Learning Center - Margin

I paid $1000 for an Adam Khoo investing course so you don't have to! (Summarized in post)

Lesson one is "stock basics" summarized: (2 videos) for every buyer there's a seller, for every seller there's a buyer, fear and greed drives prices, what fundamental analysis means, what technical analysis means.
lesson 2 is ETFs summarized: (video 1) Bull markets are opportunities, bear markets are bigger opportunity's, Bear markets never last, always followed by bull market. (video 2) The market is volatile in the short term in the long term it always goes up, what an ETF is, different types of ETF indexes. (video 3) Expands on the different types of ETFs (bonds, commodities etc). (video 3) A 35min video on dollar cost averaging lol. (Video 5) summarizing the last 4 videos.
Lesson 3 is Steps to investing summarized: (video 1) A good business increases value over time, a valuable business has higher sales, earnings and cashflow. (video 2) invest in businesses that are undervalued or fairly valued, stocks trade below its value because investors have negative perception of the company
lesson 4 Financials summarized (all 4 videos) where to find financials, how to use a website (Morning Star) to screen stocks, how good is the company at making money, Look for companies that have growing revenue, check growth profit margin and net profit margin of company compared to industry.
Lesson 5 Stock Valuation summarized (2 videos) go here: https://tradebrains.in/dcf-calculato and look at what the calculator is asking for, go to Morning Star find the needed numbers that are required, bam you got the intrinsic vale.
Lesson 6 Technical Analysis summarized: (all 4 videos) What are candles sticks, what do they mean, support and ceilings, consolidation levels.
Lesson 7 The 7 step formula summarized: (3 videos) See what I wrote in lesson 3 and lesson 5.
lesson 8 Winning portfolio summarized summarized: (video 1) Diversify, keep portfolio balanced, different sectors (video 2) More sectors, Dividends (video 3) More on sectors, more on dividends, what are different stock caps (large cap, small cap etc)
Lesson 9 finding opportunities summarized: (video 1) see lesson 3, (video 2) creating a watch list,monitor news, company announcements, stock price, financials
Lesson 10 psychology of success summarized: (2 videos) basically: common sense.
Lesson 11 Finding a broker summarized: (1 video) look at fees and commissions, see minimum deposit, check margin rates, make sure it has a good trading platform.
I just saved you 18 hours and $1000.
submitted by swagbasket34 to investing [link] [comments]

Former investment bank FX trader: some thoughts

Former investment bank FX trader: some thoughts
Hi guys,
I have been using reddit for years in my personal life (not trading!) and wanted to give something back in an area where i am an expert.
I worked at an investment bank for seven years and joined them as a graduate FX trader so have lots of professional experience, by which i mean I was trained and paid by a big institution to trade on their behalf. This is very different to being a full-time home trader, although that is not to discredit those guys, who can accumulate a good amount of experience/wisdom through self learning.
When I get time I'm going to write a mid-length posts on each topic for you guys along the lines of how i was trained. I guess there would be 15-20 topics in total so about 50-60 posts. Feel free to comment or ask questions.
The first topic is Risk Management and we'll cover it in three parts
Part I
  • Why it matters
  • Position sizing
  • Kelly
  • Using stops sensibly
  • Picking a clear level

Why it matters

The first rule of making money through trading is to ensure you do not lose money. Look at any serious hedge fund’s website and they’ll talk about their first priority being “preservation of investor capital.”
You have to keep it before you grow it.
Strangely, if you look at retail trading websites, for every one article on risk management there are probably fifty on trade selection. This is completely the wrong way around.
The great news is that this stuff is pretty simple and process-driven. Anyone can learn and follow best practices.
Seriously, avoiding mistakes is one of the most important things: there's not some holy grail system for finding winning trades, rather a routine and fairly boring set of processes that ensure that you are profitable, despite having plenty of losing trades alongside the winners.

Capital and position sizing

The first thing you have to know is how much capital you are working with. Let’s say you have $100,000 deposited. This is your maximum trading capital. Your trading capital is not the leveraged amount. It is the amount of money you have deposited and can withdraw or lose.
Position sizing is what ensures that a losing streak does not take you out of the market.
A rule of thumb is that one should risk no more than 2% of one’s account balance on an individual trade and no more than 8% of one’s account balance on a specific theme. We’ll look at why that’s a rule of thumb later. For now let’s just accept those numbers and look at examples.
So we have $100,000 in our account. And we wish to buy EURUSD. We should therefore not be risking more than 2% which $2,000.
We look at a technical chart and decide to leave a stop below the monthly low, which is 55 pips below market. We’ll come back to this in a bit. So what should our position size be?
We go to the calculator page, select Position Size and enter our details. There are many such calculators online - just google "Pip calculator".

https://preview.redd.it/y38zb666e5h51.jpg?width=1200&format=pjpg&auto=webp&s=26e4fe569dc5c1f43ce4c746230c49b138691d14
So the appropriate size is a buy position of 363,636 EURUSD. If it reaches our stop level we know we’ll lose precisely $2,000 or 2% of our capital.
You should be using this calculator (or something similar) on every single trade so that you know your risk.
Now imagine that we have similar bets on EURJPY and EURGBP, which have also broken above moving averages. Clearly this EUR-momentum is a theme. If it works all three bets are likely to pay off. But if it goes wrong we are likely to lose on all three at once. We are going to look at this concept of correlation in more detail later.
The total amount of risk in our portfolio - if all of the trades on this EUR-momentum theme were to hit their stops - should not exceed $8,000 or 8% of total capital. This allows us to go big on themes we like without going bust when the theme does not work.
As we’ll see later, many traders only win on 40-60% of trades. So you have to accept losing trades will be common and ensure you size trades so they cannot ruin you.
Similarly, like poker players, we should risk more on trades we feel confident about and less on trades that seem less compelling. However, this should always be subject to overall position sizing constraints.
For example before you put on each trade you might rate the strength of your conviction in the trade and allocate a position size accordingly:

https://preview.redd.it/q2ea6rgae5h51.png?width=1200&format=png&auto=webp&s=4332cb8d0bbbc3d8db972c1f28e8189105393e5b
To keep yourself disciplined you should try to ensure that no more than one in twenty trades are graded exceptional and allocated 5% of account balance risk. It really should be a rare moment when all the stars align for you.
Notice that the nice thing about dealing in percentages is that it scales. Say you start out with $100,000 but end the year up 50% at $150,000. Now a 1% bet will risk $1,500 rather than $1,000. That makes sense as your capital has grown.
It is extremely common for retail accounts to blow-up by making only 4-5 losing trades because they are leveraged at 50:1 and have taken on far too large a position, relative to their account balance.
Consider that GBPUSD tends to move 1% each day. If you have an account balance of $10k then it would be crazy to take a position of $500k (50:1 leveraged). A 1% move on $500k is $5k.
Two perfectly regular down days in a row — or a single day’s move of 2% — and you will receive a margin call from the broker, have the account closed out, and have lost all your money.
Do not let this happen to you. Use position sizing discipline to protect yourself.

Kelly Criterion

If you’re wondering - why “about 2%” per trade? - that’s a fair question. Why not 0.5% or 10% or any other number?
The Kelly Criterion is a formula that was adapted for use in casinos. If you know the odds of winning and the expected pay-off, it tells you how much you should bet in each round.
This is harder than it sounds. Let’s say you could bet on a weighted coin flip, where it lands on heads 60% of the time and tails 40% of the time. The payout is $2 per $1 bet.
Well, absolutely you should bet. The odds are in your favour. But if you have, say, $100 it is less obvious how much you should bet to avoid ruin.
Say you bet $50, the odds that it could land on tails twice in a row are 16%. You could easily be out after the first two flips.
Equally, betting $1 is not going to maximise your advantage. The odds are 60/40 in your favour so only betting $1 is likely too conservative. The Kelly Criterion is a formula that produces the long-run optimal bet size, given the odds.
Applying the formula to forex trading looks like this:
Position size % = Winning trade % - ( (1- Winning trade %) / Risk-reward ratio
If you have recorded hundreds of trades in your journal - see next chapter - you can calculate what this outputs for you specifically.
If you don't have hundreds of trades then let’s assume some realistic defaults of Winning trade % being 30% and Risk-reward ratio being 3. The 3 implies your TP is 3x the distance of your stop from entry e.g. 300 pips take profit and 100 pips stop loss.
So that’s 0.3 - (1 - 0.3) / 3 = 6.6%.
Hold on a second. 6.6% of your account probably feels like a LOT to risk per trade.This is the main observation people have on Kelly: whilst it may optimise the long-run results it doesn’t take into account the pain of drawdowns. It is better thought of as the rational maximum limit. You needn’t go right up to the limit!
With a 30% winning trade ratio, the odds of you losing on four trades in a row is nearly one in four. That would result in a drawdown of nearly a quarter of your starting account balance. Could you really stomach that and put on the fifth trade, cool as ice? Most of us could not.
Accordingly people tend to reduce the bet size. For example, let’s say you know you would feel emotionally affected by losing 25% of your account.
Well, the simplest way is to divide the Kelly output by four. You have effectively hidden 75% of your account balance from Kelly and it is now optimised to avoid a total wipeout of just the 25% it can see.
This gives 6.6% / 4 = 1.65%. Of course different trading approaches and different risk appetites will provide different optimal bet sizes but as a rule of thumb something between 1-2% is appropriate for the style and risk appetite of most retail traders.
Incidentally be very wary of systems or traders who claim high winning trade % like 80%. Invariably these don’t pass a basic sense-check:
  • How many live trades have you done? Often they’ll have done only a handful of real trades and the rest are simulated backtests, which are overfitted. The model will soon die.
  • What is your risk-reward ratio on each trade? If you have a take profit $3 away and a stop loss $100 away, of course most trades will be winners. You will not be making money, however! In general most traders should trade smaller position sizes and less frequently than they do. If you are going to bias one way or the other, far better to start off too small.

