What are you buying today?

[rb]

EPD, MO, WFC, ZBH, some BRKB

[LC]

Been rolling a number of my long positions into two year, deep in-the-money LEAPS which has freed up 40-50% of the cash in the positions.

 

 

Will be missing out on some sizable dividends, but have same notional exposure for capital gains and will hopefully make more than the dividends missed by putting the incremental capital to work as new names go down further.

Not a bad idea at all.

[turar]

Been rolling a number of my long positions into two year, deep in-the-money LEAPS which has freed up 40-50% of the cash in the positions.

 

 

Will be missing out on some sizable dividends, but have same notional exposure for capital gains and will hopefully make more than the dividends missed by putting the incremental capital to work as new names go down further.

Not a bad idea at all.

some of those premiums are pretty high looking

[Castanza]

Been rolling a number of my long positions into two year, deep in-the-money LEAPS which has freed up 40-50% of the cash in the positions.

 

 

Will be missing out on some sizable dividends, but have same notional exposure for capital gains and will hopefully make more than the dividends missed by putting the incremental capital to work as new names go down further.

Not a bad idea at all.

 

What would this look like in practice?

[LC]

Been rolling a number of my long positions into two year, deep in-the-money LEAPS which has freed up 40-50% of the cash in the positions.

 

 

Will be missing out on some sizable dividends, but have same notional exposure for capital gains and will hopefully make more than the dividends missed by putting the incremental capital to work as new names go down further.

Not a bad idea at all.

some of those premiums are pretty high looking

 

Yeah that's the only setback. You'll have to calculate how much the leverage will cost you. On some stocks it's far worse than others. But freeing up 50% of capital, if you can put that to work and generate expected return higher than your premium cost, it can be useful.

 

Use thoughtfully.

[LC]

Been rolling a number of my long positions into two year, deep in-the-money LEAPS which has freed up 40-50% of the cash in the positions.

 

 

Will be missing out on some sizable dividends, but have same notional exposure for capital gains and will hopefully make more than the dividends missed by putting the incremental capital to work as new names go down further.

Not a bad idea at all.

 

What would this look like in practice?

 

Lets say I own 100 shares of Visa, average cost is 170. Current price is 145 or so.

 

Buy 1 Call, strike price 85, expiration Jun-2022, for about 67/sh.

 

Essentially you're buying 100 shares for 152/share (85 strike + 67 call price). But you only need to put up 6700 rather than 14,500 in the market.

 

So your cost here is 7/share premium divided by the amount of cash you are borrowing ie 14500-6700 or 7800, about 9% or so.

 

Pricey, but again it depends what your expectations are for that freed-up-cash.

[Castanza]

Been rolling a number of my long positions into two year, deep in-the-money LEAPS which has freed up 40-50% of the cash in the positions.

 

 

Will be missing out on some sizable dividends, but have same notional exposure for capital gains and will hopefully make more than the dividends missed by putting the incremental capital to work as new names go down further.

Not a bad idea at all.

 

What would this look like in practice?

 

Lets say I own 100 shares of Visa, average cost is 170. Current price is 145 or so.

 

Buy 1 Call, strike price 85, expiration Jun-2022, for about 67/sh.

 

Essentially you're buying 100 shares for 152/share (85 strike + 67 call price). But you only need to put up 6700 rather than 14,500 in the market.

 

So your cost here is 7/share premium divided by the amount of cash you are borrowing ie 14500-6700 or 7800, about 9% or so.

 

Pricey, but again it depends what your expectations are for that freed-up-cash.

 

Interesting, thanks for sharing. For some reason I was thinking it was more complicated than that haha

[LC]

There are other structures you can use to achieve the same, for example

 

You can buy the full 100 shares for 14,500 and margin the 7800 against it; use some of the 7800 to purchase a put option to prevent a margin call, and invest the remainder.

[matts]

Been rolling a number of my long positions into two year, deep in-the-money LEAPS which has freed up 40-50% of the cash in the positions.

 

 

Will be missing out on some sizable dividends, but have same notional exposure for capital gains and will hopefully make more than the dividends missed by putting the incremental capital to work as new names go down further.

Not a bad idea at all.

 

What would this look like in practice?

 

Lets say I own 100 shares of Visa, average cost is 170. Current price is 145 or so.

 

Buy 1 Call, strike price 85, expiration Jun-2022, for about 67/sh.

 

Essentially you're buying 100 shares for 152/share (85 strike + 67 call price). But you only need to put up 6700 rather than 14,500 in the market.

 

So your cost here is 7/share premium divided by the amount of cash you are borrowing ie 14500-6700 or 7800, about 9% or so.

 

Pricey, but again it depends what your expectations are for that freed-up-cash.

