November Comes Early

Hello, People!  When trading options in the FTSE 100 Index I don't use guesswork, crystal balls, goat entrails, tea leaves or the stars.  I use a set of Rules.  I won't bore you by explaining and/or justifying them except to say - my Rules do not use the past to predict the future. If this were possible there would be no Stock Market and there would certainly be no such activity as "derivative trading" i.e trading options and futures. I'll leave you to work out why.  No, my Rules serve two purposes. They tell me when it's time to trade. They stop me having to think. They have been very successful and have enriched me considerably over the years.

And yesterday, October 1st, my Rules told me "Doctor, 'tis time to redeem your October position and open November."  The diligent reader will remember that I opened my October position as recently as 10th. September, so that was quick, eh? A phone call to the brokers and I, or rather he on my behalf "bought to close" 7 x 6150 October Puts and 7 x 6750 October Calls, and "sold to open" 8 x 6050 November Puts and 8 x 6700 November Calls.  Note that this trade widened the "spread" between the November Put and Call strikes by 50 points over the October spread.  The whole trade bolstered cash at the bank by £2785.00. This is not profit unless/until the November contracts expire with the FTSE 100 Index between the Put and Call levels at 10.30 a.m on 15th. November. The trade resulted in a net profit on the October options of £3577.00

One day I shall fall flat on my face and you can all larf and say "When it sounds to good to be true it probably is."

Beans, Beans are good for the heart . . .

The post below this one informs us that  the BBC thinks "poor numeracy blights the economy and ruins lives."

Consider then this cameo pricing model that I grabbed from a well-known supermarket's on-line shopping site this morning when I sent in my weekly order.

I'll leave you to figure out which is the best buy and then to decide whether buying the wrong pack will ruin the economy.  Buying the wrong pack certainly helps the store's economy; whether it will blight your life is for you to say.  You might also think about why the store describes the six-pack as "Special Value." (Note "Add" above is not an arithmetic opertor. It means "Put the item into your on-line shopping trolley.)

Oops . . . I almost forgot!  Today I redeemed my open FTSE options position by buying 7 x September 6200 Puts and 7 x September 6750 Calls.  This position was originally opened on 8th. August 2013. The FTSE 100 Index did not stray outside this 550 point range while the contracts were in place.  Here's another little numeracy conumdrum.  If I had chosen to invest all my September profit in the better of the two offers above I could have ordered 2,222 packs with a few beans left over.  THAT'S how profitable option trading can be!

Having bought back the September contracts, I "sold to open" 7 x 6150 FTSE Index October Puts and 7 x 6750 October Calls.  The net of these trades (buying September/selling October) is not guaranteed profit yet - but it has temporarily stored a lot more tins of beans in the bank.  Listen out for more . . .

Fun With Figures

Today the BBC is telling us that "Poor numeracy blights the economy and ruins lives"  That's as maybe. (See examples below) What annoys me is how articles like this refer to "maths" when they mean "arithmetic."  Arithmetic is to maths as paintbrushes are to a J.M.W.Turner sunset. Now FTSE dismounts hobbyhorse to ask . . .

. . . 3 questions.  Do they test your ability at maths, your ability at arithmetic or simply your ability to think?

1.  If I tell you the average of two numbers and one of the numbers, can you work out the second number?  (Example:  Average of two numbers is 12.  One of them is 8. What is the other number?)

2.  The National Lottery asks you to choose 6 numbers from 49. What's the chance you choose the first number  i) correctly, ii) incorrectly? And the second number . . . and so on down to your 6th. choice.

3. How many different four digit PIN numbers are there -
    i)  If duplicated digits are allowed?
    ii) If duplicated digits are not allowed?

Armageddon is Just Around the Corner

Who says so?  The magazine "Money Week" says so.  In a massively overlong and melodramatic article  "The End of Britain" the magazine explains that Britain's debt is too big, we can never repay it, change and decay in all around they see, and say goodbye to your money, your house, your pension, your investments.  But YOU can avoid personal financial devastation.  How?  Go on, guess.  You can't?  Then I'll tell you. All you need do is take out a subscription to "Money Week" and they'll tell you all you need to know.  Schimples!  On you go, sucker! It's only £175 p.a.  If their dire warnings are right we'll all go down together including the editors and column writers at MW. If wrong, well, you're £175 worse off and they're £175 better off.  If only telephone scams were that simple . . .

