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Just in time for the holiday season is a remake of the popular 12 months of Christmas, in the theme of walking away from your underwater mortgage.

Are you looking for a new career in finance?  Or do you just wonder what all those three letter acronyms mean that people throw around?  Here is a quick summary of some of the most popular financial career acronyms, and how to become one yourself.

How to become a CFP ?- A Certified Financial Planner is a certification mark for financial planners and in the United States is governed by the Certified Financial Planner Board of Standards.  Financial advisers work either independently or through firms that sell financial planning advice, and programs.  The detailed steps to become a CFP are listed on their website, but the summary is:

1. Obtain a bachelor’s degree in any discipline, plus complete the CFP board registered curriculum.
2. Pass the 10 hour CFP Certification Exam.
3. Have at least 3 years experience in the financial planning industry.
4. Pass a mandatory background check.

How to work as a financial planner? – Surprisingly enough, completing the CFP certification and passing the exam does not give you the right to work in the industry.  In fact a large percentage of financial planners in practice today have no official CFP designation.  To practice as a financial planner, and be licensed to sell financial products, it is necessary to pass the Series 7 exam.  From the SEC website, “Individuals who want to enter the securities industry to sell any type of securities must take the Series 7 examination—formally known as the General Securities Representative Examination.”  The detailed information for taking the Series 7 are listed on the FINRA website.  For those considering financial planning as a career, it may be more cost effective to skip the costly CFP program and apply directly to a financial planning firm for sponsorship, and prior to taking the series 7 exam.  After passing the series 7 exam, it is always possible to complete the CFP program as a suplement to your education and business card listed credentials.

How to become a CFA? – The chartered financial analyst program is governed by the CFA Institute.  It is a 3 year self study program that requires taking and passing 3 financial theory intensive exams over a 3 year span.  It is best to have a strong finance and/or economics background before attempting this track.  The types of jobs that a CFA or CFA candidate would target would be investment consultant, fund manager, financial risk manager, wealth manager, or similar.

How to become a registered investment advisor (RIA)? – An RIA is very similar to a financial planner, but it is not licensed through FINRA.  RIA’s are indpendent advisors who generally work on their own, and outside of the control and limitations of larger financial firms.  Whereas financial planners are licensed through FINRA, RIA’s are generally licensed through a state.

How to become a CPA? – A CPA is a certified public accountant.  While it’s not necessary to hold the CPA designation to practice accounting, it will add an additional layer of credentials that can earn you a much higher salary.   The general requirements to earn the CPA designation are:

• A bachelor’s degree, and
• 24 semester credits in accounting and 24 in business
• Passing a uniform CPA exam
• Passing an ethics course
• 2 years general accounting experience supervised by a licensed CPA

How to become a CTA? – A commodity trading advisor is someone (or a firm) that gives people advice on options and futures for a fee.  They may also run managed futures accounts for clients on a fee basis.  CTA’s are regulated by the Commodity Futures Trading Commission.  CTA’s are required to be members of the National Futures Association (NFA).   And in order to practice, a person must pass the series 3 commodity and futures exam, administered by FINRA.  d

Pass series 3 commodity and futures exam.  Link to www.nfa.futures.org  Mention 15 client exemption that allows trading for others without license (up to 15 clients). (http://nvcatoday.nvca.org/index.php/hedge-fund-registration-legislation-introduced-in-congress.html)  Link to www.managedfutures.com  Benefits of managed futures vs hedge fund (segregated accounts, no lockout period, easy to revoke power of attorney)

How to become a CPO? – From the NFA website, a Commodity Pool Operator is “an individual or organization which operates or solicits funds for a commodity pool; that is, an enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts or options on futures, or to invest in another commodity pool” .  To conduct business with the public, CPO’s must be registered members of NFA.  Other than registration and abiding by the CFTC rules, there are apparently no special certification exams required to be a CPO.  But

How to become a CLU? – A Chartered Life Underwriter is someone who specializes in life insurance and estate planning.   The official CLU designation is managed by The American College.  The detailed requirements are shown on the American College page.  In general, it requires taking 8 courses (5 required, 3 elective), having 3 years industry experience, adhering to a code of ethics, and take 30 hours of continuing education every 2 years.

How to become a CMT? – A Chartered Market Technician is someone who studies and trades the markets based on a purely technical approach.  The designation is managed by the Market Technicians Association.   Becoming a CMT requires passing 3 technical analysis exams within a 5 year period, and demonstrating 3 years of applicable work experience.

