ERICOPOLY

Yes, of course. I hold X shares as a business owner that I won't touch. I also write puts for premium that can be used to acquire more shares upon expiration. The strategy adds to my ownership, doesn't take away from it. I don't do one or the other, I do both. Writing a put and not purchasing an offsetting call is owning the downside without owning the upside. The guy who is buying your puts (to hedge his added common) has been kicking your ass at this game. In previous posts I've mentioned if the stock is in the $60's I can buy a put to protect gains. It's important to understand the reason I'm doing this... it's to accumulate shares, not to necessarily profit a ton short-term. All I have to do writing puts is wait until they expire. That's it. What's the point of writing a put at the $45 strike for $5, buying a call at the same strike for $4... and the stock is at $45 at expiration? I would make $1 instead of $5 on just selling the put. Eric, I understand your point, but the goal of my strategy is to accumulate shares, not make a killing on price movement. It gets to the time value of options... I don't want to pay premium for it (unless the stock is in the $60's/$70's, etc. to lock in gains), I'd rather sell the time premium. We just have a different philosophy on it. I've been writing puts since 2007. Most of the time, I made a little bit of profit here and there only to get my ass kicked by losing a ton of upside eventually. I once shared your philosophy on it. Experience has changed my views. And I credit UCCMAL for being a faster learner than I. This is only if you believe SHLD has great upside to begin with. If you are in the middle, that is you dont believe it has much more downside but you also dont think it has major upside, it makes sense to write puts to take advantage of huge premiums. Depends how you measure upside. August: Stock at $40 September: Stock at $65 Now: Stock at $45 No upside right? These puts always look most tempting when the premiums are at their peak. However every time that's happened, you would have made more by purchasing more stock and hedging with the very puts that Luke is writing. And every time it's been at the optimal point for writing covered calls, you would have had greater upside opportunity by selling the stock and waiting for it to drop. The stock is just very volatile and the premiums are high (relative to Coca Cola). But Coca Cola doesn't move around as much. The common stock moves up and down far more violently than the speed at which these options decay.

hahahah pretty sure you only can find it if you drive a Tesla 8) My wife is still teasing me over the stewardess at the Santa Barbara airport. I'm parked curbside with the Tesla right outside the terminal. My wife's plane has landed and she is waiting for her bags just outside the building where the baggage claim is (the airport is tiny and you can catch a bit of sun while you wait for the bags). So she and I can see each other. This redheaded stewardess from her flight walks right past my wife and is headed for the crosswalk, about 30 feet away" from where I am parked. She stops and starts wandering over. "Is that an electric car? How far can you travel with it? etc... etc...". My wife's watching the whole thing and I know it. So it's just funny... what am I supposed to do in that situation? I can't say "hey, my wife's getting jealous"... Anyways...

You also have the choice of marrying her and then pimping her out. There are people doing this -- they lend their shares for income. I wonder how that matches up against the money you are getting for your puts. They are tightly connected of course -- the high lending fees are responsible for the put/call non-parity.

I think it's more like he's pimping out the second supermodel. He loves her and hopes to marry her one day. Ahh, no risk to earning a bit of money off of her before the wedding ceremony. He says it will pay for the cost of the wedding!!! She falls in love with the John and he loses her.

You're exactly right! I don't pretend to have any clue what SHLD stock price will do short-term. I am obviously bullish long-term. So, I write puts to collect premium and it pays off handsomely if the stock does nothing or goes up. Stock goes down and I roll forward for a little extra premium. The two strategies are not the same as you pointed out, and that's the entire point of why I'm doing it. Bottom-line is I don't have to be right on direction to accumulate a large amount of additional shares. Bottom line, you are doing this to make money on the premium. You are not doing this to accumulate more shares. Get honest with yourself -- can't you accumulate more shares by purchasing the common? The only difference between the two is the premium. It's like you have the kindest, most beautiful woman sitting at the bar next to you. She keeps looking at you, and it feels good. You intend to ask for her number, but you figure it would be a waste to ask her out right now because you estimate you can get a few more minutes of this ego-boosting good feeling of being admired. She gets a text message that her car has been towed, quickly pays her tab, and hurries out the door. You don't see her again. Your excuse was that you were risking nothing, because you got your ego shined for a bit and it was worth the cost of losing her because you intended to get her number if she stayed.

