[ucodegen]

@drunkle

btw, my scottrade guy corrected me when i called my put options “shorts”. he called them long puts. i’m still confused as to what exactly entails “long” or “short”.

Options work different than stocks.. though they tie to the price of the share. Options are holding a ‘bet’ on a future event. All option purchases are effectively ‘long’.

Purchase stock: Long position because of ‘purchasing’ an item (share in this case). You get dividends(if any). Maximum loss can be full price of stock, maximum gains are taxed at either income rate(STCG) or 15%(LTCG) (unless lower income bracket in which case it may be 10% or 5%)

Sell stock short: Short position because you ‘sold’ something you do not yet have (so you are short on that position). You ‘receive’ money when you commit a short position because of the sale. The money has a cost (generally the margin rate on the amount of money involved), but this cost can be written of on your taxes (investment interest expenses). Maximum loss is full price of stock plus carried interest expense. Maximum gain would be like stock purchase but in the opposite direction and of course interest rate subtracted.

Buy a put: Long position on the option to sell stock at strike price at a future date. Betting on stock movement down. (you did not sell a put without having the put. The originators of the put could be said to be having the short position). Puts are a way to control large blocks of stock with a small amount of exposed capital. Maximum loss is only the purchase price of the option. Maximum gain is number of controlled shares x movement above strike price – price of option. Taxed at income rates.

Buy a call: Long position on the option to buy stock at a strike price at a future date. Betting on stock movement up (the originator of the option could be stated as having a short position on the option, but since your action is a purchase.. it is a long position). Calls are also a way to to control large blocks of stock with a small amount of exposed capital. Max loss is only the purchase price of the option. Maximum gain is number of controlled shares x movement below strike price – price of option. Taxed at income rates.

You probably know most of what I stated above.. just being thorough for the other readers out there.

[ucodegen]

@drunkle

btw, my scottrade guy corrected me when i called my put options “shorts”. he called them long puts. i’m still confused as to what exactly entails “long” or “short”.

Options work different than stocks.. though they tie to the price of the share. Options are holding a ‘bet’ on a future event. All option purchases are effectively ‘long’.

Purchase stock: Long position because of ‘purchasing’ an item (share in this case). You get dividends(if any). Maximum loss can be full price of stock, maximum gains are taxed at either income rate(STCG) or 15%(LTCG) (unless lower income bracket in which case it may be 10% or 5%)

Sell stock short: Short position because you ‘sold’ something you do not yet have (so you are short on that position). You ‘receive’ money when you commit a short position because of the sale. The money has a cost (generally the margin rate on the amount of money involved), but this cost can be written of on your taxes (investment interest expenses). Maximum loss is full price of stock plus carried interest expense. Maximum gain would be like stock purchase but in the opposite direction and of course interest rate subtracted.

Buy a put: Long position on the option to sell stock at strike price at a future date. Betting on stock movement down. (you did not sell a put without having the put. The originators of the put could be said to be having the short position). Puts are a way to control large blocks of stock with a small amount of exposed capital. Maximum loss is only the purchase price of the option. Maximum gain is number of controlled shares x movement above strike price – price of option. Taxed at income rates.

Buy a call: Long position on the option to buy stock at a strike price at a future date. Betting on stock movement up (the originator of the option could be stated as having a short position on the option, but since your action is a purchase.. it is a long position). Calls are also a way to to control large blocks of stock with a small amount of exposed capital. Max loss is only the purchase price of the option. Maximum gain is number of controlled shares x movement below strike price – price of option. Taxed at income rates.

You probably know most of what I stated above.. just being thorough for the other readers out there.

[ucodegen]

@drunkle

btw, my scottrade guy corrected me when i called my put options “shorts”. he called them long puts. i’m still confused as to what exactly entails “long” or “short”.

Options work different than stocks.. though they tie to the price of the share. Options are holding a ‘bet’ on a future event. All option purchases are effectively ‘long’.

Purchase stock: Long position because of ‘purchasing’ an item (share in this case). You get dividends(if any). Maximum loss can be full price of stock, maximum gains are taxed at either income rate(STCG) or 15%(LTCG) (unless lower income bracket in which case it may be 10% or 5%)

Sell stock short: Short position because you ‘sold’ something you do not yet have (so you are short on that position). You ‘receive’ money when you commit a short position because of the sale. The money has a cost (generally the margin rate on the amount of money involved), but this cost can be written of on your taxes (investment interest expenses). Maximum loss is full price of stock plus carried interest expense. Maximum gain would be like stock purchase but in the opposite direction and of course interest rate subtracted.

