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When should we get greedy?

Investment discussion for beginners. Why you should invest your money, get help getting started
TheMotorcycleBoy
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Re: When should we get greedy?

#357690

Postby TheMotorcycleBoy » November 18th, 2020, 12:04 pm

johnhemming wrote:You can, of course, invest in your own name. You need to pay tax on dividends and capital gains, but that still leaves cash at the end of the process.

I might start to do that.

Thing is, I used to file tax records in the very early 2000s when I was s/w consultant. And when I went permie again, not having to do the returns was a breath of fresh air.

I need to check a things out with the US brokerage where my employee stock grants go. Currently I cash out my company stocks into GBP as soon as they vest, since at vest date, the necessary amount of stock is always sold first to settle my immediate tax obligation. However I need to double check that the odd smallish random lumps of USD that periodically appear in my ETRADE account are due to that process, rather than any sneaky lil dividends happening StateSide.

Another option, re. tax and spare cash, is just to give it to my eldest Daughter, whose now 18 and me and my Dad have already got her started on an iWeb ISA. It's probably best to that - her and her little Sis we get the lot anyway when me and Mel really do "buy the farm".

Matt

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Re: When should we get greedy?

#357707

Postby kempiejon » November 18th, 2020, 12:21 pm

TheMotorcycleBoy wrote:Tax?


SIPP?
Unsheltered Capital gains £12300 allowance each. Dividend income allowance £2000. These do not carry forward. Once the ISA and SIPP allowances are used I invest unsheltered. My tax planning is to sell to crystallise capital gains towards the end of the tax year and move that into the sheltered accounts and invest unsheltered for the next 11 months.

dealtn
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Re: When should we get greedy?

#357711

Postby dealtn » November 18th, 2020, 12:38 pm

TheMotorcycleBoy wrote:
GoSeigen wrote:
TheMotorcycleBoy wrote:It is. It ain't big enough. It's fixed at 20k per individual for how many years? There is such a thing as wage inflation. :lol:

'
What's wrong with a non-ISA account?

GS

Tax?


So you feel better to be constrained and potentially earn 0% than invest in a non-ISA account, earn a "farm" sized return, but pay tax on it, only retaining most of it?

TheMotorcycleBoy
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Re: When should we get greedy?

#357785

Postby TheMotorcycleBoy » November 18th, 2020, 3:20 pm

kempiejon wrote:
TheMotorcycleBoy wrote:Tax?


SIPP?
Unsheltered Capital gains £12300 allowance each. Dividend income allowance £2000. These do not carry forward. Once the ISA and SIPP allowances are used I invest unsheltered. My tax planning is to sell to crystallise capital gains towards the end of the tax year and move that into the sheltered accounts and invest unsheltered for the next 11 months.

A ha.

So in theory can have both an ISA and a SIPP?

Do you know what's the maximum one can deposit per year into a SIPP? Do I need 1) discover how much I'm already paying into my company employee-contribution plan and then 2) deduct this from a total amount?

thanks for the suggestion
Matt

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Re: When should we get greedy?

#357978

Postby kempiejon » November 19th, 2020, 8:59 am

TheMotorcycleBoy wrote:So in theory can have both an ISA and a SIPP?

Do you know what's the maximum one can deposit per year into a SIPP? Do I need 1) discover how much I'm already paying into my company employee-contribution plan and then 2) deduct this from a total amount?


Max into a SIPP is usually the max including other contributions and tax relief of £40,000 or your total earnings for the year indeed less any other contributions elsewhere. Defined benefit pensions are treated differently. There are adjustments if you earn over £150K that I've not had cause too investigate further...
If you've not used your full contribution in previous years there's carry forward for I think 3 years.
Start here https://www.gov.uk/tax-on-your-private-pension there's a pensions board. viewforum.php?f=17

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Re: When should we get greedy?

