can't we all crave respect, humility, love, and dignity?

Dear friend: just five months ago, we talked about your future; we talked about fun things like boys, movies, and places to visit. And remember when we used to hate those that do the things you do now? Because I sure do. Honestly, I can't say for sure if my suspicions are accurate, but from the words of others, those that I trust and respect, it appears they are true. I won't say names because this applies to so many others, but I want you back. I want you to change to the girl who saw the world as a stage and wanted to be an interior designer, a girl who started a tradition of gelato every month with me, a girl who punched me when something really cute happened beside us.

Most of you won't have made it to this paragraph, but I needed to use this as a catharsis, as a way to figure out what's going on in my head. It is a shame to see a life possibly wasted yet again and to see that the people she surrounds herself finds no inspiration to be better people. I want her to change back to who she used to be, but people are often set in their own decisions.

The girl I knew two years ago is long gone and the body that remains is just an empty vessel to me. I care enough to get you back on track but I feel I was too late in recognizing who you have become. I feel that I've come to the same solution that I've always resorted to and that is if you choose to ask for my help, kid, I'll be there before the sun peaks above the horizon, but if you decide that the path you have taken is best, and you feel that I shouldn't have known about it from the start, then the respect and admiration for my wisdom you have shown me was devoid of any maturity that I once thought existed in you.

I surround myself with people who will inspire me and be inspired by me. I surround myself with people who have identified their goals and wishes, things that they are passionate about, people who love to be alive and make every minute count because they know it is limited, and people whose legacy will survive because I will tell others of their wonderful soul. But the person you may become is not someone I would admire and someone I would never surround myself with. Are you ready to lose me and the people that are on this side of the track who have laughed, created, and endured with you?

I would much rather find out I'm entirely wrong and you are offended by my misleading information and intuition. I would love to know you stayed true to yourself, that your strength in character was underestimated, and you are same person I appreciate having in my life. Honestly, I really would.

Unique Tactic on Las Vegas Sands

Las Vegas Sands [LVS:NYSE] is the world's largest casino company by market cap. It operates hotels worldwide, including the Venetian in Las Vegas, USA, the Marina Bay Sands in Singapore, and the Venetian Macao in Macao, China. Next week on Monday June 18, 2012, the company will go ex-dividend and pay shareholders $0.25 per share.

This dividend occurs after an options expiry and provides a unique opportunity for traders. But first, let's examine the entire situation here to get a full understanding of the scenario and settlement dates. If you understand settlement, skip down three paragraphs.

Normally, if one wished to receive the dividend, an investor must purchase the stock before the ex-dividend date. In this case, the investor must buy it on Friday June 15 at the latest to receive the dividend. He or she can sell the shares on the 18th and maintain their rights to the dividend as well. By purchasing the stock on the 15th, the shares would settle three business days after, which is Wednesday June 20.

Settlement for an option is significantly different. Regular buys and sells settle in just one day. Assignment is two business days. Example, if I purchased a call option on Monday, it would settle on Tuesday. However, if I decided to exercise the option on Wednesday, it would settle on Friday. I could also wish to exercise the option on Tuesday and have it settle on Thursday, just like if I purchased the stock on Monday instead of the option. This is very important to know because the following strategy could get very confusing.

Now, the most important date in this entire scenario is not the ex-dividend date, but the record date or date of record. Las Vegas Sands would deem the record date for its dividend Wednesday June 20. This means that the shares must be in the account and have settled on this day for an investor to receive a dividend. With all that information provided, and hopefully it makes sense, how can one attempt to receive two payments from the LVS options?

If a trader wrote a put, they would receive a premium. Now, if the stock fell below the strike price on Friday, there is a chance the buyer of the put exercises their option and sells the stock to you at the strike price. The assignment would settle on June 20, which means you would be entitled to the $0.25 dividend as well.

