Saturday, April 16, 2011
Two New Ways to Make Money
MarketSmith is a remarkably flexible stock-charting and screening application, and Born To Sell gives covered call traders some great ideas.
Two new tools came to our attention recently, and they are both worth a look. The first, MarketSmith, is a remarkably flexible stock-charting and screening application, and the second, Born To Sell, gives covered-call traders some great ideas.
You may be familiar with the MarketSmith (http://www.marketsmith.com) product line if you’ve ever accessed Daily Graphs or Daily Graphs Online, founded by William J. O’Neil, the money manager who created Investor’s Business Daily. Daily Graphs started out in dead-tree form in 1972, then went online in 1998. In 2002, the service added mutual-fund and options data. Subscriptions are $999 a year, or $112.25 a month. Renamed MarketSmith last fall, the company is now run by O’Neil’s son, Scott.
Scott O’Neil says that his firm spent “an incredible amount of time designing the layout and scaling to make sure that each chart is representative of that particular security.” The design is extremely elegant, as all the components are accessible from a single screen. MarketSmith is intended to cover the entire research process behind making a trade, starting with idea generation, managing ideas and then analyzing them.
The tool runs in Microsoft Silverlight and launches from most popular browsers. We ran it on Firefox, Chrome and Internet Explorer; it behaved best on the last.
The central tool is, of course, a price/volume chart, but other capabilities are available through tools that slide in and out from the four sides of the chart. A screening tool slides out from the left side, and you manage all your watch lists through a tool at the bottom. There is a panel on the right side that provides related information, such as criteria from investing gurus. The tools slide open over the chart you’re viewing, then slide back when you’re done with them. There’s no digging through menus to find a particular tool in this very modern interface.
You can choose from over 200 data points in the screener, including the usual suspects in fundamental and technical analysis. You can set up your own screen, which is then saved for you, or go to the MarketSmith stock screens that match the style and approach of various investing legends such as Warren Buffett, Martin Zweig, Peter Lynch and Benjamin Graham.
The list panel, located at the bottom of the chart, is the program’s hub. This is where you store the results of your screens, so that you can go through them more completely. As you run a screen, you can drag and drop your ideas onto a watch list. The lists are displayed in a table with column headings that are customizable with any of the 200-plus data fields in the system.
The charts can be displayed as daily, weekly, monthly and one-minute intervals. One intriguing feature that sent me on a walk through history is the “Change Date” box, which lets you set the date for any individual stock back to 1962 (when available). You also can look at movements in the Dow Jones Industrial Average back to 1900.
While viewing a chart, you can slide out the panel on the right and find information on institutional ownership or see how the company’s industry is performing. There is also a news feed on the right panel. Options data are also included, though the options analysis isn’t very deep.
There is also a community you can join to get feedback or to share screens. In the blogs area, you can mark up a chart and share it with others in the community. You have to be a MarketSmith member to post or read the blogs. A feature I would like is the ability to link a MarketSmith membership to your online brokerage account, which would avoid a fair amount of manual data entry.
MarketSmith is pricey, but has excellent tools in a well-designed interface. It’s worth a trial, at the very least.
FOR COVERED-CALL WRITERS, the site BornToSell (http://www.borntosell.com) offers a customizable screener that searches through approximately 150,000 available transactions and displays the results in an easy-to-read table.
The basic search screen uses slider bars to set your options criteria, including expiration date, whether they are in, at or out of the money and the price of the underlying stock. The screen’s results display instantly, with visual cues, such as earnings dates, highlighted in red if they will occur prior to expiration.
Advanced filters let you see market capitalization, the price of the option and the industry. You can also exclude various stocks. The results are ranked by the transaction’s annual return and will definitely generate some ideas for you.
Born To Sell analyzes only covered calls, but is a terrific tool for those who generate income by selling calls against existing positions. After a two-week free trial, subscriptions run $499.95 per year, $149.95 quarterly or $59.95 monthly. Check it out.
Published in Barron’s, April 11, 2011
Saturday, April 02, 2011
OptionsXpress Gives Schwab a Leg Up
The smaller firm will bring better options tools and the possibility of integrated futures trading.
Charles Schwab’s $1 billion offer last week for midsize optionsXpress seems like a good move for the online-brokerage giant. The all-stock deal should allow Schwab to update the options tools on its Website and to integrate futures trading, helping it stay relevant in a very competitive technology race. The firm is choosing to buy the technology rather than build it, and also gets the chance to absorb optionsXpress’ nearly 400,000 accounts.
Charles Schwab’s (http://www.schwab.com; ticker: SCHW) recently released StreetSmart Edge platform, available only to frequent traders, is a huge improvement over the firm’s Website when it comes to researching and trading options (see “A Peek at Schwab’s New Trading Site,” Barron’s Electronic Investor, Dec. 20, 2010). However, the Street-Smart Edge tools aren’t incorporated into the Web platform.
