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Flirting with Floats


farnamstreet
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Professor Sanjay Bakshi teaches MBA students two popular courses: “Behavioral Finance & Business Valuation (BFBV)” and Financial Shenanigans & Governance” at MDI, Gurgaon.

 

He's not all theory — He's also a practitioner with an enviable track record.

 

Flirting with Floats: Part I

http://fundooprofessor.wordpress.com/2012/07/09/flirting-with-floats-part-i/

 

Flirting with Floats: Part 2

http://fundooprofessor.wordpress.com/2012/07/16/flirting-with-floats-part-ii/

 

Flirting with Floats: Part 3

http://fundooprofessor.wordpress.com/2012/08/12/flirting-with-floats-part-iii/

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Professor Sanjay Bakshi teaches MBA students two popular courses: “Behavioral Finance & Business Valuation (BFBV)” and Financial Shenanigans & Governance” at MDI, Gurgaon.

 

He's not all theory — He's also a practitioner with an enviable track record.

 

Flirting with Floats: Part I

http://fundooprofessor.wordpress.com/2012/07/09/flirting-with-floats-part-i/

 

Flirting with Floats: Part 2

http://fundooprofessor.wordpress.com/2012/07/16/flirting-with-floats-part-ii/

 

Flirting with Floats: Part 3

http://fundooprofessor.wordpress.com/2012/08/12/flirting-with-floats-part-iii/

 

Thanks Farnamstreet.  Excellent set of posts.  Although much of the first two posts has been discussed on this forum.  The idea of linking floats to moats is very interesting. 

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Any ideas how I as a private investor can create my own free or profitable long-term float?

 

Write a put on something you wouldn't mind owning at the strike price of the put. :)

However, you will probably have to have collateral set aside for your counterparty in the event the put is exercised.

 

The best way to lever up with non recourse leverage is to buy a long dated call or warrant at an attractive price as measured by implied volatility in a time of low interest rates on a stock that you think is a good value.  Then, you have the leverage of a margin loan that is non recourse beyond the price you paid for the LEAP or warrant.  :)

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Great read! Thanks farnamstreet!

 

I've been following the proffesors blog for a while now, it is pretty good indeed; like farnam says the guy has a great investing record and also, I should add, a wonderful disposition to teach!

 

Here's a series of fantastic interviews done to him on the basics and not so basics of value investing:

 

Part 1:

http://www.safalniveshak.com/value-investing-sanjay-bakshi-way/

 

Part 2:

http://www.safalniveshak.com/value-investing-sanjay-bakshi-way-part-2/

 

Part 3:

http://www.safalniveshak.com/value-investing-sanjay-bakshi-way-part-3/

 

Part 4:

http://www.safalniveshak.com/value-investing-sanjay-bakshi-way-part-4/

 

You can also download the entire interview in pdf form, here (my preference):

http://www.safalniveshak.com/wp-content/uploads/2012/08/Value-Investing-The-Sanjay-Bakshi-Way-Safal-Niveshak-Special.pdf

 

Enjoy!

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Any ideas how I as a private investor can create my own free or profitable long-term float?

 

Write a put on something you wouldn't mind owning at the strike price of the put. :)

However, you will probably have to have collateral set aside for your counterparty in the event the put is exercised.

 

The best way to lever up with non recourse leverage is to buy a long dated call or warrant at an attractive price as measured by implied volatility in a time of low interest rates on a stock that you think is a good value.  Then, you have the leverage of a margin loan that is non recourse beyond the price you paid for the LEAP or warrant.  :)

 

twacowfca,

as it happens, I always agree with your writings, so you must surely be right! But I have still to find a broker in Italy that lets me buy long dated call options on a company listed on the NYSE… My firm has also a Tradestation account, but I don’t really like to always wire money overseas… Actually, I cannot say why: it would be much safer in JPMorgan than it is in Intesa SanPaolo!!  :-\

Anyway, I reckon an investment in BRK, FFH, GLRE, etc. at book value the best way to “create my own free or profitable long-term float”. Through BRK, FFH and GLRE, my firm owns float and benefits from it. It is just that I am not the one to decide what to do with that float… oh well, I really don’t care much! I am very happy with my float in the hands of Mr. Buffett, Mr. Watsa, and Mr. Einhorn! I am positive that it is working for me and that it is ultra-safe.

 

giofranchi

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marodq,

thank you for your first, very interesting contribution!

I am not the one who should welcome you to the board (I am also new to the board) ... but welcome anyway!!  ;)

 

giofranchi

 

Yes. Welcome indeed!

 

You should be a very informative contributor if even a small number of your subsequent posts are as good as your first.  Sanjay Bakshi's writings simplify profound value investing concepts, the mark of a good teacher.

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Any ideas how I as a private investor can create my own free or profitable long-term float?

 

Write a put on something you wouldn't mind owning at the strike price of the put. :)

However, you will probably have to have collateral set aside for your counterparty in the event the put is exercised.

 

The best way to lever up with non recourse leverage is to buy a long dated call or warrant at an attractive price as measured by implied volatility in a time of low interest rates on a stock that you think is a good value.  Then, you have the leverage of a margin loan that is non recourse beyond the price you paid for the LEAP or warrant.  :)

 

Thanks twacowfa:  Buffett used this strategy several years ago when he wrote puts on several indexes such as the S & P 500.  I think he used European options instead of American which gave the owners of the puts only one chance to exercise their rights at the end of life.  These puts had a very long life if memory serves me correctly and he collected a high premium. Brilliant move!

 

Personally I've never written a put option before so kind of nervous about doing it and especially do not want to make mistakes.  Can you so kindly go into detail about your use of writing put options such as percent of portfolio, what kind of premium you demand, do you have a consist float from writing puts, etc?  Anyone else, please feel free to add any comment on your use of written puts. 

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