Buy a put: Long position on the option to sell stock at strike price at a future date. Betting on stock movement down. (you did not sell a put without having the put. The originators of the put could be said to be having the short position). Puts are a way to control large blocks of stock with a small amount of exposed capital. Maximum loss is only the purchase price of the option. Maximum gain is number of controlled shares x movement above strike price – price of option. Taxed at income rates.

Buy a call: Long position on the option to buy stock at a strike price at a future date. Betting on stock movement up (the originator of the option could be stated as having a short position on the option, but since your action is a purchase.. it is a long position). Calls are also a way to to control large blocks of stock with a small amount of exposed capital. Max loss is only the purchase price of the option. Maximum gain is number of controlled shares x movement below strike price – price of option. Taxed at income rates.

You probably know most of what I stated above.. just being thorough for the other readers out there.

[ucodegen]

One thing to consider is that Shiller feels that the bottom will be around 2013 at the earliest (5 years from now). Unless we have massive inflation (That is an interesting ‘if’), houses will have a dollar value in 2013 that is less than their mortgage. This makes refinancing a house around that period problematic because the property will be underwater. The historical period of house prices is 12 years peak to peak (or if you prefer, valley to valley). This makes 6 years down from peak (and about 6 years back up).

I would be careful about buying into any loan where you would have to refinance when the lock goes away because you can’t afford the adjustment. You can easily get caught on the downside with these. The adjustment and what rate you can get in the future will depend upon what the Fed rates are in the future (which can be hard to predict). Not only that, if Fed rates go up, what the comps for the house you have the mortgage on may be lower than the outstanding balance of the loan (Interest rates and property prices move in opposite directions, interest rates up, price goes down.. and visa-versa).

Best way to look at this is with the following questions:
1) Can you presently afford the fully indexed rate (What you would have to pay if the adjustment went to the cap)
2) Will your wage increase enough during the lock that you will be able to handle the fully indexed rate.

If #1 is the situation, you don’t have much problem either way. I would recommend trying to save and invest the difference between the fully indexed rate and the current rate you would be paying. For #2, I would try to save off as much as possible whenever possible. Built up a safety net.

Neither #1 nor #2 is flirting with disaster. I would do as the last sentence in the previous paragraph and save as much as possible. You may have to come up with cash on a refi, depending upon where rates are in the future.

[ucodegen]

One thing to consider is that Shiller feels that the bottom will be around 2013 at the earliest (5 years from now). Unless we have massive inflation (That is an interesting ‘if’), houses will have a dollar value in 2013 that is less than their mortgage. This makes refinancing a house around that period problematic because the property will be underwater. The historical period of house prices is 12 years peak to peak (or if you prefer, valley to valley). This makes 6 years down from peak (and about 6 years back up).

I would be careful about buying into any loan where you would have to refinance when the lock goes away because you can’t afford the adjustment. You can easily get caught on the downside with these. The adjustment and what rate you can get in the future will depend upon what the Fed rates are in the future (which can be hard to predict). Not only that, if Fed rates go up, what the comps for the house you have the mortgage on may be lower than the outstanding balance of the loan (Interest rates and property prices move in opposite directions, interest rates up, price goes down.. and visa-versa).

Best way to look at this is with the following questions:
1) Can you presently afford the fully indexed rate (What you would have to pay if the adjustment went to the cap)
2) Will your wage increase enough during the lock that you will be able to handle the fully indexed rate.

If #1 is the situation, you don’t have much problem either way. I would recommend trying to save and invest the difference between the fully indexed rate and the current rate you would be paying. For #2, I would try to save off as much as possible whenever possible. Built up a safety net.

Neither #1 nor #2 is flirting with disaster. I would do as the last sentence in the previous paragraph and save as much as possible. You may have to come up with cash on a refi, depending upon where rates are in the future.

[ucodegen]

One thing to consider is that Shiller feels that the bottom will be around 2013 at the earliest (5 years from now). Unless we have massive inflation (That is an interesting ‘if’), houses will have a dollar value in 2013 that is less than their mortgage. This makes refinancing a house around that period problematic because the property will be underwater. The historical period of house prices is 12 years peak to peak (or if you prefer, valley to valley). This makes 6 years down from peak (and about 6 years back up).