#359805

Postby GoSeigen » November 25th, 2020, 7:18 am

GoSeigen wrote:
GoSeigen wrote:Quick update, as I'd covered my short puts earlier I reopened a short Nov slightly OTM put into yesterday's weakness. Just seemed more sensible than closing the calls with quite a bit of time value left and only a week to expiration.

GS


Added a short Nov strangle. Silly prices for expiration in 3 trading days. Might regret it come Friday though :-o

Expiration at 3600 or just below would be ideal.

GS


Expiration last week was as good as could be hoped with the S&P opening around 3580 on Friday bringing a good chunk of profit. I still hold a net long Jun position with two straddles. I've written Dec strangles against these positions. I still feel the market is bullish: if we get a strong Santa rally the Jun positions will protect against big rises.

GS

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Re: When should we get greedy?

#375066

Postby GoSeigen » January 9th, 2021, 11:09 am

GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:Quick update, as I'd covered my short puts earlier I reopened a short Nov slightly OTM put into yesterday's weakness. Just seemed more sensible than closing the calls with quite a bit of time value left and only a week to expiration.

GS


Added a short Nov strangle. Silly prices for expiration in 3 trading days. Might regret it come Friday though :-o

Expiration at 3600 or just below would be ideal.

GS


Expiration last week was as good as could be hoped with the S&P opening around 3580 on Friday bringing a good chunk of profit. I still hold a net long Jun position with two straddles. I've written Dec strangles against these positions. I still feel the market is bullish: if we get a strong Santa rally the Jun positions will protect against big rises.

GS


Sorry, no update in December after being tested positive for Covid, from which I've mostly recovered now. December expiration went well, with a decent profit on positions. However, I rolled my positions much more cautiously than previous months, partly due to being sick but also because of a general uneasiness which has now developed into a solid decision to change strategy.

Previously I have been happy to write options, earning money from the time value and (hopefully) falling implied volatility which I have noted has been at historically high levels. I was happy to do this because I was somewhat uncertain as to how the market would evolve, and indeed I have been pretty surprised. The S&P has risen fast and persistently, hitting new post-COVID highs and maintaining this momentum with regular new record highs. Its strength certainly justifies the premium on the VIX: calls were the way to go but options buyers had to pay up for them. OTOH the FTSE has surprised by remaining weak, only gaining positive momentum in recent weeks.

Since December I have reassessed and feel I have a solid new strategy which I have already been following.
-I have taken positions in long FTSE futures and short-put positions (a strongly bullish view) to add to my previous leveraged long position on UK stocks and hybrid securities.
-I will no longer write S&P straddles and strangles, instead taking a cautious watching remit with options and perhaps purchasing long-dated options as market moves dictate i.e. will buy puts after extended rises and buy calls on sharp falls. Given the still-high implied volatility this must be done cautiously over an extended period. If I note an inversion of the volatility term curve I will perhaps buy straddles again. Similarly, if contango rises strongly from it's current low levels I may restart the option writing.
-In the short term I'll try to increase exposure to bank equity and China/Emerging markets as conditions permit. Over time I will also seek opportunities to increase cash levels by taking profit on UK positions and increase my short exposure to the US.

These changes are prompted by the following observations:
1. I was wrong about VIX. It has not broken its rising trend and my view now is that it will remain elevated in a warning of bubble conditions.
2. The CBOE has updated its web pages and in the process screwed up its term structure data and chart page. I haven't an alternative source so this has removed a major data input to my option writing strategy and I'm no longer confident I can time it correctly.
3. The S&P has broken out to all-time highs; the FTSE has broken out of its consolidation. These events add too much risk to a short-options/short-vol strategy IMO, while at the same time allowing transition to the above alternative approach.
4. VIX contango has remained stubbornly low, making me nervous about a short vol strategy.
5. My view is that the US is entering bubble territory. This is a time to start thinking about more defensive positioning even as one's portfolio is looking in increasingly good shape. In our case we are now well up on last year's highs so I am conscious that I need to progressively rein in my bullish impulses.
6. All over I see signs of late-bull danger. Last year in Feb I called a secular bull. For the FTSE I think that is still possible, but equally we may see an extreme late-stake acceleration of prices which will be difficult to trade. The signs I am seeing are the long-awaited IPO frenzy with ISTM an increase in M&A, and insane movement in risky and obscure assets like Tesla, bitcoin and US small caps. Also this year has seen the first signs of a rotation from growth back to value -- or to be fair the first signs of bottoming of the previous trend. I'm already positioned towards value so not really concerned at what I'm seeing and I have to say, the way the market evolves might simply turn out to be a massive rotation rather than a crash of the entire market.