The stock is currently trading at $45.21 and the June puts are priced as follows:

Strike Price	* Last Bid
46.00	$1.07
45.00	$0.52
44.00	$0.22

What you choose to write is your choice, but it is very rare for an opportunity with a silver lining like this to arise, that is, an unwanted assignment would provide income as well. Unlike most weeks, we must consider that the in-the-money put may not be assigned in the account of the writer, since the owner of the put, who may have bought it as insurance if the stock falls, may wish to receive the dividend instead. The stock has also shown good support at $45 and the stock could rally shortly after wards like it did in March after the dividend payment.

As with all trades, there is always a risk of losing your entire investment. The market is currently in a bit of turmoil and there is a chance these shares could fall well below your strike price. Take into consideration your financial strategy, needs, and tolerance.

Range Bound Stocks to Capitalize On

Playing the Expiry: June 8, 2012

I will make this short and simple. Amazon [AMZN:NSD] has been trading in a range between $205 and $220 since it fell below $220 support on May 18, 2012; the support was the initial low price after earnings. With the market looking to recover from a near correction, the market could start heading sideways before traders and investors build confidence in the world's economy and market.

Taking a look at the Amazon June 8 weekly options, the 220 calls are selling for $1.00 and the 215 puts are selling for over $1.50. The stock is trading in and around $217 at the moment, so a credit spread looks promising. Total premiums received per contract would be at minimum $250 with margin required at no more than $6,300. Total earnings potential is at least 3.97 per cent with a break even range of $212.50 to $222.50. This provides downside protection of 2.07 per cent and a rise of 2.53 per cent.

In the event either options are in-the-money on Friday, consider rolling out the option or taking assignment, as it appears the stock will be brought back into the range determined above.

Another range-bound stock has been Baidu [BIDU:NSD]. The shares have had trouble rising above $120 while giving good support around $115. The weekly options are not as juicy as Amazon's, but a trader with less margin could consider Baidu instead. The 120 call is trading around $0.82 while the far out-of-the-money puts are only $0.34. This would provide income of $116 per pair for the next two days. Note that Baidu is most likely at 50% margin, so margin required is about $6,000. This would earn about 1.93 per cent return if both options expire worthless. The break even range is $113.84 to 121.16 or a drop of 4.33 per cent to a rise of 1.82 per cent.

First Quarter Earnings Options Logbook 2012

It was a few hours before Apple's [AAPL:NSD] first quarter earnings report for 2012 and I wrote on my Facebook status suggesting option traders consider writing a 495 put and 630 call on the weekly option; it was the April 27, 2012 expiration at the time. The stock was trading around $560 pre-earnings report and the trade implied the stock would move less than 11.5 per cent at the most in any direction by Friday. My colleagues and friends recognized the risk of the trade which prompted a short debate.

It was pointed out that writing naked calls as an investment strategy will not always work in your favour. That person is correct, but no investment strategy will either. Buy-and-hold strategies have failed for many investors and 95 per cent of day traders don't make money either. Mutual funds have been ripping people off for decades and other instruments are yielding a return less than inflation. So, I thought it was unfair to single out naked options as an unfavourable investment style. Fortunately for me, the Apple options expired worthless and I was able to reap the monetary reward and some bragging rights.

Following Apple's earnings, I decided to disclose all trades dealing directly with earnings and post them here. The point is to show that writing options with proper risk management can and will always work in your favour 9 times out of 10. It's not for everyone and if you miscalculate your break-evens and ranges, you could easily lose the shirt off your back, along with the rest of the closet. Statistically speaking, 93 per cent of options expire worthless, according to the Chicago Board of Options Exchange (CBOE); those are very good odds in the writer's favour. Below are the trades in chronological order starting on April 10, 2012 (Alcoa earnings typically kicks off earnings seasons) and ending May 25, 2012 (six weeks later). Green indicates a profit at expiration and red indicates a loss at expiration. I will in this instance use my real dollar figures to provide better insight on cash flow.

