Centrica plc Contracts

I have rolled my Centrica 320p Calls (expiry March 18th) forward to the September series 340p Calls. This  rearrangement cost a net £163.00p.  The share price at the time I struck the deals was 328.6p. i.e. above the strike price of the 320p Calls. If the share price had stayed at that level, I would have lost the shares on assignment at 8p below their market value, i.e I would have received £400 LESS than the shares were worth in the market. So . . . the £163.00 SAVED me £400 on the shares, ADDED £1000 to the value of the shares should I be assigned at the 340p level, and ENSURED that I keep the two dividends declared between now and September - provided that the share price does not go much above the 340p level. The 5 x 340p September Calls are covered by 5000 shares.

Auntie Beeb . . .

. . . is at it again!  Today's BBC Terror Campaign aims at eating red meat.  Last week not eating enough of something . . . I forget what, does it matter . .  probably rice pudding, would kill us for sure.  Having failed to get that one off the ground the BBC is trying to ferment panic in the streets by telling us not to eat more than 70 gms of red meat per day.  Have these prats NO IDEA HOW BLOODY SILLY they are making themselves look?  But they never give up. Day by dreary day their lamentably dreary Newsroom front men and women shriek and wail about what we should and should not be doing. Drink more red wine!  Don't drink too much alcohol!  Take a handful of aspirin every day!  Don't get addicted to pain killers etc. etc. etbluddicetera.  But they never, ever, ever advise us to avoid the most dangerous thing anyone can do up to the age of about 50. DON'T GET INTO A MOTOR VEHICLE.  If you are under your half century, a serious RTA is your most likely cause of death.  Of course, on the other hand, most people - particularly idiot males . .  would rather die than go without the daily dose of vrooom vroooom. I blame Jeremy Clarkson.  Goodbye. I have financial matters to attend to.

The Things They Do In Your Name!

The government has abandoned its plans to privatise England's public forest estate

In a statement to the Commons on 17 February 2011, Environment Secretary Caroline Spelman, who oversaw the controversial proposals, announced the u-turn, saying: "I am sorry, we got this one wrong."

She said she took "full responsibility" for the climb-down, which was required after it became clear "the public and many MPs are not happy with the proposals".

"If there is one clear message it is that people cherish their forests and woodlands and the benefits that they bring," she told the House.

The government's plan to sell off or lease 258,000 hectares of England's public forests, managed by the Forestry Commission, was intended to give the private sector, community and charitable groups greater involvement in woodlands by encouraging a "mixed model" of ownership.

Let us translate this.

1. The Tories wanted to sell our forests to their Friends in the City.

2. Why?

3. Because there are all sorts of tax advantages in owning woodland, and presumably so that their Friends in the City could charge the hoi-polloi an arm and a leg to go into the woods to picnic with our Teddy Bears or pick mushrooms or whatever.

4. Our Prime Minister (that's the fellow with a face like a china doll that has spent too long in a dishwashing machine, what's-'is-name . .  CAMERON!) hoped we wouldn't notice what he was getting up to in our name.

5. We did notice. 

6. We didn't like it. We told him so.

7. With one eye on the next election and the other on recent events in Tahrir Square, he thought "The buggers will remember this!" Sooooo . . 

8.  . . he sent poor Ms.Spelman into the House to withdraw the measures and take the flak.

9. The hilarious aspect was Her Majesty's Opposition shouting . .

TIMBER!

February 2011 FTSE 100 INDEX Option Contracts

I redeemed my FTSE Contracts for February this morning when the Index stood at about 6040. My net profit for February is shown in the table at the top of this blog (£1314.60p)  At the same time, I opened "short" (i.e. by SELLING)  7 x Put Contracts at 5400, and 7 x Call Contracts at 6350 in the March series. Prices are pretty low at the moment because market volatility has been low recently.  My potential profit on the March contracts, assuming they expire valueless on 18th. March is £1479.80, but I expect I will redeem them before they expire, and open contracts for April.

BBC TV News . .

. . . just now is telling us about an unfortunate householder who lost the whole of his pension "pot"(*) of £200,000 because he had been given "bad financial advice". He is now doing a manual job for the minimum wage. £200K in a pension "pot"(*) suggests he was a 'professional' . . . er . .  professionally, in which case presumably, though not definitely, he could READ. (I  qualify my "presumably." After all, football players are described as "professional" although I doubt most of them can read above the level of Red Top headlines. My evidence?  Most of them can't grunt their own names intelligibly.) 