Sorry long post, but there were a few things to put in there. Given the change in strategy I'm not sure it would be appropriate to keep updating my posts here, so unless there is strong demand to the contrary I will make this my final update.

GS

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Re: When should we get greedy?

#375103

Postby TheMotorcycleBoy » January 9th, 2021, 12:14 pm

As far as I'm concerned you can keep posting just here, if you like!

Matt

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Re: When should we get greedy?

#375140

Postby MaraMan » January 9th, 2021, 1:27 pm

TheMotorcycleBoy wrote:As far as I'm concerned you can keep posting just here, if you like!

Matt


Me too. I hope you continue.

MM

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Re: When should we get greedy?

#425779

Postby GoSeigen » July 8th, 2021, 9:00 am

GoSeigen wrote:
Sorry, no update in December after being tested positive for Covid, from which I've mostly recovered now. December expiration went well, with a decent profit on positions. However, I rolled my positions much more cautiously than previous months, partly due to being sick but also because of a general uneasiness which has now developed into a solid decision to change strategy.

Previously I have been happy to write options, earning money from the time value and (hopefully) falling implied volatility which I have noted has been at historically high levels. I was happy to do this because I was somewhat uncertain as to how the market would evolve, and indeed I have been pretty surprised. The S&P has risen fast and persistently, hitting new post-COVID highs and maintaining this momentum with regular new record highs. Its strength certainly justifies the premium on the VIX: calls were the way to go but options buyers had to pay up for them. OTOH the FTSE has surprised by remaining weak, only gaining positive momentum in recent weeks.

Since December I have reassessed and feel I have a solid new strategy which I have already been following.
-I have taken positions in long FTSE futures and short-put positions (a strongly bullish view) to add to my previous leveraged long position on UK stocks and hybrid securities.
-I will no longer write S&P straddles and strangles, instead taking a cautious watching remit with options and perhaps purchasing long-dated options as market moves dictate i.e. will buy puts after extended rises and buy calls on sharp falls. Given the still-high implied volatility this must be done cautiously over an extended period. If I note an inversion of the volatility term curve I will perhaps buy straddles again. Similarly, if contango rises strongly from it's current low levels I may restart the option writing.
-In the short term I'll try to increase exposure to bank equity and China/Emerging markets as conditions permit. Over time I will also seek opportunities to increase cash levels by taking profit on UK positions and increase my short exposure to the US.

These changes are prompted by the following observations:
1. I was wrong about VIX. It has not broken its rising trend and my view now is that it will remain elevated in a warning of bubble conditions.
2. The CBOE has updated its web pages and in the process screwed up its term structure data and chart page. I haven't an alternative source so this has removed a major data input to my option writing strategy and I'm no longer confident I can time it correctly.
3. The S&P has broken out to all-time highs; the FTSE has broken out of its consolidation. These events add too much risk to a short-options/short-vol strategy IMO, while at the same time allowing transition to the above alternative approach.
4. VIX contango has remained stubbornly low, making me nervous about a short vol strategy.
5. My view is that the US is entering bubble territory. This is a time to start thinking about more defensive positioning even as one's portfolio is looking in increasingly good shape. In our case we are now well up on last year's highs so I am conscious that I need to progressively rein in my bullish impulses.
6. All over I see signs of late-bull danger. Last year in Feb I called a secular bull. For the FTSE I think that is still possible, but equally we may see an extreme late-stake acceleration of prices which will be difficult to trade. The signs I am seeing are the long-awaited IPO frenzy with ISTM an increase in M&A, and insane movement in risky and obscure assets like Tesla, bitcoin and US small caps. Also this year has seen the first signs of a rotation from growth back to value -- or to be fair the first signs of bottoming of the previous trend. I'm already positioned towards value so not really concerned at what I'm seeing and I have to say, the way the market evolves might simply turn out to be a massive rotation rather than a crash of the entire market.

