FMG - Fortescue Ltd

[basilio]

Value Collector
Thanks for clarifying.
You know .... even having invested in shares for 30 years, being a Math and excel geek, and having 2 types of degrees in finance, this options stuff is still tricky. You have to be a bit Schizophrenic ....... there are credits and debits, calls and puts. You can be on one side of the trade, or the other. You have to look at it from the writers side and the sellers side. What you are 'selling' and how that exposes oneself, and buying if you want to. And then ttheres time decay.......... **** man this takes a twisted brain to work it out. I guess I better put the bottle of red wine away .....
Gunnerguy.
(If it was easy everybody would do it. 5 weeks trading options ....... 5 cases of beer 'realised' so far)

Indeed. Have to say the game of puts and calls and options and derivatives and the hundred other ways to play the market look like variations on a roulette wheel or perhaps card counting in baccarat to me. I'm sure some smart money makes decent coin out of it all but I still suspect the smart money is largely with the bank and the promoters.

It would be really interesting as a study to see what the outcomes are for ASF posters. I would believe that this forum would have a higher range of skilled traders than the average punters and there is excellent sharing of knowledge. But in the end wouldn't it be useful to see how profitable these plays are ?

Perhaps a university could be persuaded to fund a study for it's economics/finance faculty ?

 

[Value Collector]

Indeed. Have to say the game of puts and calls and options and derivatives and the hundred other ways to play the market look like variations on a roulette wheel or perhaps card counting in baccarat to me. I'm sure some smart money makes decent coin out of it all but I still suspect the smart money is largely with the bank and the promoters.

It would be really interesting as a study to see what the outcomes are for ASF posters. I would believe that this forum would have a higher range of skilled traders than the average punters and there is excellent sharing of knowledge. But in the end wouldn't it be useful to see how profitable these plays are ?

Perhaps a university could be persuaded to fund a study for it's economics/finance faculty ?

I keep it pretty simple, I sell puts against shares I think are under valued that I would like to buy, and sometimes I sell calls on stuff I own that is over priced that I wouldn’t mind selling.

I have been doing that since 2013, so far my worst year was a profit of about $20k, and last year was my best year a profit of over $800K (that was enlarged due to covid crash towards the end of the 2020 finiancial year, I had to roll a bunch of positions out to later dates, which meant the eventual profits were pushed into 2021 year, which made 2021 look huge but reduced profit for 2020 to $70k).

the fantastic performance of my options portfolio has been mainly due to selling puts against FMG over the last several years, I have been able to regularly sell out of the money puts and collecting premiums that would be equal to about 20% of the face value on an annualised basis.

I then used these premiums I collected to buy shares of FMG, which then earned dividends which allowed me to buy more shares again.

the increasing size of my share portfolio, also then acted as increased collateral, which I was able to use to do more options, and take out a margin loan to cover any positions that got exercised.

I have said before I don’t go in for all the complicated options strategies, because this very simple approach has worked wonders for me.

but at the end of the day it only has worked because my underlying valuation of FMG (and other shares) has proved correct, you need to get the right companies at the right prices to make this system work, if you can’t value businesses, and keep within strict limits, you will blow up.

 

[basilio]

I keep it pretty simple, I sell puts against shares I think are under valued that I would like to buy, and sometimes I sell calls on stuff I own that is over priced that I wouldn’t mind selling.

I have been doing that since 2013, so far my worst year was a profit of about $20k, and last year was my best year a profit of over $800K (that was enlarged due to covid crash towards the end of the 2020 finiancial year, I had to roll a bunch of positions out to later dates, which meant the eventual profits were pushed into 2021 year, which made 2021 look huge but reduced profit for 2020 to $70k).

Great..Sounds clear and simple - and obviously profitable when you make good choices.
Now I know how you afford your fleet of Teslas (Totally ignoring FMG..)

 

[Gunnerguy]

I keep it pretty simple, I sell puts against shares I think are under valued that I would like to buy, and sometimes I sell calls on stuff I own that is over priced that I wouldn’t mind selling.

I have been doing that since 2013, so far my worst year was a profit of about $20k, and last year was my best year a profit of over $800K (that was enlarged due to covid crash towards the end of the 2020 finiancial year, I had to roll a bunch of positions out to later dates, which meant the eventual profits were pushed into 2021 year, which made 2021 look huge but reduced profit for 2020 to $70k).

the fantastic performance of my options portfolio has been mainly due to selling puts against FMG over the last several years, I have been able to regularly sell out of the money puts and collecting premiums that would be equal to about 20% of the face value on an annualised basis.