How to use stop losses sensibly

Stop losses have a bad reputation amongst the retail community but are absolutely essential to risk management. No serious discretionary trader can operate without them.
A stop loss is a resting order, left with the broker, to automatically close your position if it reaches a certain price. For a recap on the various order types visit this chapter.
The valid concern with stop losses is that disreputable brokers look for a concentration of stops and then, when the market is close, whipsaw the price through the stop levels so that the clients ‘stop out’ and sell to the broker at a low rate before the market naturally comes back higher. This is referred to as ‘stop hunting’.
This would be extremely immoral behaviour and the way to guard against it is to use a highly reputable top-tier broker in a well regulated region such as the UK.
Why are stop losses so important? Well, there is no other way to manage risk with certainty.
You should always have a pre-determined stop loss before you put on a trade. Not having one is a recipe for disaster: you will find yourself emotionally attached to the trade as it goes against you and it will be extremely hard to cut the loss. This is a well known behavioural bias that we’ll explore in a later chapter.
Learning to take a loss and move on rationally is a key lesson for new traders.
A common mistake is to think of the market as a personal nemesis. The market, of course, is totally impersonal; it doesn’t care whether you make money or not.
Bruce Kovner, founder of the hedge fund Caxton Associates
There is an old saying amongst bank traders which is “losers average losers”.
It is tempting, having bought EURUSD and seeing it go lower, to buy more. Your average price will improve if you keep buying as it goes lower. If it was cheap before it must be a bargain now, right? Wrong.
Where does that end? Always have a pre-determined cut-off point which limits your risk. A level where you know the reason for the trade was proved ‘wrong’ ... and stick to it strictly. If you trade using discretion, use stops.

Picking a clear level

Where you leave your stop loss is key.
Typically traders will leave them at big technical levels such as recent highs or lows. For example if EURUSD is trading at 1.1250 and the recent month’s low is 1.1205 then leaving it just below at 1.1200 seems sensible.

If you were going long, just below the double bottom support zone seems like a sensible area to leave a stop
You want to give it a bit of breathing room as we know support zones often get challenged before the price rallies. This is because lots of traders identify the same zones. You won’t be the only one selling around 1.1200.
The “weak hands” who leave their sell stop order at exactly the level are likely to get taken out as the market tests the support. Those who leave it ten or fifteen pips below the level have more breathing room and will survive a quick test of the level before a resumed run-up.
Your timeframe and trading style clearly play a part. Here’s a candlestick chart (one candle is one day) for GBPUSD.

https://preview.redd.it/moyngdy4f5h51.png?width=1200&format=png&auto=webp&s=91af88da00dd3a09e202880d8029b0ddf04fb802
If you are putting on a trend-following trade you expect to hold for weeks then you need to have a stop loss that can withstand the daily noise. Look at the downtrend on the chart. There were plenty of days in which the price rallied 60 pips or more during the wider downtrend.
So having a really tight stop of, say, 25 pips that gets chopped up in noisy short-term moves is not going to work for this kind of trade. You need to use a wider stop and take a smaller position size, determined by the stop level.
There are several tools you can use to help you estimate what is a safe distance and we’ll look at those in the next section.
There are of course exceptions. For example, if you are doing range-break style trading you might have a really tight stop, set just below the previous range high.

https://preview.redd.it/ygy0tko7f5h51.png?width=1200&format=png&auto=webp&s=34af49da61c911befdc0db26af66f6c313556c81
Clearly then where you set stops will depend on your trading style as well as your holding horizons and the volatility of each instrument.
Here are some guidelines that can help:
  1. Use technical analysis to pick important levels (support, resistance, previous high/lows, moving averages etc.) as these provide clear exit and entry points on a trade.
  2. Ensure that the stop gives your trade enough room to breathe and reflects your timeframe and typical volatility of each pair. See next section.
  3. Always pick your stop level first. Then use a calculator to determine the appropriate lot size for the position, based on the % of your account balance you wish to risk on the trade.
So far we have talked about price-based stops. There is another sort which is more of a fundamental stop, used alongside - not instead of - price stops. If either breaks you’re out.
For example if you stop understanding why a product is going up or down and your fundamental thesis has been confirmed wrong, get out. For example, if you are long because you think the central bank is turning hawkish and AUDUSD is going to play catch up with rates … then you hear dovish noises from the central bank and the bond yields retrace lower and back in line with the currency - close your AUDUSD position. You already know your thesis was wrong. No need to give away more money to the market.

Coming up in part II

EDIT: part II here
Letting stops breathe
When to change a stop
Entering and exiting winning positions
Risk:reward ratios
Risk-adjusted returns

Coming up in part III

Squeezes and other risks
Market positioning
Bet correlation
Crap trades, timeouts and monthly limits

***
Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
submitted by getmrmarket to Forex [link] [comments]

The results are in for: LEAST Valuable Player

The NBA league office announced that all awards will be officially based on play PRIOR to the bubble. With that, the cases are locked, the campaigns are closed, and the voting will begin.
While the media may focus on the MVP award and other prestigious honors, reddit has the distinct honor of awarding the LVP. The LEAST Valuable Player. It's a tradition that dates back to 2016-17, when aging Indiana SG Monta Ellis won the inaugural trophy and then promptly disappeared from the NBA forever. In 2017-18, Minnesota SG Jamal Crawford won the (dis)honor with some incredibly bad defensive numbers. Last season, New Orleans SF Solomon Hill won LVP by helping to sink a drowning team and accelerating Anthony Davis' decision to fly the coop.
Before we announce this year's winner, let's review the criteria and caveats:
--- Obviously, the worst players in the league are the ones who sit at the end of the bench and don't get any playing time. However, this award focuses on players who log a decent amount of minutes and consequently affected their team's play the most. Simply put: the more you play, the more damage you can do.
--- And that actual "damage" is important. If you're on a tanking team, no one cares about your poor play; it may even be a positive. I'm also ignoring young players (under 21) who are still developing and can't be expected to be solid players yet.
--- Similarly, we don't want to judge players within the context of their salary any more than the actual MVP does. We also do not weigh in injuries either. For example, the Wizards would have a hard time competing with John Wall on the sidelines (0 games played, $32M in salary), but we want to focus on players' on-court performance instead.
dishonorable mentions
PG Mike Conley, Utah: 28.6 minutes per game, -0.80 RPM
We're using Mike Conley to reiterate that the LVP does NOT factor salary into the equation any more than the MVP does. But if it did, Mike Conley and his $33M salary may be in trouble.
It was a disastrous start to the season for Conley. Playing in a new role as a second fiddle to another guard, he could never find his groove. His assists plummeted (down to 4.3 per game), his free-throw attempts cut in half (from 5.8 to 2.9), and he only shot 42.9% from two-point range. That said, he still shot pretty well from 3 (37.6%) and played OK defense, keeping him off our official ballot.
SF Miles Bridges, Charlotte: 30.7 minutes per game, -2.68 RPM
Like Mike Conley, Miles Bridges seems like a great guy whom you'd hate to criticize. Alas, that's our exercise here. Caught in between positions, Bridges hasn't been able to figure out his rhythm on offense in the NBA either. He hasn't shot well (33% from three, 48.6% from two) and doesn't get to the line enough (2.0 FTA) to make up for it. The advanced stats get even worse from there (although to be fair, they get dragged down by playing in a bad starting lineup.)
Fortunately for him, Bridges is spared by his youth. At 22, he's technically over our "21 year old" threshold, but it still feels unfair to pick on his growing pains as a sophomore. Perhaps in time, he can find a role that can take advantage of his athleticism and talent. But be warned: the clock is ticking. We're taking the kid gloves off soon. Bridges and fellow analytics-allergic Kevin Knox (-7.7 RPM!) will be entering Year 3 next season and will need to step their games up to avoid LVP discussion.
SF Kyle Kuzma, L.A. Lakers: 24.6 minutes per game, -0.74 RPM
Kyle Kuzma can score if need be, but his skill set never made him a natural fit to play third banana to superstars like LeBron James and Anthony Davis. He's not a 3+D player -- he's more of a no-3 (30% this year) no-D player. At the same time, the LVP is about negative impact, and it's hard to find much of consequence here. After all, the Lakers still finished with the # 1 record in the West. Kuzma struggling to find his way is like a tree falling in the woods or a person farting in an empty elevator – ultimately it didn't matter.
SF Andre Iguodala, Memphis/Miami
It feels like ancient history now, but this past offseason, the Memphis Grizzlies acquired Andre Iguodala in a trade (under the presumption he may be dealt again.) According to official reports, Iguodala and the Grizzlies MUTUALLY decided that he wouldn't play for Memphis and wouldn't even report to the team in the meantime. Okay. Fine. We'll go along with that.
Still, that situation leaves a sour taste in the LVP headquarters. Memphis turned out to be better than expected, and could have used an extra rotational player. And even if Iguodala wouldn't have helped much on the court, he could have been a valuable mentor for their young kids. That's the least you can expect for a nice $15M in salary.
our official top 5 LVP ballot
(5) PF Anthony Tolliver (POR, SAC, MEM): 15.6 minutes per game, -3.60 RPM
I've always had a soft spot for the wise ol' owl, Anthony Tolliver. He's reportedly a great teammate and locker room presence. He also started to develop into an effective stretch four towards the end of this career.
But alas, the end of his career may have snuck up on us sooner than we expected. Tolliver disappointed for Minnesota last season, and completely flopped in his return to Portland. At age 34, he doesn't seem to be a viable rotation player anymore. He didn't play quite enough to merit LVP, but he still played more than he should have.
There's a chance Tolliver comes back next year to serve as a veteran mentor and pseudo-assistant coach somewhere, but it's more likely that he retires. If he does, he'll have played for 10 different franchises in his not-so-illustrious but very respectable career.
(4) SG Bryn Forbes, San Antonio: 25.1 minutes per game, -0.95 RPM
The NBA is all about shooting these days, and Bryn Forbes can shoot. He's hit an even 40.0% from three during his NBA career so far, and wasn't too far removed from that this season with 38.8% on 6.0 attempts per game. As a result, his true shooting percentage (57%) was above average. The Spurs lacked spacers, and Forbes fit that bill.
So what's the problem...? Turns out, basketball is more than a halfcourt game. And whenever the ball crosses that pesky midcourt line, Bryn Forbes starts to become a liability.
At only 6'3", Forbes is undersized to play the SG position, which is where the Spurs played him 74% of the time (according to basketball-reference.) Partly due to those athletic limitations, he only registered 0.5 steals per game, and blocked a grand total of 0 shots in his 1579 minutes of action. The advanced stats get ugly; Forbes ranks near the bottom at his position in DRPM, DBPM, all the alphabet formulas that you can cook up.
At the end of the day, LVP is about negative impact, and there's plenty here. Forbes is not a bad player in a vacuum, but he did not help the Spurs this year. In fact, their undersized lineup is a big reason why they're struggling so much on defense (25th in the NBA). As a direct result, they're on track to miss the playoffs for the first time in decades.
(3) SF Mario Hezonja, Portland: 16.3 minutes per game, -2.79 RPM
During the entire run of the Damian Lillard - C.J. McCollum era, Portland has struggled to figure out their wing rotation. That would be tested even more this season, with familiar faces like Moe Harkless, Al-Farouq Aminu, and Evan Turner slipping out the door. The trials and tribulations kept coming like Damian Lillard was Job, as injuries ravaged the Blazers' new depth chart. The team didn't need a star to emerge at forward -- but they needed somebody. Anybody.
In theory, that player should have been Mario Hezonja, a former lottery pick and a live body with good athleticism and size at 6'8". Signed this summer for a modest price ($1.7M), Hezonja had the chance to jumpstart his NBA career with a major opportunity on the team. Instead, he flopped like Marcus Smart taking a phantom elbow.
Hezonja's biggest problem is that, at age 25, he still hasn't found his feel on the court. He's not a good shooter (32.8% from three), and doesn't use his athleticism to find his way to the line (1.1 attempts per game.) He was a non-factor (5 PPG, 3 RPG) on a team that desperately needed him to step up. In fact, the Blazers were so desperate for help that they not only signed Carmelo Anthony, but they played him over 32 minutes a game.
Again, we see a real "LVP" candidacy here with a direct effect on the standings. The Blazers' getting a big fat nothing from Hezonja was a major part of their struggle to get to .500 this season.
(2) C Dewayne Dedmon, SAC/ATL: 17.6 minutes per game, -2.51 RPM
We're not supposed to factor in salaries into this equation, but Dewayne Dedmon's situation merits a mention for context. The Sacramento Kings signed the big man to a head-scratching 3-year, $40M deal this summer (seriously.) Clearly, GM Vlade Divac thought his young Kings were only a few veterans away from making the playoffs, bringing in (and over-paying) Dedmon, Cory Joseph, and Trevor Ariza.
Among the three, Dedmon turned out to be the most disappointing for several reasons. He didn't play well to start the season, and got usurped in the rotation by underrated Richaun Holmes. Rather than suck it up, take a deep breath, and take a relaxing dive in his new Scrooge McDuck money pool, Dedmon started to whine and complain and push for a trade. For a team that was struggling, Dedmon's headache became the last thing they needed. Ultimately, they ditched him back to where he came from in Atlanta.
Now, being difficult and being a prima donna isn't enough to get you LVP honors. You have to stink on the court as well. And sure enough, Dedmon started to check those boxes. Billed as a stretch five after hitting some threes in Atlanta, Dedmon lost his shot in the SMF airport baggage claim. He shot only 19.7% from three for the Kings, registering a 47.3% true shooting percentage on the season. His defense is OK, but it's not good enough make up for his poor offensive play. He's not bad enough to get LVP, but he hurt his team this year.
(1) PG Isaiah Thomas, Washington: 23.1 minutes per game, -2.75 RPM
We've awarded three LVP trophies in the past, and a familiar pattern is starting to emerge. The most dangerous players aren't necessarily the bad players; they're the players who used to be good. Because of their prior success, they tend to get overplayed by their coaches and drag their teams down with them.
It wasn't too long ago that Isaiah Thomas found himself in the MVP conversation for the Boston Celtics, as his incredible shotmaking helped make up for any defensive limitations he may have as a 5'9" player. That said, a small player like Thomas is always going to have a thin margin for error to remain a winning player. He needs to be GREAT offensively to make up for his defense. Unfortunately, his offense has not been great since his infamous injury. He can still make shots (hitting 41.3% of his threes), but he's not getting inside the paint and not getting to the free-throw line (1.9 attempts per game.) As a result, his true-shooting percentage lagged to 53.1%, well below league average.
If Isaiah Thomas isn't making scoring efficiently, then what is he doing to help a team win? He's not a great distributor (3.7 assists per game.) He's a very poor rebounder (1.7 per game.) And yes, that defense is still a major problem. According to ESPN's RPM metric, Thomas graded as a -4.2 impact per 100 possessions, the second worst in the league at PG after Trae Young. Basketball-reference lists his "defensive rating" at 121. For comparison's sake, the worst team defense in the league still held teams under 116. (That worst team? The Wizards.)
You can make an argument that there's still a place for Thomas in the NBA as a sparkplug scorer off the bench. Alas, that's not how the Wizards had been using him this season. He started 37 of 40 games for the team. Largely as a result of that, the Wizards' starting lineup was atrocious defensively. Fellow starters like Bradley Beal and Rui Hachimura ranked toward the bottom of their position in defensive metrics as well. When your lineup stinks defensively, a good coach may look in the mirror and say: hey, maybe we need a change here. Sadly, quick reactions are not Scottie Brooks' strong suit. He has the type of sloth-like speed that even frustrate workers at the DMV. The Wizards eventually dumped IT, but it took far too long to make that shift.
To be fair, the Wizards' options at point guard were limited with John Wall injured. Veteran Ish Smith is mediocre right now, and Shabazz Napier arrived late in the season. Still, the point here is: almost any competent point guard (like a Napier) would have helped the Wizards more than Isaiah Thomas. He had become a negative for them. The cold hard truth is that: it's very difficult to win basketball games with Thomas starting. And given that, he is our official LVP.
submitted by ZandrickEllison to nba [link] [comments]

