My favorite strategy I used when trading for a hedge fund was using call options to replace buying a stock. On large blue chip companies, you can find options that are extremely cheap and which move almost one for one with the underlying stock.
These options are deep in the money call options (usually with a delta above .80) and with an expiration that is less than one month out.
Right now Darden Restaurants (DRI) looks like an attractive stock to trade using my stock replacement strategy. If I wanted to buy 1000 shares of Darden it would cost me almost $51,000. But if I use my secret stock replacement strategy instead I can buy 1000 shares of Darden for just $3900.
The April Darden $47 Call Options trade for just $3.90, and with the stock priced at $50.71 that means these call options will move almost 1 for 1 with the underlying stock. Better yet I am paying only 19 cents (the options premium) to control 1000 shares of a blue chip company.
Even better if Darden hits $55 anytime over the next month I will make more than a 100% return on my money in less than a month.
Where else but the options market can you legally make a 100% plus return in less than a month on just a $4 stock move?
This is the power of the stock replacement strategy the ability to make a 100% plus return in less than a month and you wonder how people become Billionaires
There is an emerging small cap activist hedge fund that has been shooting the lights out. Their average return on a stock where they have won a board seat is 115%, let me repeat that every time this fund has invested in a stock and won a board seat the stock returned an average of 115%.
Even better the fund just won a board seat on a small cap technology stock that sells for less than $5. Furthermore this hedge fund owns more than 8% of this company and has been adding to its position as well.
So based on past history this stock should go up at least 115% or more.
Moreover the stock is so undervalued that it sold for $65 in 2008, more than a 1200% return from its current share price.
To find out the stock, the hedge fund and its performance data all you have to do is go The Billionaires Portfolio and sign up today.
Will Meade
President of The Billionaires Portfolio
If you did not read my previous post about the world’s greatest investor, David Tepper, please do. In that post I explained how David Tepper has produced the greatest returns in hedge fund history, 41% a year for 21 years which would turn $10000 into $12 Million by simply using 3 rules for investing.
Tepper is a event driven distressed investor meaning he will only buy something that has a catalyst and has crashed in price.
Well right now there is a market that has both crashed and has a catalyst. It is China and Chinese stocks. Its simple David Tepper has stated in both the New York Times and Kiplinger’s that the key to his investing success has been following the moves of The Fed and Global Central Banks, its that simple. Remember Tepper is not your typical hedge fund billionaire-ivy league grad, he is a graduate of the the University of Pittsburgh, so my point is that anyone can do this.
And right now China is giving you the same signal that the US did in 2009-2010 with QE, they are about to launch a massive stimulus package which will boost China’s economy and stock market. Chinese stocks are cheap they have crashed more than 50% and now there is a potential catalyst that will boost this market back to its highs. This is a classic David Tepper play.
Tepper has made billions on plays like this, he purchased Argentinian Bonds, Russian Debt, Telecom Stocks and Banking Stocks all after they had crashed and there was a government mandated catalyst/policy move that told him these markets had bottomed.
Even better with the advent of leveraged etfs you don’t need a fancy prime brokerage account or margin account. You can simply buy the Direxion 3X Bull China ETF, Symbol YINN, (which gives you leveraged exposure to the Chinese Stock Market) and you can put on the exact same trade that top billionaire hedge fund managers use, like David Tepper.
David Tepper is simply the world’s best investor, he has averaged 41% annualized for 21 years in his flagship hedge fund Appaloosa Partners. That means $10000 invested with David Tepper 21 years ago would now be worth almost $12 Million Dollars!
David Tepper is worth more than $8 Billion dollars and he is a completely self made.
Tepper did not grow up rich nor is he some fancy ivy league grad or rocket scientist phd, he has a degree from a state school the University of Pittsburgh.
Yet Tepper has beat the pants off every other single hedge fund manager in the world, even without the fancy Harvard of Stanford MBA.
He did this by following 3 simple rules:
1) Only buy stocks or asset classes when there is a Catalyst
2) Only by stocks or asset classes after a major sell-off, (this is called forced selling)
3) Look anywhere and everywhere for value across the globe, emerging markets etc.
This is the exact same philosophy we use at billionairesportfolio.com, where we only buy a stock, etf or asset class when there is a catalyst, we are deep value distressed investors, just like David Tepper, and we will go anywhere to find value.
A trader paid almost $8 million for a trade that will pay off if the VIX (Volatility) Index rallies at least 60 percent by May.
The trader bought 150,000 bullish contracts on the VIX expiring in May with a strike price of 22.
This could be a hedge for a big fund or an outright bet, if its an outright bet it would be an incredible asymmetrical trade in that the $8 Million could easily turn into $170 Million or more if the VIX Spikes to 30 or above by May.
