Canada's ING Direct Orange Key Promotion

Hi Friends,

A while ago, I was searching for something else but accidentally came across a great promotion by ING Direct Canada, which is based on referring friends. With the program and with a little effort, you can collect a lot of cash just for referring someone. In brief, if you open an account (such as a no fee Chequing account) and deposit $100. Not only you will get a $25 bonus, but also your friend who referred you would get $25. The referral program, will allow you to earn up to $2000 in bonuses if you refer 50 friends. I have opened the account and there is absolutely no tricks or hidden fees. This is the way ING Direct wants to encourage people to use their great services.

I will explain the program in more details below:

The referral program is called ING Direct Orange Key program.

What is the ING Direct Orange Key program?

The ING Direct Orange Key program is a referral based program. When you sign up for the first time with ING Direct Canada, and deposit at least $100, you will be rewarded $25. To earn the bonus $25, you have to input a current Orange Key when you sign up.

Now the key to this program is the Orange Key you receive when you sign up with ING Direct.

What do I do with my Orange Key?

When you have your Orange Key, all that is left for you to do is to convince a friend to sign up with ING Direct Canada (which is not that hard to do at all) and give them your Orange Key. You have to be sure that your friend deposits at least $100, which they will likely do as it will earn them $25. Once they make the deposit, not only will they get $25, but you will as well.

How to earn $2000?

You will need 50 friends or family to sign up with ING Direct in order for you to earn $2000.

Here is the rundown of how it works:

• Refer 10 friends and family – get $25 x 10 + $50 bonus = 300
• Refer 20 friends and family – get $25 x 10 + $100 bonus = 350
• Refer 30 friends and family – get $25 x 10 + $150 bonus = 400
• Refer 40 friends and family – get $25 x 10 + $200 bonus = 450
• Refer 50 friends and family – get $25 x 10 + $250 bonus = 500

This makes the grand total $2000.

As you can see, with every 10 successful referrals, you earn an additional bonus which increases as you make your way to 50 referrals.

The family members can refer themselves and get $50/family for every account opened:

One effective way to get started with a good chunk of bonuses is that you open separate accounts for each member of the family. For example, if you are a family of 4, your family will immediately earn: $25 (1st account opening) + $50 (2nd account) + $50 (3rd account) + $50 (4th account) = $175

Plus, each of you stand the chance of earning $2000 in future.

I want to get started. What should I do?

1) Go to:

http://www.ingdirect.ca/referafriend/

2) Go to "open an account" at the right bottom of the page

3) Choose one the available accounts (I recommend either using one of the savings accounts (maybe the first one 1.5%) or even better the new no fee Chequing account)

4) Select Enroll then use the orange key: 35530019S1 (or the one on the main page of the blog)

5) Once you enter the information and set up the account, it will give you the instructions to mail a Cheque to yourself for $100.

6) Once the Cheque is cleared (in about 2-3 business days), you will already see the bonus $25 plus your own orange key.

Please let me know if you have any questions. Once you open your account, I can show you how to get more referrals. Feel free to drop a line.

One way to hedge your portfolio

Hi all,

There are many ways to hedge your portfolio against a market correction. However, there is one that I have discovered myself and has saved me during the correction times in 2010.

Before I start explaining about my method, let me review the most widely used methods and their drawbacks:

1) Buying puts: This method is useful if you buy the right put option (right strike price), at the right time, and with the right amount. With this method, time is your main enemy as the options decay so quickly. So, many of the times, not only you lose money on the stock you own, but also you will lose on the put option you bought as it does not surpass the strike price for example.

2) Shorting the index or stocks: This method doesn't have the time decay problem of method one. However, 1) You are exposed to unlimited loss, 2) There are usually high margin requirements to short stocks, which may make it an inefficient method, 3) Market volatility may cause your position to be closed automatically by your broker, and 4) Your account may not allow you to short (Such as RRSP accounts in Canada)

3) Buying inverse ETFs: Most of the inverse ETFs are leveraged ones. It is well known that these ETFs have time decay plus some hidden ETF fees (look at SRS or FAZ for example). Even worse, the leveraged ETFs require a very higher margin requirement which again makes them inefficient. There are non-leveraged short ETFs too that may work better, which I don't have much experience with. But even those look to have inconsistent performance over a long period of time (look at the chart comparison of SEF and XLF for example)

The above methods are not necessarily wrong approaches, but due diligence is needed in using them.

