IceCreamMan
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Posts posted by IceCreamMan
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It seems like you could compare the returns of your actual portfolio to the returns of a hypothetical portfolio in which cash is replaced by your actual stock holdings at proportional weights (or replaced with the previous portfolio when cash is 100%).
An easier calculation might be to compare the S&P 500 to a hypothetical portfolio in which cash allocation is identical to your actual portfolio, but your stocks are replaced by the S&P 500. The difference would be attributable to market timing. However, unlike the first method, this wouldn't measure the timing of your specific investment decisions, e.g. selling a particular stock at an opportune time.
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5 hours ago, Dave86ch said:
It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value”
Satoshi Nakamoto 2009-02-18Interesting. It sounds like the speculative contagion was part of the original vision.
"users"
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23 hours ago, boilermaker75 said:
If the stock falls to $28.01 I make money and you don't make anything, We can play this game all night.
I was just pointing out how it is not the same as putting in a limit order.
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Nice find. Can you always redeem these for par? e.g. if interest rates rise to 5%, can we still redeem $10k of Series I bonds for $10k?
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13 hours ago, boilermaker75 said:
Same as if you put a limit order in to buy at $28, except you didn't pocket the put premium.
If the stock falls to $28 and then rises, my limit order gives me all of that upside. Not so for selling a put.
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12 hours ago, rkbabang said:
if I'm put to, I'd be perfectly happy to own it at $28.
Here's how I usually look at it:
On the expiration date, regardless of the stock price and regardless of whether or not I previously sold an option on it, I have the ability to own the stock. That's not dependent on whether or not I previously sold a put. If the stock falls below the strike price, the only economic difference in the case that I sold a put is that I now have a loss.
Whether I cover my put a moment prior to expiration or not... whether I keep the shares from an automatic exercise or sell them immediately... doesn't actually impact the bet that I already lost.
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I guess choosing a strike price is like choosing where you want to be in the capital structure. Looking at the extremes, if you choose a deep ITM put to sell, your return profile is almost identical to an equity investor's. If you choose a deep OTM put to sell, you're similar to a credit investor (your upside is fixed, your maximum loss is a large multiple of your upside, but your probability of gain is very high).
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On 11/9/2021 at 5:34 PM, RedLion said:
I would like to hone my strategy on writing cash secured PUTS
When you sell a put, you could be making two bets:
1) the stock will go up
2) the stock has a narrower distribution of future outcomes than the options market is pricing (i.e. the stock will not move much)
It may be helpful to think about these two bets separately. To the extent that you want to bet on the first one, you may want to sell ITM puts. To the extent that you want to bet on the second one, you may want to sell ATM or OTM puts.
If you want to bet on the second one: To what time frame does your belief apply? This can inform your choice of expiration date. For example, if you think APO will have relatively low volatility over one month periods, you might sell 1-month ATM puts.
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5 hours ago, RedLion said:
I've got kids around for halloween today, I'm going to need to make a few pots of coffee and devote some time to poring through this link, because a cursory read is WAY over my head. Very interesting though, and if the author's projections/modeling is correct, it seems like it could be a very good interest rate hedge.
Are swaptions even available to retail investors?
An introduction to PFIX is here:
QuoteThis Strategy will be constructed with only two assets, each initially about 50%:
A seven-year (May 2028) expiration interest rate (put) option on roughly a $1000 twenty-year bond with a strike of 4.25%. This type of option has typically ONLY been available to professionals (with an ISDA contract).
A portfolio of US Treasuries with roughly a seven-year maturity.
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On 10/29/2021 at 4:18 PM, RedLion said:
I'm looking to purchase a home probably sometime in the middle of next year, I'm concerned about rising interest rates, and would like to come up with a way to hedge against rates rising in the next 12 months.
Has anyone thought about this?
PUTS on TLT, or maybe some type of leveraged preferred stock ETF? I'm probably looking to borrow around $600k, so would love to hedge interest rates for around that dollar amount, I've never traded in futures or interest rate swaps or anything like that, not even sure if they are available for what I'm trying to do.
