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Randy Frederick, Vice President of Trading and Derivatives

Randy Frederick

Vice President of Trading and Derivatives

Randy focuses primarily on client education and market analysis. He is a frequent guest on CNBC and Bloomberg TV.

Get the latest market commentary and join the conversation.

Stock Market Report

October 3, 2018


LIZ ANN SONDERS: As most people know, I spend some time in the world of the media, whether it’s on the phone with print journalists or doing financial radio, financial media on television. And more often than not, they’re three- to five-minute segments, and it’s usually about current events, what’s going on in the market and the economy. And rarely am I given the opportunity in that forum to get down to the basics and talk about, arguably, what is much more important to investors than what the market did today, what we think it’s going to do next week, and it goes back to the tried and true disciplines around things like diversification and rebalancing. As most people know who read our work, since we put out our 2018 outlook and then we updated it mid-year, we have talked about the fact that we believe we are late in the cycle, and, as a result, I think disciplines around things like diversification and rebalancing are even more paramount now than they are in general. They’re always important.

And let me talk about some of the reasons why it makes sense, in particular, right now, and the way to think about the concept of rebalancing maybe in a little bit different a way than you might have before. I think most people understand the benefits of diversification. But, really, the point of being diversified across non-correlated assets is to smooth-out the ride, so that you’re less likely to make rash, panicky kind of decisions, either in or out. The purpose is not to generate the highest return, but to get above-average returns, but with much lower risk, which, again, helps to smooth the ride. Rebalancing comes into play, especially if you’re in more volatile markets, where you are trimming from asset classes that have outperformed, adding to asset classes that have underperformed. And what that does is it forces us to do exactly what we’re supposed to and we’ve been taught to do, which is buy low, sell high. Often, when we’re left to our own devices, we tend to do the complete opposite.

What rebalancing does, as well, is your portfolio tells you when it’s time to do something. You don’t have to worry about which bombastic analyst or strategist, me or anybody else, has the right call on any given day or any given moment. You don’t have to rely on your own intuition or instincts as to have we hit a market top, have we hit a market bottom. Your portfolio will tell you when it’s time to do something. And if you apply that discipline, especially if you have a diversified portfolio and you have multiple asset classes on which you can apply that rebalancing discipline, that’s the closet thing you’re going to get to a free lunch in this world of investing.

Important Disclosures

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

Diversification and rebalancing strategies do not ensure a profit and do not protect against losses in declining markets.

Please note that this content was created as of the specific date indicated and reflects the author’s views as of that date. It will be kept solely for historical purposes, and the author’s opinions may change, without notice, in reaction to shifting economic, market, business, and other conditions.

Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. Supporting documentation for any claims or statistical information is available upon request.

Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.

Investing involves risk including loss of principal. 


©2018 Charles Schwab & Co., Inc. (“Schwab”). All rights reserved. Member SIPC (1018-8YZR).

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Randy Frederick
Schwab's Vice President of Trading and Derivatives
TIME IS UP
Randy Frederick
Schwab's Vice President of Trading and Derivatives
Q
Question 1
Question 2
Question 3
Question 4
Question 5

Which of the following is used in technical analysis?

Which of the following is NOT a key characteristic of options trading?

Options trading can be used for:

Writing options on stocks you already own is called a:

When a put options’ strike price is above the market price of the underlying security, it is:


Countdown clock TIME IS UP
A
Valuation
B
Trend Lines
C
Financial Strength
D
Earnings Growth
Correct!

Trend lines visually show support and resistance in a certain time frame.

A
Open Interest
B
Time Value
C
Close Interest
D
Intrinsic Value
Correct!

These other three statistics are commonly used by options traders.

A
Speculation
B
Income Generation
C
Neutral Strategies
D
All of the above
Correct!

Options can be used for speculation, income generation, neutral or directional strategies and much more.

A
Covered Call
B
Bull Spread
C
Butterfly Spread
D
Contingency Order
Correct!

Because you own the underlying asset, a covered call is a limited risk strategy.

A
A Net Credit
B
In-The-Money
C
Out-Of-The_Money
D
At-The-Money
Correct!

“In-the-money” refers to an option’s intrinsic value.

You got 2 questions right!

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