Any One Else Out There?
- Thread starter GeeVee
- Start date
No...I have factored another 20% drop in and still come out 20% ahead.
The stocks I invest have already fallen 25-35% so another 20% is alot particularly as these companies are very profitable. Even when they have fallen 20%...they have recovered most of the fall in matter of weeks. I am planning to hold these stocks for the longer term so I am not worried about short term fluctuations.
I started with 32K...I now have about 90K in stock based on todays prices. Of this 55K is borrowed. I reckon if I can get preimums of 2-5K per month...I should hold about 100k of stock with 35k in borrowings by June 2009. This is not a bad return on a 32k investment...is it?
I am writing call against WBC and NAB.....NAB gives brilliant premiums but a tad riskier.
Cheers
Sash
The stocks I invest have already fallen 25-35% so another 20% is alot particularly as these companies are very profitable. Even when they have fallen 20%...they have recovered most of the fall in matter of weeks. I am planning to hold these stocks for the longer term so I am not worried about short term fluctuations.
I started with 32K...I now have about 90K in stock based on todays prices. Of this 55K is borrowed. I reckon if I can get preimums of 2-5K per month...I should hold about 100k of stock with 35k in borrowings by June 2009. This is not a bad return on a 32k investment...is it?
I am writing call against WBC and NAB.....NAB gives brilliant premiums but a tad riskier.
Cheers
Sash
Hmmmmm.....Sunfish....I think I would make a very unattractive women...as I am a guy...
My apologies! It's hard to remember how one's opinions are formed. Maybe I thought of "Sasha".
The most dangerous thought in investment is: "You haven't made a loss till you sell".
I look at what I've been selling in the last six months and most had a shocker again today. They don't give bravery medals to share investors.
Taking that thought a little further, the "Generals" of commerce love a hero as much as the Generals in France did in The Great War. They both need cannon fodder but neither wish to actually be there.
Rule 1.... Never volunteer.
I look at what I've been selling in the last six months and most had a shocker again today. They don't give bravery medals to share investors.
Taking that thought a little further, the "Generals" of commerce love a hero as much as the Generals in France did in The Great War. They both need cannon fodder but neither wish to actually be there.
Rule 1.... Never volunteer.
Maybe I thought of "Sasha".
which is actually a boys name (african bushman) for "good water".
but i digress ... 1/3 built house over the road for sale today "for sale as is ph xx". builders were working on it just last week. i wonder what went wrong - will have to plug into the local gossip. i wish them luck as NOTHING is selling here at the moment.
makes one realise that things ain't so bad for us.
Ive finally woken up to your strategy (sorry im a slow learner). This is a fantastic way to acquire stocks in a volatile market (and probably a bit late for me now as ive just about got a full position in the market).
Can you help me run through things so i can clarify everything.
Firstly:
Lets assume i like ANZ, and i think its good value at say $17. In order to avoid missing out of the stock i pick up my first parcel at $17. However being the type of person thats happy to dollar average down, with the logic that a price less than $17 represents even better value, i take out a put option at say $15.
I get paid the option price, and in the event that it hits $15 i have to acquire the stock (which works out at $15 less the price of the put option).
Is this correct?
2nd:
Is it in my interests to pick up some longer dated put options. I realise the risk is higher because of the increased time factor, but isnt the option price also higher to reflect this increased risk. If i was happy to acquire the stock anyway, does this strategy make sense?
3rd:
How do i go about getting put options?
4th:
Now lets go the reverse way. Assume i am nearly fully invested, i am happy with my share portfolio but i want to hedge against a future major downswing, especially say around Jan09 when earnings results for the US and Australia come out. Is there a ASX200 call option? whats the underlying value for? and is this an effective insurance scheme (i realise that i am not fully covered unless my portfolio replicates the ASX200 exactly).
Help much appreciated.
Wow..this thread has headed into another direction...cool!!
I read the Thrillionaire, Nik Halik and he talks about being a share lord, which in Aussie terms seems to amount to writing covered calls.
Sash, did you do a course? Or is it something you study and move into?
Thanks.
BTW we are out of the market, licking our wounds.....
I read the Thrillionaire, Nik Halik and he talks about being a share lord, which in Aussie terms seems to amount to writing covered calls.
Sash, did you do a course? Or is it something you study and move into?
Thanks.
BTW we are out of the market, licking our wounds.....
Chilla
I am not giving you financial advice ....but this is what I am learning...
1. You could write puts where you agree to buy a share at a particular price to get you started. You also get paid a premium for this.
