what do you think of peter spanns new course

[Piston Broke]

PB, do I detect a hint of sour grapes?

What do I have to be sour about?
That others lost their money in the share market and I did'nt?
That some of us came here posting that you can't make money buying a bear market and got poopooed by those who then lost their money with many no longer posting?
That I sold naked puts for Zinifex and Oxiana and made much more than 36% return in less than a year before I new the time to stop had come?
The truth is nobody likes the truth.
One truth being that it's written everywhere clear as day, yet so many have no clue about it regardless if they get it free of pay thousands for it.
I find it rather amusing actually, and for all that condescending "expert" superiority complex that I had to read on this forum, I can now rub the salt in, and then throw some vinegar on top with a great big smile.
The point being you have to be your own expert, and if you dont understand it, leave it the **** alone.
If you can't clearly grasp the concept of what a "call" and "put" is, then it may not be for you until you do (if at all).

 

[crc_error]

looks like even peter spann cant make money from his buy write strategy.

http://www.excela.com.au/reports/MOO - 201002 - MONTHLY REPORT - FINAL.pdf

his fund is losing 2.5% since the find has started.

so how come he cant make 3% per month?

his marketing hype might fool some people, but it wont fool the careful investor.

 

[wobbycarly]

What do I have to be sour about?
That others lost their money in the share market and I did'nt?
That some of us came here posting that you can't make money buying a bear market and got poopooed by those who then lost their money with many no longer posting?
That I sold naked puts for Zinifex and Oxiana and made much more than 36% return in less than a year before I new the time to stop had come?
The truth is nobody likes the truth.
One truth being that it's written everywhere clear as day, yet so many have no clue about it regardless if they get it free of pay thousands for it.
I find it rather amusing actually, and for all that condescending "expert" superiority complex that I had to read on this forum, I can now rub the salt in, and then throw some vinegar on top with a great big smile.
The point being you have to be your own expert, and if you dont understand it, leave it the **** alone.
If you can't clearly grasp the concept of what a "call" and "put" is, then it may not be for you until you do (if at all).

Well done, good effort. One day I plan to have enough expertise to replicate efforts such as these.

OK, so you're really just trying to say that Mr. Spann promotes himself as the "knower or all things"? Did you do any of his "courses" or just read about him and his methods?

 

[Piston Broke]

Well done, good effort. One day I plan to have enough expertise to replicate efforts such as these.
OK, so you're really just trying to say that Mr. Spann promotes himself as the "knower or all things"? Did you do any of his "courses" or just read about him and his methods?

1. It's not that easy, I just happened to quit at the right moment (luck or hunch who knows) and will start again when and if the SP200 goes back to =<4000
but that's where MAs may come in handy as an indicator for me.
2. I think I'm just as much "know it all" lol though evryone makes mistakes.
I have nothing against anybody, I just like discussing investing & trading. Strictly biz.
3. I'm a fan of Peter Spann's real estate books. Not so much much his RE seminar on cd, though it has some good points.
That's all I have of his products.
And being fair the hardest thing to do when managing funds is say "Allright investors, there's nothing happening so we're gonna pull out and do nothing for a few months"
Or say "We're getting bugger all premiums for our options, we're going flat until premiums increase" and be left with no investors.
There's is so much pressure that it seems investors would rather lose money than "sit out" for fear that they may "miss out" if and when something happens.
Just like in RE with all those buyers paying to own their IPs for the last few years.
The problem was nobody believed that the market would take such a hit as all the "experts" were saying "We see blue skies ahead" and "wont affect Australia".
From my experience it would've been the first time in history had it happened, so I bet on the last few hundred years of history repeating.

crc_error
There 2 components of gains/losses and they are capital and option premium.
The capital value of the share fluctuates daily as the share price always changes.

The premium income is earned once a month by writing (selling calls) options.

The capital gain (or loss) becomes realized when the option get exercised and the shares are sold.

In a bull market, selling puts works a treat.
If you get exercised you sell an almost in the money call, get exercised, and repeat.
As long as there's a bull market, and you time the transactions, it's shooting fish in a barrel when the water level is low.

If we have seen the bottom of the market, it will work again.
If the market ranges, returns should still be positive.
If the market dives, then returns will be negative again.

 

[WinstonWolfe]

PB, how about another explanation? I am a bit fuzzy on how funds report performance. I get mixed up on what part of fund performance is share performance, what's options income, and what's my own capital being returned to me.

Can you explain MOO performance as per the pdf crc linked to.

 

[Intrinsic_Value]

In a bull market, selling puts works a treat.
If you get exercised you sell an almost in the money call, get exercised, and repeat.
As long as there's a bull market, and you time the transactions, it's shooting fish in a barrel when the water level is low.

This is interesting. Thanks for this 'tip' i will look into it.

