Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 07-19-2008, 09:46 PM   #101
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by samclem View Post
RockOn--For the record, the part I quoted was in your post. You've subsequently edited out your stated request for a %5 guaranteed return (after provided a place where you could get it. What's the new request going to be--belly dancers on your birthday?
Sorry about that, I set my goal a little too low. No not belly dancers just 5% for as long as I want it with no reinvestment risk (risk rates will be lower at the time of the rollover) can you do that too.
__________________

__________________
RockOn is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-19-2008, 09:53 PM   #102
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,296
Quote:
Originally Posted by RockOn View Post
Ok 5% isn't enough without any inflation protection or any other upside. Sorry I need 6.5%, can you do that with a level of safety?

I want the rate guaranteed for as long as I want it also, CD's have reinvestment risk.
RockOn, you keep missing the point about a free market. If the gov't is offering (or insuring) a 'risk free' (say) 5%, then why would any capitalist offer to pay a significantly higher rate, unless it also included higher risk (which it does, almost be definition).

If it existed, it would be bought up faster than you could move on it, and it would exist no more. This seems to be how markets work.

-ERD50

PS - did someone say 'bellydancers'?
__________________

__________________
ERD50 is online now   Reply With Quote
Old 07-19-2008, 09:54 PM   #103
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by ERD50 View Post
There is a general misunderstanding of 'naked puts'. Technically, yes I sell them 'naked', but I always have the cash to buy the stock at the strike price. I think it is more descriptive to call them 'cash covered' puts. This is in an IRA, and it is the only way you can do it in an IRA. Funny thing is, some institutions won't let you. If anyone should understand that a cash covered put is no more risky than a covered call, it *should* be a financial institution.

There is (slightly) less 'black swan' risk than holding the stocks. I generally sell the puts at a strike below the current stock price, and get a premium to boot. So my potential loss is a few % less than just holding the stock. But it ain't your grandma's money market.

I won't say that options are 'over-priced', they are priced at what the market will bear. Yes, there is a premium to pay to buy an option. But if it was 'over-priced', more people would jump in and sell them, and that would drive the price down... supply/demand.

In theory, you should be able to make good money selling options. Just like a casino makes good money selling the option to get rich. In practice, I think you need to be diversified across maybe a hundred underlyings , and I can only afford to be diversified across a dozen. So, I still get hit with the downside risk, and maybe not enough diversification to balance that out with the premiums.

But I try. 'Testosterone trading', I think unclemick calls it.

-ERD50
I didn't know that was allowed in an IRA, do you mind saying who allows it. I think I could make some scratch doing that. The market action recently would be a tough one to handle though. I think they are overpriced because the reward doesn't equal the risk on the long side IMO but there are a lot of variables at play. Time decay is on your side.
__________________
RockOn is offline   Reply With Quote
Old 07-19-2008, 09:59 PM   #104
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by ERD50 View Post
RockOn, you keep missing the point about a free market. If the gov't is offering (or insuring) a 'risk free' (say) 5%, then why would any capitalist offer to pay a significantly higher rate, unless it also included higher risk (which it does, almost be definition).

If it existed, it would be bought up faster than you could move on it, and it would exist no more. This seems to be how markets work.

-ERD50
You are correct. I think I got a little offtrack talking about a guaranteed fixed rate, I really am more interested in reasonably priced limited risk equity/portfolio participation ideas.

On the capitalist, he might be willing to pay more because he is willing to take risk and invest it in stocks (or something else) and pocket the difference and make profit over the long run.
I have heard quite a few financial people talking about 8% to 10% returns over the long haul, if they are sure why wouldn't they spread the risk by creating a large long term pool and give me 6% and keep the rest? Is it because 2% to 4% (20 to 40%) a year isn't enough profit? If so, that greed may abate some day.
__________________
RockOn is offline   Reply With Quote
Old 07-19-2008, 10:16 PM   #105
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,409
25 years ago - the SO for my 40th birthday party - got me the Bellydancer instead of 'The Singing Telegram.'

Habiba, Shiek of the week T-shirt, and a fake belly button ruby.

All of which goes to prove - you could have fun in New Orleans even on week nights!

With something as ho hum as pssst Wellesley you get dividends and interest which to paraphrase Yogi are almost as good as real money.