JPMorgan & Chase (JPM)
Trade Date: April 10, 2012	Reporting Date: April 13, 2012 BMO
Closing Price Pre-Earnings: $44.84	Closing Price Post-Earnings: $43.21
Sold 5 45.00 calls at $0.25, sold 5 40.00 puts at $0.11; expiring April 13, 2012
JPM finishes week at $43.21
Net profit of $147.50 on $6,670 margin or 2.21% return

Intel (INTC)
Trade Date: April 16, 2012	Reporting Date: April 17, 2012 AMC
Closing Price Pre-Earnings: $28.47	Closing Price Post-Earnings: $27.95
Sold 10 30.00 calls at $0.29, sold 10 27.00 puts at $0.12; expiring April 21, 2012
INTC finishes week at $27.60
Net profit of $365.00 on $6,630 margin or 5.51% return

Qualcomm (QCOM)
Trade Date: April 18, 2012	Reporting Date: April 18, 2012 AMC
Closing Price Pre-Earnings: $66.99	Closing Price Post-Earnings: $62.57
Sold 5 70.00 calls at $0.38, sold 5 62.50 puts at $0.19; expiring April 21, 2012
QCOM finishes week at $62.25
Net profit of $111.26 on $8,995 margin or 1.24% return*
*Note: In-the-money put closed on April 21 at $0.25

Apple (AAPL)
Trade Date: April 24, 2012	Reporting Date: April 24, 2012 AMC
Closing Price Pre-Earnings: $560.28	Closing Price Post-Earnings: $610.00
Sold 1 630.00 calls at $1.14, sold 1 495.00 put at $1.25; expiring April 27, 2012
AAPL finishes week at $603.00
Net profit of $112.26 on $10,280 margin or 1.09% return*
*Note: Closed call on April 25 at $0.83 to free margin for other trades, profit would have been $216.50 or 2.11%

Las Vegas Sands (LVS)
Trade Date: April 25, 2012	Reporting Date: April 25, 2012 AMC
Closing Price Pre-Earnings: $58.78	Closing Price Post-Earnings: $56.97
Sold 3 62.50 calls at $0.35, sold 3 55.00 puts at $0.55; expiring April 27, 2012
LVS finishes week at $55.87
Net profit of $242.50 on $3,816 margin or 6.35% return

Amazon (AMZN)
Trade Date: April 26, 2012	Reporting Date: April 26, 2012 AMC
Closing Price Pre-Earnings: $195.99	Closing Price Post-Earnings: $226.85
Sold 2 215.00 calls at $0.60, sold 2 175.00 puts at $0.80; expiring April 27, 2012
AMZN finishes week at $226.85
Net profit of $1,534.05 on $9,098 margin or 16.86% return*
*Note: I took assignment and shorted the stock and closed it several weeks later.

Visa (V)
Trade Date: May 2, 2012	Reporting Date: May 2, 2012 AMC
Closing Price Pre-Earnings: $122.19	Closing Price Post-Earnings: $116.41
Sold 2 125.00 calls at $1.16, sold 2 120.00 puts at $1.25; expiring May 4, 2012
V finishes week at $117.79
Net profit of 18.51$ on $6,938 margin or 0.27% return
Note: In-the-money put was closed at $2.10 prior to expiration

In summary, the net income generated on the nine closed and profitable trades equated to $997.03 over five weeks. That profit is after commissions and SEC Fees, but before taxes. Only one trade generated a loss, a substantial loss of nearly $2,100 in fact, which would have created a loss of roughly $1,100. Fortunately, I had enough margin to take assignment and short the shares. The stock is now in a profitable position of over $400, plus the net option premiums received was $257.00, and I had also written covered puts to hedge the trade. I may consider disclosing future earnings plays to provide a detailed history and log of the potential profits and losses that occur. If this were to happen, it will be available in a future link in the top navigation bar.

Disclaimer: As always, writing naked options is considered a higher risk trading strategy and should not be available to all investors. Please discuss this with a financial professional as it can pose serious financial losses if not managed properly.