How to become a CEO? -  Seth Godin commented in his book The Dip that “It’s easy to be a CEO.  What’s hard is getting there.  There’s a huge Dip along the way.  If it was easy, there’d be too many people vying for the job and the CEO’s couldn’t get paid as much, could they?”  The larger the organization, the more difficult it will be climbing the ladder to becoming a CEO.  There are no hard and fast rules, but it helps to have an MBA from a top school, be well connected with the leaders of your organization, and possess the personal skills and qualities that are shared by other CEO’s.   If you are serious about rising to the top and becoming a CEO, check out Jeffrey Fox’s book, How to Become CEO: The Rules for Rising to the Top of Any Organization.

How to become a CFO? – A chief financial officer of an organization is a highly paid executive whose main responsibilities are to manage financial risks of the business.  There are no certifications for becoming a CFO, and those that attain this mark have done so by selling themselves into the position, or working their way up the ladder.  According to the Journal of Accountancy website, CFO’s “need need a broad range of skills beyond knowing the ABCs of accounting”.  They also recommend becoming a CPA first, getting a lot of corporate experience, and making your CFO desires known to the CEO. Sam Molinaro, the former CFO of now bankrupt Bear Stearns, and completely derelict in his duties of managing risk, was once quoted as saying “The revenue-generating capacity of this franchise has not been permanently impaired”.  Similar quotes, along with the typical “We are well capitalized” has been the CFO cheer of most financial firms during the financial crisis of 2008 – usually days or weeks before begging for taxpayer funded bailouts.  You want to become a CFO?  Find a blackboard, and write “We are well capitalized!” 10 times, and you are hired.

The second version of Amazon’s electronic book reader is availalbe at a newly reduced price, just $259.  The newer versions offers improvements in the following areas:

• Lower Price
• Thinner device – only .36 inches
• Half inch taller, and weighs slightly less (10.2 ounces vs 10.3 ounces)
• Global coverage with AT&T’s network vs limited U.S. coverage with Sprint

To buy the new Kindle, just click the image below.

Exchange Traded Funds (ETF’s) can be a great low cost investment vehicle for either short term traders or long term investors.  The advantages of ETF’s are:

• Instant diversification
• Low fees
• Intra day pricing
• Better tax advantages as compared to index mutual funds

For short term ETF traders, especially option ETF traders, it is crucial to find active ETF’s with the following characteristics:

• low fees
• high trading volume
• optionable with high open interest and daily volume
• small BID / ASK spreads for options

It should be a simple task to find ETF’s with the above characteristics.  Unfortunately, two of the brokers I checked – OptionsXpress and TradeKing – have no such way to screen by the most active ETF’s.  Both have great ETF scanners to screen by performance and other attributes, but neither by most active.  Fortunately, I found a link at Schaeffer’s Research to screen by most active.    The output of the Schaeffer’s screen is limited to symbol, name, last price, change in price, and volume.  Below is a snapshot of the most recent results.

Most Active ETF’s:

• SPY – S&P 500 ETF.
• QQQQ – Nasdaq 100 Trust.
• XLF – SPDR Financial.
• EEM – iShares emerging markets.
• IWM – iShares Russell 2000
• EWJ – iShares Japan index.
• ITR – iShares real estate index
• XLE – SPDR Energy
• USO – US Oil Fund
• EWZ – iShares Brazil Index.
• EFA – iShares EAFE Index
• SMH – HOLDRS Semiconductor
• DIA – Diamonds Trust (Dow Jones Index)
• EWT – iShares Taiwan Index
• XLB – SPDR Materials
• XLI – SPDR Industrial
• XLU – SPDR Utilities
• EWA – iShares Australia
• OIH – HOLDRS Oil Service

To find the most recent management fees on the above ETF”s, see the following:

• iShares
• HOLDRS
• United States Oil Fund
• Select Sector SPDR

To find out if the above ETF’s are optionable, check the option chain.  Also be sure to verify whether the average BID ASK spread on the options is small enough for your investment style.

To emphasize the importance of using high volume active ETF’s in your own option trading, consider the option chains  below of a recent option chain comparison between XLE (Energy ETF, 8th most active ETF) and IEO (iShares oil and gas exploration energy fund).  To be clear, the objective and components of XLE and IEO are definitely different.  But if all you want is an energy ETF with better BID ASK option spreads, then you may want to consider XLE over IEO because it is more active.

