hyten1

folks i don't think any disagree that we need taxes the question is how much

just spit balling/thinking out loud (i am sure everyone is already know this) so if you have a stock that you have very high conviction of and you think the stock is cheap, very cheap you can 1) sell naked put of this stock (at lowe strike price) 2) use the proceed form 1) to buy call on thee same stock if stock drops you can to exercise both 1 and 2 (which you are ok since you think the stock is cheap you would buy anyways) if the stock pops 1) and 2) are both in the money On top of that can't you do this for stock that you like but are not cheap enough now, execute 1 and 2 at decent low strike price or just do 1) are decent low strike price. hy

arden do you mean annualized return or average return they are 2 different things. i answered the poll assuming annualized return, that was prob wrong. my average return would be higher than my annualized. hy

thx

folks i was wondering if someone knows this, what happens if you wrote a put options on a company that spin off a piece of it self? for example SHLD are in the process of spinning off a piece, currently shareholder of shld got the write SHORS to buy the new spin off at a pre determine prices how does the above event affect someone who wrote a put options on for example SHLD? thanks hy

hyten1 The psychological underpinning for this dynamic is beautifully described in Chapter 29 on Kahneman's book Thinking Fast and Slow, when he uses the following example: In each of the four examples below your chances of receiving $1mm increases by 5%. Is the news equally good in each example? A. 0% to 5% B. 5% to 10% C. 60% to 65% D. 95% to 100% From an expected value standpoint all four scenarios have equal value. However from a psychological standpoint, Scenarios A and D are much more valuable (A introduces upside that previously was not there, and D eliminates all remaining downside risk). For this reason people will gladly pay a premium over the probability value for scenarios A and D. This dynamic is the foundation the insurance business, lotteries, Las Vegas gambling, lawsuits and countless more. If you think of written option premiums as insurance that introduces upside, (or eliminates downside risk), Twacowfa's statement will make sense. onyx1, hmm thanks, let me think about this one.

twacowfca, If I want to write put options on something I would like to own at a lower price, and use the proceedings to invest somewhere else – for instance in something that I like as much, but I consider to be already at a price undervalued enough –, do you know a broker that works also in Italy and that will allow me to do so? I tried with both Banca Intesa and Unicredit, but I failed… They don’t let me do that on companies listed in stock exchanges outside Italy… Maybe it’s a silly question, because you don’t know anything about Italy, but you seem a master of the trade, so I try to ask you anyway. ;) It would surely be very nice to have some float I could work with! Thank you very much, giofranchi giofranchi,... you will definitely be able to write put options in real time with "Interactive Brokers" http://www.interactivebrokers.com/ibg/main.php http://www.interactivebrokers.com/en/ibglobal_sites.php They also have a multi-currency platform, thus... USD, EUR, CAD... you can have integrated sub-accounts in any currency with your main account. Interactive Brokers are worldwide leaders for option trading. And some board members mentioned that they are also customers. Hope this helps. Cheers! Thank you very much berkshiremystery! You are always very helpful! And I will check them out asap. Just one more question: Do you think they will let me write naked put options, or that they will ask me to cover them with cash? My idea of getting some float to invest doesn’t work, if I must put aside the cash to eventually buy shares at the strike price. Right? giofranchi Gio,... I just asked this question Eric,... because he seems to be with IB,... ::) so let's wait for his answer,... I'm as curious as you to know this.... ;) I know I am not Eric, and I dont deal with IB - TDwaterhouse. Writing Naked puts requires you to put up collateral. Say you write puts on a $30 stock for $3 and the puts exercise at $25.00. You get $3 up front. If the stock drops you keep using margin, or your cash balance up, ultimately to the price of the underlying stock. You can start with a net cash position and end up with a margin call very quickly. The only times I have ever had margin calls is when I have written puts. I gave up this practice. There are other ways to earn income. I understand what Eric does and it works for him. I have no opinion on anything else about the strategy. Collaterl must be cash? Why can it not be shares of other companies you own? If the strike price is low enough and the company is one I would like to own for a long time, I would be glad to sell some shares in other investments, to buy a stake in the company I sold naked puts on. I know it is not without risk, but, if thought out conservately, I believe it could work. giofranchi gio that is my take as well i have been using put writing as a way to get some cash at the same time i do it on stock that i wouldn't mind owning, especially at these low strike prices that i am writing puts on.

