How do you plan to park your money?

[powayseller]

I’m sorry I upset you, I didn’t mean to. I appreciate your reply.

Chris was saying that his bond futures can be volatile if they are maxed out irresponsibly. He was saying that it is not risky in the way he does it with a max 5% trade and a stop loss, but it could be risky and irresponsible without those measures. I didn’t interpret him to say your trades are risky.

Zeal Intelligence doesn’t recommend options, although they list the Zeal Speculator positions in the newsletter I get.

On page 8, column 2 they list “Stock Options Speculations Warning! VERY HIGH RISK…For Experienced Traders Only” This is where I found the COP calls.

Zeal considers the COP calls Very High Risk.

If there was a 50% chance of crashing in a plane, I wouldn’t be flying. Plane safety is higher than ever. USA Today had a front page story on Saturday, about the higher airplane safety. Today, you have one chance in 10 billion or something like that, of dying in a plane crash. It was a soothing story to read as I was getting ready to board a plane.

Probabilities describe the chance of an outcome. You have a 50% chance of a coin landing heads, because half the time it does land that way. You have a .00000001% chance of dying in a plane crash, because only 1 out of 10 billion people are killed flying. You have a 90% chance of your options expiring worthless because 900 out of every 1000 options expire worthless.

I don’t know if the 90% figure is lower for professional traders, higher for amateurs, or how you can improve the odds. Perhaps Zeal has a 70% chance of options expiring worthless, because of their superior research skills. It would be a fair question to ask them.

I don’t know anything about Steve Forbe’s investment track record, his knowledge of the oil market, or his YTD returns, so I can’t really go by his assessment of future oil prices. This is a topic I’d like to know more about though, and would appreciate information if you have it. What is Steve Forbes’ reason that oil prices will go down? To me, it seems that global demand keeps rising, and oil output is maxed out. They can’t increase production further, and Zeal’s July newsletter states that high oil prices are here to stay; the current prices are based on fundamentals, not speculation. They are recommending two US major oil producers as stock holdings for the conservative investor (that’s me). But I would like to know if there are any flaws in that logic. What leads you to believe oil prices will come down, and how will that affect the oil producer stocks?

If you feel good about it, and have satisfied yourself that you can live with the outcome of your decision, then that’s all that matters. It doesn’t matter what Chris or I say.

I think a debate such as this only serves to help each of us understand our investment ideas better, and make improvements in our strategies.

What I got out of this was that my initial consideration a few weeks back to buy options, is expired. It’s not for me after all. Perhaps for you, it’s confirmation that it is a viable investment.

I appreciate the exchange of ideas, and thank you for your correspondence.

[anxvariety]

I like the exchange of ideas too.. this will be my last post on this thread though(not trying to be dramatic), unless I see further mistruths that I feel I need to fight off, because I’m burnt out and I think the information has pretty much been exchanged. I’m not debating whether or not you should buy options, it doesn’t matter to me what you or anyone else does, I only want everyone to be successful. At this point I’m just tryign to defend what I believe to be truth, and it’s not a question about options risk, it’s a question of certain statements and assertations.

The 90% number has been repeated over and over… are we willing to take Chris’ word for it? Have you found a source that backs up his claim? 90% sounds like a very *sensational* number, and it’s round too! I didn’t take his statement as fact, but as hyperbole…

I also think some responses are under an assumption that one must hold options to expiration… just because an option expires in Nov doesn’t mean the purchaser has to hold it until then, option holder can sell it yesterday or tomorrow next week or any day the market is open.

The plane scenario was to show that even if Chris statement that 90% of options expire worthless is true, it’s not synonmous with 90% of PEOPLE holding options will have them expire worthless… possible outcome % does not take into account the ENDLESS number of scenarios… just as you described… (See http://airsafe.org/ I put in about 40 hours of near non-stop time into that site before I flew the first time!!! 🙂

“He was saying that it is not risky in the way he does it with a max 5% trade and a stop loss, but it could be risky and irresponsible without those measures. I didn’t interpret him to say your trades are risky.”

He warned me about my risky situation, prior to me providing any further information about the % of my cash to option investment ratio. What does telling me that options are risky accomplish? I mentioned volatility enough to bore a person in my first post… That’s partially where some of the confusion came from, most importantly thank you for taking the time to even adress my post Chris.

“It does not however, have volatility that extreme, unless it is maxed out irresponsibly.”