Were you one of the ones that thought the financial collapse would never happen? Did you think Bear Stearns, Lehman Brothers, Washington Mutual, Citibank, and AIG would never collapse? Did you think our national debt would ever approach $12 trillion dollars, with an additional $12 trillion in off balance sheet “bailout obligations”? And do you still think its completely safe to buy California municipal bonds and Federal treasuries?

If you answered YES to any or all of these questions, then perhaps you might be interested in reading This Time is Different – Eight Centuries of Financial Folly, by Carmen Reinhart and Kenneth Rogoff. Industrialized nations quickly forget their debt obligation defaults throughout history. When the authors published a paper on global defaults, they received official letters from around the world of nations denying that they ever defaulted. In the case of Japan, when the authors corrected them with the proof, Japan’s remark was “Well OK, but it was only to our enemies”.

If you are interested in the history of financial crisis’s, currency collapses, and the history of government defaults, then this book is for you.

This Time is Different: Eight Centuries of Financial Folly by Carmen M. Reinhart

Charles Gasparino,  on air editor of CNBC, is releasing a new book.  The book can be pre-ordered today and will be shipped from Amazon on November 3rd.  Just when you thought the world had enough reminders of the financial collapse and widespread corruption, the subject of the book is also wall street greed and government mismanagement.

Click below to pre-order your copy of The Sellout – How Three Decades of Wall Street Greed And Government Mismanagement Destroyed the Global Financial System. Take special note that the title says “destroyed” and not “nearly destroyed”. Goldman Sachs may be proud of their facade message about paying back TARP, but TARP is a tiny drop in the enormous bailout bucket. Goldman and every financial institution in the country is still operating today only because of taxpayer guarantees of their high risk transactions.

The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System by Charles Gasparino

Max Keiser broadcasts his opinion of United States financial firms in the video below, calling it out for what it is – a giant fraud.  After trillions of dollars in financial bailouts, the firms are hoarding cash, paying record salaries and bonuses, and hiding trillions in unrealized losses.  Don’t be surprised in 2010 when they finally come clean a second time by reporting record losses and beg for more handouts from the American taxpayers.

Part 2 of the video is below:

The stock repair strategy can be used to lower the breakeven point on a previously purchased stock that has dropped in price.  Consider an example where you purchase 100 shares of a stock for $110 per share and it drops to $100 per share, for a loss of $10 per share or $1,000.  Under normal circumstances, you would need the stock to rally 10% back to the original $110 purchase price just to break even.  Using the stock repair strategy allows the trader to lower the break even point by utilizing a ratio option spread.

To explain the strategy, lets find a stock close to $100 per share.  Precision Cast Parts (symbol PCP) is an optionable stock that closed today’s session at $99.11.  Let’s assume that we purchased 100 shares of PCP for $110, and are now down nearly $1,100.  Note the current 52 week high is only $105 so don’t over analyze the example.  Let’s just assume we bought it 2 weeks ago for $110.

To utilize the stock repair strategy, the trader would initiate a ratio spread by purchasing (1) at the money option and selling (2) out of the money options.  Let’s take a look at the December option chain for PCP.

By doing nothing, the breakeven point of PCP is $110.  The stock would need to recover back to the original $110 purchase price for the trader to break even.  But consider the changes to the December expiration day breakeven point after adding a December 1:2 ratio spread at the 100/105 strikes.

• Original stock purchase price $110
• Current stock price $99.11
• Purchase (1) December 100 call for $4.20 (midpoint of bid/ask)
• Sell (2) December 105 calls for $2.30
• Adding the ratio spread results in a credit of $40 (2.30+2.30-4.20)

Note that implementing the ratio spread without owning the stock would result in a naked option leg and unlimited risk.  But both of the (2) 105 calls are covered in this scenario due to the fact that we still have the 100 underlying shares.  Essentially what you have is a covered call plus a vertical call spread.  Consider the following expiration day prices as an example of how the above stock repair strategy example lowers the break even point of the previously purchased stock.

• $80 – All options (100 and 105 strikes) expire worthless.  The unrealized loss is now $3,000 (110 – 80).  This is no different than owning the stock without adding the stock repair strategy options.
• $105 – The loss on the stock is only $500 (110 – 105).  The gain on the 100 strike option is $80 (500-420).  The (2) 110 options expire worthless and the gain on them is the $460 total premium collected.  With a $105 strike price on expiration, the trader is already beyond breakeven and slightly profitable with $40 in profit. (-500 + 80 + 460).