Margin Isn't Dangerous & Why I'd Still Use It If I Had Less Than $25,000

Margin Isn't Dangerous & Why I'd Still Use It If I Had Less Than $25,000

Cash vs. Margin


TL;DR- Use Margin if you're trading securities and either above or below 25k. If you know how to size positions, it won't matter if you move $4,000 into a trade or $4,000,000. As long as you sized the position correctly. If you're limited to 3 trades, then take 3 PERFECT trades: https://imgur.com/a/SpPOERQ

I see lots of people discussing contrasting ideas although they attempt to justify using both. Here are some things I see said and written frequently from people that doesn't add up for me:

  • "Use a cash account to avoid PDT" - (Totally fine, in some cases such as certain options traders. Not if you're trading securities.)
  • "Risk 1% of your account" - (So if your account is at $25,500, I risk ~$255 and if I lose 2R I'm below PDT. Doesn't sound too great to me if I were to lose the first 2 straight trades.)
  • "Margin is a double-edged sword" - (It's only dangerous if you don't set hard stops or size your positions correctly.)
  • "Never take on a trade that is worth more than your account" - (I can agree if you were swing trading but in terms of IntraDay trading, this is hindering your ability to grow your account. If you're risking $100 on a trade that costs less than your account value.. then $25 on a trade because of your account value.. then you're adding unneeded variables. Remember: "Consistency.")


The Predictive Model I built lays out all valid trades within the report range as well as \"Perfect Trades\" that I consider \"Textbook\". The report range is between a 30 day range. Between 4-17-20 to 5-17-20. Total \"Perfect Trade\" count is 9 trades. Even if I were limited to 3 trades per week. I'd be able to trade them with less than 25k on margin. The stats reflect $100 risk I've set on a different tab. (The \"W\" is just a graphic I made for \"Winning\")

It doesn’t matter if you move $4,000, $40,000, or $4,000,000 into a position. As long as you’re risking the same. Your Trading Account's performance is based off of risk. Such as:
•Sharpe ratio
•RRR
•Number of R’s in 1 week/month/quarter. (Example: I made 7R this week. If my R is $100. I made $700)

If I were to go back to when I was below $25,000 some years ago. I'd still use a margin account while being limited to 3 trades per week. Here's why:

Formulas you have to know:
Position size formula = Risk ÷ Stop Size
Stop Size Formula = Entry - StopLoss

Example 1a:

Stock ABC,
Entry = $10.00
StopLoss = $9.90
StopSize = 10¢
Risk = $100
In Live Trading: $100 ÷ $0.10 = 1000 Shares
1,000 shares at $10.00 = $10,000 position

Example 1b:

Stock XYZ,
Entry = $385
StopLoss = $383.00
StopSize = $2.00
Risk = $100
In Live Trading: $100 ÷ $2.00 = 50 Shares
50 shares at $385 = $19,250 position.

*$10,000 CASH account: CANNOT trade Stock XYZ and must wait 3 days for his entire account to settle after trading Stock ABC. If it was a margin account, they'd still be able to take 2 more trades this week.
*$10,000 MARGIN account: CAN trade Stock XYZ and can trade both scenarios while still able to trade 1 more time in a 5 day rolling period.

Then the next point made is, "Just won't trade anything above $20".


Ok. great rebuttal, but why?

Let's remember this: StopSizes aren't always directly correlated to the price of a stock. YES you're more likely to have a wider StopSize on a higher priced stock and a tighter StopSize on a lower priced stock. But remember this: of slippage on 1,000 shares is 10% of his risk ($10)... It will be even more slippage if his stop loss market order is hit. Even a Sell-StopLimit order will have slippage within the amount you allow for when you enter a position.
Stock XYZ would have to be slipped 20¢ just to equate the amount of slippage on Stock ABC.Highly liquid and available stocks such as AAPL, AMD, NVDA etc don't have 20¢ spreads. Not even 10¢. Rarely 5¢. Most of the time. Just a couple cents. Of course there could be more right out of the open but the spread in my years of experience is tightened within 2 minutes of the open.
Yes, these small amounts in pennies do hold lots of merit if you're looking at having any longevity in this business, it WILL add up over the years.

Both trades have the same risk [in perfect world theory].

If both stop market orders were hit (StopLoss). Both traders would exit with a $100 loss on each. Although 1 trade required $10,000 in capital and the other trade required $19,250 in capital.
Use margin. If I had to go back to when I had less than $25,000 in my account, I'd still do it the same way I did it with margin. I highly suggest using margin even if you’re limited to 3 trades per week. I get asked all the time when I began trading. If you watched my last video, I showed my first ever deposit with Scottrade (Old brokerage that was bought out by TDA a few years ago) in 2015 although I don't consider that's when I started trading because I didn't treat it the way I do today.
I really consider myself starting as a trader in 2017 when I:
•Wrote a business plan
•Understood statistics
•How to research.
All this being said, slowly over time I noticed that I am taking less and less trades and increasing my risk size. Why?
EV: Expected Value.


- Margin has zero negative effect if you're sizing your positions the same every time. Margin allows you to take on more expensive positions that are showing your edge.

