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.
His name is “J”, and he runs a $40 million fund which has generated an incredible 54% annualized return over the last five years. To put this in perspective if you would have invested just $15,000 in J’s fund in 2009 you would now have more than $130,000 dollars!
J returned 264.38% in 2009 and had 2 stocks that went up 1000% or more. Even more impressive his fund only lost 9% in 2008 versus a 37% loss in the S&P 500. J has not only crushed the market indices but he has done it with less risk.
To put J’s 54% annualized return in perspective, no other mutual fund or hedge fund in the world has a better 5 year track record. This means over the last 5 years not one fund (over 18,000 funds) has better performance than his.
The name of this fund and the manager is…
I give you a lot in this blog, but this one … I won’t give everything away for free. To get the rest of this post you must subscribe to The Billionaire’s Portfolio.
So I called the bottom, now I am telling you Apple is going to $700.
Technically you can see from the chart below that Apple is ready to break out of a bullish inverse head and shoulders pattern, if it closes above $545, this pattern projects a price target of $700 for Apple.
Furthermore every stock needs a catalyst to move it. I believe Apple has two catalysts that will move its stock price up. First according to trim tabs research Value Based Mutual Funds have been purchasing Apple stock at a record pace, this has not always been the case as many value managers never purchased Apple during its big move over the last couple of years.
Secondly Apple will come out with a smart watch, many analysts think this will be released around September of 2014. This will be a game changer as it will be the first product in years that will actually get people excited about Apple the company again. More importantly it will increase Apple’s growth prospects which will cause sell side analysts to raise their earnings/revenue estimates as well as their price targets.
So what is the secret to hedge funds bringing in so much money?
Its simple, the best hedge funds do exactly what their name implies – they hedge and when you have bumps in the market like this year, hedge funds will outperform all the indices and those dinosaur mutual funds as well.
But its 2014 so no need to lock your money up with a fund of funds or hedge fund simply follow the: BillionairesPortfolio.com.
We piggyback the world’s best hedge fund’s stock picks, and we opportunistically hedge those positions with put options and inverse leveraged etfs, all for just $297 dollars.
My former boss, a former Goldman Sachs Fund Manager and Harvard MBA who managed money for some of the biggest pension funds and endowments in the country, had a special formula for investing in stocks during volatile times.
The formula had the following criteria:
1) A Market Cap greater then $10 Billion
2) Five Year Projected Annualized Earnings Growth greater than 5%
3) A dividend yield greater than the 10 year treasury bond.
The reasoning behind the screen is simple, you want a stock whose earnings are growing because it offers protection against inflation, secondly large brand name companies are less volatile and more recession proof than smaller unknown companies and buying stocks with dividend yields higher than the 10 year treasury bond allows you to get stock like returns with bond like risk.
Will Meade
President of The Billionaires Portfolio