Things to consider when utilizing the stock repair strategy:

• The choice of strike prices for each leg of the ratio spread will change the breakeven point for your particular situation.
• The choice of expiration month will change the breakeven point
• Depending on the expiration day price, tt may be is possible to repeat the stock repair strategy multiple times to collect additional profit.  Consider the example above where the stock closed at $105 on expiration day.  A new stock repair strategy ratio spread could be opened for January or other expiration month.
• Options can be closed, opened, rolled, or morphed at any time.  It is not necessary to hold them until expiration.

For more information on trading and adjusting options positions, check out the following highly recommended book:

The Option Trader Handbook: Strategies and Trade Adjustments (Wiley Trading) by George Jabbour

Hedge fund manager John Paulson began to make enormous derivative bets in 2006 against the largest bubble in history – grossly overpriced real estate.  Certainly he was not the only one to see the disaster coming, but he profited the most from it, raking in over $15 billion for his firm, and dwarfing George Soros’s $1 billion currency trade win from 1992.  To read more about the greatest trade ever, and John Paulson’s new fortune, place your pre-order for the book below.

The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History by Gregory Zuckerman

There are several posts on covered calls at Geldpress, including:

• Time for cover – the covered call
• Covered Calls – Scottrade, Tradeking, Fidelity
• The VIX index and covered calls
• Covered Call Writers Love High Volatility
• Picking A Strike Price For Covered Call On McDonalds
• Covered calls – removing the covers and going naked

I successfully use covered calls, married puts and collars within my own accounts on a regular basis. My recent trading activity in Mosaic (symbol MOS) will show some examples of covered calls and their adjustments.  It is not necessary to keep a covered call on though the expiration date.  When the underlying stock within a covered call drops significantly, there will often be an opportunity to buy back the covered call (BUY TO CLOSE) for a modest profit.  Buying back the covered call early leaves the shares naked, and fully able to capitalize on a rebound in share price, without the limits of the profit restricting covered call.  It is purely a judgement call on exactly when to buy back the calls, but as a general rule consider buying back covered calls early for the following reasons:

1. You are still bullish on the underlying shares, and happy to own them naked (without the protection of the covered call)
2. You can realize a significant profit on the covered calls by closing them early, and there is a potential for a rebound in the share price.
3. The potential for realized profit occurs with at least 1-2 weeks prior to expiration.

A summary of the points regarding the activity above:

• Purchased 400 total shares at an average price of $51.39
• Sold (2) MOS Sep calls for $2.86 and (2) MOS Dec calls for $6.91 – SELL TO OPEN
• On Sep 10th, I rolled the Sep calls to October for more protection and to collect more premium.  This resulted in a $210 realized profit from the (2) sep 50 calls when they were closed (BUY TO CLOSE).
• On Oct 5th, with Mosaic stock down, I bought back the Oct 50 calls for a $566 realized profit.
• Mosaic reported earnings on Oct 5th at the close.  To prepare for a potential disaster, I protected the Mosaic position by buying (4) Sep 45 puts. (married put)
• With earnings over, I sold off the puts on October 6th.  I took a realized loss on the puts of $376.
• On Oct 6th, I re-covered some of my naked Mosaic position by adding (1) Nov 50 covered call.  The final 100 shares were left naked to gauge the reaction of the market on Mosaic over the next few days.
• On Oct 16th after a small rally in Mosaic (I was hoping for a major rally, but settled for a small one), I covered the remainder of my shares with another November covered call.  Note that by waiting, the second covered call sold for $120 more than the first.
• My current position is long 400 shares of Mosaic, short (2) November covered calls, and short (2) December covered calls.

The point of the above is only meant to display one such example of trading, rolling and adjusting covered calls, and not to dissect all the other possible trading ideas possible – better or worse.  Trading is a judgement call, and the above is a recent history of my own trades and adjustments based on how I felt at the time the trades were made.  You are free to have your own opinions.

Disclosure: Still long Mosaic covered calls.

Disclaimer: Trade at your own risk!  The above is an example only of recent activity in my own account, and not to be considered an opinion or trading advice of any kind.

For more information on covered calls, please consider purchasing one of the following books:

Covered Calls and LEAPS–A Wealth Option + DVD: A Guide for Generating Extraordinary Monthly Income (Wiley Trading) by Joseph R. Hooper

Covered Call Writing Demystified: Double-Digit Returns on Stocks in a Slower Growth Market for the Conservative Investor by Paul D. Kadavy

The Option Trader Handbook: Strategies and Trade Adjustments (Wiley Trading) by George Jabbour