Don't Be a Sucker Bro, Stay Away From Zucker's IPO

This is the final warning to my friends and all investors lining up to buy a piece of Facebook [FB:NSD] - don't. Here's where I get blunt, which I rarely ever do here. Buying Facebook is the worst thing you can do. Not only will it prove your lack of reasoning and investment judgment, you will lose thousands of dollars too. It does not make enough money to justify its valuation and it most certainly will not make enough in the coming quarters either. And you would be naive to assume current shareholders are not waiting to sell their shares come May 18 when it hits the frenzy of the stock market. I want to save you from losing your hard-earned money by making you understand that Facebook as an investment is a poor decision. The hype surrounding Facebook is resounding and its prospect as a multi-billion dollar business is valid, but I believe this is another case of overvaluation. If you frequent my blog, you know that valuations are a key topic of mine, so you will know exactly where I'm going with this. You would be crazy to think FB would be a good investment at these prices and here's a few rreasons why.

My personal opinion is just that, an opinion, but fundamentals never lie. Based on current IPO valuations, Zuckerberg's company is worth a staggering $100 billion. This makes Facebook worth as much as McDonald's [MCD:NYSE], twice as much as Starbucks [SBUX:NSD], and four times as much as Dell [DELL:NSD]. McDonald's generated $27 billion in sales in 2011, trumping Facebook's $3.7 billion. And Dell, well it sold $62 billion worth of computers last year alone, and some how the company is worth just a fraction of Facebook.

Of course, Facebook isn't just some company. It's the world's largest social media site with 901 million active users. That's 12.8 per cent of the world's population and some expect this number to reach 3 billion. Strong growing numbers in users and revenue generation makes it a bull case for many, but they are sadly mistaken. With valuations over $100 billion, people have already priced in perfection. No company is perfect.

The first concern would be their inability to make real money. Last night, General Motors [GM:NYSE] cut ties with Facebook citing that advertising on FB was unsuccessful. Don't be surprised if more big businesses make the same decision. Recent polls suggest only 23 per cent of users click on advertising on Facebook. In fact, on advertising, Facebook earns just $3.75 per user. One could argue there's a lot of room to grow here too, but who really clicks on ads? Maybe future share holders trying to prop up the price. The company does not monetize from mobile and tablet users either and this must change as more and more of its users make the transition away from computers.

Secondly, the company's growth is decelerating. At December-end, its profit fell 12 per cent and revenue grew at 45 per cent, down from 55 per cent. Falling revenue and rising costs (strangely it doubled its marketing costs, but I've never seen an ad ever for the site) points to a falling stock in the future. This is evidence that margins are peaking or have peaked in the last 12 months. And its decreasing user count in North America is not a good sign either. Its global user growth rate has stalled to a trickling 1.5 per cent. There are only so many people in the world, and the laws of big businesses are starting to set in.

Thirdly, the CEO shows very little Wall Street prowess. Yes, he built a $100 billion company, but pleasing millions of shareholders is an entirely new realm of business Zuckerberg has yet to endure. His recent actions indicate he still acts like the boss and not the CEO of a publicly traded company, but that may change with time. Why does that matter? Because when you're a public company, shareholders with 100 shares or 100,000 shares care mainly about the stock price.

Some will argue that Facebook is the next Google [GOOG:NSD] and Amazon [AMZN:NSD] and truthfully, I agree in many senses. The company has already grown and become a big part of our lives and culture that it can not escape any aspect of our society. Businesses love it, people love it, politicians, well they're learning to love it. But therein lies its own demise. Its size is immense, and as such, it has little room to grow. Its expectations as a company are so ridiculously high that any hiccup could send these shares tumbling. Some believe that Facebook or Apple will be the first company to be worth $1 trillion. To those investors buying on Friday that believe that the shares will grow much like Google's and Amazon's, it appears your wishful thinking is misplaced and your numbers miscalculated.

When Google went public in 2004, it was valued at $30 billion. And Amazon was worth just $500 million. Today, they are worth about $200 billion and $100 billion respectively in market capitalization. Facebook might be the next Amazon in more ways than one, but I must stress that going public and already being worth $100 billion is not the same as going public at $500 million and growing to $100 billion. Facebook is at its pinnacle, its peak, its zenith if you will. Unless the company makes radical changes to its business model, the prospect that these shares will make you millions is slim. You are better off betting $10,000 on black. At least you won't have to pay a commission at the casino.