Bonus: Being limited to 3 trades a week isn't fun, I remember that feeling from years ago. Just remember to take 3 perfect trades a week. Sometimes "Perfect Trades" don't work out in your favor while some subpar situations hit target. Some weeks you might take your 3 "Perfect Trades" by Tuesday. Some weeks you might take only 1 "perfect trade". If you follow my watchlists on Twitter (Same handle as my Reddit), I keep my Day Trading Buying Power transparent. Not always is it growing perfectly linear. And not always am I posting every single day because sometimes, my edge isn't there. Just because the market is open doesn't mean you HAVE to trade.
My watchlists aren't littered with 15+ tickers. Rarely do they have more than 7. That may work for other traders, but for me, I demand quality. It's either there or it isn't. No reason to force a trade. I'd rather focus heavily on a few tickers rather than spread myself thin across multiple.
Trading isn't supposed to be exhilarating or an adrenaline rush. It can be boring. I said that in the post I wrote back in April.
Also if you make money, even if its just $20 in a month. Take that money out and buy something. Shrine it. Cherish it. You ripped that money out of WallStreet. Be proud of it. It takes a lot of courage to do this business. Realize that the P/L is real money. Sometimes even just buying a tank of gas or a book will help you realize that. Spend it from time to time. Get something out of your trading account. You may or not be trading for long, get something that is tangible to always remember the experience in case you don't last. Make it your trophy.

That's all I've got for right now. Maybe I'll make another post or 2 before the year ends. I hit my 1 year full-time mark in September.
Best wishes!
-CJT2013
submitted by CJT2013 to Daytrading [link] [comments]

How the TFSA works

(Updated August 9th, 2020)

Background


You may have heard about off-shore tax havens of questionable legality where wealthy people invest their money in legal "grey zones" and don't pay any tax, as featured for example, in Netflix's drama, The Laundromat.

The reality is that the Government of Canada offers 100% tax-free investing throughout your life, with unlimited withdrawals of your contributions and profits, and no limits on how much you can make tax-free. There is also nothing to report to the Canada Revenue Agency. Although Britain has a comparable program, Canada is the only country in the world that offers tax-free investing with this level of power and flexibility.

Thank you fellow Redditors for the wonderful Gold Award and Today I Learned Award!

(Unrelated but Important Note: I put a link at the bottom for my margin account explainer. Many people are interested in margin trading but don't understand the math behind margin accounts and cannot find an explanation. If you want to do margin, but don't know how, click on the link.)

As a Gen-Xer, I wrote this post with Millennials in mind, many of whom are getting interested in investing in ETFs, individual stocks, and also my personal favourite, options. Your generation is uniquely positioned to take advantage of this extremely powerful program at a relatively young age. But whether you're in your 20's or your 90's, read on!

Are TFSAs important? In 2020 Canadians have almost 1 trillion dollars saved up in their TFSAs, so if that doesn't prove that pennies add up to dollars, I don't know what does. The TFSA truly is the Great Canadian Tax Shelter.

I will periodically be checking this and adding issues as they arise, to this post. I really appreciate that people are finding this useful. As this post is now fairly complete from a basic mechanics point of view, and some questions are already answered in this post, please be advised that at this stage I cannot respond to questions that are already covered here. If I do not respond to your post, check this post as I may have added the answer to the FAQs at the bottom.

How to Invest in Stocks


A lot of people get really excited - for good reason - when they discover that the TFSA allows you to invest in stocks, tax free. I get questions about which stocks to buy.

I have made some comments about that throughout this post, however; I can't comprehensively answer that question. Having said that, though, if you're interested in picking your own stocks and want to learn how, I recommmend starting with the following videos:

The first is by Peter Lynch, a famous American investor in the 80's who wrote some well-respected books for the general public, like "One Up on Wall Street." The advice he gives is always valid, always works, and that never changes, even with 2020's technology, companies and AI:

https://www.youtube.com/watch?v=cRMpgaBv-U4&t=2256s


The second is a recording of a university lecture given by investment legend Warren Buffett, who expounds on the same principles:

https://www.youtube.com/watch?v=2MHIcabnjrA

Please note that I have no connection to whomever posted the videos.

Introduction


TFSAs were introduced in 2009 by Stephen Harper's government, to encourage Canadians to save.

The effect of the TFSA is that ordinary Canadians don't pay any income or capital gains tax on their securities investments.

Initial uptake was slow as the contribution rules take some getting used to, but over time the program became a smash hit with Canadians. There are about 20 million Canadians with TFSAs, so the uptake is about 70%- 80% (as you have to be the age of majority in your province/territory to open a TFSA).

Eligibility to Open a TFSA


You must be a Canadian resident with a valid Social Insurance Number to open a TFSA. You must be at the voting age in the province in which you reside in order to open a TFSA, however contribution room begins to accumulate from the year in which you turned 18. You do not have to file a tax return to open a TFSA. You do not need to be a Canadian citizen to open and contribute to a TFSA. No minimum balance is required to open a TFSA.

Where you Can Open a TFSA


There are hundreds of financial institutions in Canada that offer the TFSA. There is only one kind of TFSA; however, different institutions offer a different range of financial products. Here are some examples:


Insurance


Your TFSA may be covered by either CIFP or CDIC insuranceor both. Ask your bank or broker for details.

What You Can Trade and Invest In


You can trade the following:


What You Cannot Trade


You cannot trade:

Again, if it requires a margin account, it's out. You cannot buy on margin in a TFSA. Nothing stopping you from borrowing money from other sources as long as you stay within your contribution limits, but you can't trade on margin in a TFSA. You can of course trade long puts and calls which give you leverage.

Rules for Contribution Room


Starting at 18 you get a certain amount of contribution room.

According to the CRA:
You will accumulate TFSA contribution room for each year even if you do not file an Income Tax and Benefit Return or open a TFSA.
The annual TFSA dollar limit for the years 2009 to 2012 was $5,000.
The annual TFSA dollar limit for the years 2013 and 2014 was $5,500.
The annual TFSA dollar limit for the year 2015 was $10,000.
The annual TFSA dollar limit for the years 2016 to 2018 was $5,500.
The annual TFSA dollar limit for the year 2019 is $6,000.
The TFSA annual room limit will be indexed to inflation and rounded to the nearest $500.
Investment income earned by, and changes in the value of TFSA investments will not affect your TFSA contribution room for the current or future years.

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/contributions.html
If you don't use the room, it accumulates indefinitely.

Trades you make in a TFSA are truly tax free. But you cannot claim the dividend tax credit and you cannot claim losses in a TFSA against capital gains whether inside or outside of the TFSA. So do make money and don't lose money in a TFSA. You are stuck with the 15% withholding tax on U.S. dividend distributions unlike the RRSP, due to U.S. tax rules, but you do not pay any capital gains on sale of U.S. shares.

You can withdraw *both* contributions *and* capital gains, no matter how much, at any time, without penalty. The amount of the withdrawal (contributions+gains) converts into contribution room in the *next* calendar year. So if you put the withdrawn funds back in the same calendar year you take them out, that burns up your total accumulated contribution room to the extent of the amount that you re-contribute in the same calendar year.

Examples


E.g. Say you turned 18 in 2016 in Alberta where the age of majority is 18. It is now sometime in 2020. You have never contributed to a TFSA. You now have $5,500+$5,500+$5,500+$6,000+$6,000 = $28,500 of room in 2020. In 2020 you manage to put $20,000 in to your TFSA and you buy Canadian Megacorp common shares. You now have $8,500 of room remaining in 2020.

Sometime in 2021 - it doesn't matter when in 2021 - your shares go to $100K due to the success of the Canadian Megacorp. You also have $6,000 worth of room for 2021 as set by the government. You therefore have $8,500 carried over from 2020+$6,000 = $14,500 of room in 2021.

In 2021 you sell the shares and pull out the $100K. This amount is tax-free and does not even have to be reported. You can do whatever you want with it.

But: if you put it back in 2021 you will over-contribute by $100,000 - $14,500 = $85,500 and incur a penalty.

But if you wait until 2022 you will have $14,500 unused contribution room carried forward from 2021, another $6,000 for 2022, and $100,000 carried forward from the withdrawal 2021, so in 2022 you will have $14,500+$6,000+$100,000 = $120,500 of contribution room.

This means that if you choose, you can put the $100,000 back in in 2022 tax-free and still have $20,500 left over. If you do not put the money back in 2021, then in 2022 you will have $120,500+$6,000 = $126,500 of contribution room.

There is no age limit on how old you can be to contribute, no limit on how much money you can make in the TFSA, and if you do not use the room it keeps carrying forward forever.

Just remember the following formula:

This year's contribution room = (A) unused contribution room carried forward from last year + (B) contribution room provided by the government for this year + (C) total withdrawals from last year.

EXAMPLE 1:

Say in 2020 you never contributed to a TFSA but you were 18 in 2009.
You have $69,500 of unused room (see above) in 2020 which accumulated from 2009-2020.
In 2020 you contribute $50,000, leaving $19,500 contribution room unused for 2020. You buy $50,000 worth of stock. The next day, also in 2020, the stock doubles and it's worth $100,000. Also in 2020 you sell the stock and withdraw $100,000, tax-free.

You continue to trade stocks within your TFSA, and hopefully grow your TFSA in 2020, but you make no further contributions or withdrawals in 2020.


The question is, How much room will you have in 2021?
Answer: In the year 2021, the following applies:
(A) Unused contribution room carried forward from last year, 2020: $19,500
(B) Contribution room provided by government for this year, 2021: $6,000
(C) Total withdrawals from last year, 2020: $100,000

Total contribution room for 2021 = $19,500+6,000+100,000 = $125,500.

EXAMPLE 2:
Say between 2020 and 2021 you decided to buy a tax-free car (well you're still stuck with the GST/PST/HST/QST but you get the picture) so you went to the dealer and spent $25,000 of the $100,000 you withdrew in 2020. You now have a car and $75,000 still burning a hole in your pocket. Say in early 2021 you re-contribute the $75,000 you still have left over, to your TFSA. However, in mid-2021 you suddenly need $75,000 because of an emergency so you pull the $75,000 back out. But then a few weeks later, it turns out that for whatever reason you don't need it after all so you decide to put the $75,000 back into the TFSA, also in 2021. You continue to trade inside your TFSA but make no further withdrawals or contributions.

How much room will you have in 2022?
Answer: In the year 2022, the following applies:

(A) Unused contribution room carried forward from last year, 2021: $125,500 - $75,000 - $75,000 = -$24,500.

Already you have a problem. You have over-contributed in 2021. You will be assessed a penalty on the over-contribution! (penalty = 1% a month).

But if you waited until 2022 to re-contribute the $75,000 you pulled out for the emergency.....

In the year 2022, the following would apply:
(A) Unused contribution room carried forward from last year, 2021: $125,500 -$75,000 =$50,500.
(B) Contribution room provided by government for this year, 2022: $6,000
(C) Total withdrawals from last year, 2020: $75,000

Total contribution room for 2022 = $50,500 + $6,000 + $75,000 = $131,500.
...And...re-contributing that $75,000 that was left over from your 2021 emergency that didn't materialize, you still have $131,500-$75,000 = $56,500 of contribution room left in 2022.