Sorry long post, but there were a few things to put in there. Given the change in strategy I'm not sure it would be appropriate to keep updating my posts here, so unless there is strong demand to the contrary I will make this my final update.

GS


Quick update on the above.
1. The short FTSE Puts mentioned have almost all been closed now, all of them OTM, so good trade there. I've replaced them with further long FTSE index futures to the same nominal value, which show a small profit.
2. VIX has dropped a bit remains higher than it deserves to be IMO. As before I think this reflects ongoing anxiety about US stock values. I'm short the S&P but have also bought straddles which are now far above their strike but still slightly under water. These will provide some protection if the market moves higher, hence...
3. Given the steepening term structure of the VIX I have renewed my taste for short S&P straddles. Thus today opened a position in the August contracts. Obviously I'm hoping the Summer season will produce limited overall movement up or down in the S&P. However given the ITM long straddle already held this trade is overall still bullish -- I'll be much happier with a rising than a falling market.
4. Banks have done very well. Some will know I have been focussing on Manchester Building Society stock which has done very well after a win in Court, they now account for about 25% of net worth so I'll look to liquidate some of these gradually into strength, probably adding to other UK bank positions.
5. Value had a good run and has paused, may be a good time to look at it again. I like UK and emerging stock markets. Also looking to buy a bit more property, but not in the UK -- where I am now 20% gross yields are common, we are grossing that on the property we bought a couple of years ago without trying. The world is leaving the COVID problem behind now and there should be a good bit of growth in the next few years IMO and profit margins are strong.
6. Metals, mining and commodities have taken a rest. Glad we took profit earlier this year, the remaining positions have gone nowhere. Just being patient with this area.

All the above is my own ramblings. I fully expect to be proved wrong in a number of ways within days of making this post so please, as usual, Do Your Own Research.

GS

TheMotorcycleBoy
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Re: When should we get greedy?

#425812

Postby TheMotorcycleBoy » July 8th, 2021, 11:19 am

GoSeigen wrote:2. VIX has dropped a bit remains higher than it deserves to be IMO. As before I think this reflects ongoing anxiety about US stock values. I'm short the S&P but have also bought straddles which are now far above their strike but still slightly under water. These will provide some protection if the market moves higher, hence...

My reading of the current S&P behaviour is that inflation worries seem to have subsided based on the premis that "the Fed knows what it's doing". In the sidelines there are doom and gloom monger predicting big corrections, possibly triggered by exit from memes, which could be unnerving some.

https://markets.businessinsider.com/new ... ash-2021-7

6. Metals, mining and commodities have taken a rest. Glad we took profit earlier this year, the remaining positions have gone nowhere. Just being patient with this area.

I read an interesting post somewhere in here.

Trump's trade war smashed commodity prices. In time though every time you hold back commodities you just store up a bigger problem down the road. Arguably the spike in commodity prices we are seeing today is in part a result to his trade war.

Extrapolating upon that, I'm curious that recent global equities run could stem as much from the exit of Trump (and his effect on global trade) as from the Covid vaccines rollout, and the removal of the pandemic threat.

Matt

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Re: When should we get greedy?

#426013

Postby TheMotorcycleBoy » July 9th, 2021, 6:10 am

I'm familiar with the idea that rising bond yields may precipitate a sell off in equities. But this pundit is suggesting a recent fall in yields has resulted in the same thing.

