Trick to take advantage of a flash crash

Remember the Flash Crash of 2010?  Little has been found out about why the crash occurred, but I lost money on that day because I was unprepared. Here is a little something I have set up in case a flash crash occurs again and it involves put options.

When you sell a put option on a stock, you receive cash immediately in your trading account. In return, you obligate yourself to buying the shares at the strike price you selected, and here's why this works so well during a crash...

When the market tanks, all options premiums increase rapidly - and especially those on put options. That's because buyers and sellers don't know if the fall is the beginning of a wider correction, or a one-off crash.

Not even the Black-Scholes options pricing model can anticipate whether a crash is going to be short-lived or not. Therefore, the pricing plays to the sellers' advantage, since the premiums increase substantially. When volatility kicks in, options prices move higher fast, often to a greater degree than the underlying share price. This occurs since options are creatures of time.

So this is what you need to do:

First, make sure you have permission to sell puts. This requires a higher clearance than more basic strategies like trading covered calls, for example.

Make a list of companies that you'd like to own at the price you want to pay. Preferably, that price will be 30% to 40% lower than the current price of the shares. For example, if you like a stock at $40, you may really like it at $25. You can enter a limit price at which you're comfortable selling the $25 put - maybe for $1 or $1.50. If the shares slump during a crash, you may get filled at your price, before the stock subsequently recovers. But remember the cardinal rule of put selling: Only sell puts on shares of companies that you want to own!

Be sure you have the capital required to pay for the shares if you end up being obligated to buy them. 

I prefer to leave the orders open, its a lot like fishing, the price I place on the put options would only trigger in the event of a severe crash that would cause the price of the put options skyrocket upward to my price target. 

If I had placed a trade like this back before the flash crash, the market would have crashed, put option values would have risen, my order would be triggered, the market recovers, the value of put options falls back to the level they were before the crash, and I buy to close the put options I sold. 

And remember, the shares don't have to hit your price to make a lot of money... they just have to head in the direction of your price.

Put-selling is a very effective way of generating income and also building a potential portfolio of stocks at much better prices than they're trading for today. You owe it to yourself to spend some time learning how to sell puts - it could be the most profitable option in a volatile market.

The New Paradigm that I agree with

The New Paradigm in Tennessee Politics


Tennessee politics has undergone a transformation and yet our representatives in office and the media at large have failed to recognize this new paradigm.  The grassroots movement dubbed the tea party has inexorably changed the political landscape and the way politics are done in this state and across the country.

We write this out of a sense of concern for this lack of understanding for how the political landscape that has dominated Tennessee politics for over a century has changed.  In 2009 through 2010 the populace awoke and began to engage themselves in the body politic and the political system.  We at first did this through protest rallies, fax and letter campaigns, and speaking out at town halls.  We coalesced into loose confederations of likeminded individuals, and for the first time found a kinship in the knowing that there are others who feel as we do.  We felt that our country had left us and our representatives no longer represent the interests of the electorate. We began to educate ourselves and immerse ourselves in study of the constitutional principles of our founders and our Republic.  We began learning the basic civic lessons that our education system has abandoned.  In 2010 we embraced the electoral process and worked to identify and elect people who represented our core values of a constitutionally limited government, fiscal responsibility, and free market principles.  Despite our naivety and lack of cohesive organizational structure we were successful in electing many new conservatives into office.  This fledgling freshman class is now struggling with the inside party power plays from the establishment old guard politicians and they are being coerced to go along with the game plan in order to protect their seats come next election. We see it quite differently.  These representatives need to understand how they got elected.  If they think they are strengthening their future electability by dodging controversial votes and not taking a stand on the relevant issues they will soon learn the error of their ways.  This sounds very confrontational but it is the grim reality that we have struggled so hard for and achieved the gains that we have made thus far and we will not, and cannot letup or stand down now.

Tennessee is a conservative state, however the democratic machine has dominated the political landscape for as far back as we can remember.  For years the GOP has played the game of underdog and has settled on the scraps of compromise handed out by Jimmy Naifeh and other influence peddlers of his ilk. We are now positioned with so called Republican majorities in the House, Senate, and Governor’s office and yet these legislators are still operating as if they are stuck in this old modality of operating as a minority party and always looking for the path to compromise.  It’s as if they are bereft on how to lead and how to understand the mandate of 2010.  We say Carpe Diem, use your newfound power and stick to the conservative core principles that got you elected and lead as if you actually understand who you are representing.  We demand principled representation, and if granted we have an opportunity to effect sweeping reform and the restoration of constitutional balance and fiscal solvency.  If our representatives stand for us we will stand with them. We will be there with you in the fight win, loose, or draw.  We will stand by you if you are standing on principle.


The tea party is now maturing into a true political power player and we are honing our skills within the political landscape and are gearing up to be a dominating factor and game changer come the 2012 election cycle.  We are actively engaged and working within the halls of government and we are keeping score on our representatives and how they are voting and what they are saying publically.  We have become tech savvy and are documenting all of this and we will use this information in the next election to weed out the remaining old guard.  We have become practiced in the old fashioned campaign arts of door knocking and phone banking.  We are using social media and new media outlets to spread our message and grow our movement.  We are getting involved in our local precincts and are getting people who share our values into the party leadership positions.  The old school ways are over.  Many within the Grand Old Party are embracing this new found blood.  Yet many are erroneously dismissing it as a passing fancy and of little lasting effect.