I crave your indulgence while I say it again.  IF YOU CAN READ YOU DO NOT NEED A FINANCIAL ADVISER.  You don't actually need a pension fund. i.e. a bottomless pit of promises that you pour money into every month in the hope that it will still be there when you die or reach retirement age, assuming that happy day ever arrives now that the pensionable age is growing up faster than you are.

But if you insist on (oops . . maybe your conditions of employment require that you HAVE to pay into a pension fund, well hard luck!) . . . setting up a pension pot (*) under the guidance of a Financial Adviser, make sure that he or she knows:-

1. where the FTSE Indices of shares will be when you reach pensionable age.

2. that no World Wars are due to break out before you retire

3. that your government (UK in my case) will not default on its Bond repayments or interest payments or otherwise go the way of Greece, Iceland, Ireland, Portugal etc before you retire

4. that your FA is not going to invest your cash on your behalf in Enron, Lehman Brothers, GEC-Marconi, Ferranti, BCCI, Polly Peck, British Airways or similar disaster areas.

4. which Managed Funds will do best between now and when you retire

5. with 100% certainty that the funds she or he will dump your money into are going to do at least as well as the one they name in 4.

6. that the answer to 4 won't have changed when the FA gets to next week/customer.

I hope you see the ironies implied in this rant.  If you can read, you can fix your pension for yourself - at least when nemesis strikes you won't lie awake blaming someone else because your £200K has vanished.

The basic rules are very simple.  One third in Bonds(**). One third in Blue Chip shares. One third in cash. (Most Financial Advisers charge you about £100/hour for telling you that.) 

(to be continued)

(*)  pension funds are referred to as "pots" because of the alliteration. The BBC obviously employs a Poet-In-Residence.  I can think of a more fundamental reason for the term "pot" in the context.

(**) Mine are all UK Gilts. A life-long friend of mine lost £4K IN A FEW DAYS when her Financial Adviser suggested an investment in bonds issued by . . . Lehman Brothers just before the 2008 melt-down.

BBC Radio 4 News . .

. . . at 6a.m this a.m was gearing up for another Media Orchestrated Terror Campaign.  And what is it this time?  Well, it's FOOD SECURITY, innit?  The problem seems to be that the world's ballooning population (6.4 billion and rising faster than you can count) is putting pressure on:-

Agricultural land (that's WHERE we grow food)
Fresh water         (a resource necessary for growing it)
Energy                (for - you name it, food needs it)

As Molesworth sez, "Eny fule kno all this" although we collectively pretend it doesn't matter - as long as it impinges only on the poor of the world and not on the developed world - and even though many of us weigh twice as much as is good for us. But I digress. The bulletin went on to say (something like)  "various authorities have been issuing warning about the impending crisis for the last thirty or forty years."  

ONLY thirty or forty?  The Reverend Thomas Malthus first pointed to the problem  in his Essay on the Principle of Population (1798 to 1826) in which he argued that population growth must eventually be limited by famine and disease.  At the time he was up against utopians like Jean-Jacques Rousseau.  (For the more mathematically minded, Malthus pointed out that population can in principle increase in a geometric progression - whereas food supply can increase only in an arithmetic progression. When the graphs cross, we're in trouble.) Technology has done pretty well so far to fix things up, despite the insane vapourings of the anti-GM lobby.  These are amongst the World's True Weirdos. Why?  Because if they are below the age of about 150, they haven't eaten a mouthful of food in their whole lives that isn't genetically modified(*).  These maniacs are not objecting to GM. They are objecting to GM being done quickly and cheaply in laboratories, rather than slowly and expensively on plant and animal breeding stations. They are objecting to science, which they don't understand yet rely on for everything they do and are, every minute of their lives.  They will change their minds the day they find empty shelves in Tesco. Remember folks . . next time you eat any of your five- a- day, you're eating a genetically modified  hybrid.   ENJOY!  

(*) fish and game are perhaps exceptions to this, except that evolution has been genetically modifying even these species for millions of years.

I'm just now watching

 . . . an elderly economic lunatic from Ernst & Young "explaining" that although fuel, commodities and VAT increases are pushing up shop prices faster than we can follow them, underlying inflation is "below the Government's target" even though inflation has been above the Government's target every month for the last six, twelve or is it twentyfour, and that's despite the Government or is it the Treasury switching to a new measure of inflation which excludes anything that has the audacity to go up in price but does include the price of saddle-soap, repairs to your longbow and housemaids knee-pads.  You've never had it so good, folks, and do you wonder that Doctor FTSE takes no notice at all of economic news, indicators and above all of the vapourings of half-way insane pundits when he decides which FTSE options to deal in next time around.  Goodbye.