For a more comprehensive discussion, please see the CRA info link below.

FAQs That Have Arisen in the Discussion and Other Potential Questions:



  1. Equity and ETF/ETN Options in a TFSA: can I get leverage? Yes. You can buy puts and calls in your TFSA and you only need to have the cash to pay the premium and broker commissions. Example: if XYZ is trading at $70, and you want to buy the $90 call with 6 months to expiration, and the call is trading at $2.50, you only need to have $250 in your account, per option contract, and if you are dealing with BMO IL for example you need $9.95 + $1.25/contract which is what they charge in commission. Of course, any profits on closing your position are tax-free. You only need the full value of the strike in your account if you want to exercise your option instead of selling it. Please note: this is not meant to be an options tutorial; see the Montreal Exchange's Equity Options Reference Manual if you have questions on how options work.
  2. Equity and ETF/ETN Options in a TFSA: what is ok and not ok? Long puts and calls are allowed. Covered calls are allowed, but cash-secured puts are not allowed. All other option trades are also not allowed. Basically the rule is, if the trade is not a covered call and it either requires being short an option or short the stock, you can't do it in a TFSA.
  3. Live in a province where the voting age is 19 so I can't open a TFSA until I'm 19, when does my contribution room begin? Your contribution room begins to accumulate at 18, so if you live in province where the age of majority is 19, you'll get the room carried forward from the year you turned 18.
  4. If I turn 18 on December 31, do I get the contribution room just for that day or for the whole year? The whole year.
  5. Do commissions paid on share transactions count as withdrawals? Unfortunately, no. If you contribute $2,000 cash and you buy $1,975 worth of stock and pay $25 in commission, the $25 does not count as a withdrawal. It is the same as if you lost money in the TFSA.
  6. How much room do I have? If your broker records are complete, you can do a spreadsheet. The other thing you can do is call the CRA and they will tell you.
  7. TFSATFSA direct transfer from one institution to another: this has no impact on your contributions or withdrawals as it counts as neither.
  8. More than 1 TFSA: you can have as many as you want but your total contribution room does not increase or decrease depending on how many accounts you have.
  9. Withdrawals that convert into contribution room in the next year. Do they carry forward indefinitely if not used in the next year? Answer :yes.
  10. Do I have to declare my profits, withdrawals and contributions? No. Your bank or broker interfaces directly with the CRA on this. There are no declarations to make.
  11. Risky investments - smart? In a TFSA you want always to make money, because you pay no tax, and you want never to lose money, because you cannot claim the loss against your income from your job. If in year X you have $5,000 of contribution room and put it into a TFSA and buy Canadian Speculative Corp. and due to the failure of the Canadian Speculative Corp. it goes to zero, two things happen. One, you burn up that contribution room and you have to wait until next year for the government to give you more room. Two, you can't claim the $5,000 loss against your employment income or investment income or capital gains like you could in a non-registered account. So remember Buffett's rule #1: Do not lose money. Rule #2 being don't forget the first rule. TFSA's are absolutely tailor-made for Graham-Buffett value investing or for diversified ETF or mutual fund investing, but you don't want to buy a lot of small specs because you don't get the tax loss.
  12. Moving to/from Canada/residency. You must be a resident of Canada and 18 years old with a valid SIN to open a TFSA. Consult your tax advisor on whether your circumstances make you a resident for tax purposes. Since 2009, your TFSA contribution room accumulates every year, if at any time in the calendar year you are 18 years of age or older and a resident of Canada. Note: If you move to another country, you can STILL trade your TFSA online from your other country and keep making money within the account tax-free. You can withdraw money and Canada will not tax you. But you have to get tax advice in your country as to what they do. There restrictions on contributions for non-residents. See "non residents of Canada:" https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4466/rc4466-19e.pdf
  13. The U.S. withholding tax. Dividends paid by U.S.-domiciled companies are subject to a 15% U.S. withholding tax. Your broker does this automatically at the time of the dividend payment. So if your stock pays a $100 USD dividend, you only get $85 USD in your broker account and in your statement the broker will have a note saying 15% U.S. withholding tax. I do not know under what circumstances if any it is possible to get the withheld amount. Normally it is not, but consult a tax professional.
  14. The U.S. withholding tax does not apply to capital gains. So if you buy $5,000 USD worth of Apple and sell it for $7,000 USD, you get the full $2,000 USD gain automatically.
  15. Tax-Free Leverage. Leverage in the TFSA is effectively equal to your tax rate * the capital gains inclusion rate because you're not paying tax. So if you're paying 25% on average in income tax, and the capital gains contribution rate is 50%, the TFSA is like having 12.5%, no margin call leverage costing you 0% and that also doesn't magnify your losses.
  16. Margin accounts. These accounts allow you to borrow money from your broker to buy stocks. TFSAs are not margin accounts. Nothing stopping you from borrowing from other sources (such as borrowing cash against your stocks in an actual margin account, or borrowing cash against your house in a HELOC or borrowing cash against your promise to pay it back as in a personal LOC) to fund a TFSA if that is your decision, bearing in mind the risks, but a TFSA is not a margin account. Consider options if you want leverage that you can use in a TFSA, without borrowing money.
  17. Dividend Tax Credit on Canadian Companies. Remember, dividends paid into the TFSA are not eligible to be claimed for the credit, on the rationale that you already got a tax break.
  18. FX risk. The CRA allows you to contribute and withdraw foreign currency from the TFSA but the contribution/withdrawal accounting is done in CAD. So if you contribute $10,000 USD into your TFSA and withdraw $15,000 USD, and the CAD is trading at 70 cents USD when you contribute and $80 cents USD when you withdraw, the CRA will treat it as if you contributed $14,285.71 CAD and withdrew $18,75.00 CAD.
  19. OTC (over-the-counter stocks). You can only buy stocks if they are listed on an approved exchange ("approved exchange" = TSX, TSX-V, NYSE, NASDAQ and about 25 or so others). The U.S. pink sheets "over-the-counter" market is an example of a place where you can buy stocks, that is not an approved exchange, therefore you can't buy these penny stocks. I have however read that the CRA make an exception for a stock traded over the counter if it has a dual listing on an approved exchange. You should check that with a tax lawyer or accountant though.
  20. The RRSP. This is another great tax shelter. Tax shelters in Canada are either deferrals or in a few cases - such as the TFSA - outright tax breaks, The RRSP is an example of a deferral. The RRSP allows you to deduct your contributions from your income, which the TFSA does not allow. This deduction is a huge advantage if you earn a lot of money. The RRSP has tax consequences for withdrawing money whereas the TFSA does not. Withdrawals from the RRSP are taxable whereas they are obviously not in a TFSA. You probably want to start out with a TFSA and maintain and grow that all your life. It is a good idea to start contributing to an RRSP when you start working because you get the tax deduction, and then you can use the amount of the deduction to contribute to your TFSA. There are certain rules that claw back your annual contribution room into an RRSP if you contribute to a pension. See your tax advisor.
  21. Pensions. If I contribute to a pension does that claw back my TFSA contribution room or otherwise affect my TFSA in any way? Answer: No.
  22. The $10K contribution limit for 2015. This was PM Harper's pledge. In 2015 the Conservative government changed the rules to make the annual government allowance $10,000 per year forever. Note: withdrawals still converted into contribution room in the following year - that did not change. When the Liberals came into power they switched the program back for 2016 to the original Harper rules and have kept the original Harper rules since then. That is why there is the $10,000 anomaly of 2015. The original Harper rules (which, again, are in effect now) called for $500 increments to the annual government allowance as and when required to keep up with inflation, based on the BofC's Consumer Price Index (CPI). Under the new Harper rules, it would have been $10,000 flat forever. Which you prefer depends on your politics but the TFSA program is massively popular with Canadians. Assuming 1.6% annual CPI inflation then the annual contribution room will hit $10,000 in 2052 under the present rules. Note: the Bank of Canada does an excellent and informative job of explaining inflation and the CPI at their website.
  23. Losses in a TFSA - you cannot claim a loss in a TFSA against income. So in a TFSA you always want to make money and never want to lose money. A few ppl here have asked if you are losing money on your position in a TFSA can you transfer it in-kind to a cash account and claim the loss. I would expect no as I cannot see how in view of the fact that TFSA losses can't be claimed, that the adjusted cost base would somehow be the cost paid in the TFSA. But I'm not a tax lawyeaccountant. You should consult a tax professional.
  24. Transfers in-kind to the TFSA and the the superficial loss rule. You can transfer securities (shares etc.) "in-kind," meaning, directly, from an unregistered account to the TFSA. If you do that, the CRA considers that you "disposed" of, meaning, equivalent to having sold, the shares in the unregistered account and then re-purchased them at the same price in the TFSA. The CRA considers that you did this even though the broker transfers the shares directly in the the TFSA. The superficial loss rule, which means that you cannot claim a loss for a security re-purchased within 30 days of sale, applies. So if you buy something for $20 in your unregistered account, and it's trading for $25 when you transfer it in-kind into the TFSA, then you have a deemed disposition with a capital gain of $5. But it doesn't work the other way around due to the superficial loss rule. If you buy it for $20 in the unregistered account, and it's trading at $15 when you transfer it in-kind into the TFSA, the superficial loss rule prevents you from claiming the loss because it is treated as having been sold in the unregistered account and immediately bought back in the TFSA.
  25. Day trading/swing trading. It is possible for the CRA to try to tax your TFSA on the basis of "advantage." The one reported decision I'm aware of (emphasis on I'm aware of) is from B.C. where a woman was doing "swap transactions" in her TFSA which were not explicitly disallowed but the court rules that they were an "advantage" in certain years and liable to taxation. Swaps were subsequently banned. I'm not sure what a swap is exactly but it's not that someone who is simply making contributions according to the above rules would run afoul of. The CRA from what I understand doesn't care how much money you make in the TFSA, they care how you made it. So if you're logged on to your broker 40 hours a week and trading all day every day they might take the position that you found a way to work a job 40 hours a week and not pay any tax on the money you make, which they would argue is an "advantage," although there are arguments against that. This is not legal advice, just information.
  26. The U.S. Roth IRA. This is a U.S. retirement savings tax shelter that is superficially similar to the TFSA but it has a number of limitations, including lack of cumulative contribution room, no ability for withdrawals to convert into contribution room in the following year, complex rules on who is eligible to contribute, limits on how much you can invest based on your income, income cutoffs on whether you can even use the Roth IRA at all, age limits that govern when and to what extent you can use it, and strict restrictions on reasons to withdraw funds prior to retirement (withdrawals prior to retirement can only be used to pay for private medical insurance, unpaid medical bills, adoption/childbirth expenses, certain educational expenses). The TFSA is totally unlike the Roth IRA in that it has none of these restrictions, therefore, the Roth IRA is not in any reasonable sense a valid comparison. The TFSA was modeled after the U.K. Investment Savings Account, which is the only comparable program to the TFSA.
  27. The UK Investment Savings Account. This is what the TFSA was based off of. Main difference is that the UK uses a 20,000 pound annual contribution allowance, use-it-or-lose-it. There are several different flavours of ISA, and some do have a limited recontribution feature but not to the extent of the TFSA.
  28. Is it smart to overcontribute to buy a really hot stock and just pay the 1% a month overcontribution penalty? If the CRA believes you made the overcontribution deliberately the penalty is 100% of the gains on the overcontribution, meaning, you can keep the overcontribution, or the loss, but the CRA takes the profit.
  29. Speculative stocks-- are they ok? There is no such thing as a "speculative stock." That term is not used by the CRA. Either the stock trades on an approved exchange or it doesn't. So if a really blue chip stock, the most stable company in the world, trades on an exchange that is not approved, you can't buy it in a TFSA. If a really speculative gold mining stock in Busang, Indonesia that has gone through the roof due to reports of enormous amounts of gold, but their geologist somehow just mysteriously fell out of a helicopter into the jungle and maybe there's no gold there at all, but it trades on an approved exchange, it is fine to buy it in a TFSA. Of course the risk of whether it turns out to be a good investment or not, is on you.
Remember, you're working for your money anyway, so if you can get free money from the government -- you should take it! Follow the rules because Canadians have ended up with a tax bill for not understanding the TFSA rules.
Appreciate the feedback everyone. Glad this basic post has been useful for many. The CRA does a good job of explaining TFSAs in detail at https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4466/rc4466-19e.pdf