I would be careful about buying into any loan where you would have to refinance when the lock goes away because you can’t afford the adjustment. You can easily get caught on the downside with these. The adjustment and what rate you can get in the future will depend upon what the Fed rates are in the future (which can be hard to predict). Not only that, if Fed rates go up, what the comps for the house you have the mortgage on may be lower than the outstanding balance of the loan (Interest rates and property prices move in opposite directions, interest rates up, price goes down.. and visa-versa).

Best way to look at this is with the following questions:
1) Can you presently afford the fully indexed rate (What you would have to pay if the adjustment went to the cap)
2) Will your wage increase enough during the lock that you will be able to handle the fully indexed rate.

If #1 is the situation, you don’t have much problem either way. I would recommend trying to save and invest the difference between the fully indexed rate and the current rate you would be paying. For #2, I would try to save off as much as possible whenever possible. Built up a safety net.

Neither #1 nor #2 is flirting with disaster. I would do as the last sentence in the previous paragraph and save as much as possible. You may have to come up with cash on a refi, depending upon where rates are in the future.

[ucodegen]

One thing to consider is that Shiller feels that the bottom will be around 2013 at the earliest (5 years from now). Unless we have massive inflation (That is an interesting ‘if’), houses will have a dollar value in 2013 that is less than their mortgage. This makes refinancing a house around that period problematic because the property will be underwater. The historical period of house prices is 12 years peak to peak (or if you prefer, valley to valley). This makes 6 years down from peak (and about 6 years back up).

I would be careful about buying into any loan where you would have to refinance when the lock goes away because you can’t afford the adjustment. You can easily get caught on the downside with these. The adjustment and what rate you can get in the future will depend upon what the Fed rates are in the future (which can be hard to predict). Not only that, if Fed rates go up, what the comps for the house you have the mortgage on may be lower than the outstanding balance of the loan (Interest rates and property prices move in opposite directions, interest rates up, price goes down.. and visa-versa).

Best way to look at this is with the following questions:
1) Can you presently afford the fully indexed rate (What you would have to pay if the adjustment went to the cap)
2) Will your wage increase enough during the lock that you will be able to handle the fully indexed rate.

If #1 is the situation, you don’t have much problem either way. I would recommend trying to save and invest the difference between the fully indexed rate and the current rate you would be paying. For #2, I would try to save off as much as possible whenever possible. Built up a safety net.

Neither #1 nor #2 is flirting with disaster. I would do as the last sentence in the previous paragraph and save as much as possible. You may have to come up with cash on a refi, depending upon where rates are in the future.

[ucodegen]

One thing to consider is that Shiller feels that the bottom will be around 2013 at the earliest (5 years from now). Unless we have massive inflation (That is an interesting ‘if’), houses will have a dollar value in 2013 that is less than their mortgage. This makes refinancing a house around that period problematic because the property will be underwater. The historical period of house prices is 12 years peak to peak (or if you prefer, valley to valley). This makes 6 years down from peak (and about 6 years back up).

I would be careful about buying into any loan where you would have to refinance when the lock goes away because you can’t afford the adjustment. You can easily get caught on the downside with these. The adjustment and what rate you can get in the future will depend upon what the Fed rates are in the future (which can be hard to predict). Not only that, if Fed rates go up, what the comps for the house you have the mortgage on may be lower than the outstanding balance of the loan (Interest rates and property prices move in opposite directions, interest rates up, price goes down.. and visa-versa).

Best way to look at this is with the following questions:
1) Can you presently afford the fully indexed rate (What you would have to pay if the adjustment went to the cap)
2) Will your wage increase enough during the lock that you will be able to handle the fully indexed rate.

If #1 is the situation, you don’t have much problem either way. I would recommend trying to save and invest the difference between the fully indexed rate and the current rate you would be paying. For #2, I would try to save off as much as possible whenever possible. Built up a safety net.

Neither #1 nor #2 is flirting with disaster. I would do as the last sentence in the previous paragraph and save as much as possible. You may have to come up with cash on a refi, depending upon where rates are in the future.

[ucodegen]

It depends upon how the mortgage broker is going to get him the money/loan.

*If the guy is already has a house, the next purchase has to show as a Non-Occupied status (can’t be in both at the same time).

*Already having payments for one house (which will be more expensive than he can afford when it resets), it will be difficult to get another loan when he is already cash flow limited (irregardless of his FICO). He may be thinking stated income? In addition, while there aren’t any Foreclosures in his current situation, there is a planned one in his future (his current lender might like to know, and wonder how they feel). I would watch out for 18 USC Ch 47 violations here. Material misrepresentation of income related to obtaining, misrepresenting facts current or soon to be in evidence that are detrimental to obtaining loan

I would like to see some of the CDO holders start pursuing these… otherwise we just end up penalizing the honest and rewarding the dishonest.

