The Tasgall Group

Need to calculate the implied volatility of an at-the-money option on the fly and you left your Nobel laureates at home?? Not a problem…

IV = 40 x p / SQRT(t)

where p is the price of the option (as a % of the underlying) and t is trading days until expiration.

That’s all.? Forget all the complications of the million dollar formula as this gives you all you need.? However, it only works at-the-money, but then again so does Black-Scholes.

So what if the price is between strikes so there is no at-the-money?? Well here is another spiffy formula:

CM = 1.04 – 0.04 * R

where R is the ratio of the more expensive to least expensive options that are nearest to the money.? Just multiply your option price p above by CM and there you have it: the price converted to the at-the-money equivalent.

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We discussed at our 2nd Tasgall meeting two two articles, one from Fortune and another by Dr. Fahlenbrach, regarding whether Founder-CEOs could serve as a first-pass filter for determining whether a stock is a potential long-term buy. Based on Fahlenbrach’s research, it appears that Founder-CEOs make up approximately 10-15% of the overall market. Thus, using Founder-CEOs as a first-pass filter to limit the number of stocks up for long-term investment consideration is a potentially effective tool, although it’s clear that additional filters would also need to be employed before making an investment in a company. (more…)

Crestmont Research has put together an excellent resource called the Stock Market Matrix. It shows how the long-term buy-and-hold approach would have worked for every holding period of the last 100 years.

Take a look. There are a lot of other good resources on their website too. I highly recommend looking at the Excel spreadsheets they put together with the historical interest rate yield curve graphed over time.

The general consensus is that the markets and/or economy will do well once the Fed stops raising rates…

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Since we’re all actively seeking yield, I figured you might want to know about this promo (and I can be a bit of a smartass at the same time):

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You guys already know about StockCharts.com, but one feature I didn’t know about was the ability to chart two stocks against each other. Another way of thinking about it is to see the price of X in terms of Y — i.e., the performance of the Dow priced in Gold.

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One of my friends made an offhand comment about how options are dangerous and should be avoided. I make a case for a contrary opinion — options are a sophisticated tool that can be very useful if you understand and manage the risks properly.

Let’s look at a few specific uses of options that we might find useful. (more…)

Welcome, and let’s get started!