Yes, of course. I hold X shares as a business owner that I won't touch. I also write puts for premium that can be used to acquire more shares upon expiration. The strategy adds to my ownership, doesn't take away from it. I don't do one or the other, I do both. Writing a put and not purchasing an offsetting call is owning the downside without owning the upside. The guy who is buying your puts (to hedge his added common) has been kicking your ass at this game. In previous posts I've mentioned if the stock is in the $60's I can buy a put to protect gains. It's important to understand the reason I'm doing this... it's to accumulate shares, not to necessarily profit a ton short-term. All I have to do writing puts is wait until they expire. That's it. What's the point of writing a put at the $45 strike for $5, buying a call at the same strike for $4... and the stock is at $45 at expiration? I would make $1 instead of $5 on just selling the put. Eric, I understand your point, but the goal of my strategy is to accumulate shares, not make a killing on price movement. It gets to the time value of options... I don't want to pay premium for it (unless the stock is in the $60's/$70's, etc. to lock in gains), I'd rather sell the time premium. We just have a different philosophy on it. I've been writing puts since 2007. Most of the time, I made a little bit of profit here and there only to get my ass kicked by losing a ton of upside eventually. I once shared your philosophy on it. Experience has changed my views. And I credit UCCMAL for being a faster learner than I.

Yes, of course. I hold X shares as a business owner that I won't touch. I also write puts for premium that can be used to acquire more shares upon expiration. The strategy adds to my ownership, doesn't take away from it. I don't do one or the other, I do both. Writing a put and not purchasing an offsetting call is owning the downside without owning the upside. The guy who is buying your puts (to hedge his added common) has been kicking your ass at this game.

Yes, I'm OK getting put the stock. The vast majority of the time you can simply roll them forward, collect additional premium, and wait until it expires above the strike. If you're bullish on a stock the added time can be your friend and you get paid to roll it. Must use the appropriate size on the trade. There are people writing covered calls on SHLD after a runup, and writing cash covered puts after each pullback. I can't help but notice that you'd be making more profit if you instead sold your common after each runup, and bought the common after each pullback. The volatility in the stock is so extreme that the moves to the upside and downside far exceed the profits you are pocketing on these trades. True, but there is no way I'm risking my ownership in the company to try and get a little short-term profit. I'm holding my shares as a business owner, and trading around that position (not touching the shares) to try and add to it/generate income. You don't risk ownership in the company if you purchase common instead of your writing these puts. By definition you get more ownership, not less -- if anything, you are taking on downside risk but not getting the full upside potential. So given what you are risking, it looks to me as if you are in fact risking ownership in the company if your puts don't get assigned. Somebody else (not you) was commenting that he has been writing covered calls. So part of the post was directed at him, and part at you, but not both behaviors at the same time per person.

Yes, I'm OK getting put the stock. The vast majority of the time you can simply roll them forward, collect additional premium, and wait until it expires above the strike. If you're bullish on a stock the added time can be your friend and you get paid to roll it. Must use the appropriate size on the trade. There are people writing covered calls on SHLD after a runup, and writing cash covered puts after each pullback. I can't help but notice that you'd be making more profit if you instead sold your common after each runup, and bought the common after each pullback. The volatility in the stock is so extreme that the moves to the upside and downside far exceed the profits you are pocketing on these trades.

Suppose you were able to write a 5 year put on SHLD (even though you can't)... Even though you get a strike adjustment on each spinoff, the price stability of the stock left behind (that you wrote the downside on) might get more and more crazy as increasingly (with each iterative divestiture) you own a piece of something backed mostly by the retail and less by easily identifiable non-core assets of clear value.

Guitar lessons.

I have come to learn the hard way that's it's best to use non-recourse leverage. So just buy at-the-money call or get a loan paired with at-the-money put. Look, if things take off and go straight up, you can always recoup the cost of most if not all of your volatility premium by writing covered calls (after the runup). And if they drop like a stone, it costs you a lot less than if you'd borrowed money without the put. And if they stagnate... well they don't normally do that. At least not in recent years.

You'll be fine -- the ban does not include 3-way bulbs: http://www.amazon.com/s/ref=nb_sb_ss_i_0_11?url=search-alias%3Daps&field-keywords=3-way%20incandescent%20light%20bulbs&sprefix=3-way+incan%2Caps%2C200&rh=i%3Aaps%2Ck%3A3-way%20incandescent%20light%20bulbs It also allow you to have " high efficiency incandescents -- which are just regular incandescents that have the filament wrapped in gas"

It appears the average inheritance in Australia is over $501,919. Here in the US, only $177,000: http://money.cnn.com/2013/12/13/retirement/american-inheritance/index.html?iid=HP_LN I'm sure that is heavily linked to residential property valuation.