uccmal i am not sure what you mean regarding writing puts, i have done it and i usually pick strike prices that is extremely low (i also have cash around) for example I wrote BAC Jan 14 puts with strike of $5, I got 0.77 per share for it in the event BAC hits $5 i'll be happen to exercise this option (this mean I am buy BAC at $4.23 per share) how come you get margin calls so easily? hy

twacowfa, i am curious about your statement "However, most of the time the consistent profits are in writing options, not buying them, because the writer has to accept the risk of a large loss if there is a big move, while the buyer wants to profit from a big move upward or gain protection from a big move downward. " just curious on why you say this? I am not saying you are wrong or right, I am just curious as a beginner in options. personally, I found it strange and advantages to me that a few months ago i could sell/write put options for some stock at extremely low strike prices (i don't see how they can get to these strike prices unless something extremely bad happen) at a above 10% return with the proceed i get. part of me feel like, these are like free money that i am picking up. but they soon disappear as stock market went up and the % return on the proceed seem not to be worth it. just curious if anyone/everyone can provide your opinion/reason on the above? since i am new to options (just started using it this year) hy

i am new at options, for me i never really got the hang of options in the past, but this year, it suddenly just clicked, not saying i am an expert at it. i still have a lot to learn. i mainly use it for some extra income (especially sellings put, where i see the strike price relative to the proceed i get is attractive). especially when the likelihood of some of these stock getting to some of these low levels just seem very improbable. also i sell put were if the strike price is hit i wouldn't mind (I actually would be happen) to purchase some of these stocks at these extremely low prices. there are definitely risk. put i think this is will prob give me 1 or 2 extra % annually for the entire portfolio. however, now i am trying to broaden my use of options to use it to lever up my varies long position or to protect the downside when appropriate. this is the area that i am still getting a hang of. i think this is area were from what I can tell eric is good at. hy

eric i hear ya, that is what i have been doing to some extend, but i don't have the conviction to be so concentrated in any one position. hy

eric i know you do quite a lot of options (or maybe i am wrong), I just started dipping my toes into options this year, have been selling quite a few puts to get some cash. by no means is this strategy that will generated considerable amount of return, it might give me an extra 1 or 2% per yr eric, would you mind sharing some of your options strategies and thinking? for example I understand you are big in BAC, do you just by calls mostly for the outsize return?

man eric, damn i only up 30+% ytd

no plan on selling it yet

i own a decent amount of GM (have been accumulating when it went down to 19/18. packer is right see the gm thread, lots of stuff there.

also remember BAM has member on GGP's board while at the same time the same individual is on BAM's board. now how can this person be objective when it comes to making decision that is in the best interest of GGP's shareholders vs BAM's shareholders. I don't see how this person can be objective. hy

craigatk hmm strange i don't see it that way, I think ackman is doing the right thing here. BAM can effectively (slowly, little by little) take over GGP. I for one as a shareholder would like to get a control premium via what ackman is doing. hy

folks i was wondering is there some sort of database out there that allows me to search for a company and see what lawsuit of litigation the company currently has? any insight or comments are welcome

mostly long equity i have sold some put options

is there some sort of database or list of individual that have been fined/suspended/barred you can then cross reference this list of individuals involve in current companies?

my other question is so the market think the risk attach to agency reits warrents a 12 to 13% yield. i would think given the current environment the yield should be lower. but what do i know. hmmm

a_hamilton, i hear ya, think nly mention they lower their leverage due to the 2008/2009 event. you are right in the past the leverage is higher. i think at the end of the day the risk are very clear and how they will play out i don't think anyone knows. hy

a hamilton from my understanding agency reits like nly which deploy leverage of 6x or so are operating considerablely under that the repo market deem te max which i believe is typical 20x. so agency reits like nly are comfortably with the boundary. hy

folks, interested in hearing everyones opinion on agency reits (nly, anh etc) at the end of day these reits are very similar to bank they having funding cost 2% (reits) vs 0.50% (bank) and they earn interest on these fund. albeit there are many differences. if anyone who are interested could comment on: - probability of the curve becomes flat or invert - the leverage deploy (approx 6x for agency reits) vs traditional bank leverage - in the event of the fed fund rate goes up, what are some historical reference to that and how quickly could/do they usually happen thanks hy

dcg you can download for free windows 8 release preview http://windows.microsoft.com/en-US/windows-8/release-preview it was just available starting yesterday its pretty close to the final version hy