You may want to look into PFIX. Some explanation here: https://www.convexitymaven.com/wp-content/uploads/2021/06/convexity-maven-fire-insurance.pdf
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9 hours ago, Gregmal said:
Haha its exactly that. This sort of thing applies to a lot of investing. You really just have to wrap your head around the intended purpose and objective of what you're doing, and then its really easy and for the most part stress free. I have had so many convos with people about selling puts over the years and it always initially came back with some iteration of "yea but if the stock goes down a lot you get screwed"....but then its like....well, you might get screwed, but you get screwed less than if you just bought the shares. And if you arent interesting in owning the shares, why would you short the put? And then theres a eureka! moment.
Maybe it depends on whether you see the glass as half full or half empty.
If the stock goes up a lot, you miss out on all of the upside except for the put premium and would've been better off buying the stock. If the stock goes down, you suffer all of the decline minus the put premium and would've been better off doing nothing.
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10 minutes ago, SharperDingaan said:
The systemic risk is generational shift, that older folks just do not get.
Simply look around you. Most folks < 35 look to apps (ie: a Wealth Simple) for their financial and investment advice (ie: a Robin Hood) - not an investment advisor. To them, doing anything without tech is wierd, this is most of the demographic buying crypto ETF's, and most wealth apps are quite adequate for the everyday transaction. Sure, young investors can still make stupid investments, and there is risk to being on the bleeding edge - but against the remaining runway? it's just not a big deal.
You and I might rant that we'd never trust an app (ie: algo), or hold a token - but we're the dinosours. As long as we see lots of other dinosours around us, we are positive that things will never change! - yet totally miss that the glacier we are standing on is rapidly melting. Every chunk of glacier breaking off, a black swan event.
SD
This explains the short-run: Why so many young people feel comfortable buying crypto.
But it doesn't address the long-term question of where this is going. Crypto and NFTs don't generate cash flows. Isn't that a meaningful distinction (compared to other asset classes)? If we follow the crypto boom to its logical end point, we get a bunch of tokens that are changing hands at astronomical prices and accounting for a large percentage of global paper wealth. (They still don't generate any cash flows, right?) So... maybe this would allow actual cash-flowing assets to continue generating decent returns, since their prices have not been bid up as much in that world?
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What's the total market cap of crypto in relation to all other assets? My guess is small, but I don't know. How does it compare to art, rare coins, gold, collectibles, and other speculative assets that generate no cash flows?
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On 10/22/2021 at 3:21 PM, StubbleJumper said:
No, I have never had my father donate $1 billion so I could be hand-picked to run my own philanthropy foundation. My guess is that somebody who climbed through the ranks of the non-profit sector, with successive jobs of progressively higher responsibility, to eventually be competitively selected to be the boss of a $1 billion foundation would be a pretty talented person. But, that's not how Susie was selected for the job, was it?
The culture of BRK will probably last one or two CEOs post-Buffett and then it will likely revert to a typical organization with an over-confident, self-interested management cadré. Appointing a 68 year-old family member to the board is unlikely to forestall that process.
SJ
UNLESS...
What if Susie and Howard have been instructed to make sure more "culture keepers" are added to the board (as S & H reach retirement age) and to instruct them continue the cycle?
Buffett has talked in the past about his desire for Howard to maintain the Berkshire culture; is it possible that Warren
wants tohas a plan to try to keep the chain of trust going for as long as possible (i.e. beyond his children)? -
2 minutes ago, ERICOPOLY said:
1st point.
The option premiums are $154 for the calls vs $125 for the puts. That differential is $29. That $29 already takes into account the $17 that is in-the-money on the calls, and I'm saying there is an extra $12 to boot.
2nd point.
Yes, no margin cost with naked puts. However, if this is cash-covered puts the covered calls may be better unless you earn enough interest on your cash to meet or exceed $12.
Yeah, it's the financing cost. I was assuming a margin account.
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4 minutes ago, ERICOPOLY said:
Yes, cases where the option expires OTM but also when you get put the option you restart the clock and need to hold yet another 12 months to get to long-term status.