I don’t feel that volatility has anything to do with $ amount of a persons portfolio, I believe that it descries past or present how much up or down a stock can go. Given that I described the stocks, and provided %, what other information can be associated with the “maxed out irresponsibly” claim. I am not trying to prove Chris wrong or challenge him, I’ve already conceeded experience and knowledge, I am genuinely interested in what he was trying to communicate by that statement in response to my post, without him knowing what % of my capital was invested in options.

“You have a 90% chance of your options expiring worthless because 900 out of every 1000 options expire worthless.”

I can’t address that statement again, because it’s been repeated at least 4 times now, and I feel that it’s slightly deceptive(this word might be a little strong, but I’m limited on vocab) and not true. Should someone else provide multi-sourced evidence that it’s fact, I’ll accept and learn from it.

The good thing is, we’ve explored lots of different opinions.. and we can for what it’s worth, use hindsight to grade our decisions based on our objectives.

Thanks everyone who read my posts, for having the patience to navigate my atrocious grammar!! 🙂

I don’t have time to scan this for broken sentneces right now my gf wants to go watch fireworks and we’re about to miss them! Happy 4th everyone!!

[synchro]

This may get lost among the inevitabel degenration of conversation into tit-for-tat sniping between 2 or 3 posters, but nonetheless, to park money in a safe place, consider TreasuryDirect.gov — website run by your own Federal Government. You can buy a ladder of Treasury Bills w/ yields higher than 5%. That’s better than Treasury money market mutual funds, which typically have expenses ranging from 0.25% to 0.75%. Minimum investment in a Treasury Bill at TreasuryDirect.gov is $1,000, which is small.

If you’re more deep pocketed, Fidelity Brokerage and, starting 7/1/06, Charles Schwab will allow you to buy Treasury Bills at Auction for free (as in no commission). But the minimum denomination for Treasury Bill is $10,000, which is more than the min of TreasuryDirect. One advantage of going w/ Schwab is that they have 100% guarantee against security breach and unauthorized activities. TreasuryDirect.gov, astoundingly, does not offer that guarantee even though it is run by the Federal Government. So you do run a small risk if someone steal your TreasuryDirect.gov account id and password

If my opinion, if your purpose is to “park money in a safe place”, then there is no safer place than Treasury Bills. T-Bills are safer than your local bank’s FDIC-insured CDs. For one thing, if your local bank goes belly up, you may get your money back eventually, it’s still a hassle w/ heartburn. Besides, there’s a the $100K max insured amount per account w/ FDIC.

As an additional hedge against the US dollar going the way of soiled toilet paper, you may want to diversify w/ foreign exchange. And, what do you know, you can now buy FX via exchange traded funds. Check out currencyshares.com for more detail on these new ETFs. I am partial to the Canaadian loonie (FXC). But there are others such as Euros (FXE) and Swiss Francs (FXF), but my personal opinion is that the Euro is overvalued, and the Swiss Franc is losing its hard currency status. Stay away from the Pound Sterling (FXB), Australian dollar (FXA), and others.

Hope this helps.

[powayseller]

Why do you prefer Canadian currency, and why is the euro overvalued? What would happen to euro’s value as the oil trading moves is done more in euros?

Is Treasury bill yield as high as CD? USAA paid 5.71% in mid-June and is FDIC insured (you get that extra 1% for opening the account online).

[synchro]

You can sort of view the Canadian dollar as collateralized by its vast natural resources such as Gold, Uranium and Oil (nice things to have in a pinch). The socialist tendencies of the Canadian gov’t and people are also on the mend. Their federal gov’t’s finances is probably the best among the G7 now. The bottom line is that it is a politically and economically stable country w/ relatively sane fiscal and monetary policies. The wild card is Alberta and Quebec want to break free, but those possibilities are slight.

As far as the euro goes, the economonic and political situation in the euro zone does not justify the euro’s high price (in terms of USD). Sometime w/n the next 5 yrs, you will probably see some cracks in the European Union, starting, probably, w/ the basket case Italy in terms of currency crisis, or France, in terms of immigrant unrest,or Germany, in terms of a recession. Australian dollar and the British Pound have similar problems as the USD in terms of the twin deficits, so it’s not that much better than USD. The Swiss central bank has lost its Gold religion. In fact, they hired a bunch of MBAs and now fancy themselves as hedge fund managers, dabbling in corporates bonds, junk bonds, equities as reserve assets. Too kinky for my comfort.

As far as Asian currencies go, most of them are pegged to the USD, so not sure what you get for jumping into them. The only exception is the Singapore dollar. But inexplicably, CurrencyShares doesn’t offer the Singapore dollar in an ETF.

[synchro]

Sorry for the repoeat, not sure what happened!