Unrelated but of Interest: The Margin Account

Note: if you are interested in how margin accounts work, I refer you to my post on margin accounts, where I use a straightforward explanation of the math behind margin accounts to try and give readers the confidence that they understand this powerful leveraging tool.

How Margin Loans Work - a Primer

submitted by KhingoBhingo to CanadianInvestor [link] [comments]

3.10 and the “Laranite Bug”

TL;DR The bug that allows Laranite and all other trade cargo to be bought and sold at high volumes and good prices has been fixed in 3.10 PTU.
Hello traders of the ‘verse! I’m sure plenty of y’all are new from the recent Invictus Flight Week and many of y’all have been enjoying high profits from buying and selling laranite. While there are unfortunately many detrimental bugs, this high amount of laranite going around is due to a “positive” bug, which so far has not occurred in the 3.10 PTU.
To explain what this bug is, I will first go into how trading worked in 3.8. Every station, mining outpost, and city has it’s own inventory that it will buy and sell from. This inventory is server based and will slowly regenerate over time. A fresh server will start with a full inventory (empty in the case of places you sell to). There is also a global price that changes based off supply and demand, lowering profits on high traffic routes.
To see the raw numbers head over to scunpacked.com/commodities, which shows the location, base price, percentage of inventory it will refresh every minute (it typically will do this every 10 minutes), and how much it will refresh. This is an unintuitive way to show things, but it’s what the raw information is. The formula I use to find the max inventory is 1/{refresh percentage}*{refresh quantity}. With this, you can see that while drugs are highly profitable, they only move in small quantities and would take a long time to fill up a caterpillar.
For a more informative style, I recommend www.gallog.co/trading/, which goes ahead and shows the refresh rate and max inventory for commodities in a far more intuitive way. This site is also crowd sourced to update the commodity prices as they globally change, allowing you to find more profitable routes.
Sometime in 3.9, there was a bug that sprung up that caused all trading locations to do two things: every refresh cycle (~10 minutes) filled the location to max/default inventory and not track prices globally, defaulting to base prices.
The now famous laranite run from Arial to Lorville was a lot rougher before. Some runs that I recorded in March showed that only 4,842 units of laranite (each mining site on Arial has 1,389 per minute, up to 99,928 units in it’s inventory) was available for purchase as Lathan (I also traded titanium, but that isn’t important right now) and that I was only able to make 3 aUEC per unit. With this bug, I can fill up a caterpillar with 56,400 units of laranite and make 6aUEC per unit. This is a major increase in profit margins, with my margins being 11%, requiring 9 runs like this to make up for each load I lose to pirates, ship crashes, and the Dread Pirate 30k. With the trade bug, the profit margins go up to 25% or 4 loads per load lost.
I am getting excited for things to slow down in 3.10 and for the challenge to increase. Maybe that’s just me. I don’t know whether or not there will be a wipe (other than helmet wipes) in 3.10. I am pretty surprised that they left the bug in there, it’s going to lead to a bunch of disappointment in 3.10 when laranite isn’t as available for trading, which is the point of this post, preparing y’all for what may come. A few good runs are what little laranite you can find on Arial and fill the rest of hold with titanium. Scrap running from R&Rs to Port Olisar is a cheap and safe route. Tram & Myers diamonds are still available for those strong in will, but don’t blame me for when pirates/griefers blow you up there. If you want to learn more about future plans that CIG has for trading and the economy, you can learn about the Quantum NPC simulation they are working on from a Star Citizen panel here: www.youtube.com/watch?v=_8VFw1F-olQ.
submitted by _TheForgeMaster to starcitizen [link] [comments]

How to not get ruined with options - Part 2 of 4

Post 1: Basics: CALL, PUT, exercise, ITM, ATM, OTM
Post 2: Basics: Buying and Selling, the Greeks
Post 3a: Simple Strategies
Post 3b: Advanced Strategies
Post 4a: Example of trades (short puts, covered calls, and verticals)
Post 4b: Example of trades (calendars and hedges)
---
This is a follow up of the first post.
The basics: Volatility and Time
Now that you understand the basics of intrinsic and extrinsic values and how together gives a price to the premium, it is important to understand how the extrinsic value is actually calculated. The intrinsic value is easy:
The intrinsic value of a call = share price - strike (if positive, $0 otherwise)
The intrinsic value of a put = strike - share price (if positive, $0 otherwise)
The extrinsic value is mostly based on two variables: volatility of the share price and time.
Given the historic volatility, and the predicted volatility, how far can the share price go by the expiration date? The longer the date, and the higher the share volatility, the higher the chance of the share to change significantly.
A share that jumped from $25 to $50 in the past few weeks (hello NKLA!) will have much higher volatility than a share that stayed at $50 for several months in a row. Similarly, an option expiring in two months will have a higher extrinsic value than an option expiring in one month, just because the share has more chances to move more in two months than a single month.
The extrinsic value is calculated as a combination of both the expiration date (how many days to expiration, hours even when you are close to expiration), and the implied volatility of the share.
Each strike, call or put, will have their own implied volatility. It is quite noticeable when you look at all the strikes for the same expiration. Sometimes, you can even arbitrage this between strikes and expiration dates.
The basics: Buying and Selling contracts
Until now, we have only talked about buying call and put contracts. You pay a premium to get a contract that allows you to buy (call) or sell (put) shares of a specific instrument.
As your risk is the cost of your premium, you can notice that buying options is a risky proposition.
To make a profit on the buying side:
  1. You have to be directionally correct. The price must go up for calls, down for puts.
  2. AND the share price move must be bigger than the premium you paid.
  3. AND the share price move must happen before the option expiration.
You will notice that it is pretty unforgiving. Sure, when you are right, you can make a 100% to 1000% profit in a few months, weeks, or even days. But there is a big chance that you will suffer death by thousands of cuts with your long call or put contracts losing value every day and become worthless.
We were discussing earlier how volatile stocks can have a high extrinsic value. What happens to your option price if the share is changing a lot and suddenly calms down? The extrinsic portion of the option price will crater quickly because volatility dropped, and time is still passing every day.
The same way you can buy options, you can also sell call and put options. Instead of buying the right to exercise your ITM calls and puts, you sell that right to a 3rd party (usually market makers).
To make a profit on the selling side:
  1. You have to be directionally correct.
  2. OR the share price does not move as much as the premium.
  3. OR the share price does not move before the option expiration.
Buying calls and puts mean that you need to have strong convictions on the share’s direction. I know that I am not good at predicting the future. However, I do believe in reversion to the mean (especially in this market :)), and I like to be paid as time is passing. In case you didn't guess yet, yes, I mostly sell options, I don’t buy them. This is a different risk, instead of death by a thousand cuts, a single trade can have a big loss, so proper contract sizing is really important.
It is worth noting that because you sold the right of exercise to a 3rd party, they can exercise at any time the option is ITM. When one party exercises, the broker randomly picks one of the option sellers and exercises the contract there. When you are on the receiving end of the exercise, it is called an assignment. As indicated earlier, for most parts, you will not be getting assigned on your short options as long as there is some extrinsic value left (because it is more profitable to sell the option than exercising it). Deep ITM options are more at risk, due to the sometimes inexistent extrinsic value. Also, the options just before the ex-dividend date when the dividend is as bigger than the extrinsic value are at risk, as it is a good way to get the dividend for a smaller cash outlay with little risk.
In summary:
The Greeks
Each option contract has a complex formula to calculate its premium (Black-Scholes is usually a good initial option pricing model to calculate the premiums).
Things that will determine the option premium are:
There are four key values calculated from the current option price: delta, gamma, theta, and vega. In the options world, we call them ‘the Greeks’.
Delta is how correlated your option price is compared to the underlying share price. By definition 100 shares have a delta of 100. If an option has a delta of 50, it means that if the share price increases by $1, the new price of your option means that you earned $50. Conversely, a drop of $1 means you will lose $50.
Each call contract bought will have a delta from 0 to 100. A deep ITM call will have a delta close to 100. An ATM call will have a delta around 50. Note that on expiration day, as the intrinsic value disappears, an ATM call behaves like the share price, with a delta close to 100. Buying a put will have a negative delta. A deep ITM put will have a delta close to -100. Selling a call will have a negative delta, selling a put will have a positive delta.
Gamma is the rate of change of delta as the underlying share price changes. Unless you are a market maker or doing gamma scalping (profiting from small changes in the share price), you should not worry too much about gamma.
Theta is how much money you lose or profit per day (week-end included!) on your option contracts. If you bought a call/put, your theta will be negative (you lose money every day due to the time passing closer to the contract expiration, and your option price slowly eroding). If you sold a call/put, your theta will be positive (you earn money every day from the premium). It is important to note that the theta accelerates as you get closer to the expiration. For the same strike and volatility, a theta for an option that has one month left will be smaller than the theta for an option that has one week left, and bigger than an option that has 6 months left. In the third post, I will explain how you can take advantage of this.
FWIW, with the current volatility, I get 0.1% to 0.2% of Return On Risk per day, so roughly 35% to 70% of return annualized. I don’t expect these numbers to keep like this for a long time, but I will profit as long as we are in this sideways market. I also have an overall positive delta, so I will benefit as the market goes up, and theta gain will soften the blow when the market goes down.
Vega is how much your option price will increase or decrease when the implied volatility of the share price increase by 1%. If you bought some puts or calls, your vega will be positive, as your extrinsic value will increase when volatility increases. Conversely, if you sold some puts or calls, your vega will be negative. On the sell side, you want the actual volatility to be lower than the implied volatility to make money.
This is why we often say that you sell options to sell the volatility. When volatility is high, sell options. When volatility is low, buy options. Not the opposite. This also explains why some people lose money when playing stock earnings despite being directionally correct. Before earnings, the option price takes into account the expected stock price change, so the volatility is significantly higher than usual. They bought an expensive call or put, numbers are out, share price moves in the correct direction, but because suddenly the volatility dropped (no uncertainty about the earnings anymore), the extrinsic value of the option got crushed, and offset the increase in intrinsic value. The result is not as much profit as expected or even a loss.
Bid/Ask spread
Options are less liquid than the corresponding shares, especially given the sheer quantity of strikes and expiration dates. The gap between the bid and the ask can be pretty big. If you are not careful about how you enter and exit the trade, you will transform a profitable trade into a losing one. Due to the small contract costs, the bid/ask spread adds up quickly, and with the trading fees, they can represent 10% or more of your profit. Beware!
Never ever buy or sell an option at the market price. Always use a limit order, start with the mid-price, or be even more aggressive. See if someone bites, it happens. If not, give up $0.05 or less, wait a bit longer, and do it again. Be patient. If you are at mid-price between the bid and the ask, and you think this is a fair price, and the market or time is on your side, again just be patient. It is better to not enter a trade that is not in your own terms than overpaying/underselling and reducing your profit/risk ratio too much.
LEAPs
Leap options have a very long expiration date. Usually one year or more. ETF indexes, like SPY, can have leaps of 1, 2, or 3 years away. They offer some advantages as they have a low theta. A deep ITM Leap can behave like the stock with 30% of the cost. Just remember that if the share drops by 30% long term, you will lose everything. Watch out! This is a personal experience of mine in 2008, where I diversified away from a few companies to many more companies by buying multiple leaps. It was akin to changing 100 shares into options with a delta of 250. However, when the market tanked, all these deep ITM leaps lost significantly (more than if I only had 100 shares). Good lesson learned. You win some, you lose some.
Number of shares
The vast majority of options trades at 100 shares per contract. But during share splits, or reverse splits, company reorganizations, or special dividend distributions, the numbers of shares can change. The options are automatically updated.
The 1:N splits are easily converted as you just get more contracts, and your strike is getting adjusted. For example, let’s say you own 1 contract of ABC with a strike of $200 controlling 100 shares (so exposure to $20k). Then the company splits 1:4, you are going to get 4 contracts with a strike of $50, with each contract controlling 100 shares (so still the same exposure of $20k).
The N:1 reverse splits are a tad more complex. Say you have 1 contract of ABC with a strike of $1, controlling 100 shares (so exposure to $100). Then the company reverse splits 5:1, you are going to still get 1 contract, but with a strike of $5, with each contract controlling 20 shares (so still the same exposure of $100). You will still be able to trade these 20 shares contracts but they will slowly trade less and less and disappear over time, as new 100 shares contracts will be created alongside.
Brokers and fees
In my experience, ThinkOrSwim (TOS owned by TD Ameritrade, being bought by Schwab) is one of the very best brokers to trade options. The software on PC, Mac, iPad, or iPhone is top-notch. Very easy to use, very intuitive, very responsive. Pricing on contracts dropped recently, it’s now $0.65 per contract, with $0 for exercise or assignment. You may actually be able to negotiate an even better price.
I also have Interactive Brokers (IB), and that’s the other side of the spectrum. The software is very buggy, unstable, unintuitive, and slow to update. I tried few options trades and got too frustrated to continue. Too bad, it has very good margin rates (although if you are an option seller it is not really needed, as you receive cash when you open your trades). However, it’s perfectly acceptable to trade plain ETFs and shares.
Market Markers
Most of the options you buy or sell from will be provided by the Markets Makers. Do not expect that you will get good deals from them.
You will see in the third post how you selling a put and buying a call is equivalent to buy a share. When you buy/sell a call / put from the market makers, you are guaranteed that they will hedge their corresponding positions by buying/selling a share and the opposite options (put/call).
The next post will introduce you to simple option strategies.
---
Post 1: Basics: CALL, PUT, exercise, ITM, ATM, OTM
Post 2: Basics: Buying and Selling, the Greeks
Post 3a: Simple Strategies
Post 3b: Advanced Strategies
Post 4a: Example of trades (short puts, covered calls, and verticals)
Post 4b: Example of trades (calendars and hedges)
submitted by _WhatchaDoin_ to investing [link] [comments]