January 2011 FTSE Index Options

I redeemed my 7 x 6200 Calls in the FTSE 100 Index this morning, paying 4p per "share" or £40.00 per contract (Lots of 1000 "shares"). Followers and fans who study the dealing prices on the Euronext pages will perhaps notice that towards the expiry date, the "buy back" prices of contracts for expiry "this month" are declining much more slowly than those for contracts expiring "next month."  Thus it is potentially more profitable to redeem "this month" contracts a few days before expiry, and sell "next month" rather than waiting till "this month" contracts finally expire.  

So I have trousered an overall profit in January of £1571.60p.  My contracts for expiry in February are 7 x 6350 Calls and 7 x 5400 Puts. These deals added £1584.80p to the account balance, and this is the profit I will make if the contracts expire worthless on 18th.February - i.e. with the FTSE 100 Index anywhere between 5400 and 6350 - presently at 6028.

Final FTSE of 2010

The FTSE Index of 100 leading shares ended the year at 5899.9, call it 5900.  This is well into the top half of experts' forecast (January 2010, see tables above posts), between the 5850 and 5930 predicted by Simon Marsh and Robin Greffen.  You may wonder why these investment experts made predictions across such a wide range of FTSE values - and whether Mr. Goldstein-Jackson sold off his portfolio in anticipation of the big falls in the Index which he. . . er. . . anticipated.  My conlcusion?  There's no such thing as an "expert" in this game. In fact, you can make a case from the little game we've been playing here that their "expertise" is positively dangerous to your financial health.  

Predictions for end-2012 will emerge in the weekend press Business/Money sections, so I will start the game again.  Bet the experts at the lower end of the forecasts here are hoping no-one kept a note of their predictions, hee hee!

Happy and Prosperous New Year to all my readers.

NOTE  A new range of FTSE Index predictions for end of 2011 is now shown above.  I will leave the 2010 predictions for a few weeks for comparison.  The 2011 predictions include one made by "Mr.Fox" (See below the table of FTSE predicted values above.) Readers are invited to suggest other techniques and methods for predicting future values of the FTSE, outbreak ot World War III, or anything else. No goat entrails, please. That's very old hat.

Somewhat Lost Interest . .

in the blog, mainly because no one has been commenting much, so I assumed no one was reading it much. I have restored the Option Trader's Diary to report my full year result for 2010 and to check out the expert's predictions for the end-of-year FTSE value.  At the moment, the lads at the top of the Guesstimates Table (above) are doing best - but there's still 2 days trading to run.  My guesstimate, for what it's worth, is that the FTSE will end the year in the 5950 to 6050 range, but don't ask me even to guess where it will lie at close of business 2011.  If you push me, I'll hazard that the FTSE Index will be higher at end 2011 than it is just now. We shall see.  

Goldman-Sachs . . .

 . . . are to be prosecuted for fraud!  They devised a scheme linked to sub-prime mortgages, that could not but fail, then placed big bets on it failing.  Why can't I dream up fool-proof wheezes like that?

Some Geezer on BBC Radio . . .

. . .  this a.m was arguing that the whole of the world economy is a gigantic Ponzi Scheme.  All over the world, governments have borrowed so much money that the only way they can pay the interest due on the money is to borrow more money and the only way they can pay the interest on THAT money is to borrow  . . .  but I'm sure you get the idea.   So far, only Greece appears to be in serious trouble . . . and Thanks Be that UK is not in the eurozone, so UK taxpayers, for the time being, won't have to rescue the Greeks . . . . . But how long before the whole house of cards comes down?  BTW, made £1136.80 on the April FTSE 100 Index contracts. 

Rearranged . .

. . . my February FTSE contracts.  The Index has climbed quite a few points this week.  So I have rearranged my February contracts which were originally struck at 5900 Calls and 4900 Puts, 5 contracts each side.  I now have short contarcts as follows:- 7 x February 4950 Puts and 7 x February 5500 Calls.  These contracts expire of 29th. February at 10.30 a.m.  My potential profit now is £1323.00p

Hooray! Hooray!