I then used these premiums I collected to buy shares of FMG, which then earned dividends which allowed me to buy more shares again.

the increasing size of my share portfolio, also then acted as increased collateral, which I was able to use to do more options, and take out a margin loan to cover any positions that got exercised.

I have said before I don’t go in for all the complicated options strategies, because this very simple approach has worked wonders for me.

but at the end of the day it only has worked because my underlying valuation of FMG (and other shares) has proved correct, you need to get the right companies at the right prices to make this system work, if you can’t value businesses, and keep within strict limits, you will blow up.

Great Stuff @Value Collector
Thanks for letting us know.
For those interested I started with options about 2 months ago through many hours of reading and learning. Ultimately I wanted to generate some income from the shares I already own. Simply getting growth and dividends is nice but I wanted to try to get some additional income. I 'resurrected' another Forum on options in ASF (Options trading in OZ) and have been putting in some of my ideas and learnings of my journey. I plan to update that forum 'regularly', maybe weekly with my possible trade ideas and some of the progress on no. of trades, win/loss etc.
Gunnerguy.

 

[Fatnana]

Sometimes the market can be so sadistic

I bought this stock in early August for $3.06 then sold a week odd ago for $3.00, as it appeared to be dropping off.

Within a day or two of selling it started heading up again. I got another buy signal on it a couple of days ago, but by the time I could check it out yesterday, it was already up about 6%, so I didn't buy. Today it's up another 9.4%, just closed at $3.85.

I'm sure there's some little man sitting there in the stock exchange watching what I'm doing on my computer... :

Cheers,
GP

I totally know how you feel. I had 360life, I sold at $4.05 after it had gone up and down around this price or less fit a while.
it’s now got a target price of over $7!!!

 

[over9k]

What type of finance degrees do you have gunner? You should have been doing this type of stuff in them?

You can also just find online calculators for things like black-scholes and just pump the numbers into them and they'll spit you out an answer to save you writing the excel codes etc yourself.

 

[Gunnerguy]

What type of finance degrees do you have gunner? You should have been doing this type of stuff in them?

You can also just find online calculators for things like black-scholes and just pump the numbers into them and they'll spit you out an answer to save you writing the excel codes etc yourself.

@over9k
MBA in 2005, and Masters in Financial Planning completed in 2019.
Done plenty of finance stuff. Did options in my last Masters, but I found it tricky and wasn’t really interested in that part of the course. Now I am very interested and trying to eek something out if it.

Gunnerguy
(Timing is important, like completing a Masters in Financial Planning right when the Royal Commission is in full flow ??)

 

[Value Collector]

You can also just find online calculators for things like black-scholes and just pump the numbers into them and they'll spit you out an answer to save you writing the excel codes etc yourself.

In my opinion the black and scholes model is not a substitute for doing manual valuations, in fact I believe that the reason I have been able to do so well in options without ever using the black and scholes model is that my competitors relied so heavily on it.

The biggest flaw I see in the B and S model is that it makes a short cut by using Beta as a calculation for risk, which means that in situations where actual risk is low, but volatility is high, long term players can collect premiums that are far higher than they actual risk they are taking.

 

[over9k]

Inboxed.

 

[basilio]

but at the end of the day it only has worked because my underlying valuation of FMG (and other shares) has proved correct, you need to get the right companies at the right prices to make this system work, if you can’t value businesses, and keep within strict limits, you will blow up.

That is the point isn't it ? The various ways of maximising value from the share are reliant on the company doing as well as you believe they should.

I think that is the difference between research and investing vs punting on rising and falling share prices on stock where the actual company is not considered important.

 

[Value Collector]

I think that is the difference between research and investing vs punting on rising and falling share prices on stock where the actual company is not considered important.

This is a great video explaining that, what he says about low cost producers is very relevant to FMG, and what I was saying about high cost producers a few posts back.

At the end he also discusses the difference between risk and volatility and what options traders can beta.

as I said the try and short cut the calculation by using volatility instead of business risk, which saves them time, but also hands real long term investors a free kick.

 

[over9k]

Sure but macro conditions will still effect the individual stock basilio, hence why you might need some kind of hedge and/or insurance.

Simple example:

Markets are currently tanking because of fears about this delta coronavirus variant. But moderna's stock is screaming because of it - hence holding moderna & selling it/pumping your gains back into a market etf when you think you've reached flipping point is a solid swing play.


What the equivalent is for FMG I do not know. I can't think of anything that'd spike in response to a market/macro drop in demand for iron ore.

 

[basilio]

Sure but macro conditions will still effect the individual stock basilio, hence why you might need some kind of hedge and/or insurance.

Simple example:

Markets are currently tanking because of fears about this delta coronavirus variant. But moderna's stock is screaming because of it - hence holding moderna & selling it/pumping your gains back into a market etf when you think you've reached flipping point is a solid swing play.