Yogi real money - not inflation or world currency adjusted - but .

heh heh heh - over the years either the T shirt shrunk or I put on weight. .
__________________
unclemick is offline   Reply With Quote
Old 07-19-2008, 10:20 PM   #106
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by unclemick View Post
25 years ago - the SO for my 40th birthday party - got me the Bellydancer instead of 'The Singing Telegram.'

Habiba, Shiek of the week T-shirt, and a fake belly button ruby.

All of which goes to prove - you could have fun in New Orleans even on week nights!

With something as ho hum as pssst Wellesley you get dividends and interest which to paraphrase Yogi are almost as good as real money.

Yogi real money - not inflation or world currency adjusted - but .

heh heh heh - over the years either the T shirt shrunk or I put on weight. .
That's it I'm buying some pussy Wellesley on Monday.
__________________
RockOn is offline   Reply With Quote
Old 07-19-2008, 10:21 PM   #107
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,296
Quote:
Originally Posted by RockOn View Post
I didn't know that was allowed in an IRA, do you mind saying who allows it. I think I could make some scratch doing that. The market action recently would be a tough one to handle though. I think they are overpriced because the reward doesn't equal the risk on the long side IMO but there are a lot of variables at play. Time decay is on your side.
E-Trade for one.

But, do you not see the contradiction in your own words?

Do you want to limit your risk, or do you want to 'make some scratch' selling risk?

As I posted earlier, if you try to do both, all you will do is pay commissions and spread.


Stick to bellydancers

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 07-19-2008, 10:37 PM   #108
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
ERD50, it is not a contradiction. The naked selling of options is an idea I have always had but never fully pursued. I thought if I found a way to do it in an IRA (my money is almost all tied up in retirement accounts) I'd give it a shot. I know most brokers don't want to hear about naked options. Collecting time decay is pretty inviting, it significantly lowers the risk of the short postion, be it put or calls. It is an interesting income generating idea. Just watch out for the Black Swan.

Of all the option ideas, I like that one the best. The margin is large though, making it marginally profitable even if successful. If it works, I'll get myself a dance or two.
__________________
RockOn is offline   Reply With Quote
Old 07-19-2008, 10:44 PM   #109
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,296
Selling a put is not a short position. You are accepting the obligation to go long on the stock if it drops below the strike price.

Sometimes the premiums you receive seem too good to be true. Sometimes they are.

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 07-19-2008, 10:47 PM   #110
Dryer sheet wannabe
 
Join Date: May 2008
Posts: 20
Quote:
Originally Posted by guest View Post
Just checked and it was October 2002 when I rejoined the land of big gains and possible loses and I "stayed the course" until my jump out at the end of last year.
Guest, would you let us know when you decide to get back in the market? You seem to be pretty good at it.
__________________
cloudeleven is offline   Reply With Quote
Old 07-19-2008, 10:48 PM   #111
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by ERD50 View Post
Selling a put is not a short position. You are accepting the obligation to go long on the stock if it drops below the strike price.

Sometimes the premiums you receive seem too good to be true. Sometimes they are.

-ERD50
I understand, I meant short the put. Selling fairly deep out of the money options with little time remaining is pretty safe, again except when the swan shows.

How long have you been doing it? Have you done ok? Are you doing it for income or as a stock play?
__________________
RockOn is offline   Reply With Quote
Old 07-19-2008, 10:53 PM   #112
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by cloudeleven View Post
Guest, would you let us know when you decide to get back in the market? You seem to be pretty good at it.
ditto
__________________
RockOn is offline   Reply With Quote
Old 07-19-2008, 10:57 PM   #113
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,387
Quote:
Originally Posted by ERD50 View Post
For example, you can buy Puts to limit risk. Except for special circumstances (holding for long term cap gains vs short term, protecting an employee stock option position, or just wanting to hold during a volatile period that you *think* is over reaction), I think that just owning less equities is a better way to hedge risk than buying puts on those equities. No one charges a premium for that.
I have bought puts. Invariably I get tired of losing money month after month, and neglect to continue the put buying program ino the very month that the damn market crashes. I think I give up on this "strategy".

Quote:
Full disclosure: I tend to sell puts for the premium - I am a seller of risk.