Before I explain my method, I would like to draw your attention to the following chart overlay:


It is the long term overlay of the S&P 500 index with CAD/USD (FXC) chart. What shows to be interesting is that the Canadian dollar (to USD) trend follows the same trend as the S&P 500 index. When the index goes up, Canadian dollar also trends up; when the index goes down, the Canadian dollar goes down. So, what is the idea?

The idea is: Instead of shorting the market, one can buy USD/CAD in the forex market. What are the benefits of this method?

1) Leverage: Most of the forex brokers give a very good margin to do forex trades. For example, to buy $40,000 USD.CAD, you only need $1000 in your account. Of course, you have to leave enough cash in your account to avoid margin calls.

2) More freedom: As forex is traded internationally, you can trade forex outside of stocks trading hours giving you more time flexibility.

3) Bottom line: If you buy USD and the value drops: 1) Most probably your stocks (or your index investment) will go a lot higher, 2) It's money! You can keep it and use it to buy cheap merchandise priced in USD, or use it later on when you travel to the US. I don't mind owning USD for long term, but I do mind owning an inverse ETF for long term.

The next question is how to design the portfolio to have enough protection. I will discuss it in future posts. Your comments and thought are welcome.

Trading Strategies going into 2011

Hi Fellas,

I have not been posting for quite a while now, so I thought to start over again and also see how you guys are doing. I have been relatively active since, and now will update you of some interesting trade ideas soon. I would be glad to hear from you guys too.

Wish you a very happy new year and happy holidays.

Smart

My recent thoughts

Hi Joe,

Glad you are doing well. Sorry I haven't had a new post lately. I have been too busy. But let me update you about my views and trades:

I think market is in an undecided point. Shorts are selectively and aggressively shorting specific stocks and are gaining some confidence. But I think they will be squeezed soon. Here are the things I consider for trading:

1) First Coverage Sentiment report: They have a real time sentiment which has proved to show the mood of the market short term. Now they are calling to be long, so I am back to business. Their stock picks aren't really reliable as it reflect the past weeks activity. If they are bullish on a stock and I see the stock has been beaten, I consider selling out of the money puts. I am also considering neutral trading or writing closer to the money put spreads on bullish stocks. This way, I have a higher risk portfolio but risk less money too. Unfortunately, whenever I tried bearish or neutral spreads, I got caught. In case of DELL, I managed to get out with minimal loss. I also had a neutral spread on POT (sold 110 calls and 75 puts, bought 115 calls and 70 puts). That trade was good, but I got panic when POT rallied 10% in one day and close it the bearish side. Now that I am trying to be bullish, things seem to be turning bearish for me :) Seems I am out of phase a bit these days. Despite all that, so far my portfolio had been steady with small gains, so no major complain yet.

2) Here are the open positions I have:

- GMCR 55-50 bullish put spread (it is down after hours but I am going to hold on to it probably)

- MOS (45-40 bullish put spread)
- POT (80-70) bullish put spread
- SNDA (45-40) bullish put spread

- I own THLD (wish I added more when it was 1.10, insider bought it long time ago at 1.50)

My plan is to take profits when possible and keep the capital 1-2 weeks before expiration to sell neutral box spreads. Time decay should be killing both calls and puts.

It is a good idea to buy some insurance in case of market crash. I have a feeling that US dollar will go higher. The best deal for that I found are UDN puts since it has both time decay and UDN goes down if dollar goes up. I was looking at December 26 puts. As soon as I watched it, it got some volume the day after :) But I want to get it for less that $0.2/contract. We will see. I was thinking of some neutral ideas: for example something that takes advantage of dollar + gold trade...

The real time sentiment from first coverage is good although stocks are tanking. So that is a good short term sign to me. I am still concerned about the whole economy testing its past lows again and possibly tanking further. So, it is good to prepare for that (just as a small possibility)

Update on my portfolio

Last week's first coverage report was still somewhat bullish but not as much as before. The sell side is selective about stocks with some bearish and some bullish. There are some investors who sold and went to the sidelines. There is also a tradition that says: "Sell in May". However, the sell side says stay bullish but be nimble!