 

[Intrinsic_Value]

In a bull market, selling puts works a treat.
If you get exercised you sell an almost in the money call, get exercised, and repeat.
As long as there's a bull market, and you time the transactions, it's shooting fish in a barrel when the water level is low.

If we have seen the bottom of the market, it will work again.
If the market ranges, returns should still be positive.
If the market dives, then returns will be negative again.

This is sounding more and more interesting.

Firstly allow me to make some comments and then i would be very appreciative if you could respond to them.

Firstly i understand the risk of writing a naked put.
However at the moment i am in the process of de-gearing, both in the stock market and property market (by selling assets selectively and paying back debt).
Therefore my 'available' finance is increasing rapidly. Thus i can 'afford' to be excercised even if the market dives again.

So here goes my thoughts:
Write the naked puts against shares that you wouldnt mind owning anyway.
Off the top of my head i am thinking QBE.
I already own some shares, but i am not acquiring more at this stage due to my preference to de-gear.

Now what would you do?
write only one month out, or take it a bit further, say 2 months to get the extra premium and reduce transaction costs.

would you write the put very close to the money position?

If i look at QBE, share price is $21.23.
Using the ASX options site, i could write
April PUTS:
$21 for $0.28
$21.5 for $0.54

May PUTS:
$21 for $0.58
$21.5 for $0.73

If i use a rough guide for the calls (in the event of being excersised), the $21.5 april call is around $0.33

My first view (and again please comment) would be to write the MAY $21 put.
Reason: slightly out of the money, two months out, so less transaction costs (cost of rolling), difference in the premium spread.

My total capital at risk would be based on roughly $21-0.58-0.33= $20.09
My two month income return = 2.7% (0.58/21) of capital at risk (actually higher because what is the probability of being excercised, i am not mathematically sophisticated to know this probability). This does not include transaction costs.

To further reduce risk, would you write positions against several stocks simultaneously.

 

[Intrinsic_Value]

actually this is getting better, sorry i am typing as a think, so this may get a bit jumbled.

Lets increase the total risk a bit, the above scenario was based on 100% risk protection (ie ensuring 100% of capital backup in the event that the stock went to zero).

Lets throw some other figures out there.

Lets say i start with $50,000 capital for the purpose of this excersise.
I could write 5 options for the MAY put which would give me income of 0.58x5000= $2900.

Maximum exposure is 5,000 shares x $20.39= $101,950
QBE is a 75% LVR ratio stock, so gearing upon excersise would be approx 50% which seems ok, at least from a trading position, there is enough fat there (so long as you can draw from outside the investment pool if necessary).

Two monthly return equals $2900/$50,000=5.8% (excluding transaction costs).

Now of course this is before any potential losses from the underlying shares.

Also how do you structure to minimise tax??????
this would be hitting you on your marginal tax rate with no concessions.
Would you use a company structure?

 

[Piston Broke]

PB, how about another explanation? I am a bit fuzzy on how funds report performance. I get mixed up on what part of fund performance is share performance, what's options income, and what's my own capital being returned to me.

Can you explain MOO performance as per the pdf crc linked to.

I'm not sure on how funds report their performance, but here's another explanation that may help you:

I buy 100k of XXX stock.
If at end of month the stock price rises 5%, I have 105K. 5k capital gain on paper.

If I sold calls (and did'nt get exercised) and received 2k, then total gain is
5K CG + 2K income, 7%.
The fund declares 2K dividend (or distribution) and also is left with a 5% CG.
--
If the price falls to 95K then there is a capital loss of 5%.
But the total is -5K + 2K = -3K.
The fund can still pay out 2K dividend income(or distribution), and declare a 3% capital loss.

 

[Piston Broke]

Now what would you do?
write only one month out, or take it a bit further, say 2 months to get the extra premium and reduce transaction costs.

I'm not in the biz of giving advice, so pls don't take this as such, only an opinion.
I come from a trader's background, so imo you have to time the market.
Time in the market is for suckers & noobs.
You know the ole
"you bought it $85 so now it's cheap at $70 and should buy some more, it's obviously going to $100"
"It's really cheap at $60, buy some more as this is value investing like Buffett"
"It's a steal at $50, invest like Buffet and load up"
"Nobody could predict what happened and it's now <$40! load up!"
"What? you got a margin call and lost the lot and had max the LOC? as well...have a nice day Mr A"
"Hello Mr B there's a great opportunity to value invest in a great stock at $40"
"Mr B it's now $30 load up matey!"
"Wow it's awesome value at $20, this is where the big boys get in!"
"What? you got a margin call and lost the lot and had max the LOC? as well...have a nice day Mr B"
"Hello Mr C there's a great opportunity to value invest in a great stock at $20"
"Mr C it's now a bargain at $16 load up matey!"
"Hello Mr C just thought I'd let you know it's now $30! you did well Mr C"
"Yeah I know I'm a genius, but that's what we do for our customers. We are in biz just for them"

And that pretty much describes the whole investment commission industry.
Be it brokers stocks, cfds, commodities, currencies, managed funds, financial planners (misleading and deceptive title of course) RE institutes and REAs and now also BAs and I'm sure I've missed some.

would you write the put very close to the money position?

