Zaxon
The voice of reason
- Joined
- 5 August 2011
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Very informative. Thanks.
Very informative. Thanks.over the years i have made better overall returns from short option trades vs long option trades. it's basically lots of small winners vs a few large winners that get more or less neutralised by a lot of losers.
on the ASX, pretty much has to be the top 20 large caps, and i find i don't trade much outside the top 10.
$1 per underlying, options are generally over 100 units of the underlying per contract. if you sell 20 contracts, you take in $1,994 after IB commission ($6) and worst case you get to buy 2,000 shares at an
I only bought options once years ago, in Franked Income Fund, I did very well but with a young family and kids life got busy, so I never got around to buying any more.over the years i have made better overall returns from short option trades vs long option trades. it's basically lots of small winners vs a few large winners that get more or less neutralised by a lot of losers. a big part of that is, as you mention, long options need good timing, so you need to be able to watch the market if not continuously, then at least fairly regularly. i've found that difficult to do due to work getting in the way, so i seldom make long gamma bets now. might try dabbling in them again in retirement though, when i will be able to watch the market more, and see if i can do any better.
on the ASX, pretty much has to be the top 20 large caps, and i find i don't trade much outside the top 10.
for trading options regularly, you must use IB or similar (hence my mention of the loss of SIPC), not a ripoff CHESS broker, otherwise you'll be eaten up by commissions. from Value Collector's example, that's $1 per underlying, options are generally over 100 units of the underlying per contract. if you sell 20 contracts, you take in $1,994 after IB commission ($6) and worst case you get to buy 2,000 shares at an effective entry cost of $69. i like to fully collateralise, even though most brokers don't require that (even though IB no longer offers margin, they still calculate your collateral under the old margining rules, just can't let your cash balance drop below $0), as i find it makes it easier to manage - i can opt to simply take the assignment without doing anything if it makes sense to do so. so i would then set aside $140k to collateralise such a trade.
I hear about a lot of people who "feel lost" once they retire. I think having an active interest in making money through investing/trading once you retire can be very power. You've got the time. There's excellent communities to tap into. And it can become your new focus that gives you purpose.
Sounds very similar to me. My "job" is also as a full time investor. In one sense I'm retired, because I don't have to go to work. In another sense, I'm not because we don't draw down any money from the investments at this time.I haven't retired, I just changed jobs and now manage our investments full time.
OK. That makes sense.
I think that's a smart use of options.
Do you find that if you stray into mid or small caps, that options aren't available - they're a large cap game only, at least on the ASX? And is there much liquidity: if you write an option, is there a high chance there will be a buyer for it?
You gave the example of earning $1 on a $70 share. Wouldn't your brokerage for selling the put, just eat up the premium you received for it? For instance, my broker charges $33 as a minimum fee for options.
Value Collector beat me to it, but yes that's how i primarily trade options - as a seller, not a buyer. that's why i need a 20-25% allocation to short term trading - have to stump up collateral for short option positions. would probably only need 5% or less if i was doing long options only.
over the years i have made better overall returns from short option trades vs long option trades. it's basically lots of small winners vs a few large winners that get more or less neutralised by a lot of losers. a big part of that is, as you mention, long options need good timing, so you need to be able to watch the market if not continuously, then at least fairly regularly. i've found that difficult to do due to work getting in the way, so i seldom make long gamma bets now. might try dabbling in them again in retirement though, when i will be able to watch the market more, and see if i can do any better.
on the ASX, pretty much has to be the top 20 large caps, and i find i don't trade much outside the top 10.
for trading options regularly, you must use IB or similar (hence my mention of the loss of SIPC), not a ripoff CHESS broker, otherwise you'll be eaten up by commissions. from Value Collector's example, that's $1 per underlying, options are generally over 100 units of the underlying per contract. if you sell 20 contracts, you take in $1,994 after IB commission ($6) and worst case you get to buy 2,000 shares at an effective entry cost of $69. i like to fully collateralise, even though most brokers don't require that (even though IB no longer offers margin, they still calculate your collateral under the old margining rules, just can't let your cash balance drop below $0), as i find it makes it easier to manage - i can opt to simply take the assignment without doing anything if it makes sense to do so. so i would then set aside $140k to collateralise such a trade.