[synchro]

Deleted.

[synchro]

Use this link for a convenient way to check interest rates:

http://www.bloomberg.com/markets/rates/index.html

AS far as USAA goes, I happen to be a member, and after you mentioned it, I did check, and you’re right: they do have CDs that are yielding more than Treasury bills. It comes down how comfortable you feel about USAA’s bank. I feel pretty comfortable. On the other hand, I would avoid Corus Bank’s CDs. It seems they are desperate raising funds via high-yielding CDs: Corus is very exposed to, not only the Housing Bubble bursting, but specifically the _CONDO_ housing bubble bursting. If you buy Corus’s CDs, you’re in a way investing indirectly in the condo lending game!

[Anonymous]

Chris Johnston

Just go to the CBOE, that is where the stats are available. Maybe it is 89 or 91%. Historically, this is where they have been. I really could care less, as I am an experienced enough trader to know the suckers game that buying options is. The stats are what they are, there is no hyperbole. If I am off by a few % points, it does not change the premise.

I am sorry to have created any controversy here. Next time I will just remain silent, unless someone asks me a question about something like this.

This really started as a joke on myself, and has gotten too carried away. My apologies. I wish you luck in your options trading.

[Lickitysplit]

If you’re looking for a CD and don’t qualify for USAA, SDCCU is running a 5-mo 5.50% CD special that appears to be pretty competitive. I don’t know what their risk exposure is in regards to SD RE though.

[powayseller]

USAA takes non-civilians too.

Chris, I for one value your input very much. Please don’t deprive this forum of the wisdom that only you possess. You are the only trader on this forum. You are the most experienced investor, as far as I can tell. We need your investing wisdom, your balanced view, your insights. I need it.

anxvariety, I think you are on solid ground following Zeal recommendations. They are well respected by many of us on this forum. I only disagreed with your statement that it is a low risk way to increase leverage, and wanted to point out that options trading has a high risk of losing money. They are a big money maker for the options writers. I am certain the COP call option will work out for you, and I really hope it does. I would guess that Zeal options recommendations have a lower risk of expiring worthless, because the Zeal research is so good.

One more thing about posting controversial ideas. I am getting ready to make a post about the book Bubble Man. Alan Greenspan encouraged the bubble because he wanted to be liked. Schwarzenegger did the same thing when he backed off his propositions to reform education, because the teachers unions were mad at him. Greenspan and Arnold were more interested in being liked than in doing the right thing. Let’s not make their mistake. Let’s do the right thing and tell people what we see. After all, that’s the purpose of this forum.

[anxvariety]

Don’t worry, I know options are risky, I’m certain I didn’t say otherwise. I will though acccept repsonsibility for the interpreation of my communication. I was only saying, that in the context of my strategy, I am more comfortable with the options risk/reward scenario, than the stocks risk/reward. I believe the truth is, almost everytime you invest you’re risking 100% of your investment… even FDIC could go splat.

[masayako]

Guys, I decided to go with the San Diego County Credit Union
CD account (5 months deposit) for 5.50% APY.

It’s the best and safest way in town to park my money. Check it out. The rate is better than most of the national banks, wells fargo, washington mutuals, BofA, CBofT etc…

http://www.sdccu.com/pages/index.asp

(Click the piggy) 🙂

I have a feeling that the rate will keep going up so, my suggestion is, don’t lock in too long. At most, 6 months.

[zk]

SDCCU’s 5-month CD with a 5.5% APY is the best I could find for that term. La Jolla bank has a 5.5% APY for a one-year CD, which is competitive with banks around the country. It’s kinda nice to have it in a local bank, though.

Somebody said something about Corus (and maybe the SDCCU) being vulnerable to a crash in housing. But, since they’re insured, isn’t your money safe there (assuming the type of disaster neccessary for the FDIC to fold doesn’t occur)?

[zk]

I know nothing about investing (that’s why my money is in CDs).

But it seems to me that if you bet on a decline in oil after the rise that inevitably occurs when news that scares the oil market happens, you’d be right most of the time. After the Korean missile test today, the price hit a record high above $75. I bet 3-5 days from now it will be lower than that.

Maybe the time frame would be shorter or longer than 3-5 days; I never really closely looked at the exact timing. But it seems that, not just in the oil market but in other markets as well, whenever investors react to news by pushing the price of something one way or another, the price corrects shortly thereafter.

I’m quite certain I have no idea what I’m talking about, but it seems to me to happen with such consistency that I wonder what I’ve missed; I wonder why it won’t work.

Any ideas out there?

[Author]

Posts