Fairly Conservative Stock Advice for the non Expert


Buy stocks with earnings and increasing revenues. You can forget that occasionally but it takes time to learn when you can do that.
Yahoo finance has all the general info you need to assess a stock in most cases but it'll take a while to learn to navigate for everything.
If you can find a stock that is going up nicely (during normal times) in volume more than triple its average inexplicably on NO CURRENT NEWS-that is the best way i have found explosive stocks-Finding one in a hot sector is a big plus. It may take 2-3 weeks or more before they start popping. The reason this works is because it indicates some 'wise guys' know something is coming that isn't out yet. It is best used for small cap to low mid cap generally unknown stocks. Don't use this formula for stocks that have crashed and are now bouncing up.
Read these boards and watch all the business channels as often as you can-Listen when Buffet speaks. This is to learn basic market and business principles and not necessarily for specific stock picks. If you hear of an interesting stock, do your own due diligence.
A Drip plan on a Utility or Dividend Mutual Fund where you add extra money of the same amount regularly is the surest way to make a nice score over time. Try to get in when the market tanks and/or up your extra contribution at that time.
Don't EVER buy stocks under $3-$4. If you have to, make sure you can handle a total loss. If you receive a phone call from a broker you don't know to buy one, don't even think about it-just hang up.
Avoid Margin unless you can transfer in covering funds in a day or two
Buy thinly traded stocks that you like when they are down on low volume.
Never set a GTC order for more than a week or two at most. You can wind up buying a stock for forty that is 25 ten minutes later. Much less likely to happen in a week or two and then you can re-assess your decision. If you have a GTC order, you must read the after market and pre market news so that you can cancel your order if something weird is going on. The exception might be in the crypto market to set some GTC orders at 60% below market and hope for a flash crash.
With short term trading, only trade stocks with good fundamentals that you wont mind owning if things don't go your way.
Don't buy in the pre market
Once you sell a stock at a profit, don't buy back in on a small drop
Always have 20% cash in case of a market crash. Adding money incrementally and waiting for a 5% rally are usually good ideas
If you get lucky and have a 500% gain or more inside of a year on a stock, take double your investment off the table.
Remember "No one ever went broke taking a profit" and You'll never buy at the absolute lows or sell at the highs. When in doubt on taking a profit, sell half!
NONE of this info came from a book. I have never read a book on the market but quite a few articles, watched the business channels, talked extensively to active investors and been trading and following the market for decades.
Good luck!
submitted by Knownothingfool to StockMarket [link] [comments]