I'm familiar with infrastructure: roads, bridges, ports; I'm familiar with property. But what do you class as property infrastructure?Property Infrastructure - 20%
You're possibly the respondent with the most diversification so far, so congrats.Aus Shares - 35%
Rest of World (mainly US) -30%
Property Infrastructure - 20%
Cash/Bonds/Fixed Interest - 15%
What's your drawdown. Are you doing the 4% SWR, or something else?My plan is a form of bucket strategy with shares and property/infrastructure providing the drawdown for retirement.
I think that's the first discussion we've had about rebalancing so far too.If/when we have a recession/ large pull back in the market, plan is to swap the drawdown to Cash/Bonds/Fixed Interest during this period of time till shares and infrastructure recover. I plan to re-balance typically every 12 months as fits in the best.
That makes sense. How do you structure your bonds, fixed interest, and cash? For the bonds, I guess you're holding ETFs?I will most likely spend some of the cash component on large purchases - house refurb, holidays, etc as part of the plan. Seems to be working OK at the moment.
Interesting. Instinctively I don't see Australia as much of as risk, but that's based on how well it's performed in the past - which is very well - as opposed to some insight into it's future. I definitely agree about mining being very cyclical. But on the other hand, it did help us through soft spots when other economies went into recession, and we sailed on through. The other sector the ASX is massively overweight in, is our banks. That's bad post royal commission, but historically, they've done really well.
Although Australia is considered very underrepresented in tech, we are quite good at bio tech (CSL, Cochlear, etc), and fin tech (APT, ISX, Z1P, etc). So we're getting there. Not so much straight tech, but I'm waiting on the launch of DingoBook to take over the world.
You and VC have re kindled my interest, must read up on them again.
Cheers
I only bought options once years ago, in Franked Income Fund, I did very well but with a young family and kids life got busy, so I never got around to buying any more.
You and VC have re kindled my interest, must read up on them again.
Cheers
That is kind of what I meant, when I said I had some a long time ago and I must read up on them again.I only sell options (mainly puts, sometimes calls), but I never bought any options.
The Permanent Portfolio certainly has a logic: don't try to time the market. Keep diversified across asset classes. I didn't read anything about changing envelopes in that link. Is that your own adaption?
On the other hand, if you're holding gold or any commodity as a part of "balanced" portfolio on a permanent basis, I'm not sure of what mechanism would make long term, non-timed holding of commodities worthwhile.
It's worth remembering that the worst stock performance of the 1970s came not when inflation peaked but when it first spiked rapidly. From 1972 to 1973, inflation doubled to more than 6 percent. By 1974 it was 11 percent. In those two years, the S&P 500 declined by a combined 40 percent. Inflation was higher in 1979 and 1980, topping out at 13.5 percent, by which time the S&P 500 had long returned to positive performance, though on an inflation-adjusted base. It was a lost decade for stocks.
That is kind of what I meant, when I said I had some a long time ago and I must read up on them again.
To me personally that is the critical thing, there is no point in over reaching your comfort zone, retirement is about enjoying holidays, time with family, doing your hobbies etc it is not about worrying yourself sick over investment decisions IMO.So I have to be comfortable staying in the markets through good and bad times, with the % allocations that I will decide on.
To me personally that is the critical thing, there is no point in over reaching your comfort zone, retirement is about enjoying holidays, time with family, doing your hobbies etc it is not about worrying yourself sick over investment decisions IMO.
I wont be buying any more, I have plenty of exposure to them, but the thing with the Banks is they are the most regulated in the World, they have to make money and they will be there in twenty years. IMOHey mate, I know I am not in a position to give any advice, but if you already have enough exposure to the banks via an asx market ETF, I think you have to be careful to not go overweight into that sector further and make sure there is good diversification in the portfolio IMHO.
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