Straddle

Your reasoning is correct, but keep in mind the premium for these options will be expensive and highly correlated with the implied volatility in the EUR/USD currency. Intuitively I would say the premium on those currency options will immediatly cause a cost for you which then needs to be set off by a move of the spot price (EUR/USD). A far better (and simpler) hedge here is to just enter into a forward contract today with expiration date next year (the date you need to pay the salaries). This will be far cheaper (you just pay the forward points) and the pay-off for your firm is 100% certain (and the currency risk is eliminated).

It depends where you work I guess. In Western Europe I don't see the added value really. I finished level I and stopped there as the course was consuming too much of my free time. If you work for an investment bank it will probably add some value, but in the general finance industry I don't think it will make much of a difference.

I use a spreadsheet similar to the one showed here: http://trading-journal-spreadsheet.com/wp-content/gallery/default/trading-journal-spreadsheet-trading-log.jpg Selling European style options on American stocks? Not that I know off, the only options I've ever bought or sold were American. I suppose you could ask a bank to buy a custom made OTC option from you, but that will becoma expensive. I would stick to the general American style options.

Thanks for posting that Peter, it's the first message with information on why Parames left Bestinfond. Stupid mistake of the Bestinver management apparently.

ESV

Nice job! You might want to post an update on your strategy since your last post is from January 2014. I'm curious to read what you're looking at lately. Thanks for sharing.

Bad news, a large part of my funds was with Bestinver and I planned to hold it for years. I'm also going to look for something else, but I'll stick with the current stock portfolio for the time being. The cheap euro is limiting most investment alternatives to Europe at the moment.

I used to trade based on technicals. Mostly moving averages cross over systems and also based on the MACD indicator. It always looks good in hindsight, but I doubt if anyone can make money using technical analysis over a period of 10 years.

1) Warren Buffett, The making of an American Capitalist 2) Joel Greenblatt - The Little book that beats the market 3) Jack Schwager - Market Wizards 4) Mandelbrot - The misbehaviour of financial markets 5) Aronson - Evidence Based Technical Analysis

I've read One Upon Wall Street several times, one of the better books on investing. The only problem is that Lynch stays it bit too general on how to select stocks and which criteria he uses. The most helpful from the book are the P/E line charts plotted next to the growth of the stock and the growth of the earnings over 5-8 years. I use the same charts in excel now to compare the stock growth to the earnings growth.

Montier has been bearish for quite a while now. In my opinion he doesn't like the current economic situation and the Fed policy and then concludes stocks are overpriced. I don't follow his reasoning. Most stocks are still solid, fundamentals are improving and big stocks like AAPL, BAC or XOM are not overpriced based on their fundamentals.

What's that book he's talking about at 04:09?

I'd like to know this as well. I was already watching the Berkshire homepage the whole day and right now I still don't see it posted there. Thanks anyway for the letter.

Nice, thanks for the link. You don't need to be an expert in order to achieve satisfactory investment returns. But if you aren't, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don't swing for the fences. Games are won by players who focus on the playing field -- not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.

Me too. I have done some expirements with the Kelly formula and volatility adjusting my position size, but this is hard to combine with value investing in my opinion.

I had that feeling throughout 2013 all the time but I have just hold my common stock in BAC and WFC all the same. Now in 2014 I'm also thinking about taking my gains, but I haven't sold one stock yet. Both stocks can still rise with double digits and they're not overpriced, so I'll try to stay in stocks this year as well. My bet for 2014 stays the same as in 2013: banking stocks.

Banking, OTC desk.

I had a bad experience with investing based on quantitative tests. 2 years ago I read the Ivy Portfolio (still a good book) which presented a very (very) simple trading system in which you would invest your money in 10 different asset classes (through the etf's). You would simply allocate the largest part of your money to the asset class with the strongest momentum and next moment you would sell it and then buy the asset class with the strongest momentum. Backtesting was simple and the results were simply excellent. I added 2 things to the system based on the backtest results: a stop loss order at 8% and I would use leverage to buy more once a position was up 7%. After 8 or 9 months I threw in the towel. I lost almost 46% of my account and was getting sick from the disappointing results. Just buying SPY would have been much better. Maybe other investors have more luck (or are better at it) than me, but I surely haven't met people making money this way. It seems appealing and simple once you read a book from Greenblatt or O' Shaughnessy, but in reality it tends to go wrong badly. I also know a few traders who had the same experience with investing in the magic formula as presented by Greenblatt.

For my stocks & options a spreadsheet I based on screenshots from this site: http://trading-journal-spreadsheet.com/ For my funds (Bestinver) a spreadsheet based on an excel from http://www.gummy-stuff.org/

It gets even more humiliating when you try to explain to others you've red a book about a guy who has a magic formula and how you can apply his magic formula to get rich ..

I red the book a few years ago. Really bad book and no link at all with Wall Street. Lots of stuff over his drugs addiction, his whore visits, how he cheats on his wife, how he deals with auditors and how he tries to transport his money to Switzerland. Maybe DiCaprio can save the movie still.

Next time you can better sell half your position and keep the other half in your account. Those options can still be sold later on and you'll reduce the risk by half.

Finviz.com by far. MSN Money Central used to have a super stock screener much more advanced than some stock screeners which aren't free. Unfortunately they stopped that screener for some reason.

A nice introduction to quantitative trading with a few examples (and code language included). A bit expensive for the content but not bad at all. I prefer Thomas Stridsman his books on quantitative trading.