You seem to know the mechanics of it.
Me, I think like a trader, and that options give me a bit of leeway in my timing.
I don't use a "system". I have preferred parameters I like and work with and
look for opportunities. (the P.P. strategy lol)
I was pretty far away from the market and closed quite a few positions when happy with the returns.
My time frame was 1-2mths. Never more.
But I would not get bogged down with calendar mths, that sounds good at seminars though.
And it took a bit more than a "few minutes a mth", more like 1-3hrs a week.

My first view (and again please comment) would be to write the MAY $21 put.
Reason: slightly out of the money, two months out, so less transaction costs (cost of rolling), difference in the premium spread.
My total capital at risk would be based on roughly $21-0.58-0.33= $20.09
My two month income return = 2.7% (0.58/21) of capital at risk (actually higher because what is the probability of being excercised, i am not mathematically sophisticated to know this probability). This does not include transaction costs.

As a trader I like to minimise my probabilities of being called up to buy the stock.
I wanted to keep the writing income for nix. Never ended up exercised, that's why a bull market helps.
But if you wanted to own the stock and it went up to $25 then, then you may mentally beat yourself up for "missing out" which generally causes expenses (or losses).
For me I could'nt give 2 hoots if ZFX poked above outside my screen. (thou be fun to see!)
I took my cash and waited for and when the next opportunity would come.
Very few stocks would fit and they ended being ZFX & OXR most times, Lihir & BHP on a few occasions.
When they stopped coming, I was out of the market.
I posted a few times about buying RE when the market is good for buyers, not sellers. Which is why I did'nt even read this forum for a few years, and now back.

To further reduce risk, would you write positions against several stocks simultaneously.

I neva did that and I dont think it's reducing risk.
And there is plenty risk doing this. Lots of risk.
I would only do it with a very small slice of my assets.

 

[keithj]

Firstly i understand the risk of writing a naked put.
However at the moment i am in the process of de-gearing, both in the stock market and property market (by selling assets selectively and paying back debt).
Therefore my 'available' finance is increasing rapidly. Thus i can 'afford' to be excercised even if the market dives again.

Now what would you do?
write only one month out, or take it a bit further, say 2 months to get the extra premium and reduce transaction costs.

You may recall that I suggested this to you a while ago. Your response was that you had enough leverage and didn't feel able to take on the additional risk of buying more on margin if the puts were exercised.

Now you've deleveraged, you should consider selling calls (at what you consider over value) over your existing QBE (for example), while selling same dated puts for QBE at a good value strike price. Both positions cannot both be exercised, so you're guaranteed to keep one premium.

And, you should be happy either -
keeping both premiums as nothing is exercised,
or buying more QBE (on margin) at a good price (if the put is hit),
or selling (your existing) QBE at an overvalued price (if the call is hit).

And as an additional risk reducing measure, consider buying a long dated put over the whole of the index, which will guard against a serious left field event (like a 2nd dip of the GFC).

I'd prefer to write 2 individual months, rather than one 2 month position... better total premium, more liquidity (look at open positions for 2 months out, compared to current month) - if txn costs are an issue, get a lower cost broker or write larger positions.

 

[crc_error]

selling puts on stock you would like to buy is ok. cause at worst your left with stock should you be exercised. and since you got a premium, you purchased the stock at a cheaper price on that day.

you could also sell a naked call at say $5 and buy a call at $5.50 hence limiting your exposure.

Problem with these is multiple brokerage, and at $80 a pop, it eats away into your premium.

 

[WinstonWolfe]

If the price falls to 95K then there is a capital loss of 5%.
But the total is -5K + 2K = -3K.
The fund can still pay out 2K dividend income(or distribution), and declare a 3% capital loss.

That's how a rational person would understand it.

But not the way it is reported in the MOO fund update....growth and option income are thrown in a soup, then compared against an accumulation index, which has a different style and risk profile.

 

[Intrinsic_Value]

I neva did that and I dont think it's reducing risk.
And there is plenty risk doing this. Lots of risk.
I would only do it with a very small slice of my assets.

Maybe i wasnt clear about this. I dont mean extending the total $ value of the naked puts being written.
Instead stick to a 'maximum exposure level', but write against different stocks to 'diversify'.
For example if $100,000 is maximum underlying risk, instead of writing just QBE try to do it over additional stocks (might be hard with only $100k exposure though because of transactional costs).
This way if the QBE tanks you dont blow up your capital on a single trade.