Bond yields continued to fall on Thursday, with the yield on the benchmark 10-year U.S. Treasury note holding well below 1.3%, down dramatically from 1.45% at the beginning of the week and 1.6% just last month.

This has, in turn, pummeled Dow industrials DJIA, -0.75% and the S&P 500 SPX, -0.86% index, while the Nasdaq COMP, -0.72% and its tech stock favorites, such as Amazon AMZN, +0.94%, have fared relatively better.

When bond prices are high — signaling strong demand — yields, the interest paid to a bond holder, fall. Strong demand signals a decline in economic-growth expectations among investors, who wish to lock in future gains by owning bonds.

This has a knock-on effect for the blue-chip companies with earnings tied to economic growth, which populate the Dow and S&P 500. It’s a better picture for growth and tech stocks — the likes of Amazon, Apple AAPL, -0.92% and Tesla TSLA, +1.27% — because their share-price performances rely on future earnings expectations, which get discounted as yields rise.


Actually perhaps I misunderstood his message: expectations of slower growth, result in some portfolios increasing their fixed income allocations, which in turn push up the bonds, and depress some parts of the S&P500.

https://www.marketwatch.com/story/why-e ... 1625743122

Matt

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Re: When should we get greedy?

#426029

Postby GoSeigen » July 9th, 2021, 8:29 am

TheMotorcycleBoy wrote:
Actually perhaps I misunderstood his message: expectations of slower growth, result in some portfolios increasing their fixed income allocations, which in turn push up the bonds, and depress some parts of the S&P500.

https://www.marketwatch.com/story/why-e ... 1625743122



As always, a reminder that "some portfolios increasing their fixed income allocations" will have zero effect on price on average -- because some other portfolios are decreasing their allocations simultaneously.

It is when ALL portfolios in aggregate are increasing their allocation that the price rises. In other words it is about the market's valuation of the asset, not about what a certain class of investors is doing at the relevant time.

I think it's also true to say that one can largely dismiss the ruminations of journalists on why prices are rising or falling, no matter how well-informed: there are many reasons why prices might change -- who's to tell that only one is predominating? -- and it's just opinion and often wrong, so one should form one's own view.

Bond yields don't simply move up or down, as we know there is a range of maturity and credit risk to bonds represented by the yield curve and risk curve respectively. Those curves may be bull steepening, bear steepening, bull flattening, bear flattening, or moving up or down or even something else. The interpretation for shares varies accordingly and also according to where we are in the business cycle. So for a journo to make a bland "bonds did X so shares did Y" statement grossly simplifies the reality.

My view, as shared in a PM earlier with TheMotorcycleBoy is that we are in the early to mid stage of the business cycle where bond and share markets are alternately fretful and cheered by interest rate news with prices jumping around accordingly. Personally I prefer to look through these zigzags and recognise that by the end of the cycle, rates will have already risen significantly and markets will not give a hoot, and then it's time to be really cautious. I believe we are far far from that point right now.

GS

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Re: When should we get greedy?

#426116

Postby TheMotorcycleBoy » July 9th, 2021, 11:10 am

GoSeigen wrote:My view, as shared in a PM earlier with TheMotorcycleBoy is that we are in the early to mid stage of the business cycle where bond and share markets are alternately fretful and cheered by interest rate news with prices jumping around accordingly. Personally I prefer to look through these zigzags and recognise that by the end of the cycle, rates will have already risen significantly and markets will not give a hoot, and then it's time to be really cautious. I believe we are far far from that point right now.

That's a fair comment.

Matt

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Re: When should we get greedy?

#473082

Postby GoSeigen » January 14th, 2022, 2:26 pm

I've entered a new phase of my strategy now where I am gradually reducing leveraged long positions by closing a very small tranche of bank share forward contracts.

I'm doing this just to assess how wrong/premature the change will prove to be.

:-)

GS


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