BBC News tells me today that figures released by the National Office for Lies, Damned Lies and Statistics show that the economy of Great Britain plc is "out of recession."  First question.  How many of the words in that sentence do you understand?  Can you, for instance, explain what is meant by "the economy"?  In the context of this ill defined "economy", what is meant by "recession" and hence, what is meant by the economy being "out of it"  Remember that the same NODLS (see above) told us we were out of recession in the 3rd. quarter of 2009.  Then they decided we weren't.  Or some other quango using different figures told us we weren't. Later on, another expert on BBC TV News said words to the effect that "Until we get out there into the High Street and start spending again, the economy will continue to something-or-other"  So there's one definition.  "The economy" is you lot pouring your money into Marks and Spencer, etc. And I hope you can now see why I don't mind in the least using vague terms like something-or-other, since I don't believe the weasel words like "recession" mean anything much either.

Now, what about "recession"  Believe it or not, there is a definition of this!  It's something like "four consecutive quarters of negative growth."  "Four consecutive quarters" I understand, "negative growth" I'm not so sure.  Four?  Might be three.  I forget.  Who cares!  But accepting the definition, we are "out of recession" when the 5th quarter turns positive.  O.K. Now we are getting somewhere!  Let's see . . .  Q1 Growth minus 3%.  Q2  Growth minus 1.5%  Q3 Growth minus 2%. Q4 Growth minus 1.25%.  Now we are officially in recession.  So in Q5, NODLS now tells us, growth is PLUS 0.4%.  In terms of the definition of "recession" we are now "out" of it.  But does PLUS 0.4% after MINUS 6.75% in the previous 4 cheer you up?  Should it?

Lunchtime today . .  the actual figure came out.  WOW. Output however they measure it, is up by 0.1%. Nought point one percent! That's ONE part in ONE THOUSAND!  D'you really think economic data can be measured that accurately.  Goodbye.

It's a Funny Old World!

President Obama announces his intention to restrain the antics of American B(w)anks.  He wants this group of eternally greedy, self-regarding billionaires to recognise and start acting on a simple idea. "Wall Street exists for the benefit of the American economy."  And not "The American economy exists for the benefit of Wall Street." And what happens?  Wall Street (via the Dow Jones Share Index) immediately falls 2%. Does this mean Wall Street disagrees with him, or does it mean the US economy disagrees with him?   In my expert opinion, which of course, no one ever takes any notice of, it confirms something I have long suspected.  The Dow Index, like the FTSE in this country, has no real connection to "the economy."  These market indices are actually a measure of how confident the financial institutions are that they can rip the economy off.  The markets have fallen because the people who decide what its level should be (i.e the B(w)ankers) are suddenly worried that a couple of noughts might get chopped off their bonuses. But of course, I'm just a tired old cynic who makes loads a' munni by taking no notice at all of financial and business news, and in particular, of Financial Advisers, who, whether independent or not, know no more about finance than you and I can learn by reading a few books.  So here's a piece of financial advice, for which I won't charge you an arm and a leg.  At the moment, Premium Bonds represent a good CASH investment for small(ish) amounts of yer spare loot.  And I'll tell you when this ceases to be true.

Postman Prat Put in his Place

Overpromoted postman Alan Johnson, our inhumane Home Secretary who, obeying the dictats of his political masters in the Unmentionable States of America, sanctioned the extradition of Garry Mckinnon, has been given a bloody nose by the High Court.  Remember, this arrogant little cretin-posing-as-politician was once a postman, who, having outgrown his postman's boots, has grown far to big for the new ones given him by Gordon "Everyone's Booby" Brown.  Well, Mr. J . . . how will you go about setting yourself above the law now, which,  at least in your own opinion, you are, or should be.  I can imagine you raging in front of your shaving mirror, "If these silly bigwigs in the courts don't leave me alone to wreak havoc in peoples' lives, I'll make sure they never get any post ever again. I know where they all live!" Johnson is a disgrace to his Office.  Our best hope is that he is soon relieved of it in favour of someone who puts the interests and welfare of British subjects above the whinings of Americans whose feelings have been hurt, poor little dears.

February 2010 FTSE Index Options

I redeemed my January FTSE 100 Index options at a cost of £305.20, leaving me a profit for January of  £1769.60p. At the same time, I opened a position for February by selling 5 x 4900 Puts and 5 x 5900 Calls, for a potential profit of £1362.00p if the FTSE Index lies between 4900 and 5900 when these options expire on February 19th. at 10.30a.m.  The FTSE Index stood at about 5505 when I did these trades.

Leave It To The Experts!