Here is the update to my portfolio:

1) I sold my CTIC for $1.32. I saw the share auction news and felt it is not a good sign. I may be wrong, but getting out with profit is always right :)

2) I closed my FSLR put spread today with less profit (about 16%). Although most likely it will expire worthless tomorrow, I again thought I should protect myself specially with yesterday's nasty sell off + yahoo finance reports that there were a lot of insider selling on FSLR a few days ago. So, there may be something wrong out there. It was a good trade, but the only problem was that sometimes, the bid/ask spread was too wide. So as soon as I saw the bid and ask gap decreased today, I closed out the position.

3) WMT: This has been such a good trade so far. Although WMT trend was not so positive, the puts are almost worthless already. The good thing about WMT is that the bid/ask spread on puts are so narrow, so it is very liquid + It is not too volatile like FSLR. I actually transferred my margin from FSLR to WMT June put options as WMT was negative today. An aggressive investor could at the same time sell bearish call spreads on WMT to double the profit. I guess this is called a box spread :) Maybe my next step should be doing these kinds of neutral trades.

4) FCX: I also wrote some bullish put spreads for June strike 36 and 35.

5) DRYS: Sold June $5 strike and bought $4 strike (I am not so sure about this, but the pullback was too much I think)

6) RIMM: Finally, I wrote a bullish put spread on RIMM with June $55 and $50 strikes.

Other than that, it seems to me that the market has sort of slowed down recently. Some shorts are aggressively looking to short stocks. However, I think it is going to be a neutral month. I want to start selling box spreads on neutral stocks. I am thinking of AMGN right now. Here are my reasons:

1) Bullish reasoning: AMGN is cheap and trading close to its 52 week low + Health Care is a bullish industry (based on first coverage)
2) Bearish reasoning: Insiders sold shares recently around $48
3) Analysts in GS recently downgrade AMGN to neurtal.

So, I was thinking of a put spread on $42.5 and $40 puts + bearish call spread on $52.5 and $55. I am just keeping and eye on this trade. The gain is about 20%. For tomorrow, I may just do nothing letting the options expire.

Let me know how you guys have been doing these days.

Portfolio Adjustments

My BAC strangle did well, with the BAC $9 call becoming well in the money. Yesterday, I saw weakness in BAC in early trading with high volume, so decided to do profit taking. I sold it for about $5.2/contract. Instead, I bought 2 BAC calls of the next month at strike $20 in case the rally continues. Even if the calls expire worthless next month the overall gain on this trade will be more than 100%.

The $40 investment on CTIC is giving good results! I am still holding on to it.

FSLR and WMT put spreads are doing fine so far. I actually added some more to them as I thought they are profitable. I also sold WMT put spreads for June with $45 an $42.5 strikes.

FCX did so well. For FCX, buying call options would have been the most profitable. I actually sold some $43 puts (buying $42 puts). They almost became worthless in a matter of 1 day!

I actually entered two more trades today for June. I sold INTC $14 June puts (buying $13 puts). INTC is not too volatile (similar to WMT), and pays dividend. There is some recent news keeping it down, so I look at it as an opportunity. There are not much insiders owning it though. I will watch it and if I feel further weakness, I will consider some action :)

The other trade I entered which made more sense was put spread on VZ. VZ had some recent insider buying at $30.5, so I sold June $28 puts buying $27 June puts.

I was almost triggering to do an option strangle on PCLN with Monday earnings report. However I got scared of the time decay effect. I may instead write June put spreads after the report.

Trade Entered

Today, I was anxiously looking for a trade and finally did :) I thought with the time decay accelerating, I should increase my risk appetite a bit, so I was looking for a bullish stock that has pulled back and the answer was FSLR. I have seen that on RIMM before. After RIMM reported strong results, it had a 20-25% jump and then a brief pullback and then continued its bullish action. So, looking at the two day chart of FSLR, I guessed it will close above $170 at option expiration in two weeks, so decided to sell 2 $170 put contracts around $4 and buy 2 $165 put contracts around $2.9. Risk/Reward is $780/$220, which can give a gain of around 28% if it closes above $170. It may be a bit on the edge, but I decided to give it a try :)

By the way, I sold my other MAR contract today as I lost faith in the buyout. The lesson is: Buy about a week after rumor, sell on news or even before news. Based on experience, it is best to close all option positions well before the expiration as the time decay is a real killer. I only have BAC as a strangle as it has the potential to move big any day. We will see how that will do though.