And a word to the MW editors and copywriters.  The article is so wearyingly and boringly long and repetitive that very, very few readers are going to get anywhere near the "Send us your money" bits at the end.  I mean, the kick-off's at 3.30 . . .

Invest For Yourself!

First, the downside.

If/when you join a workplace pension scheme your employer top-slices you salary and hands it over to the Pensions Fund whose job it is to impoverish you when you reach retirement age. Your employer adds a contribution and H.M. Government adds a bit more in the shape of tax relief on these contributions.  Short of opting out of the scheme, there's nothing you can do except pay up.

If/when you start a pension plan, money is taken from your bank by direct debit, monthly or annually.

In either case, you are contributing willy-nilly to the scheme or plan. You don't have to exert any self-discipline about actually making the payments.  You can happily forget about them, which is exactly what the pension fund managers want.  They want your money.  They don't want you to ask questions about what they're doing with it.

If you invest for yourself, YOU must make a personal commitment to put money into your investments on a regular basis. This is not easy because most people - and that includes you - can't resist looting their investments/savings for a new car, jet-skis. daughter's wedding, holiday in Marbella etc. etc. whenever the fund reaches a miserable few hundred quid.  Fatal. If you recognise yourself in the above, better after all to hand your cash to a penison fund, unit trust etc and let the manager spend it for you.  At least you'll get something back when you retire.

More tomorrow.

The Great Rip Off

Your workplace pension scheme and/or your private pension probably requires you to convert your pension-pot into an annuity (i.e. annual income paid monthly). Journalist Paul Collinson in the "Guardian" 24th. August 2013 has interesting things to say about this system for rewarding/defrauding you at the end of your working life.

You can opt out of workplace pension schemes, although not until after your employer has opted you in.  So if you're in one, get out of it - now.  The scheme might insist on keeping contributions you have already made until you retire, in which case you've just learned your first lesson about how pension schemes extract money from you.

Nor do you need a private pension. These schemes are headed up by overpaid men in red braces who probably skim 2% minimum off every one of your contributions. Pension Funds exist to make money for the Fund, not for you.  The annuity you get at retirement probably won't repay you as much as you've paid in unless you live to a very, very ripe old age.  If you die earlier than actuarial forecasts say you should, the balance of your pension pot goes to an insurance company, probably with a "thank you" payment to the pension fund that you fell for in the first place.  You should be more scared of pension funds than of internet fraud or identity theft - a lifetime spent piggybanking a proportion of your pay cheque will probably turn out to be about as rewarding as buying lottery tickets - if you're an average earner, that is. All the cards are stacked against you. If you're already massively overpaid your pension is probably gold-plated by the taxpayer or your company's shareholders. 

We don't teach folk anything useful about money and finance and how to avoid being ripped off either at school or after.  We leave them to find out for themselves at 65 what they should have found out for themselves at 25  - invest for yourself.  Do I hear cries of "Ooerr!  I can't do that!  I don't know anything about investing!"?  So already you're level with a lot of pension fund managers and Independent Financial Advisers.  

I give financial advice for nothing - and I bet that in the most cases it will be the same as an IFA gives you for about £125 and hour.

Third in shares.  Third in UK short/medium term Gilts(*). Third in Premium Bonds - which with only average luck pay more than the banks. Forget ISAs. They're another scheme for extracting commissions and management charges from you. Do everything for yourself. Don't leave it to the wide-boys.

(*) NEVER corporate bonds.  I know IFA's who were busy flogging Lehman bonds 24 hours before the firm went belly up.  

Watch this space.

Do You Ever Feel Close to Despair?/Club News

Here's another example of the sh**e that the BBC offers us as "news." Oh my friends, this one really will change your life, even if you don't know where to put your apostrophes!  (Anagram of "Stop Her Soap" - which doesn't matter one way or the other)  

I interrupt another of my lunchtime rants to remind you there are plenty of vacancies in the phenomenally successful "White Knuckle Riders Investment Club" which modestly tries to make you 1% per month (that's per month).  Details from wkr.inv.club@gmail.com. Preference will be given to punters who can express 1% per month as an annualised rate . . .

Dare We Believe It!

The BBC News this morning is telling me that the Banks - the Institutions that steal your money - are getting rid of up to half their Financial Advisers!   That can only be good news.  There's a young woman being interviewed just now who was introduced as a "highly qualified Financial Adviser"(*)  WHAT THE HELL IS THAT!   I give financial advice for nothing.  Ready?

