scorpioncapital

Which businesess related to mortgages do you think has better economics? Both servicing and insurance seem to be high volume, low margin businesses and both seem to be in some form of long-term run-off.

"SMA refers to the Special Memorandum Account which represents neither equity nor cash but rather a line of credit created when the market value of securities in a Reg. T margin account increase in value. For example, assume the market value of securities purchased at a cost of $10,000 on margin (at 50%) increase in value to $12,000. This $2,000 increase in market value would create SMA of $1,000, which provides the account holder the ability to either: 1) buy additional securities valued at $2,000 (assuming a 50% margin rate) without depositing up additional funds; or 2) withdraw $2,000 in cash, which may be financed by increasing the debit balance if the account holds no cash. It should be noted that while an increase in market value over original cost creates SMA, a subsequent decline in market value has no effect on SMA. SMA will only decline if used to purchase securities or withdraw cash and the only restriction with respect to its use is that the additional purchases or withdrawals do not bring the account below the maintenance margin requirement. SMA will also increase on a dollar for dollar basis in the event of cash deposits or dividends." So from what I understand SMA is a tracking account created by market gains, cash transactions, or dividends. I usually just look at excess liquidity, that's the important value for all practical purposes - including option writing.

In Canada it's pretty simple. You pay taxes to Canada as long as you have ties to that country when you're travelling. For all intents and purposes I consider this definition to consist of two things: 1. You are travelling on a tourist visa even if you travel for years on end (although you can never stay put very long.) 2. You are financing the travel from money in your "home" country and continue to pay your bills at home. This last point is a bit murky. What if you have no house to rent or own or car, just bank accounts and medical care and a phone? Well, I think that would be fine given that your money centre is still your home country.

How can taking a random % be right? What you do is walk around your home office and measure the square feet. Then you divide by the total # of sq feet in your house and that's the %.

KCG holdings. Largest market maker, growing brokerage. Selling close to book value. costs are going down, earning power is going up, debt is being paid down. 2014 should be good.

fbrc, cheap, just bought back 650,000 shares.

IB as a partner is a good investment. They have helped me to make more money then otherwise would have been possible in stocks, options, and futures. Am just an individual. I am surprised they don't take ALL the business away from everybody else, call it lack of knowledge. I'm sure there are a huge amount of 10k+ accounts out there. I hope they succeed big time, but that has never been in doubt.

My observation for several years holding the same stock is that you almost always tend to get some proportion as a payment in lieu. I'd say around 30% of the total.

He said an interesting thing - I usually go long the things others go short. I liked that :)

And now, Jefferies & Rich`s first `semi-letter`! http://jefferies.com/CMSFiles/Jefferies.com/files/Insights/JefferiesInsights_July2013.pdf

given that you have to file an ammended T1-ADJ if a written put is assigned instead of expires worthless in a new year, I usually add these two provisions to reduce headaches - either write options that are deep out of a money with slim chance of assignment OR ensure assignment is in the same year as it was written.

i sell deep out of the money put options while waiting. If I think a stock is overvalued now, many premiums are yielding 15-20% on collateral at half the price. Presumably half the price is a better entry point for a stock you like than twice the price.

The easiest strategy is to buy a good investment and forget about it. You don't have to worry about when to sell or buyback. And you don't miss out when it shoots up. Conversely you also have to watch it go down, but so what if you're holding for a long time?

thanks! seems options reduce buy/sell flexibility to some degree in exchange for carrying out a plan at fixed benchmarks.

Does anyone with experience know how assignments of option contracts occurs in real life? E.g. You sell covered calls 6 months away at a certain strike. Let's say the premium is close to zero. It's one month later and the stock reaches the strike price. Question: - Is assignment immediate or do you have a couple of minutes or hours notice? - Is assignment guaranteed? I.e. could the other party wait for the stock to rise even higher thus ensuring a lower exercise price but giving the seller uncertainty about what will happen? - Can you induce the assignment at the strike if you want to?

cypress is a tax haven right? So a 6.7% one time tax in a tax haven appears to be peanuts to foreign account holders who are paying no income tax.

I see, so people are saying something like: put premium / (Capital outlay if exercised * probability of exercise (est.)) * (time to expiry*annualized adj.) = return. (and minus interest on collateral if you have to pay it)

For deep out of the money puts, I take the return to be roughly equal to the premium divided by the collateral requirement. Some people take it as the risk of exercise * the cost divided by the premium (but how do you quantify the risk for an of the money option?). as an aside, do people think getting 10.5% annualized on a 4month put that is 33% out of the money is a good deal in this environment?

What's to stop interest rates from staying at zero until stocks double from current levels, only then to be raised for them to crash back down? Who wouldn't want to participate in the extraordinary profits from now until that time?

If interest rates are zero (or negative after inflation), 15x earnings for S&P500 is very cheap. I would expect it to climb much higher. Maybe 30x earnings is more reasonable actually.

How can we short japanese bonds like he says? He thinks japan is a disaster waiting to happen in 2-3 years. Is shorting bonds or other derivatives possible? What's an easy solution via a us discount broker who does options/derivatives?

Goodwill is an attempt to represent equity valuation on the balance sheet as opposed to the share market. It's the difference between cost and market value. It represents the essence of investing really - you can see all the smart or bone-headed deals a company has ever made in the goodwill. Conversely, you can see how they mark up or down their organic business based on what they think the cash-flows are. It's a great way to see the insider's opinion about business value as opposed to the market or your own.

An article in the globe and mail investing section today about how financial repression and inflation both swindle the saver and creditor. But I don't really see the difference between the two concepts are they not in fact the same thing?

I don't think calleability of leverage is particularly that important. The central issue is the success or failure of the investment. Whether my loan can be called and I lose part of my shares or investment seems to mean very little even if that loan can't be called and it has dropped to such an extent to make my return very low. If my house is worth half of what I paid for it and I have to wait 10 years to get to break-even, the penalty is in the rate of return, not that I didn't lose my house. I could very well lose my house, and use whatever cash is left over and make another investment. As a sidenote, a major study was done showing that even with margin calls, young people would still have a higher overall return if using leverage than just cash. The conventional wisdom is that recklessness doesn't pay off, perhaps this is only a half-truth. The truth is that recklessness in investment selection is far more damaging than recklessness in financing that investment.

Unless you trade in foreign currencies, I don't see much need to keep any records as the broker has all the data and calculations. For example, my broker even provides an annual statement with cost based, realized gains, etc.. Therefore, I've concluded foreign currency is the only enemy