2. When writing calls or puts....ideal time frame is 4-6 weeks from expiry...this maximises profit (premimums).
3. Brokers like CommSec have both phone and online broking services. My preference is to use phone broking. I use Morrison's Securities....they are very cost effective $44 for buying stocks under 40k value and options premium under $8.
4. Not sure about the ASX200 options....ask a broker.
Cheers
Sash
I attended a lot of the beginners seminars of the spruikers....the rest I read up on via a couple of books. I then paper traded for a year....hooing and haaing...contemplating my navel!
It was then in Aug. 2008...I entered the market. I have only concentrated on Covered Call.....I would consider writing puts...but not really motivated to do the more complex trades....too lazy!
I like to keep it simple.
I am not giving you financial advice ....but this is what I am learning...
1. You could write puts where you agree to buy a share at a particular price to get you started. You also get paid a premium for this.
2. When writing calls or puts....ideal time frame is 4-6 weeks from expiry...this maximises profit (premimums).
3. Brokers like CommSec have both phone and online broking services. My preference is to use phone broking. I use Morrison's Securities....they are very cost effective $44 for buying stocks under 40k value and options premium under $8.
4. Not sure about the ASX200 options....ask a broker.
Cheers
Sash
I attended a lot of the beginners seminars of the spruikers....the rest I read up on via a couple of books. I then paper traded for a year....hooing and haaing...contemplating my navel!
It was then in Aug. 2008...I entered the market. I have only concentrated on Covered Call.....I would consider writing puts...but not really motivated to do the more complex trades....too lazy!
I like to keep it simple.
I did one of the three day courses a few years ago. It was still a basic "writing covered calls" one but I never felt happy with the idea because I foresaw this chaos and writing covered calls leaves one fully exposed to the drops we've suffered.
Yesterday I said I was going to do things a little differently and this is what I meant. Writing covered calls has potential returns of a few percent a month and I reckon there is little "dangerous" downside left. This does not absolve the investor from careful study and stock selection!!!!
I'm unwilling to put my head on the chopping block and make any recommendations but I will say my thoughts are still much the same as they have been except that junior miners no longer figure in the short term and banks do because, if there is to be a general recovery, the banks must lead the way up, as they led the way down. Besides, they are among the few ASX shares with enough liquidity to be able to write C calls.
I'm looking to go to the US market where it is cheaper to trade, there are far more liquid stocks to choose from, an options contract is only 100 shares, not 1,000 as on the ASX and there are better premium available anyway.
Yesterday I said I was going to do things a little differently and this is what I meant. Writing covered calls has potential returns of a few percent a month and I reckon there is little "dangerous" downside left. This does not absolve the investor from careful study and stock selection!!!!
I'm unwilling to put my head on the chopping block and make any recommendations but I will say my thoughts are still much the same as they have been except that junior miners no longer figure in the short term and banks do because, if there is to be a general recovery, the banks must lead the way up, as they led the way down. Besides, they are among the few ASX shares with enough liquidity to be able to write C calls.
I'm looking to go to the US market where it is cheaper to trade, there are far more liquid stocks to choose from, an options contract is only 100 shares, not 1,000 as on the ASX and there are better premium available anyway.
The idea is to buy a long term, at the money PUT when you buy the head stock. Then write short term covered calls each month.
The long term put may cost you 10% for the year, but you get to keep (say) 12 x 2% covered call premiums.
The bought put will remove one downside risk.
Can be used as either gender... more commonly male in Eastern Europe and is almost exclusively used for girls in the US. It comes from the Russian form of Alexandria.
http://babynamesworld.parentsconnect.com/meaning_of_Sasha.html
http://www.thinkbabynames.com/meaning/0/Sasha
http://en.wikipedia.org/wiki/Sasha_(name)
Geevee, you're brave to post your story. I can feel your pain.
So last week Suncorp sold all my units. It was a tough decision to make not to meet the margin call. It was only our first margin call. The unit price has dropped by 75%!!
We invested $50k in June 06 and lost about $40k, received about $10k in dividends. It's just not worth it. Thankfully it's not tied to properties. I figure, you can always buy back again and make money in a rising market rather than pick a bottom...that's dangerous.
My shares portfolio is also down 50%.
it's a tough lesson to learn.
Being religious, we prayed for our answer and it was the right thing to do. If we had made the margin call, we would have received another one days later.
But funny how things work out, we got a valuation on our property on Fri as we plan to sell it and it has came back around $50k above my expectations. God works in mysterious ways.
On the same day, our agent from Adelaide phoned us about the farm my uncle left us. I thought it was only 2acres but it's actually 10 acres because he owns the block behind aswell. Even my uncle and aunty is looking out for us from heaven.