What the equivalent is for FMG I do not know. I can't think of anything that'd spike in response to a market/macro drop in demand for iron ore.

I take your point over9k and it seems you have made it clearer than ever that identifying a stock opportunity like moderna even in a market slump is a way to go.

I'm not a market player of stocks. My reservations are about the turning of market investment vehicles like stock markets into virtual casinos where the biggest game in town is not identifying a fair share business opportunity but attempting to make money from just moving the price of stocks around.

Obviously no market is perfect and there are always bad actors. But what is the balance ?

 

[wayneL]

@striek
Thanks for you great comment. This is exactly the wonderful ASF community provides !!
I looked at buying the calls back and incurring a loss but they are very expensive compared to my credit ?, obviously.
I could just be happy and be assigned, incur the trading costs, but overall with my held shares I would be happy with the profit. I’m gonna just hold a little longer and see what happens.
Thanks
Gunnerguy

Don't forget the tax implications... Depending how long you have held the shares etc. Whether you want to keep them as a long-term hold etcetera

There are other ways to manage this position that may be more tax effective.

 

[Gunnerguy]

Don't forget the tax implications... Depending how long you have held the shares etc. Whether you want to keep them as a long-term hold etcetera

There are other ways to manage this position that may be more tax effective.

Thank @wayneL.
I am fully aware of the CGT timing, 12 months holding , etc and tax issues.
Thanks for reminding me to keep an eye on this though. I have a full tax management strategy set up between myself and Ms. Gunnerguy. I sell to take profit, pay low tax %, or ‘desired’ losses, and the Ms. GG just buys them back.
Makaging and using tax losses against winners is nice, and Ms. GG just buys them back.
I don’t really mind paying ‘minimal’ taxes, as it means I’m making a profit, however at the same time my investments are not controlled by my tax. Rather the ‘vehicle’ I use reduces my tax.
Gunnerguy.

 

[wayneL]

Thank @wayneL.
I am fully aware of the CGT timing, 12 months holding , etc and tax issues.
Thanks for reminding me to keep an eye on this though. I have a full tax management strategy set up between myself and Ms. Gunnerguy. I sell to take profit, pay low tax %, or ‘desired’ losses, and the Ms. GG just buys them back.
Makaging and using tax losses against winners is nice, and Ms. GG just buys them back.
I don’t really mind paying ‘minimal’ taxes, as it means I’m making a profit, however at the same time my investments are not controlled by my tax. Rather the ‘vehicle’ I use reduces my tax.
Gunnerguy.

Very good. It is a good point for others to consider also, so worth the discussion

 

[againsthegrain]

If your FMG holdings are valued less than $50,000 you could go to linkmarketservices.com.au follow prompts and have your SRN/HIN: Xxxxxxxxxxxx handy and add or update your TFN or ABN, Bank Details and make a DRP Election if you wish to.

Finally had time to do this, went with a full share repurchase plan, thank you for the link nice and simple

 

[basilio]

Thank @wayneL.
I am fully aware of the CGT timing, 12 months holding , etc and tax issues.
Thanks for reminding me to keep an eye on this though. I have a full tax management strategy set up between myself and Ms. Gunnerguy. I sell to take profit, pay low tax %, or ‘desired’ losses, and the Ms. GG just buys them back.
Makaging and using tax losses against winners is nice, and Ms. GG just buys them back.
I don’t really mind paying ‘minimal’ taxes, as it means I’m making a profit, however at the same time my investments are not controlled by my tax. Rather the ‘vehicle’ I use reduces my tax.
Gunnerguy.

That's interesting... and clever. So how does one set the price for a share sale to Ms Gunnerguy ? I guess you don't sell through brokers and pay commissions each way ? Do you just transfer shares based on the the most appropriate value for the shares on a particular day. I assume you would have to keep excellent personal records of such transactions.

 

[Value Collector]

That's interesting... and clever. So how does one set the price for a share sale to Ms Gunnerguy ? I guess you don't sell through brokers and pay commissions each way ? Do you just transfer shares based on the the most appropriate value for the shares on a particular day. I assume you would have to keep excellent personal records of such transactions.

I thought he meant he would sell on the market, and she would buy the same day if they had the opportunity to sell and receive a loss for tax purposes.

not would be illegal to repurchase them himself.

 

[Gunnerguy]

I thought he meant he would sell on the market, and she would buy the same day if they had the opportunity to sell and receive a loss for tax purposes.

not would be illegal to repurchase them himself.

@basilio
Correct. I sell on the market and Ms.GG buys on the market if ‘we’ want to continue holding.
Gunnerguy