On the positive side, we do all benefit by having fewer electricity transmission lines. In some areas, there are brownouts during peak loads. Plus, it's really no extra bother in screwing one type of light bulb versus another. They are interchangeable. It's not like you are being forced to bicycle to work instead of driving your car. That would save more energy but it would perhaps be a serious impediment to your ability to live your life as you please. This is not freedom limiting. No more so than say, having a building code that doesn't allow you to put single-pane glass windows in your home. Sure, the double pane glass costs more. Isn't that freedom-limiting too? I guess it is.

Usually I like analogies, but that made me confused... Are you saying SHLD is now falling apart and we're getting to the good part? The part where value's created? Sum of the parts value (if he can indeed separate the good meat from the bad). However part of the cooking is still left to be done (he still has a lot of real estate to unlock but that depends on SYW). Ok, cool. How does that depend on SYW? Are you saying if SYW begins to fail they'll sell/unleash the real estate? No, I mean if it begins to succeed they can operate with a smaller real estate footprint (and spin off the excess real estate). They need to turn the retailer into something that can at least bring market-rent to the real estate assets that it consumes, and preferably a return in excess of that. EDIT: The bone will be sticking out when SYW is a success

Usually I like analogies, but that made me confused... Are you saying SHLD is now falling apart and we're getting to the good part? The part where value's created? Sum of the parts value (if he can indeed separate the good meat from the bad). However part of the cooking is still left to be done (he still has a lot of real estate to unlock but that depends on SYW).

A few years ago I bought a Big Green Egg and learned how to make pulled pork. You start off with a bone-in pork shoulder (a very cheap piece of meat) You cover it with a rub and let it sit in the fridge overnight Cook it at like 230F for a super-long time (like 15 hours) until the bone is sticking out Then it's done. You take it out of the Big Green Egg and lay it on the table for an hour -- it will still be quite warm You then slide the bone out and "pull" out all the good pieces of meat That's my SHLD mental model. It's not one of cutting away the cancer and leaving a good business behind, but rather it's one of buying a piece of meat really cheap and with a very laborious and long process of properly preparing it, you then have some moist and delicious pork bits and a big pile of fat and bone that you throw in the waste-bin. See... you initially buy the pork shoulder really cheap. You can't separate the good pieces from the bad pieces unless you cook it for a very long time until it falls apart.

Actually, if you could just convince the Chinese to dump their treasury holdings, and convince US taxpayers to purchase them... that would go a long way towards fixing the budget.

I envision them to set low interest rates and high tax rates. So that if you are earning 3% interest rate and paying 40% tax, you only have 1.8% left which doesn't even give you a positive return after inflation. So they are effectively seizing 100% of your real return. I expect them to bring this tax in... immediately. Oh wait, they've exceeded my expectations! The 100% tax is already here.

I believe he said something to the effect of being entitled to earn an acceptable return on each asset. Spin off the retailer, today? Seriously? It would go bust immediately. He can only give it the old college try with SYW to turn it around so he isn't remembered as the asshole who fired everyone. And he stands to benefit if it works out -- he might even believe that it will. He preserves jobs by shrinking the square footage of the store occupied by the existing bare-bones staff of the retailer (the smaller store, by comparison, appears to be well staffed). The rest of the real estate, he can spin off in Seritage to earn an acceptable return. Once the retail transformation is complete (standing on it's own), everything else remaining can be spun off/liquidated. Any and all real estate not consumed by the retailer can then be monetized (by redevelopment or otherwise). So the strategy is simply: 1) shrink the real estate needs of the retailer via SYW strategy (and redevelop or otherwise monetized the freed-up real estate) 2) deconglomerate via spinoffs 3) if 1 succeeds he not only makes more money (from the retailer), but avoids looking like the jerk who fired everyone for a quick liquidation

They're not mutually exclusive. Maybe he just wants the bag left behind (the retailer) to have value. It doesn't mean he isn't going to spin off everything else. Why spin off Land's End if his goal is to build the next Berkshire Hathaway? Huh? Makes no damn bit of sense.

That's more expensive than the IB margin rates. There is little risk of rising rates in that timeframe.

I just turned off the central heating and opened my doors. Ahh.... it's over 70 here today :) Forecast for Monday is 77.

That's hilarious.