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What are you buying today?


LowIQinvestor

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Bought some WRK ( paper packaging co). Selloff in this sector due to concerns over pricing pressure . We will see, some of these stocks have become cheap and the industry has consolidated a lot. Packaging is one of these sectors where rollups are actually fairly low risk and the rollup model seems to work.

 

Cardboard might like this stock :-)

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Bought a boatload of CRC LEAPS today. Painful to do but hopefully with a good return like last year. Basically crashed yesterday (and lost 10% days before) following a bill in California to restrict drilling, news that was already known on Tuesday. Purely sentimental selling if you ask me. Bill unlikely to go through. But even if it did, it would hardly be the end of CRC. Given that CRC is an option on brent prices already, you might as well leverage that leverage with options. Binary outcome most likely (either they survive and are a multibagger or they become a zero at some point) so much preferable about regular stock.

 

Would you mind sharing (even generally) the timeframe and strikes you're looking at here. I like this idea, but man some of those options are expensive. Be curious to hear how you're thinking about in the money/at the money/out of the money.

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Megacable MEGACPO.MX ( Mexican cable co.) and DWDP

 

would you elaborate on MEGACPO?  going through CHTR and Liberty complex has me interested in cable cos esperially in emerging markets.

 

The thesis is simple - this is like US cable 20 years ago. It’s cheap (~7x trailing EBITDA ) and has a long  growth trajectory. Also interesting is that it has virtually no net leverage (cash is almost equal to debt). The stock was a bit depressed after the release of the Q1 report (increased churn diente bad economy in Mexico), somI took a plunge and bought some this AM at the open.

http://inversionistas.megacable.com.mx/en/reportes.php

 

There Isa los a VIC writeup on this stock a while back (2017.). Biggest risk is macro and currency, imo.

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I wrote some WFC 48-strike May 17 puts.

 

Boilermaker, why you don’t short longer term put, say 1 year? The put premium will be taxed at long term capital gain and there is a higher chance it will expire worthless.

The premium is higher if the date is very short? Also, if you are doing this in an IRA or 401K account, then the tax is not so much of a consideration?

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I wrote some WFC 48-strike May 17 puts.

 

Boilermaker, why you don’t short longer term put, say 1 year? The put premium will be taxed at long term capital gain and there is a higher chance it will expire worthless.

The premium is higher if the date is very short? Also, if you are doing this in an IRA or 401K account, then the tax is not so much of a consideration?

 

I use Merrill edge which doesn’t allow naked put writing in IRAs. Is this allowed with any other broker ?

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Yes, several brokers allow this in an IRA, but the puts are required to be “cash covered” or whatever you call it - so not really “naked” like a naked call sale would be. In reality it is basically identical to a limit buy order on the underlying- not too exotic for a retirement account

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I wrote some WFC 48-strike May 17 puts.

 

Boilermaker, why you don’t short longer term put, say 1 year? The put premium will be taxed at long term capital gain and there is a higher chance it will expire worthless.

 

Short options are never LTCG regardless of the duration if they expire worthless.  Nor short anything for that matter, as your purchase date is always considered the same as the sale date.

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I wrote some WFC 48-strike May 17 puts.

 

Boilermaker, why you don’t short longer term put, say 1 year? The put premium will be taxed at long term capital gain and there is a higher chance it will expire worthless.

The premium is higher if the date is very short? Also, if you are doing this in an IRA or 401K account, then the tax is not so much of a consideration?

 

Exactly, there is a rapid decay of the time premiums with a shorter term put. So typically my time to expiration is between 1-day and 2-months.

 

Edit: But 90% of the time when I write a put the expiration is less than a month away.

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Yes, several brokers allow this in an IRA, but the puts are required to be “cash covered” or whatever you call it - so not really “naked” like a naked call sale would be. In reality it is basically identical to a limit buy order on the underlying- not too exotic for a retirement account

 

My IRA is with Schwab and they allow writing cash-covered puts. It is exactly the same as writing a covered call.

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