OptionsXpress (http://www.optionsxpress.com) was a pioneer in bringing options-strategy searches to the retail trader, and rose to prominence on the strength of its tools. More recently, optionsXpress customers have been able to trade futures as well as stocks, options, mutual funds and bonds; this trading technology will be a welcome addition to the Schwab suite. Currently, Schwab customers have to open a separate account with the firm’s Lind-Waldock affiliate if they want to trade futures, which we’ve regarded as a pain. Schwab officials emphasize there will be no changes in the optionsXpress platform.
In Barron’s recent ranking of online brokers, optionsXpress garnered four stars out of a possible five, while Schwab merited 3½ ("Making the Right Connection,” March 14).
Unlike after many recent mergers, optionsXpress customers could see their trading costs drop once the firms are merged. Currently, Schwab charges $8.95 for stock transactions, $1 less than optionsXpress.
Although a group of optionsXpress (OXPS) stockholders, hoping to increase the price, has filed suit to block the sale, I would be surprised if this deal didn’t go through. The two firms appear to be following in the footsteps of TD Ameritrade’s (http://www.tdameritrade.com) takeover of one of our electronic favorites, thinkorswim. The latter was allowed to maintain a separate identity, although that could change later, when the clearing operations merge.
If you’re an optionsXpress customer (not stockholder), what are your concerns about this takeover, if any? If you already have accounts at both Schwab and options-Xpress, which one do you prefer? Let us know at firstname.lastname@example.org
A FREE IPHONE APP called Chaikin Power Tools was just launched. It provides trading signals on approximately 5,000 stocks. The app lets you set up your own watch list or select from a built-in industry list. If you pick, for example, conglomerates, you’ll see recent prices (20 minutes delayed) for the companies in the group, plus a proprietary Power Gauge which gives you a bullish (green), bearish (red) or neutral (yellow) signal. Clicking on a gauge provides additional detail, plus the ability to view a graph and see some basic information about the company. It’s free, and it’s fun. Check it out.
IN OUR RECENT READER MAIL was an inquiry about how to synthesize various financial Websites when seeking information on a particular company. We were tipped to the site http://stocks.overthefalls.com, which brings together pages from 14 different financial sites such as Yahoo! Finance, Seeking Alpha and Zacks for a chosen ticker symbol.
The service is free, and offers a very stripped-down interface. You type a ticker into the search box, click on the “Go” button, and wait a few seconds—how many depends on the speed of your Web connection. The content from each of the sites can be seen by clicking on the appropriate box on the left margin.
You’ll be introduced to some Websites, such as StockTA and J3, that you might not have seen before. StockTA offers technical analysis of stock-price movements, while J3 gives you a breakdown of a stock’s institutional ownership. If you don’t want to bother loading content from one of the sites built into the search, you can uncheck the box with the word “enabled” to the right. That can cut the time it takes to make the pages ready to view.
It’s a little bit buggy, however. I found that I had to close the browser window and reload overthefalls to get a different ticker symbol to load correctly. In addition, most of the ticker symbols I checked out eventually loaded the Seeking Alpha page—if I didn’t click on anything. Still, it’s an interesting little tool, and you can’t beat the price.
SEVERAL READERS HAVE ASKED if there’s a Website that can help them find preferred stocks, as they attempt to generate more income from their portfolio. One resource is the Preferreds Online site (http://www.epreferreds.com, which is run by the same group that publishes Bonds Online (http://www.bondsonline.com).
One intriguing feature of this site is the Relative Value Indicator, which shows whether the stock you’re mulling is cheap or pricey when compared with similar kinds of stocks. The site also shows historical credit ratings of the companies issuing the preferred stock. It’s a subscription service that will set you back anywhere from $10.49 for a one-day pass to $445 per year.
If you’re on a budget while looking for added income, check out Quantum Online (http://www.quantumonline.com), which isn’t as pretty as Preferred Online but is considerably less expensive. Actually, it’s free; however, the publisher is happy to accept contributions. To use the site, you have to sign up for a free log-in; it can take several hours for your password to arrive.
Upon logging in, you can search for securities related to a particular company by name or by ticker symbol. You can see the company’s current credit ratings, which are supplied by Moody’s and Standard & Poor’s. One resource I found helpful was an article entitled “What Income Investors Should Know.” It provided insights on what happens to preferred stocks in bankruptcy, what a redemption or call date is, and why some issues trade on the Over-the-Counter Bulletin Board, more commonly known as the “pink sheets.”
You can find lists of real-estate investment trusts, closed-end funds, limited partnerships, royalty trusts and a variety of other securities. As mentioned, it isn’t going to win any beauty contests, but it contains excellent data for income investors—and, once again, the price is right.
Published in Barron’s, 3/28/2011.