Daily Archives: October 11, 2017

Cryptocurrency

The New Way to Stop Hackers — and Make Profits

At a recent investment conference, someone asked me my opinion on bitcoin and other cryptocurrencies…

I said they were worth paying attention to — not for speculating, but for solving one of the biggest problems of our time: keeping computer networks and data safe from hackers.

I mean, if you want to speculate in bitcoin, Ethereum, Dogecoin — you name it — go right ahead. But the bigger profits will be in the underlying technology that makes cryptocurrencies possible. It’s called a blockchain.

Not Just About Bitcoin

Like anything that’s new, it all sounds a bit scary with a lot of “what ifs” attached. But blockchain is going mainstream faster than most people realize.

  • Lockheed Martin wants to use blockchain technology to keep its defense secrets safe.
  • The Walt Disney Co. built a platform called Dragonchain that’s now open-source.
  • Credit Suisse and other banks are running experiments with logging and tracking their financial deals using blockchain.

We happen to have two companies in the Total Wealth Insider portfolio that are pioneering the use of blockchain technology by major banks, insurance companies and other financial institutions. One is already up more than 25% in six months, and the other I see rising 60% over the next 18 months.

Shared Secrets

So what is blockchain, exactly? Basically, it’s a bit of data — it could be a transfer of money, a contract to buy or sell something or just some information that needs to be kept track of.

But instead of keeping it a secret and hidden away in one place (where it could be stolen or altered without your knowledge), the material is recorded as a “hash” — a random series of numbers and letters — and broadcast to a series of other computers on a network.

The information is attached with other transactions on the network and embedded into a cryptographically sealed “block.” With each series of transactions, the system creates more and more blocks.

Suddenly, it becomes next to impossible to steal or tamper with your data. It would be like hanging a basket (it could be full of cash, or something else) over the crowds in Times Square — everyone can see who makes a grab for it.

Incidentally, what is buried deep inside the new $700 billion spending request from the Defense Department, recently approved by the U.S. Senate?

A request for a new government report that would outline the possibilities of “offensive and defensive cyber applications of blockchain technology.”

Kind regards,

Jeff L. Yastine
Editor, Total Wealth Insider

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Source: Banyan Hill

Options

How To Profit From One Trader’s Large Bet The Market is Crashing

Predicting where the stock market is going is a tricky business. Very few investors or traders have a consistent, strong track record when it comes to guessing the short- to medium-term direction of the market. That’s because there’s always plenty of noise in the short-term.

While there aren’t any obvious events this year (like an election) which could move the market, there are always plenty of unexpected occurrences which can change investor perception. The biggest potential catalyst in the coming months is probably North Korea. However, investors are already starting to write off the rhetoric involved in the situation.

Of course, you can’t ignore interest rates and upcoming Fed meetings. However, the market feels a December rate hike is all we’ll see this year, and Yellen’s Fed has been pretty transparent. Most likely, the Fed isn’t going to offer any major surprises for the balance of 2017.

On the other hand, the choice of a new Fed Chair could disrupt the markets somewhat if an interest rate hawk is brought on board. A more aggressive approach to raising rates could certainly impact stock prices. However, at this time we don’t have any idea who the next Chair will be and if that person will even be confirmed by the Senate.

Other than political events, which tend to only have short-term impact on stock prices, the only big changes in market direction could come from economic news. Particularly, if there are economic surprises, stocks may react more than expected.

This is primarily only a factor with major reports like monthly jobs, GDP, or inflation numbers. Lately, economic news has been pretty much on target, and there’s no reason to believe it will change significantly. Clearly, the hurricane damage will factor into jobs numbers, but economists will likely have taken those changes into account.

Here’s the thing…

Options traders have a better chance at making consistently successfully trades because they don’t typically have to pick a direction to make money. They can place high probability trades (selling options) which make money if stocks stay in a trading range or move sideways.

In fact, a pretty massive range-bound options trade was just made last week in the SPDR S&P 500 ETF (NYSE: SPY). SPY is the most heavily traded ETF in the world and tracks the S&P 500 index, a common proxy of the overall market. This particular trade was an options strangle, where the trader sold an out-of-the-money call and put at the same time, in the same expiration period (but at different strikes).

The short strangle consisted of selling the December 15th 263 calls and 237 puts. The credit received for the strangle was $1.64, and it traded about 21,000 times. That means the trader collected over $3.4 million in premium as a credit, and will keep all of it if SPY stays between $237 and $263 by December expiration.

Breakeven points for this trade are around $235 and $265. With SPY at roughly $254 at the time of the trade, the trader has more cushion to the downside ($19 down compared to $11 to the upside). Clearly the trader is less worried about upside for the remainder of the year.

Once again, there’s not much expected to occur between now and December which could roil the markets significantly. Of course you never know, which is why I’d recommend a very different trade than this. Frankly, selling strangles isn’t the sort of thing most traders should be doing. Leave that sort of strategy to the big institutions and professionals.

Instead, buying a straddle (buying the call and put at the same strike, at the same time, in the same expiration) could be a profitable strategy while also not in direct opposition to the short SPY strangle we just discussed. You see, a large stock index like the S&P 500 could easily sit within the range of the short strangle, but an individual sector could see a lot more movement.

One such sector is consumer staples. The Consumer Staples Select SPDR Fund (NYSE: XLP) is sitting right at the 200-day moving average, and could easily be much higher or lower by December 15th. Plus, the December 15th 54 straddle (buying the 54 call and put) is trading for less than $2.

XLP would only need to go to $52 or $56 in the next 10 weeks or so to make money. That seems like a very achievable goal with so much time left before expiration.

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Source: Investors Alley