So last week Suncorp sold all my units. It was a tough decision to make not to meet the margin call. It was only our first margin call. The unit price has dropped by 75%!!
We invested $50k in June 06 and lost about $40k, received about $10k in dividends. It's just not worth it. Thankfully it's not tied to properties. I figure, you can always buy back again and make money in a rising market rather than pick a bottom...that's dangerous.
My shares portfolio is also down 50%.
it's a tough lesson to learn.
Being religious, we prayed for our answer and it was the right thing to do. If we had made the margin call, we would have received another one days later.
But funny how things work out, we got a valuation on our property on Fri as we plan to sell it and it has came back around $50k above my expectations. God works in mysterious ways.
On the same day, our agent from Adelaide phoned us about the farm my uncle left us. I thought it was only 2acres but it's actually 10 acres because he owns the block behind aswell. Even my uncle and aunty is looking out for us from heaven.
Sue78... Hi.
We have had a very tumultuous few weeks. 20/20 hindsight is remarkable, and on thinking about a good many things, if we had seen the signs we would have got out this time last year when the market was flying...[wouldn't we all?].
Brave is one word... I am interested in the comments of the forum. I started here in 2002, come and went, but now I am reading here again. Not posting much though.
We started with a book: "Anyone Can Be a Millionaire" then moved into Jan Somers. Have ended up with IP's and then "diversified". The rest is now history. Your set of "co-incidences!" sound warming. I am glad that the balance has happened for you as it has....nice.
We have had a very tumultuous few weeks. 20/20 hindsight is remarkable, and on thinking about a good many things, if we had seen the signs we would have got out this time last year when the market was flying...[wouldn't we all?].
Brave is one word... I am interested in the comments of the forum. I started here in 2002, come and went, but now I am reading here again. Not posting much though.
We started with a book: "Anyone Can Be a Millionaire" then moved into Jan Somers. Have ended up with IP's and then "diversified". The rest is now history. Your set of "co-incidences!" sound warming. I am glad that the balance has happened for you as it has....nice.
Chilla
I am not giving you financial advice ....but this is what I am learning...
1. You could write puts where you agree to buy a share at a particular price to get you started. You also get paid a premium for this.
2. When writing calls or puts....ideal time frame is 4-6 weeks from expiry...this maximises profit (premimums).
3. Brokers like CommSec have both phone and online broking services. My preference is to use phone broking. I use Morrison's Securities....they are very cost effective $44 for buying stocks under 40k value and options premium under $8.
4. Not sure about the ASX200 options....ask a broker.
Cheers
Sash
I attended a lot of the beginners seminars of the spruikers....the rest I read up on via a couple of books. I then paper traded for a year....hooing and haaing...contemplating my navel!
It was then in Aug. 2008...I entered the market. I have only concentrated on Covered Call.....I would consider writing puts...but not really motivated to do the more complex trades....too lazy!
I like to keep it simple.
Thanks for your suggestions. Its probably too late in the this cycle downturn for me to do it as im nearly fully invested. However it represents a good opportunity for next time, especially writing put options on stocks i wish to aquire.
From the way i see it, writing PUTS is a win win. If i dont get excersided i get the premium and if i get excercised i get the share (which i wanted anyway).
thanks again.
Perhaps God should spend less time worrying about capital gains and spend more time preventing bombs in Balinese night clubs
In a perverse manner, the more out there you are with large debt and the more the economy falters (provided your tenants don't falter) the more you will benefit by large interest rate cuts. Really high lvr's will hurt you though.
For instance $1m in borrowings on total assets of $1.428m (assuming 70% lvr) with a net rental yield (after all expenses) of 4.5% doesn't look too flash at the moment.
If RBA rates fall to 4.0% and bank interest rates are around 6% these properties will end up cashflow positive.
i.e.
$1.428m x 0.045= $64260 annual net rental income
$1m x 0.06=$60,000 annual interest expense
$4260 cashflow positive
Of course the ability of oyur tenants to pay the rent will always be an issue. You don't want the economy to completely fall off a cliff.
For instance $1m in borrowings on total assets of $1.428m (assuming 70% lvr) with a net rental yield (after all expenses) of 4.5% doesn't look too flash at the moment.
If RBA rates fall to 4.0% and bank interest rates are around 6% these properties will end up cashflow positive.
i.e.
$1.428m x 0.045= $64260 annual net rental income
$1m x 0.06=$60,000 annual interest expense
$4260 cashflow positive
Of course the ability of oyur tenants to pay the rent will always be an issue. You don't want the economy to completely fall off a cliff.