 

[Intrinsic_Value]

Now you've deleveraged, you should consider selling calls (at what you consider over value) over your existing QBE (for example), while selling same dated puts for QBE at a good value strike price. Both positions cannot both be exercised, so you're guaranteed to keep one premium

.

This is interesting. The trouble is my intrinsicvaluation for QBE is significantly above current prices, so i'm not happy to loose my position with the physical shares. I would have to write very out of the money calls, and unfortunately the market is not paying me for this.

I'd prefer to write 2 individual months, rather than one 2 month position... better total premium, more liquidity (look at open positions for 2 months out, compared to current month) - if txn costs are an issue, get a lower cost broker or write larger positions.

Yes i agree with you (but hey im inexperienced with this so my opinion doesnt count for much)

 

[WASP]

That's how a rational person would understand it.

But not the way it is reported in the MOO fund update....growth and option income are thrown in a soup, then compared against an accumulation index, which has a different style and risk profile.

I recently saw that they reported the MOO Fund paid a 5.6% yield to investors in the last three months

 

[Piston Broke]

Both positions cannot both be exercised, so you're guaranteed to keep one premium.

Yes they can. The market can go up, and the market can go down.
It very much depends on the strike price difference, which if too far apart makes the gains not worth the risk. If too close getting exercised can also kill the gains or cause losses. There is no guaranteed profits.

Maybe i wasnt clear about this. I dont mean extending the total $ value of the naked puts being written.
Instead stick to a 'maximum exposure level', but write against different stocks to 'diversify'.

You were clear, it's that to me it's not risk mitigation rather throwing mud against a wall hoping some will stick. Same as buying or selling calls or puts at the same time.
If I've worked out that my odds of a BHP put not getting called are pretty good, why would I write against anything else? (unless the odds are equal imo)
The both way bets don't make much sense to me. They eat away too much profit.
The risk is too big to do this expecting a small return.
This was one of my topics of discussion here a few years ago which fell on deaf (now poor) ears.
I redeployed my play capital to other safer bets imo like buying USDs at the time.

 

[keithj]

while selling same dated puts for QBE at a good value strike price. Both positions cannot both be exercised, so you're guaranteed to keep one premium.

Yes they can. The market can go up, and the market can go down.

I highlighted same dated. How can the price of the underlying security be both above the high call strike price & below the low put strike price on the same date ? It's obviously impossible in the scenario that IV is envisaging.

If you're referring to the possibility of early exercise of one or both options..... it's unusual for anyone to exercise an option early & waste the remaining Time value of the option (although there are occasionally good reasons).

Regardless, if this (highly unlikely) scenario happened, then it's straightforward to buy or sell the underlying to restore the position to balance, and make a small profit from the forced early exercise (equivalent to time value less brokerage & slippage). Or alternatively close the other position, for a gain of the elapsed time value.

It very much depends on the strike price difference, which if too far apart makes the gains not worth the risk. If too close getting exercised can also kill the gains or cause losses. There is no guaranteed profits.

There's a guaranteed profit on one of the positions, and a possibility of a profit on the other.... although any loss on the 2nd position may be greater than the gain on the 1st. The reason this strategy works is because IV is happy to be exercised (& buy or sell at his strike prices), and is also happy not to be exercised (& keep 2 lots of premiums).

Taking QBE as an example - if in IVs opinion it's close to being cheap, then write a slightly out the money put for a high premium, and a far out the money call for a small premium.... there's a big difference between strike prices but (in IVs opinion) it's a low risk position that would give high premiums.

It's unlikely that IV would be writing options with strike prices that are too close.

 

[Intrinsic_Value]

You were clear, it's that to me it's not risk mitigation rather throwing mud against a wall hoping some will stick. Same as buying or selling calls or puts at the same time.
If I've worked out that my odds of a BHP put not getting called are pretty good, why would I write against anything else? (unless the odds are equal imo)
The both way bets don't make much sense to me. They eat away too much profit.
The risk is too big to do this expecting a small return.
This was one of my topics of discussion here a few years ago which fell on deaf (now poor) ears.
I redeployed my play capital to other safer bets imo like buying USDs at the time.

Ah i get it (at least from a traders mindset).
Its a bit like my percieved valuation of intrinsic_value.
If i think a stock is significantly below intrinsic value, why will i diversify for the sake of diversification (diworsification), where the alternative opportunities do not present the same upside.

 

[Peter Spann]

Yawn

Same ol', same old.

Same old folk making the same old criticisms.

This topic has been amply discussed (and more comprehensively developed I might say) by people with better arguments both for and against, more experience, and more intelligence in other threads, so nothing to add here.
There is a difference between taking a well educated position for or against a strategy and arguing that point and just slinging mud or airing old gripes.
But nice to see I’m still worth a line or two in here.