Fuller disclosure: It's only working out so-so .
Erd50 might have been selling puts to me. As luck would have it, neither one of us did very well with it.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 07-19-2008, 11:03 PM   #114
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by haha View Post
I have bought puts. Invariably I get tired of losing money month after month, and neglect to continue the put buying program ino the very month that the damn market crashes. I think I give up on this "strategy".

Erd50 might have been selling puts to me. As luck would have it, neither one of us did very well with it.

Ha
If you get tired of buying puts and losing money, what about trying to sell them? You could be making money month after month . I think that selling them is a much easier way to make money since time decay is on your side and you win in a sideways or up market (2 out of 3) but it has the risk of a serious loss so you have to be very careful. If something happens overnight, you could get trampled.
__________________
RockOn is offline   Reply With Quote
Old 07-19-2008, 11:09 PM   #115
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,296
Quote:
Originally Posted by RockOn View Post
Selling fairly deep out of the money options with little time remaining is pretty safe, again except when the swan shows.
If it is 'pretty safe' there won't be a very exciting premium, they go hand-in-hand in my experience, and from my very basic knowledge of supply/demand and risk/reward, I would expect nothing different.
Quote:
How long have you been doing it? Have you done ok? Are you doing it for income or as a stock play?
3-4 years. Consistently did a *bit* better than the market with lower volatility for about 18 months. Then kinda sideways, then the market volatility (and premiums dropped) and I did a bit worse than the market, then volatility picked up, but I seem to get slammed from time to time.

I try to construct it to do a bit better than the market, with a bit of downside protection to reduce volatility. In theory, the premium that people are willing to pay to either reduce risk, or to gamble on gains should make this a profitable endeavor. But, as Yogi Berra said:

In theory there is no difference between theory and practice. In practice there is.


-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 07-19-2008, 11:13 PM   #116
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,616
An observation that will probably come as no surprise to those here: Trading options (selling or buying either puts or calls) is a zero sum game. By definition, for every person that makes a dollar, someone loses a dollar. For every person on one end of a trade wo thinks he knows what will happen, there's someone else on the other end who is sure he knows. Add in substantial transaction costs and it's clear who the long-term winner always is.

Owning actual stocks (or MFs/ETFs, etc) is different--it is possible for everyone to make money.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 07-19-2008, 11:24 PM   #117
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by samclem View Post
An observation that will probably come as no surprise to those here: Trading options (selling or buying either puts or calls) is a zero sum game. By definition, for every person that makes a dollar, someone loses a dollar. For every person on one end of a trade wo thinks he knows what will happen, there's someone else on the other end who is sure he knows. Add in substantial transaction costs and it's clear who the long-term winner always is.

Owning actual stocks (or MFs/ETFs, etc) is different--it is possible for everyone to make money.
I'll have to think about your last statement. I suppose that is true as long as you do not trade but didn't someone sell you that stock? Didn't he lose if it goes up? I always thought of trading options as essentially the same as tading stock. You have a buyer and a seller, a bid and an ask, two people who think they are right, and a commission.
__________________
RockOn is offline   Reply With Quote
Old 07-19-2008, 11:24 PM   #118
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,387
Quote:
Originally Posted by RockOn View Post
If you get tired of buying puts and losing money, what about trying to sell them? You could be making money month after month . I think that selling them is a much easier way to make money since time decay is on your side and you win in a sideways or up market (2 out of 3) but it has the risk of a serious loss so you have to be very careful. If something happens overnight, you could get trampled.
Hey. I just might hire you to be my investment advisor!
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 07-19-2008, 11:26 PM   #119
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by haha View Post
Hey. I just miught hire you to be my investment advisor!
You might not like all the money I'd have of yours in MM funds at 2% right now.
__________________
RockOn is offline   Reply With Quote
Old 07-19-2008, 11:26 PM   #120
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,616
Quote:
Originally Posted by RockOn View Post
Didn't he lose if it goes up?
No
__________________

__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Market Timing??? rpow53 FIRE and Money 43 06-22-2007 10:05 AM
timing markets NYCGuy FIRE and Money 20 12-17-2005 09:39 AM
Timing GIM mikew FIRE and Money 5 11-19-2005 08:32 PM

 

 
All times are GMT -6. The time now is 07:50 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.