Today is quadruple witching day tread carefully. This means that the markets will be extremely volatile and directionless due to the fact that stock options, index options, single stock options and stock index futures all expire today.
Will Meade
President of The Billionaires Portfolio
I love biotech stocks, not only are they non correlated to the stock market and economy, but a lot of the companies are actually improving the world by creating drugs that are curing serious diseases. As a student at The Johns Hopkins University I became very familiar with the Biotech Industry and have been enamored with it ever since.
Even better biotech stocks are red hot, the sector has been one of the best performers this year up 17% YTD and 66% in 2013. Small cap biotech stocks have performed even better, last year alone there were 14 biotech stocks that went up more than 500% and 4 that went up more than 1000%.
So how do you find the best small cap biotech stocks, the ones that go up 500% a 1000% in a year. Its simple you piggyback the stocks owned by the best biotech hedge funds in the world.
There are about 6 to 8 superstar biotech hedge funds, and all of them invest in the small cap homerun type biotech stocks. These hedge funds are run by managers with PHDs, MDs from the top schools in the world Stanford, Harvard and Johns Hopkins. Moreover these managers have medical and research experience at hospitals universities and labs, so they really know how to analyze biotech companies and their drugs. Furthermore many of these hedge funds were up 80% or more in 2013 and are up 25% YTD.
In our Billionaire’s Portfolio Service we own 4 biotech stocks, all of which are owned by some of the top biotech hedge funds as well. Our Biotech portfolio has crushed the market YTD with one biotech stock that has almost tripled.
Bloomberg had an article this morning on the best performing mutual fund over the last 10 years its run by the 71 year old Mario Gabelli and its (no joke) called the Mighty Mites Fund (no joke). The fund has been the best performing equity mutual fund over the last 10 years yet is has only averaged 11% a year.
This is sad, basically the best mutual fund or investment product offered to retail investors can only produce 11% a year over the last 10 years versus an 8% return in the S&P 500. Even worse the Mighty Mites fund holds more than 450 stocks making it basically a closet index fund, on top of that Cornball Gabelli charges you a hefty 1.41% management fee.
Investors should be upset at this I am, and that’s one of the main reasons I started The Billionaires Portfolio to give the everday investor access to hedge fund type returns.
I have published many times my exhaustive performance study of piggybacking the world’s best billionaire investors and hedge funds.
If you would have simply purchased every stock owned by what I call the ‘Activist Master Select Group” which includes managers like Carl Icahn, Bill Ackman you would have returned 24.5% annualized over the last 10 years.
That 24.5% is more than double the return of the best performing mutual fund (11.4% annualized) and it costs less than a mutual fund at only $299. To get a copy of my study and to subscribe to the Billionaires Portfolio visit us at Billionaires Portfolio
A trader paid almost $8 million for a trade that will pay off if the VIX (Volatility) Index rallies at least 60 percent by May.
The trader bought 150,000 bullish contracts on the VIX expiring in May with a strike price of 22.
This could be a hedge for a big fund or an outright bet, if its an outright bet it would be an incredible asymmetrical trade in that the $8 Million could easily turn into $100 Million or more if the VIX Spikes to 30 or above by May.
I have written a lot lately on this blog about my stock replacement strategy. As you remember the stock replacement strategy is buying deep in the money call and put options to replace buying the actual stock. The advantage of using options is that gives you free juiced leverage 10 to 20 times, with limited downside and low capital requirements (you only have to put 1/10 or 1/20 of the amount compared to buying the actual stock).
And this stock replacement strategy allows you to trade with an account as little as $5000 to make a $1000 a day swing trading and day trading stocks.
The key to this strategy is to find highly volatile, liquid stocks that have options with high trading volume so that you have a very small spread when you buy the option. What this means is when you are day trading or swing trading stock options, you only want to buy puts and calls that have very tight spreads, (the spread is the difference between the bid and ask). You want the spread to be pennies.
Next, you need to understand that in the short term (anywhere from 1 to 5 days) price action, money flows and technicals drive 95% of the stock price in the short term. So you need to know what chart patterns work in the short term and luckily there are a few great ones that work almost all of the time.
Lastly, you need to use my secret stock replacement technique, that is only buy options that are deep deep in the money, so that the option moves almost one for one with the stock.
So to use this secret stock replacement technique of day trading swing trading options you need the follow these rules every time:
1) Only trade stocks that have options that are very liquid with high volume, so that you when you buy the put or call the spread is very low, (it should be pennies) so that you are not paying a big premium on every trade.
2) Only trade volatile stocks with great short term chart patterns. Like Lululemon (LULU) today.
3) And most importantly, you want to use my secret stock replacement strategy of only buying deep in the money calls and puts, in which the options moves almost one for one with the stock.
