What are you buying today?

[TwoCitiesCapital]

On 7/19/2023 at 12:34 PM, rkbabang said:

 

No problem.  It's interesting, I've never owned nothing but dividend reinvested shares for any of my positions before in my IRA.   It gets the Total Gain percentage wrong.  It says "0.00%" rather than  "∞%" or just "n/a" or something.

 

 

That's bizarre accounting. Generally the way it works is you pay taxes on the receipt of the dividend so the basis shouldn't be zero but rather the price per share at which the reinvestment occurred so you're not taxed twice -

But, since it's an IRA and no taxes are paid anyways, perhaps they just don't track it and mark it at $0 to reflect that no taxes were paid on the receipt either? 

Edited July 25, 2023 by TwoCitiesCapital

[Castanza]

8 hours ago, Spekulatius said:

It is going to linger but keep in mind that P&W is only a part of RTX business. There is the Raytheon defense business and avionics as well as the P&W defense business. I think they can ride this out.

Looking more and more like this will not be that big of a deal. No sign of it grounding any jets so far which is a big hurdle. Looking like an extra safety check on a few hundred engines (consider there are thousands of engines in operation). 

[rkbabang]

14 hours ago, TwoCitiesCapital said:

 

That's bizarre accounting. Generally the way it works is you pay taxes on the receipt of the dividend so the basis shouldn't be zero but rather the price per share at which the reinvestment occurred so you're not taxed twice -

But, since it's an IRA and no taxes are paid anyways, perhaps they just don't track it and mark it at $0 to reflect that no taxes were paid on the receipt either? 

 

Yes, it kind of does make sense for a retirement account where no taxes are owed.  If you think about it it is the taxable accounts that don't make much sense other than for keeping track of taxes owed according to the US tax code.  Those shares don't cost you anything, so why would they have a cost basis?  Fidelity marks all dividend reinvested shares as cost basis $0 on all of my tax deferred accounts (IRA, Roth IRA, and 401k brokerage link accounts).  

[Saluki]

Sold the last of my BRK in my retirement account and redeployed to FRFHF, FFXDF, TV and BTI.

 

 

[Castanza]

48 minutes ago, Saluki said:

Sold the last of my BRK in my retirement account and redeployed to FRFHF, FFXDF, TV and BTI.

 

 

 

Big move for you no? Wasn't BRK your largest position? 

[Saluki]

13 minutes ago, Castanza said:

 

Big move for you no? Wasn't BRK your largest position? 

 

It still is.  With my work 401k +IRA my retirement accounts are almost as big as my taxable account.  But with my IRA, where I can buy individual stocks, it's about 10% vs 90% taxable accounts.  And I had been owning the same stocks in each, but I'm trying to take advantage of the no-tax consequences of my Roth IRA, so I sold and redeployed.  Still have about 90% of my original position in BRK, but it's in my taxable account.

 

If a stock gets ahead of itself in my retirement account, or I have no better ideas, I may park the money in BRK again, even at these prices, since it will do much better than cash. But FFH is less well followed and cheaper by comparison, and is a good place to compound steadily too.

 

 

 

[Xerxes]

On 7/25/2023 at 11:08 AM, Castanza said:

 

It's tempting for sure, but who knows how long this will linger 

nothing new here. Jet engines are hugely complex. It will sort itself out. (At a cost) The real concern however is the optics, of this coming out weeks after the Investor Day in Paris. 
 

So bad optics, and given that they didn’t disclose cash impact in 2024 TBD (only for 2023), and given that with bull market roaring I bet GE pulls in more of investor money riding momentum. 

so perhaps there is room for it to go down further. So I ll wait a few weeks before adding if at all. 

 
if you like A&D, I recommend the weekly Sunday A&D business podcast. The same podcast has Monday episode on war in Europe. 

 

 

[Castanza]

2 minutes ago, Xerxes said:

nothing new here. Jet engines are hugely complex. It will sort itself out. (At a cost) The real concern however is the optics, of this coming out weeks after the Investor Day in Paris. 
 

So bad optics, and given that they didn’t disclose cash impact in 2024 TBD (only for 2023), and given that with bull market roaring I bet GE pulls in more of investor money riding momentum. 

so perhaps there is room for it to go down further. So I ll wait a few weeks before adding if at all. 

 
if you like A&D, I recommend the weekly Sunday A&D business podcast. The same podcast has Monday episode on war in Europe. 

 

 

 

As much as I want to add a bit here, I'm pretty much at a full position in my Roth (plus I'm out of cash!) 

[petec]

On 7/20/2023 at 12:46 PM, nwoodman said:

For me it is visibility and while below “book’ value,  a decent margin of safety. They are firing on the equity front so there is a little arbitrage there as it flows to book.  My buys lately are only an increase of around 10% on a large position and are a rotation out of PE 30 names eg AAPL.  I would be interested to know if anyone is doing a major change in capital allocation eg low to say 20% of their portfolio.  If these are only minor adds that are being reported then the datum of “what you are buying” is low value but not worthless. 
 

What I will say is your recent comment about them buying positions consistent with MKL and BRK and your disappointment if they weren’t differentiating struck a chord and I have pondered it considerably.  Thank-you.

 

Thank you all for your replies and @nwoodman I'm delighted if anything I said was helpful. FWIW FFH is my biggest single position (16%) and I think it is good value here. It was just even better value $250 and $500 ago!