15 of them have stuck their necks out and made predictions of where the FTSE Index of 100 Leading shares will be at close of business on the last trading day of 2010.  Note the range of affiliations. Investment Managers (IM), Investor Magazine Writers, brokers . .  to a man (where are the ladies, by the way?) they are all "financiers" or "financial experts", or something.  So how do they arrive at such widely diverging takes on that which they pretend they can predict? Clearly, the first thing to learn is DON'T TRUST THEM WITH YOUR MONEY - or if you must, trust only the one whose prediction is correct. (Er . .  er . . . there's a catch in that somewhere!)  You can chase the weblink above the table of predictions to the F.T webpage where these 15 sages "explain" why the FTSE Index will end up where they say it will even though it won't because they're all so different. Wake up, folks . . . NO ONE can guess the future. But I suppose these geezers have to do something to justify their telephone number salaries and bonuses-or-we'll-emigrate,-you-ungrateful-British-mugs.

Here are my thoughts on what the 2768 FTSE points minimum-to-maximum suggests.  First; whatever "economics" is, it is not a predictive science. For if it were, these predictions would surely be much closer together.  I suspect (but cannot prove) that economics would be a predictive science if it could distinguish "first order" from "second order" influences.  I suspect that the only influences that can be measured with any accuracy are "second order" ones, that have no real effect on economic outcomes.

How will I incorporate these all-over-the-place expert predictions into my option trading strategies during 2010?   Briefly, I shall ignore them. Taken as a bunch, they are meaningless. But I will leave them posted until next New Year, and we'll see who got closest.

My own FTSE prediction - remembering that mine will be correct? eMail me if you really want to know. (dr.FTSE@googlemail.com)

May 2010 . . .

. . . be the prosperous New Year we all hope for!  I renew my annual resolution, which I kept throughout 2009, to resolutely ignore the advice of anyone described by the BBC or any other organ of the British media as an "expert."  That way I might just maintain the winning run I enjoyed this year.  This Sunday (3rd.Jan.) is the day when these self-regarding and magnificently overpaid gals and guys give us their wildly divergent predictions - in the Business/Money sections of the broadsheets - of where the FTSE Index will be on Dec 31st. 2010. There will be a big spread of predictions as usual. Many experts will be wildly wrong. One or two will be somewhere near the mark by the Laws of Probability

I ALONE, The All-Knowing Doctor FTSE, can tell where the FTSE Index will be at the end of 2010! And don't you forget it.  Post a comment - with YOUR guess, if you like - and I will reply via eMail with my prediction.

In the meantime, here's a weblink that tells you about things much more interesting than the FTSE Index or Option Trading . . .

Happy New Year!

Ponzi

One of my delightful daughters gave me "Ponzi" for Christmas.  This is the story of Charles Ponzi, Italian immigrant to the USA early in the 20th century, who ran probably the most audacious "pyramid" scheme of all time.  Most of Boston fell for "Deposit your dollars with Ponzi's 'Securities Exchange', and in 90 days time, he will return it with 50% (that's FIFTY percent) interest." The commodity he pretended to trade on his investors' behalf was international postal reply coupons.  His idea worked (in principle) and indeed, he checked it out using French, Italian and Spanish coupons(*) and made himself a few dollars profit before he opened the scheme to all comers.  Thereafter he forgot about trading the coupons, took in the investors money, handed them out their 45 or 90 day promissory notes and . . . well, read it for yerselves!  Available from A**z*n. Like any well thought out pyramid scheme, it hangs together as long as there's a queue of suckers outside the office eager to hand over their hard-earned life savings, which he used to pay off the lucky folk who had joined the pyramid earlier.  Or until the Boston Post got interested in this dapper, 5'4" smiling, charming Italian who seemed to produce money out of nothing. This was in the days before "If it sounds too good to be true, it IS" became the investor's watchword.  There's a picture of the little miscreant elsewhere on this blog.  Let Ponzi be a warning to all. He gave his name to  . . . "Ponzi" schemes. I'll stick to trading FTSE Index options . . .

(*)  Buy International Postal Reply Coupons in European countries using U.S dollars. Redeem the coupons in the US for US postage stamps.  In 1920, when Ponzi was operating, IPRC's could be exchanged for stamps at a favourable rate.  This was a concession, so that European immigrants in the US could write home cheaply.  In other words, Ponzi ended up with MORE stamps for his dollar than  he would have if he'd spent the dollar in the US.  The "extra" stamps were his profit.