1.  Look after your own pension. The H.Q.F.A's(*)  and Fund Managers rob you blind for doing it on your behalf.

2.  One third in Gilts. 

3.  One third in solid shares such as BP, Centrica, BT, Sainsbury, Legal and General

4.  One third in cash.

5.  Consider investing the "cash" in N.S&I Premium Bonds up to the maximum £30,000.  The Prize Fund is worth as much as or more than the interest you'll get on a bank account or cash ISA, and you might get lucky and end up a millionaire.

6.  Whatever you do DON'T give a penny to a Fund Manager or H.Q.F.A.  They don't want to make sure YOU end up with a fat pension. They want to make sure that THEY do.

Anything else you want to know   email me at wkr.inv.club@gmail.com  

OYEZ! OYEZ!

Good Morning friends, fans and followers!   Follow THIS LINK and tell me . .  is it really News?  Will it change World History? Or is it the sort of shite that our nation - drunk on drink, footie, cheap holiday flights, celeb gossip and TV quiz shows - uses to further reduce its brains to custard?

That's all for today.

Sainsbury "Put" Options - Again!

The price of Sainsbury shares at market close on 22nd. July was 316.4p - 23.6p below the "strike" price, (340p) of my December "Put" contracts in these shares.  This means that a counterparty could at any time insist on me buying 2000 Sainsbury shares at 23.6p above the market price.  But there's a long way to go to the expiry date for these contracts - 15th. December - and a glance at the Euronext Option prices (link above) shows me that a counterparty could sell the contracts -  not the shares, in the market for more than 23.6p at the moment. I reckon that's what a sensible option trader would do - assuming he/she wants to dispose of their contracts.  So I will hang on for a while yet  - quite aware that my stockbroker could call any day to tell me I've just bought 2000 Sainsbury shares at 340p!   Then I'd have 5000 shares, so experienced followers of the Sainsbury story will be able to figure out what I would do next.

Addendum 29th. July 2011.  During the week, Sainsbury shares have fallen further and closed today at 304.1p - 35.9p below the strike price.  The argument for doing nothing at the moment remains as stated above. But now I have my fingers crossed!  I don't want to buy shares at 340p.  I could buy 2000  at the present price, which would make the average paid for the 5000 shares 319.79p and then take out the 340p Puts and instead sell 5 x 320 calls - but I think I would come out "cash down" on that deal.  Ho hum!  Who'd be an option trader. On t'other hand, my covered calls in Centrica and Logica are well safe, and the August FTSE contracts are safe also, despite the noises coming out of Washington about the U.S. borrowing requirement.  Today Greece . .  tomorrow the States!

August 2011 FTSE Index Options

I redeemed my July FTSE contracts on 1st. July at a cost of £458.80p leaving me in profit on the opening sale of these contracts (see post below) of £1442.40p. At the same time I sold to open 8 x August 6300 Call Options and 8 x August 5350 Put Options. These sales yielded £2021.20p. Expiry date for these options is 21st. August, but I expect to redeem them before the expiry date. This is now my regular trading pattern. Full results for 2011 to the July expiry are now at the foot of this page.

Sainsbury "Put" Options.

The share price is currently languishing well below the "strike" price  (340p) of the 2 short Put contracts that I hold in the stock, opened in December 2010.  So I could be required to buy 2000 Sainsbury shares for 340p at any time, and I certainly will have to buy them on expiry day, Friday 17th June. The market price is in the 325p range.  I don't want to do buy the shares. So I have bought back the Put contracts and opened 2 more contracts at the same strike (340p) in the December series, expiry 15/12/2011.  Plenty of time for the price to recover, and I'm not likely to be assigned the shares on contracts with 6 months still to run. I hold 3000 Sainsbury shares and the net cost to me, including all receipts from trades in the options, is 330.25p 

July 2011 FTSE Index Contracts

I redeemed my June FTSE contracts on 31st. May at a cost of £538.80p, leaving me in profit on the opening sale of these contracts (see post below) of £1881.40p. At the same time I sold to open 8 x July 6350 Call Options and 8 x July 5400 Put Options. These sales yielded £1.901.20p. Expiry date for these options is 15th. July, but I expect to redeem them before the expiry date. This is now my regular practise. Full results for 2011 to the June expiry are now at the foot of this page.

June 2011 FTSE Index Contracts

I redeemed my May FTSE contracts early at a cost of £698.80p, leaving me in profit on the opening sale of these contracts (see post below) of £1915.80p. At the same time I sold to open 8 x June 6450 Call Options and 8 x June 5500 Put Options. These sales yielded £2,420.20. Expiry date for these options is 17th. June, but I expect to redeem them before the expiry date. This is now my regular practise. Full results for 2011 to date are now at the foot of this page.

