I read a book called The Big Short, Michael Lewis wrote the blind side (football) Moneyball (baseball), in money he wrote the classic Liars Poker.
this book is very good and probably better than Liars Poker, hard to say.
this is page turner about the ones who were on the correct side of the credit default swaps in 2008. I will comment on a few item about this later, but in the book there was a group of beginning investors who played options a made great returns.
they also shorted cds market however their first trade was a credit card company that ran into accounting problems, the stock traded in the 30s, they did their research on the stock and thought that it was a minor problem and not serious.
they bought calls on the stock (Leaps) long term options (out a year) (Leaps are just long term options out 1-3 years). anyways they bought the leaps for $3.. so they figured if they were wrong they would lose $3 a share.
however they thought they would be correct and the stock would rally, the stock would go to either 0 or double....it turned out well and the stock rallied sharply they made multiples on the $3.
I sell options, always, collect premiums, premiums, 98%, 99% of the time I sell options. however looking back to the sharp market selloff in 2008 I should have played it differently.
in the spring/summer of 2008 talked to a friend about options, they were very cheap, was looking at buying options on the SP and the Toronto Composite. they were very very cheap, for the most part would sell, but never did bought some but not very much should have purchased much, much, more.
in the fall 2009 when the market began to rally in March, slowly bought in, but cash was used to buy corporate debt, this paid off, was not sure the rally would take and scared of a bear market rally.
So in late 2008 and early 2009 would buy debt, cdn. bank debt would pay 10% or close to, overall yield shot up, to me corporate debt was good since if we hit really hard times would be ahead of equity (shareholders) and most balance sheets were decent.
happy I played corporate debt but there was many companies that traded at depressed levels for good reason.
The cdn. banks never cut their dividends to commons shareholders, even during the great depression, you could buy them, yielding now 8-10%, at 5-8PE.
however they were not earning the divdend in Q4 of 2008, now if that continued in 2009 for another 6 months, then they would have to cut the div, and the stocks would tank.
should have in this case bought 1 yr. calls on the banks, you would lose 1-3, if you were wrong or no rally but if there is you would make 10X on your money.
same goes for base metal stocks, retail, ect...so next time if I want to bet money on a rally will look at long term calls.
live and learn.
thanks
selkirk
thanks
selkirk
this book is very good and probably better than Liars Poker, hard to say.
this is page turner about the ones who were on the correct side of the credit default swaps in 2008. I will comment on a few item about this later, but in the book there was a group of beginning investors who played options a made great returns.
they also shorted cds market however their first trade was a credit card company that ran into accounting problems, the stock traded in the 30s, they did their research on the stock and thought that it was a minor problem and not serious.
they bought calls on the stock (Leaps) long term options (out a year) (Leaps are just long term options out 1-3 years). anyways they bought the leaps for $3.. so they figured if they were wrong they would lose $3 a share.
however they thought they would be correct and the stock would rally, the stock would go to either 0 or double....it turned out well and the stock rallied sharply they made multiples on the $3.
I sell options, always, collect premiums, premiums, 98%, 99% of the time I sell options. however looking back to the sharp market selloff in 2008 I should have played it differently.
in the spring/summer of 2008 talked to a friend about options, they were very cheap, was looking at buying options on the SP and the Toronto Composite. they were very very cheap, for the most part would sell, but never did bought some but not very much should have purchased much, much, more.
in the fall 2009 when the market began to rally in March, slowly bought in, but cash was used to buy corporate debt, this paid off, was not sure the rally would take and scared of a bear market rally.
So in late 2008 and early 2009 would buy debt, cdn. bank debt would pay 10% or close to, overall yield shot up, to me corporate debt was good since if we hit really hard times would be ahead of equity (shareholders) and most balance sheets were decent.
happy I played corporate debt but there was many companies that traded at depressed levels for good reason.
The cdn. banks never cut their dividends to commons shareholders, even during the great depression, you could buy them, yielding now 8-10%, at 5-8PE.
however they were not earning the divdend in Q4 of 2008, now if that continued in 2009 for another 6 months, then they would have to cut the div, and the stocks would tank.
should have in this case bought 1 yr. calls on the banks, you would lose 1-3, if you were wrong or no rally but if there is you would make 10X on your money.
same goes for base metal stocks, retail, ect...so next time if I want to bet money on a rally will look at long term calls.
live and learn.
thanks
selkirk
thanks
selkirk
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