Who's cashed up waiting for bottom to fall out in 2018?

[Darc Knight]

Forgive me if I'm asking for your secrets but how many people here are lurking all cashed up waiting to swoop in when this market crashes like some are expecting it to?
I thought about it a year or so ago, so lucky I didn't "cash up* back then.

 

[systematic]

Forgive me if I'm asking for your secrets but how many people here are lurking all cashed up waiting to swoop in when this market crashes like some are expecting it to?
I thought about it a year or so ago, so lucky I didn't "cash up* back then.

A lot of people try to go in on the dips and lighten up later on. I've got a mate that does...and as far as I know, it's paid off for him (but you never know for sure).

Personally, I'm 100% invested, 100% of the time...so it's not something I look to do.

 

[Joules MM1]

A lot of people try to go in on the dips and lighten up later on. I've got a mate that does...and as far as I know, it's paid off for him (but you never know for sure).

Personally, I'm 100% invested, 100% of the time...so it's not something I look to do.

this http://www.rcsaustralia.com.au/wp-content/uploads/share_price_movements.pdf
says 'not so dumb' .....but i guess it also depends on how long youre alive

 

[So_Cynical]

Im 96% in and maybe 4% cash, was like 90/10 a few months back but i couldn't resist any more.

 

[Value Collector]

I am pretty much all in, the cash holding I have at the moment are for other purposes eg. living expenses and savings for a new car I have on order.

However, if there was a big decline, I would be seeking to take advantage of it by drawing on some debt, writing put options, and using dividends and put options premiums to by some more stock.

 

[kid hustlr]

I am pretty much all in, the cash holding I have at the moment are for other purposes eg. living expenses and savings for a new car I have on order.

However, if there was a big decline, I would be seeking to take advantage of it by drawing on some debt, writing put options, and using dividends and put options premiums to by some more stock.

Hi,

if you are writing put options and they get exercised, you will still be required to stump up the cash to buy the stock will you not?

 

[Cam019]

Hi,

if you are writing put options and they get exercised, you will still be required to stump up the cash to buy the stock will you not?

Depends on whether they are naked or covered puts being written. If they are naked and OTM, and price of the underlying shares plummet below the exercise price, it could turn bad, fast, and you would need to provide the cash to buy the shares should the options get exercised. On the other hand, if they are covered puts, you would be short the underlying shares hoping that the price moves down to, but not exceed the exercise price, to collect the premium and the capital gain on your short position. Once the share price is lower than the strike price, they are ITM and the money made on the short position is counteracted by the money lost on the option. Therefore, you could use the short position to finance the terms of the option should the need arise.

 

[Value Collector]

Hi,

if you are writing put options and they get exercised, you will still be required to stump up the cash to buy the stock will you not?

Yeah, But thats the point, when the market has crashed its a good idea to buy more stock.

Lets say you don't have any spare funds to invest at the moment, But you have an existing portfolio that pays dividends every 6 months, and you could draw on a margin loan if you really wanted to invest (but you want cheaper prices before you do that).

CBA is $73.00 today, but you think thats a little expensive and not worth drawing from your margin loan.

So you can just wait for the months to tick by and wait for some dividend checks to come in and hope CBA price falls

or, you can be a bit more active, and sell a put in anticipation of your future dividends coming in.

what I might do is this.

Sell a CBA put option with a strike price of $62 for June 2019 for $1.96 today, earning me a premium of $1,960 in my pocket today (which can be put off the home loan earning around 5%)

then in 12 months if the CBA share is above $62 I keep the premium

but if the share price is below $62, I take the stock, It costs me $62,000 for the stock but I have the $1960 options premium + the accumulated dividends over the 12 months and if needed I could draw on my margin loan.

At $62, CBA would have a grossed up dividend of 9.9% So it would be generating positive cashflow to pay back any margin loan I took out to pay for it.

It's not a strategy I would recommend for everybody, but long dated puts can be a good way to get paid for basically having a deep out of the money buy order in the market, when you know you will be wanting to buy shares with future dividends or margin loans in the future if prices were to drop.

and it the price doesn't fall, its a bit like being paid the dividend without having to buy the stock.

 

[kid hustlr]

All good VC.

If you have access to a margin loan and a clear plan in place I like it.

 

[fiftyeight]

$1960 options premium + the accumulated dividends over the 12 months

You collect the CBA divs over that 12 months for the puts you sold?

 

[Value Collector]

You collect the CBA divs over that 12 months for the puts you sold?

No I am referring to the dividends from the existing portfolio,

I said this earlier

Lets say you don't have any spare funds to invest at the moment, But you have an existing portfolio that pays dividends every 6 months, and you could draw on a margin loan if you really wanted to invest (but you want cheaper prices before you do that).

CBA is $73.00 today, but you think thats a little expensive and not worth drawing from your margin loan.

So you can just wait for the months to tick by and wait for some dividend checks to come in and hope CBA price falls

or, you can be a bit more active, and sell a put in anticipation of your future dividends coming in.

I was trying to say, rather than just wait idle for your future dividends to come before you invest, you can sell a long dated puts in anticipation of the future dividends coming in.

Meaning that by the time the put would be exercised, you can buy the stock with the extra dividends your existing portfolio has generated in the mean time, along with the options premiums generated and if need be a draw down on a margin long etc.

So by the time your dividends do arrive, you have not just the dividends to invest but any options premiums you collected over that time.

 

[fiftyeight]

No I am referring to the dividends from the existing portfolio

Ok kool, this is what I thought. Just wanted to make sure I was not missing something.

 

[mcgrath111]

I'm pretty much all in at the moment. Although savings that accumulate until the end of the year will likely remaim savings.
That being said I'm bearish short term. But bulls ahoy in the long run, so no selling for me.

 

[boofhead]

I'm holding a bit in cash. It is May and some may know the old saying about May when it comes to the market. Also Things have been going reasonably okay for almost a decade. Back in early 2008 I thought it was as the bottom as markets had dropped a bit. If only I had waited until 2009 I would have had much better prices. Didn't have any money to take advantage.

 

[Knobby22]

I'm about 20% in cash.

 

[noirua]

Somehow all the negativity forgets markets often rise on a wall of worry as well as money. Many small miners, micro-caps, have not performed as well as their peers. There are of course a few we can see as shining lights but most may start to rise quickly when it is most unexpected.
Oil prices are not far short of $80 a barrel on the Iran factor. Many commodities are well off their peaks at the moment but, me thinks, the subject of profit taking and China concerns on where America is heading in a 'fits and starts Presidential policy arena'.

 

[PZ99]

I have close to zero cash in my portfolio but around 70% cash in my super.

A bit of an each-way bet but the super is more vulnerable and harder to control.

 

[Darc Knight]

You guys are pretty smart right? You'll tell me to get out before this supposed crash hits, right?

 

[galumay]

You guys are pretty smart right? You'll tell me to get out before this supposed crash hits, right?

You are right they are very smart, if they keep predicting it eventually they will be right. Due to the speed of transmission limits, you may get the message a little after the supposed crash hits.

 

[luutzu]

You guys are pretty smart right? You'll tell me to get out before this supposed crash hits, right?

Some smart guy quoted in this series of interviews put the crash cycle at 15 years (last interview I think). So in 2023.

But as a sage advise from, I think, the former CEO of Lehman Brothers after the GFC... we gotta dance until the music stop.

===========
Very informative discussion on the fictionalisation of... everything... and how all these high finances destroy the underlining economy and its infrastructure rather than being the grease that smooth the transactions.