[Dinar]

Sold MSGE August 18 35 strike puts for $2.10

[longlake95]

HTL

[changegonnacome]

HSW

[dipod]

Decent amount of CASH. Short term RTX Calls 

[Castanza]

3 hours ago, changegonnacome said:

HSW

Are you getting this on IB? Can’t find it on Schwab 

[changegonnacome]

9 hours ago, Castanza said:

Are you getting this on IB? Can’t find it on Schwab

 
Yep IBKR

[changegonnacome]

9 hours ago, Castanza said:

Are you getting this on IB? Can’t find it on Schwab 

Also if you find it on Irish stock exchange don’t be tempted to buy - not enough liquidity…..LSE listing is illiquid enough as it is!

[thepupil]

 

MGK risk reversal. 

 

Sell 245 Call, Buy 265 Call, Buy 245 Put. Jan 2024

 

This gives me about short exposure of 15% MGK and limits my loss to 125 bps pre-tax. I can take the loss in either 2023 or 2024 allowing for flexibility. 

 

Probably dumb. Can't resist.

 

 

 

 

 

Edited July 28, 2023 by thepupil

[Gregmal]

9 minutes ago, thepupil said:

 

MGK risk reversal. 

 

Sell 245 Call, Buy 265 Call, Buy 245 Put. Jan 2024

 

This gives me about short exposure of 15% MGK and limits my loss to 125 bps pre-tax. I can take the loss in either 2023 or 2024 allowing for flexibility. 

 

Probably dumb. Can't resist.

 

 

 

 

 

Nice idea. Just put in a no look order for $5k of $210 Jan puts and got filled so seems liquid. Been searching for stuff like this if nothing else cuz VIX is super low and theres gains this year to mess with. 

[sundin]

TLT 

[Castanza]

Small adds: FRFHF, CASH

 

New position FFXDF 

[KPO]

More SAVE a bit below $18 yesterday 

[dipod]

New position in CVS. Pays a good dividend. Pretty decent value compared to many others out there IMO.

[lnofeisone]

3 hours ago, thepupil said:

 

MGK risk reversal. 

 

Sell 245 Call, Buy 265 Call, Buy 245 Put. Jan 2024

 

This gives me about short exposure of 15% MGK and limits my loss to 125 bps pre-tax. I can take the loss in either 2023 or 2024 allowing for flexibility. 

 

Probably dumb. Can't resist.

 

 

 

 

 

Curious why you went with this configuration. Wouldn't selling 240/245 bull spread work better? You get credit upfront. Lose less and make more. The break-even is a bit lower but only within few % points. Are you banking on vol picking up and put getting priced up higher? 

[thepupil]

you are probably right. I just did what i thought was closes to shorting the stock but with limited risk/capital outlay...really i probably should have just shorted it and bought the call like did recently with ARKK. I trade options with the knowledge that whatever I do, I'm definitely not optimizing or doing it perfectly, so appreciate the feedback and would love any resources that guide your general thinking as to how to approach. My approach has been that of a middle of the curve liberal arts major who should probably put more time into thinking about the precise construction. 

[lnofeisone]

17 hours ago, thepupil said:

you are probably right. I just did what i thought was closes to shorting the stock but with limited risk/capital outlay...really i probably should have just shorted it and bought the call like did recently with ARKK. I trade options with the knowledge that whatever I do, I'm definitely not optimizing or doing it perfectly, so appreciate the feedback and would love any resources that guide your general thinking as to how to approach. My approach has been that of a middle of the curve liberal arts major who should probably put more time into thinking about the precise construction. 

Ha..better be generally correct than precisely wrong, right? I was just curious about the construction/assumption of the trade because both trades are betting on the same idea that MGK will reverse. You are betting that the reversal will happen around current prices and are willing to absorb the additional loss if the market keeps marching up above $265 (you are also risking assignment risk with your short $245 call).  My alternative trade says I am willing to concede 25% ($5) chance that the market will march to $265 (roughly the previous high for MGK) and pay for that upfront to remove the risk of losing ($20). Your trade is unconstrained sub-$200 and I am assuming that 20% is probably a reasonable amount for megacaps to drop in 6 months. 

 

Here is my back-of-the-envelope math:

 

You built a synthetic short and capped it with a 265 call in case it runs away. Your breakeven should be around $242 (I ballparked the $242 based on the option prices now: $245 call - $14, $245 put - $12, and $265 call - $5, in other words you paid roughly $3 ($14-$12-$5) for your trade). I think the scenarios I'm considering:

 

MGK goes above $265 - you lose your net debit and you are on the hook for $20 on your 245/265 spread (this is your max loss)

@245 - you are out $3

MGK at $242, you break even

Under $242 you start to make money with the sold $245 call really juicing your return which will show up if you are closer to $242 but this extra return will diminish as MGK goes down. Overall your trade will be making you about $0.90 for every $1 decline in MGK. 

Your actual limit is MGK hitting 0 (not very likely but mathematically).

 

The risk profile of buying $245/200 put spread (or selling $245/$200 call spread) would look like:

You pay $8.90 to enter the trade the $8.90

@245 or above, lose net debut 

Break even is $236 

Under $236 you start making $0.85 for $1 decline in MGK. 

Under $200, you get no benefit

 

 

 

You can do the same exercise with selling the call spread. The only consideration with call spread is the risk of early assignment (which is likely to happen) on the short $200 leg of the trade.