 

I'm sure LC knows this but just wanted to clarify for others:

 

That $7 "cost" is spread over 2.2 years so the annual leverage cost is much less than 9%

 

Also, visa pays a $1.20 annual dividend so you have to add (1.2x2.2 years) to the $7 cost as you miss out on dividends. That assumes the dividend will not change, which isn't necessarily true.

 

Adjusting for the above I see about a 2.7% annual cost of leverage. It's not totally equivalent to borrowing on margin from your broker because the above assumes visa doesn't fall below $85 at the time of expiration.

 

 

[sleepydragon]

Yesterday: TSCO and SBUX

Today: GD and PM

 

[LC]

PM today as well.

 

Not sure how exactly a cigarette producer will fare in a post-respiratory virus world, but hey let's find out!  :-X

[nspo]

Thanks for the info LC & matte. That said, does anyone see some obvious asymmetric payouts available with low costs of borrow?

[chrispy]

Finally got something - TTD

[Spekulatius]

PM today as well.

 

Not sure how exactly a cigarette producer will fare in a post-respiratory virus world, but hey let's find out!  :-X

 

Smoking kills even faster. The upside for PM and MO is that people may care less.

[longlake95]

Visa and HTL

[sleepydragon]

OXY and BKNG

[rb]

BRKB @166.97

[shhughes1116]

More EPD and PBA. 

 

 

 

[TwoCitiesCapital]

Been rolling a number of my long positions into two year, deep in-the-money LEAPS which has freed up 40-50% of the cash in the positions.

 

 

Will be missing out on some sizable dividends, but have same notional exposure for capital gains and will hopefully make more than the dividends missed by putting the incremental capital to work as new names go down further.

Not a bad idea at all.

some of those premiums are pretty high looking

 

Honestly not for the names I've been buying. I've been getting most of them @ 3-5% premiums over current spot (not annualized - absolute premium) being patient w/ limit orders on volatile days.

 

Now, of course I'll be missing out on dividends so add that to your premium and it might be something closer to 15-20% total or 7-10% annualized.

 

All of that being said, a few of these limit orders filled and the underlying price ROSE before I could sell the underlying meaning my implied options basis is lower than what I sold the shares for implying negative premium on the transaction. Volatility = opportunity.

 

All in all its a fair price to keep my notional exposure while freeing up 40-60% of my cash which gives me incredible optionality both rising and falling scenarios.

[TwoCitiesCapital]

Been rolling a number of my long positions into two year, deep in-the-money LEAPS which has freed up 40-50% of the cash in the positions.

 

 

Will be missing out on some sizable dividends, but have same notional exposure for capital gains and will hopefully make more than the dividends missed by putting the incremental capital to work as new names go down further.

Not a bad idea at all.

some of those premiums are pretty high looking

 

Honestly not for the names I've been buying. I've been getting most of them @ 3-5% premiums over current spot (not annualized - absolute premium) being patient w/ limit orders on volatile days.

 

Now, of course I'll be missing out on dividends so add that to your premium and it might be something closer to 15-20% total or 7-10% annualized.

 

All of that being said, a few of these limit orders filled and the underlying price ROSE before I could sell the underlying meaning my implied options basis is lower than what I sold the shares for implying negative premium on the transaction. Volatility = opportunity.

 

All in all its a fair price to keep my notional exposure while freeing up 40-60% of my cash which gives me incredible optionality both rising and falling scenarios.

 

Real time example -

 

$3.00 Call exp 1/21/2022 on NLY was just purchased for $2.75 implying an underlying price of $5.75 in 2-years.

 

Current price is $5.50. >5% premium for 2 years exposure. NLY has a 15% dividend I'm missing out on too, so this is on the more expensive end of the trades I've been doing in the name - yesterday's was basically getting them right @ spot price.

 

But it's also an up-day and not a panic driven down day. Also, I don't imagine it'll take 2-years for govt guaranteed mortgages to trade back to NAV from 50% of NAV so I'm not likely not missing out on the full 2-years of dividends either as I'll exit the position close to NaV

[flesh]

I have done very little with stocks for a year now, busy with new biz. I had a hard money deal pay off last week, good timing.  Yesterday the values compelled me to buy. 1/2 of net worth into mo, brk.b, tse, nc, ads, hca, kkr, bac, bk. Fun times, hoping for more volatility. HCA at 66? WTF. Why is fcau, fairfax, and home builders so cheap?

 

Any thoughts on 2 plus year calls on brk vs cheap margin if things get more interesting?

 

 

 

 

[LC]

Any thoughts on 2 plus year calls on brk vs cheap margin if things get more interesting?

 

I opted for calls to protect downside. Cost was not much more vs. margin. Until we know more about long-term situation, I felt it was the more conservative choice.

[Castanza]

INMD

 

RTN

[DooDiligence]

BRKB @166.97

 

Stinker Bid of the Day award

[Broeb22]

GDYN