[ucodegen]

It depends upon how the mortgage broker is going to get him the money/loan.

*If the guy is already has a house, the next purchase has to show as a Non-Occupied status (can’t be in both at the same time).

*Already having payments for one house (which will be more expensive than he can afford when it resets), it will be difficult to get another loan when he is already cash flow limited (irregardless of his FICO). He may be thinking stated income? In addition, while there aren’t any Foreclosures in his current situation, there is a planned one in his future (his current lender might like to know, and wonder how they feel). I would watch out for 18 USC Ch 47 violations here. Material misrepresentation of income related to obtaining, misrepresenting facts current or soon to be in evidence that are detrimental to obtaining loan

I would like to see some of the CDO holders start pursuing these… otherwise we just end up penalizing the honest and rewarding the dishonest.

[ucodegen]

It depends upon how the mortgage broker is going to get him the money/loan.

*If the guy is already has a house, the next purchase has to show as a Non-Occupied status (can’t be in both at the same time).

*Already having payments for one house (which will be more expensive than he can afford when it resets), it will be difficult to get another loan when he is already cash flow limited (irregardless of his FICO). He may be thinking stated income? In addition, while there aren’t any Foreclosures in his current situation, there is a planned one in his future (his current lender might like to know, and wonder how they feel). I would watch out for 18 USC Ch 47 violations here. Material misrepresentation of income related to obtaining, misrepresenting facts current or soon to be in evidence that are detrimental to obtaining loan

I would like to see some of the CDO holders start pursuing these… otherwise we just end up penalizing the honest and rewarding the dishonest.

[ucodegen]

It depends upon how the mortgage broker is going to get him the money/loan.

*If the guy is already has a house, the next purchase has to show as a Non-Occupied status (can’t be in both at the same time).

*Already having payments for one house (which will be more expensive than he can afford when it resets), it will be difficult to get another loan when he is already cash flow limited (irregardless of his FICO). He may be thinking stated income? In addition, while there aren’t any Foreclosures in his current situation, there is a planned one in his future (his current lender might like to know, and wonder how they feel). I would watch out for 18 USC Ch 47 violations here. Material misrepresentation of income related to obtaining, misrepresenting facts current or soon to be in evidence that are detrimental to obtaining loan

I would like to see some of the CDO holders start pursuing these… otherwise we just end up penalizing the honest and rewarding the dishonest.

[ucodegen]

It depends upon how the mortgage broker is going to get him the money/loan.

*If the guy is already has a house, the next purchase has to show as a Non-Occupied status (can’t be in both at the same time).

*Already having payments for one house (which will be more expensive than he can afford when it resets), it will be difficult to get another loan when he is already cash flow limited (irregardless of his FICO). He may be thinking stated income? In addition, while there aren’t any Foreclosures in his current situation, there is a planned one in his future (his current lender might like to know, and wonder how they feel). I would watch out for 18 USC Ch 47 violations here. Material misrepresentation of income related to obtaining, misrepresenting facts current or soon to be in evidence that are detrimental to obtaining loan

I would like to see some of the CDO holders start pursuing these… otherwise we just end up penalizing the honest and rewarding the dishonest.

[ucodegen]

@Raybyrnes
I also think people are fooling themselves if they think interest rates are going to stay this low forever so loan notes and cash flow will impact overall long term costs.

This is what this ‘renter’ is betting on. As interest rates rise, the prices that equivalent houses sell for will drop. Most people only look at the monthly payments for what they can buy and what they perceive it is worth. Since I am sitting on a whole pile of cash (could buy right now for cash, but won’t) I want to get the best return on my cash. You can view the return on invested down payment as being equivalent to the mortgage rate (because that is the rate and cost is offsets).

[ucodegen]

@Raybyrnes
I also think people are fooling themselves if they think interest rates are going to stay this low forever so loan notes and cash flow will impact overall long term costs.

This is what this ‘renter’ is betting on. As interest rates rise, the prices that equivalent houses sell for will drop. Most people only look at the monthly payments for what they can buy and what they perceive it is worth. Since I am sitting on a whole pile of cash (could buy right now for cash, but won’t) I want to get the best return on my cash. You can view the return on invested down payment as being equivalent to the mortgage rate (because that is the rate and cost is offsets).

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