Some see the tea party as evolving into a third party.  That is neither our intent or desire.  Yet this will happen by natural progression if our party fails to embrace our core conservative principles.  The tea party is the essence of a true grassroots people’s party.  Although largely republican in nature our ranks are growing as we attract independents and disenfranchised democrats into the fold with our poignant messaging.  One of the key failures of the GOP is to not recognize this big picture and to reach out to and embrace those who have not been party affiliated or have been abandoned by an uber-progressive big government left.

Post 2010 election we witnessed the GOP boasting and back slapping themselves for their perceived victories.  In many regards these victories were hollow and did not go to extend or represent the conservative wildfire that is sweeping the nation.  Look at our new Governor.  By all accounts he is a progressive who was able to leverage family fortunes towards a victory in gaining the Governor’s seat.  One only needs to look at his track record as mayor of Knoxville and his embrace of the socialistic principals such as sustainability and his Agenda 21 initiatives.  His two-faced approach towards 2^ndamendment freedoms should have been telling.

Nowhere is this new dynamic more evident than in the collective bargaining issue that is playing itself out in capitals across this nation.  Here in Tennessee this battle is portrayed as an assault against teachers.  Nothing can be farther from the truth.  We stand firm in support of and in our resolve for good quality teachers in every classroom who will be rewarded for teaching excellence.  Organized labor has had a stranglehold on this country’s economic potential for many years.  Although it once had purpose during the industrial revolution it is now a bloated albatross and nothing more than a political machine geared to fund the progressive agenda and the one world government mentality.  Just look to SEIU head Andy Stern’s public statements on their plans of organizing the workers of the world.  Look at what happened in Egypt with the unions ginning up the discent. This is a cancer that drains corporate resources and stifles investment and growth.  It puts municipalities at risk and endangers the American way of life. It has become too entrenched in our governmental system and wields influence that far exceeds its minority representations.  Look at AFL/CIO Chief Rich Trumka who visits the White House every week and advises our President on a daily basis. Obama has not even met with a large number of his cabinet level staff officers in months yet he always finds time between vacationing to lend an ear to the big labor unions.

In our education system, organized labor protects teachers that would otherwise be deemed unfit to teach our children.  It does nothing to advance quality in the classroom and thus our children suffer in mediocre or failing school systems.  And we just keep throwing good money after bad with every tax increase that is dubbed “for the children”!  Getting organized labor out is step one in reforming our education system.  We have a long hard road ahead and we need to be able to enlist all players who have a vested interest and a part in this to come to the table and work on reforms that work.  We need reform that enriches the classroom experience for our children, rewards good teachers, provides parental choices, and does not unduly burden the taxpayer.

We are now just witnessing the true metal of our legislators as collective bargaining moves through our House.  We have seen our House leadership cave to the power and influence of the TEA/NEA and the alphabet soup of big union organizations.  We are told that HB-130 as amended is a good thing and is in line with our Governors education reform agenda.  Frankly we don’t care much about our governors agenda.  He is the executive of the State and the representative of such and not of the people.  Our House and Senate are the people’s representatives and thus should serve our interests through thoughtful legislation.  Many are doing just that and we stand in full support of their efforts, however there is an unholy power base hell bent on maintaining the status quo in Tennessee governance.  The time is now to cut the head off the snake and settle for nothing short of a total end to collective bargaining in our states education system.  We must continue our pressure on the House members and urge them to recede their position on HB130 and support the pure SBO113 Senate version when this comes up.  We must and will remain ever vigilant and watchful of our General Assembly and be prepared to do the hard work to replace those who fail us.   


In Liberty,

The Tennessee Tea Party Team

Money issues for Generation Y; Are they different than what their parents faced at their age?

Yes and no. Young people still need to save, invest, and plan. But on many objective measures, things are not going well for gen Y. The facts just keep coming: Average tuition is up over 250 percent since 1976, revolving debt is up 24 percent in the last five years, and 2004 male graduates earned less after inflation than they did 30 years ago. Half of recent college grads have failed to pay some of their debt. And there is a staggering array of places to spend our money, including online and on luxury goods that simply didn't exist 20 years ago.

There aren't any secrets to personal finance. People have been saying similar things for 50 years: Know where your money is going, save more, invest your money, and grow it. But instead of seeming like lectures, personal finance can actually be relevant and engaging to young people. When I am teaching on the subject I try to tell stories about dumb things I've done with money, simple steps to save and invest, and how to think about money (like the difference between being cheap and frugal).  

In the end young people today are facing the same issue their parents faced, desires are limitless and money is scarce. What is most important is that young people today learn to talk about money. Learn how to gather more information in order to make smarter decisions and learn to save more earlier than previous generations because a social safety net will not likely be available in 20 years.