May 2011 FTSE Options . . .

I redeemed my April FTSE 100 options (8 x 5350 Puts, 8 x 6350 Calls) for a net £538.80, leaving me in profit by £1642.40p on my April trades.  At the same time I sold contracts for the May expiry on 20th. May as follows - 8 x 5350 Puts, 8 x 6300 Calls, yielding £2614.60, which I keep if the FTSE 100 Index is between 5350 and 6300 at 10.30 a.m. on 20th.May.  However, I find it potentially more profitable to redeem the contracts before expiry and open contracts in the following month.  Readers should study the pricing model on  the Euronext pages to see why this is. (Follow the LIFFE Option Prices link above)

Splashed Out . . .

. . . on 3000 Sainsbury shares this morning, paying 335.8p per share, plus expenses.  The share price had slumped  19p this morning. Sainsbury reported results below expectations, and a rumour is circulating that they will make a bid for Marks & Spencer Group. These 2 bits of business news combined to knock the price off its recent perch in the 380's.  "My Open Contracts" (above) shows I hold 2 x "short" Put contracts on the stock at 340p for the June expiry, so I could be required to buy another 2000 shares at any time up to the June expiry date (17th. June) if the price remains below 340p. I will then have 5000 shares and could then sell 5 Call contracts (covered by the shares) in the September or December series.  

Logica CMG Option Contracts

I was "short" 5 x 140 March Calls (covered by 5000 shares in the stock). These contracts expired at 10.30 a.m today. The share price was 127.3p at the time. So I keep the shares because only an incompetent would buy the shares from me at 140p (the Call strike) when he can buy them in the market at 127.3p. And I keep the £316 that I received when I opened the contracts in October 2010.  I could now sell 5 more contracts in the June or September series at the same strike price (140p), but I will wait a to see if the shares  recover following the recent slide in the UK markets. At the present time I would get less than £30 per contract for the June 140 Calls and little more for the September 140's.  Watch this space.

Monday, March 21st. I renewed the 5 x 140p Calls which expired last Friday. I am now "short" 5 x 140p Calls in the September series, expiring on 16th.September. I received 6.25p per share for this opening sale. I have now paid 121.08p per share net of all expenses. The shares are valued at 133.6p at the present time, so even if I the Call contracts are assigned against me, I have an assured profit of nearly £950.

You Want Your Country To Experience Economic Success?

Ask the Americans to bomb the shit out of you!  That needs some explanation.
The other day my stockbroker forwarded an eMail to me which included a lot of pictures like this . .

Hiroshima, 65 years after America bombed the shit out of it. 

If that needs explanation, or if you are American, or if you are less than about 65 years old, here it is. In August 1945, the Americans dropped the first atomic bomb on the city. The surface agenda was to end WW2.  The hidden agenda was a warning to the Russians and the rest of the World not to mess with Uncle Sam.

But don't be too hard on the Americans.  It's well known that they always operate with the World's best interests at heart, are still sore about Pearl Harbour, and MUST, someday, somewhere, do better than they did in Vietnam. (They dropped another atomic bomb on Nagasaki a few days later. Yup! They're really good at the Massacre of the Innocents.)

Along with the Hiroshima pictures, came a lot of pictures like this . . .

Detroit, 65 years after the Americans bombed Hiroshima.

No, America didn't bomb Detroit, though much of Motown now looks like they did. An "argument" accompanied these pictures - laughable if it wasn't so transparently ludicrous and sad.  Essentially the economic freakster who originated the argument seemed to be saying that Hiroshima had recovered and overtaken the Rust Belt because the Japanese don't have a Welfare System.

Whereas . . yes, you've guessed it, Detroit, Michigan etc have gone down the pan because the Clinton and Obama administrations wanted to expand the rudimentary welfare system that disgraces Old Glory!

Remember, this is "Economics" and economists have correctly predicted all 7 of the last 3 recessions.  As I see it, the Rust Belt is rusting because America thinks the world owes it a living, and nobody, least of all a crappy little country where they once slaughtered 100,000 civilians in a single morning, has the right to build better cars than Ford, GM etc., and build 'em cheaper.  Oh, the poor dears.

Here's a similar argument. I don't know if it's logically sounder, or economically more factually based, but when we're into a pseudoscience like freakonomics, who cares?