Also, notice that at closing the stock SAM was $517 and the Jan 2024 $500 strike call was approximately $154 whereas the $500 strike put was approximately $125. Taxes aside, you are risking less with the covered call strategy because $154 minus $17 (which is the amount in-the-money) is $137 and that differential is $12 greater than the $125 put premium.
There are two reasons for this. First, it's not apples to apples because the $500 put is slightly OTM (3+% cushion) vs. the call that's already ITM (immediately at risk for the first 3+%). Second, selling the put is >100% leveraged position (cash credit for notional exposure; no cash outlay).
The leverage is what I was alluding to in my prior post. If you have a broker with a 1% margin rate it probably doesn't matter which way you put on the position, but if your broker charges more than 1% margin then the options market provides cheaper financing.
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4 minutes ago, IceCreamMan said:
If you let the underlying shares get put you and then hold them for a year, the capital gains are long-term, right? So that would be a possibility.
Oh, I guess that's only a possibility if the option expires ITM. You're probably thinking about cases where the option expires OTM, I see.
Anyway, I think you know what the real answer to your question "why not buy shares and write covered calls" is, Eric
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46 minutes ago, ERICOPOLY said:
Long term put options (that you write) are taxed as short term capital gains no matter how long you are tied up in the contract. So why not instead own the shares and write covered calls?
If you let the underlying shares get put you and then hold them for a year, the capital gains are long-term, right? So that would be a possibility.
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10 hours ago, Gmthebeau said:
Over time housing rises with the rate of inflation due to the fact that its a depreciating asset. It does have to be maintained/upgraded to even keep up with inflation. Replacement costs driven by labor costs to build and the building materials themselves cause the prices to rise with inflation. It sometimes will rise faster due to speculation like the housing bubble we saw due to easy credit. Now we have super low rates that caused it to rise faster in 2020 and early/mid 2021. The rise appears to be over, but if not it will mean revert eventually.
Let's not forget about the land, which usually comes with the building. Land is not a depreciating asset.
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From my hazy recollection, Greenwald suggested dividing the increase in sales by the increase in gross PP&E, right? To calculate some sort of incremental asset turnover ratio? There's an interesting idea in there to connect an output like sales or earnings to invested capital. And you could treat some SG&A as investment if you want.
A more general approach is just to look further up the income statement and make estimates based on industry norms. i.e. go from net income to EBIT to EBITDA to gross profit to sales to users until you find a positive number. Then work in reverse making estimates to arrive at a potential future FCF figure.
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Does anybody know when was the last time Fairfax's price-to-adjusted-book-value was this low?
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The clear move at this point is for Fairfax to buy TRS on Berkshire stock and for Berkshire to buy TRS on Fairfax stock. This way as Berkshire's stock goes up, Fairfax makes money, which causes Fairfax's stock to go up, so Berkshire makes money, and the cycle repeats.
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10 hours ago, Mephistopheles said:
Sanjeev, thanks for the updates. Appreciate your continued work with this site.
Would it be possible to have a "dark" mode for the board? So that it's easier on the eyes. I'm not a software person at all, so I don't know if this is complicated or not, but just wanted to make a suggestion for a small improvement that I'm sure many will love.
I wonder if the background color affects melatonin production.
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On 7/31/2021 at 6:09 PM, ERICOPOLY said:
They have about 8% of shares outstanding worth of TRS. So I think if you multiply $54 by 1.08 you arrive at about $58.32, assuming the shares appreciate at precisely the rate of EPS increases.
It's a bit confusing to arrive at an estimate for earnings when share increases feed back into earnings and earnings drive share increases.
On 9/2/2021 at 9:52 PM, matthew2129 said:Now that the Riverstone and Brit sales are closed, I'd really like to see to FFH ratchet up the buybacks this month. Given the large TRS in place, they shouldn't be shy to smash the ask
It's too bad we can't buy OTM call options on Fairfax like the WSB team does. Imagine the gamma squeeze on a stock for which the underlying company is loaded up with total return swaps on its own shares.
Weird limit order behavior at Fidelity
in General Discussion
Posted
Something like this has happened to me with options at TD recently... something like: no fill at 1.13, no fill at 1.14, and then I bid 1.15 and it fills at 1.13.