Japan supports armed forces, but they do not go rampaging round the World squandering countless billions of their taxpayers' yen on wars which they cannot possibly 'win' in any conventional military sense, and will keep them engaged on "bringing freedom and democracy" to countries they know nothing at all about except they don't like them. Instead, the Japanese put their taxpayers' yen to work doing research into robotics, machine tools, computing, you name it . . while Detroit is sacrificed to the ambiton of military cretins throwing ther weight about in the guise of national security.

Tailpiece. The eMail also asked "What happened to the atomic radiation that was supposed to last for thousands of years?"  Well, the answer to that one so really, really simple that even an economist can understand it. The Japanese are still dying from it 65 years later.

The Greatest Nation on Earth . .

. . . are holding this young man in Abu Ghraib conditions.  Let's just repeat that . . THE GREATEST NATION ON EARTH . . y'know, the one that rampages round the World, killing, bullying, torturing and gereally kicking any ass it happens to take a dislike to, which at the same time whines and bleats that the other nations of the World don't practise democracy, freedom and human rights and so must be tortured, bullied and killed until they start so practising, which doesn't recognize the International Court of Human Rights in case that Court twits one of its precious citizens, which "negotiates" non-reciprocal extradition treaties with the British Government, which protects cotton pickin', banjo pluckin' redneck farmers from fluctations in market prices because it BELIEVES THE REST OF THE WORLD OWES IT A LIVING, which allows its insane investment b(w)ankers to piss its taxpayers' dollars down a bottomless toilet of risk and at the same time doesn't turn a hair when those same b(w)ankers award themselves multibillion dollar bonuses, . . is holding this young man in Abu Ghraib conditions, i.e. naked, sleeping on  the floor, in solitary confinement "for his own safety" because he joked to a prison guard that he might "strangle himself with his own underpants"

Bradley Manning

charged - well, actually, no, he's detained naked etc etc but he hasn't been actually CHARGED WITH ANYTHING - bit like the prisoners in Guantanamo camp, remember them? - he's being investigated to see if he's done anything wrong - that's how the Greatest Nation on Earth begins the process of dispensing justice - with supplying the thousands of documents constituting the bulk of the outbreak of WIKILEAKS. Bradley Manning's President, Mr. Barak Obama, just yesterday declared that Manning's holding conditions were "appropriate."  My guess is either the Hillary Clinton Mob or  the Pentagon told him to say that.

MAKES YOU PROUD YOU'RE NOT AMERICAN, DOESN'T IT?

And before you start protesting that FTSE has just got a chip on his shoulder, think about this . .  which organisation is carrying out the forthcoming census in our Sceptred Isle?  You don't know?  Of course you don't.  H.M Government doesn't want you to know in case you start bleating about the fact the LOCKHEED MARTIN CORPORATION, an American Corporation specialising in the manufacture of weaponry et al, is running the U.K census.  "So what?" I hear you cry, "someone's got to run it."  So this. The Patriot Act gives the American Government the absolute right to see any and all information on any subject held by any American corporation or organisation.  That's the measure of their psychoses and paranoia, but let that pass.  Lockheed Martin will hold our census data and so, in principle, the White House, the Pentagon and the incompetents in Langley, Virginia have access to any personal and family details which you are obliged UNDER BRITISH (not American) law to include in  your census return. This is one result of successive British governments since the end of WW2 sticking their tongues as far into White House underpants as they can possibly reach. Remember what the much vaunted "special relationship" means. It means "Listen, you Limey Brits. You fucking well do what we tell you, O.K?"

April 2011 FTSE Options

I redeemed my March FTSE Option (7 x 6350 Calls, 7 x 5400 Puts) on 8th March. (Expiry was 18th. March), trousering £1104.60 profit in the process - see Table at top of this blog.  At the same time, I opened by selling 8 x 6350 Calls and 8 x 5350 Puts in the April series.  These sales put £2181.20 into the bank, but I keep all of this only if I still hold the contracts and the FTSE 100 Index is between 5350 and 6350 at 10.30 a.m. on the day the contracts expire, 15th. April. If I redeem the contracts before then, the "buy back" costs will absorb some of the yield from the opening sale. So far this year, things are going well. The FTSE Index has been pretty well flat on its back since last October and I have had no anxious moments and have not had to rush about re-arranging things mid-contract. But storm clouds can gather in no time. I'm surprised that recent events in North Africa have not significantly moved World Indices.