M1 Plus Review

Intro:
Bought into M1 Plus from a $60/yr Promotion 2 months ago. I had an investment account already, and even one of the first spend accounts. I had declined the offer for M1 Plus at $125/yr.
This is a first review of M1 Plus after two months of use and a bit of a dive into the value of its features from a financial and user experience point of view.
Value:
This is a pretty simple one. Do the math. The interest vs. your other checking account multiplied by the amount of cash you’d be keeping in there for M1 Spend. If you’re borrowing from M1 too, the 1.5% difference (or whatever difference there is between M1 Borrow and your next best offer) multiplied by the amount of money you’d like to borrow. If all these add up to greater than whatever annual fee is offered, go for it.
Otherwise, it’d be a very expensive metal card. But if 4 waived ATM fees go a long way to save you money, that should be worth considering too, however, there are tons of cards and products that’ll waive said fees, some even for unlimited transactions and no upfront cost. Just because M1 is offering this benefit as part of a premium package doesn’t mean it’s impossible to find for free somewhere else.
XP:
It is a great experience. I constantly invest lumps of $500 into my portfolio all the time. It’s quick, easy, and immediately fulfilling. Not that other brokerages don’t do this. But M1 is clearly focused on showing you your long term progress on your investment goals. It uses a money weighted return formula so that you know how much your capital has been making you to easily compare to the return of bank accounts and investments. There’s a reason their product is called “Invest” and not “Trade”, more on that later. But this means it’s primarily suited for this purpose. During the Covid crash, I took to Robinhood to place my Put Options on the S&P because high frequency derivatives trading and M1 basically speak different languages. All this to say, it feels amazing to watch your investments accounts slowly creep up as you continue to dollar cost average into the market, but this has some drawbacks.
Pies. While fun and easy to build, mix and match, they are not a very common mechanic to implement on amateur portfolios. Selling stocks can be quite the process on M1, and the platform will try its darnest to discourage you from making any but the most basic adjustments to your portfolio. Its really only suited for the “set it and forget it” mindset, which is not to say you can’t mess around with your money as you please, but it’s just so perfect for investing and watching your money grow with a long time horizon. The plots will show you your progress and encourage you to keep a regular deposit schedule. But try trading into and out of a stock, or a set amount of shares, or even thinking about playing with derivatives and other financial instruments: slim pickings.
The numbers make a lot of sense, too. I’ve been investing for about 5 years now, and my latest craze has been leverage. I’ve read about how the optimal leverage ratio for the S&P on average was 2.0 or 100% levered up, and looked up the historical comparisons to corroborate. Shopping around for margin accounts and available capital, it’s tough to beat the 2% rates at the moment. I’ve been slowly levering up during the latest market rally to great effect and the low interest really pumps up those numbers. Having this much cheap capital, not just for leverage, but also for life is worth more than just the time value of money. I would make the point that this is made even more valuable by having all your financial services on the same platform, as you really get to do with your money as you please and move it around to withdraw it to your hearts content.
My real issue was with Spend. Not a problem with the product but myself, in trying to justify the annual fee. I weighed how much money it would make sense to keep in Spend as opposed to an online savings account. To keep cash a couple of months ago, it made more sense to opt for ally or marcus as they were offering close to 1.55% on cash. But as their rates have plummeted, getting 1.0% on a CHECKING account has been an absolute godsend in this crazy economy. This account works for just about anything with the notable exception of checks... in a checking account which I suspect is the reason for the “Spend” branding the product was marketed with. When it’s hard to even find 1% on a savings account, a 1% APY on checking is no-worries approach to cash investment.
Ultimately, having all of these balances displayed together on the Transfers tab is huge in terms of consumer experience. This, however, should not be a replacement for true “Dashboard” that could show an overview of all your money moves and account balances.
Ideas:
M1 Trade. Admittedly, I do see how this can be very contrary to the philosophy, product and experience that M1 has worked to create. That being said, thinking that your customer will always prefer to have their money invested into automatically allocated pies is a little short-sighted.
Opening a much more DIY Trading product on M1 would of course have them incur tons of costs in handling and verifying transactions of all the individual financial, but many places already offer such services for free, some are even profitable at it. An M1 Trade product would also need integrating the Invest product because regardless of what you’re doing on the platform, you still consider your money your investments and want to see it all together. Pies and individual Buys would have to play nice together, and that does sound like a difficult endeavor.
I keep a couple of accounts with different mixtures of my pies for all my purposes. I also handle the investments for a few of my family members, which will become relevant shortly. You can obviously set up as many accounts as you wish and move money into them as you desire, but this can get you into some warmer water. If two of your pies hold most the same securities and you just want to have a different pie for a different account, you’ll have to call up to pause trading so that your pies have a chance to get to know each other and not force you to sell and buy right back into the same assets just to incur the taxes. It’s a bit of a hassle, and I would argue, on purpose.
For Pies themselves, I often find myself wanting to make small tweaks to pies but then quickly let it go as removing slices would automatically trigger a massive sell off that incurs taxes. From a conversation with tech support, I gathered that the best way to do this was simply pause trading on your account, and change the pie you want all your money to go into. Editing pies is fine and easy, but completely swapping a pie for another one led me to believe that it would sell put of all my holdings even if the old and new pie had many of those same holdings. If this is me being stupid, good, if it’s a gap in features, I hope M1 lets you simply swap a pie for any other and gives you the option either sell everything, sell only what is 0 in the second pie, or sell nothing and simply continue aiming for the allocation of the new pie without touching your previous investments.
Lastly, an iPad app. I’m a big fan of the iPad and the iPad Pro in particular. I’ve found myself using it far more than my laptop which is now strictly reserved for long work sessions (I write and edit for a YouTube Channel) and watching content in groups of people (15” MBP Speakers are the stuff of legend). But for anything else, I subconsciously grab the iPad. It’s annoying to have the website be the best M1 experience on the iPad. I understand that making a compelling iPad investing app is its own mountain to climb, but a lot of the Mobile app’s functionality can be ported over without too much of a hassle. Charles Schwab has an iPad app based 99% on the iPhone app that still performs all the same functions, just on the bigger screen, which is the whole point of the iPad in the first place. While it’s not a top shelf iPad app (there are only a select few) the Schwab app is lovely and I’m begging M1 for anything that doesn’t force me to use my iPad in portrait mode to use a blown up iPhone app. Again, this app doesn’t have to be a world beater, just a decent looking and bigger version of the iPhone app that would go a long way to boost the M1 customer experience.
Closing Remarks:
Obligatory YMMV disclosure: it’s about the math, I won’t bore you with my own, but I was just over the line when it made sense for me to opt into the $60/yr promo.
That being said, M1’s value has been a lot about the experience. The future of finance is free. No brokerage should be making money on transaction commissions or administrative fees, it’s a relic from the before times when you needed people who knew people on wall street to do your trading. At this point its not even worth any perceived convenience.
The clever ones reading this will point out that, while true, many brokerages already offer a wide variety of free services. Many of them, even, that M1 doesn’t offer.
The true spirit of this review is to express my personal opinion on the value of M1 Plus and how the customer experience is its edge in the ebrokerage market. Rates are competitive, but it is a brand new way to consider finance and its role in your life and society.
TL;DR
Spend is pretty competitive for a checking account, and as long as you’re not using checks too often, its a no brainer for anyone with close to $10,000 in cash just sitting somewhere.
Invest is beautiful, but the free version is exactly as good, more windows means very little with the limited trading you’re allowed to do anyway.
Borrow is brilliant, hella flexible and competitive rates.
8/10 Would recommend to a friend.
submitted by TomasFCampos to M1Finance [link] [comments]

How to not get ruined with Options - Part 3b of 4 - Advanced Strategies

Post 1: Basics: CALL, PUT, exercise, ITM, ATM, OTM
Post 2: Basics: Buying and Selling, the greeks
Post 3a: Simple Strategies
Post 3b: Advanced Strategies
Post 4a: Example of trades (short puts, covered calls, and verticals)
Post 4b: Example of trades (calendars and hedges)
---
In the previous post 3a, I explained simple strategies like cash covered put, rolling, selling covered calls, and bullish and bearish spreads (also called verticals).
Now let’s do some more advanced strategies, they can be quite interesting.
First, let’s quickly introduce the concept of a leg in options. It simply describes a specific combination of expiration / strike / call or put, said differently it groups the same options contract together. A long call or put is a single leg, whether you have 1 contract or 20, it has one kind of contract. A cash covered put, or a covered call have also a single leg. A vertical has 2 legs, one for the short strike, one for the long strike. It used to be that the trading fees were different depending on how many legs you had in your position, like a fixed price per leg plus the number of contracts, or $15 for exercise or assignment per leg regardless of how many contracts. In the past couple of years, the trading fees dropped quite a bit, so it does not seem to be happening anymore, but some brokers may still do that.
Calendars
A calendar is a 2 leg position. Both legs have the same strike, but they have different expiration dates. The closest expiration is a short position, the farthest position is a long position. It can be constructed with both calls and puts, and will have roughly the same cost either way. But if your strike is far from ATM, you should pick the variant that is OTM to avoid assignment on your short position.
Here is how a calendar looks like:
SELL -1 ABC 100 17 JUL 20 17.5 CALL @ 1.00
BUY +1 ABC 100 17 AUG 20 17.5 CALL @ 1.50
2 legs, both calls, strike of $17.50, you are shorting the July 17 contract, and long the August 20. Because Aug 20 is farther, it costs more than the July 17 contract. Total cost of that position is $50 per contract (($1.50 - $1.00) * 100 shares). This is your maximum risk. Despite having one short position, your long position has the same strike, and will be worth always more. Both values will move in tandem. This will be the case for both calls and puts. If your short position becomes somehow assigned because it is deep ITM, your long position will protect you, with a bit more extrinsic value.
Why would you take this position? As time passes, the short position will lose theta much faster than your long position. At the first expiration date (the one from your short position), if that’s OTM, then that short position expires worthless, and you are left with just a long position with extrinsic that now you can sell. If the share price and volatility stays the same, the short leg will go from $1.00 to $0, the long leg will go from $1.50 to $1.00. You paid $50 per position, you got $100, i.e. 100% profit in a month.
This position is positive theta and positive vega. You will benefit if the volatility increases (both legs will have their extrinsic values increase). However, if the volatility crashes, you may not make money, or even lose some. The long leg could drop from $1.50 to $0.50. You paid $50, you got $50. No gain. Worse, this position works best when the share is around the strike you picked. If the share moves up or down significantly, you’ll lose money (potentially your full $50). The profit curve looks like a gaussian curve, with the top at your strike price.
This position excels in two cases though:
And did you notice that when you rolled your short puts or covered calls from month to month with the same strike, your trade was the same as selling a calendar?
Talking about rolls, you can also buy a much longer-term long position (like 6 months away, or even a year), and roll your short position each month, bringing you an additional premium. If the market complies, you can pay your 6 months options in 2-3 iterations of your monthly short, and maximize your profit.
Diagonals
Diagonals are a mix of calendars and verticals. You have a short position in the front month, and a long position in the back month while having 2 different strikes.
Here is how a diagonal looks like:
SELL -1 ABC 100 17 JUL 20 15.0 CALL @ 1.00
BUY +1 ABC 100 17 AUG 20 17.5 CALL @ 1.10
Diagonals can be tricky to set up, and you will have to play with the numbers a bit. It allows you to have a calendar-like position (but not exactly the same, the peak and profit/risk profile are different) at a lower cost. Notice in the example that the short position has a strike of $15, and the long position has a strike of $17.50. We pick these in a way that the cost of the short position is roughly the same as the cost of the long position (long position is farther so higher cost, but we pick a higher strike to lower its overall cost). Total cost is $0.10 per leg ($1.10 - $1.10). With this position, you will lose up to $250 in the worst-case scenario if the price shoots up (as both extrinsic values will go towards $0, and you will be left to pay for the strike difference between $15 and $17.50 - The extrinsic value of the short call will drop much faster than the long call though, so a $250 loss may not happen in practice). If the price in the short expiration is a bit below $15, you may earn $50 to $100 with the leftover extrinsic value of the long call.
Diagonals are usually positive theta, and vega neutral. Unlike for calendars, in general, the volatility change will not make a big difference in the position.
Something to note: When you roll your short puts, covered calls, or even calendars with a different strike, you are actually selling a diagonal.
Synthetic Share
Now let’s talk about a quite simple position, a synthetic share.
Did you notice that if you buy a call, and sell a short, you will have the same profit/risk as if you bought the shares?
ABC is trading at $33.05, here is a 2 leg version of a share with options:
SELL -1 ABC 100 17 JUL 20 33.0 PUT @ 1.80
BUY +1 ABC 100 17 JUL 20 33.0 CALL @ 1.85
Cost of this position is around $0.05 per share. If the share is at $40 by expiration, you will earn $7 per share (minus $0.05). If the share is at $20 by expiration, you will lose $13 per share (plus $0.05). The exact same way as if you bought the share at $33.05. Magic.
And you can pick a strike of $20 instead, that you will pay $13.05 or so. Why? Because your call has $13.05 of intrinsic value, and you pay for that. The extrinsic value of the call is paid by the extrinsic value of the short put. Same if you pick a $40 strike, you will get a $6.95 credit.
The market is quite efficient, and this holds pretty much true on all strikes, and both calls and puts. They all get repriced automatically as the share price changes and the extrinsic of the call will match the extrinsic of the put at the same price. Think of it this way, if there were some inefficiencies, someone would automate the arbitrage to profit from it. And they do. The same way market makers arbitrage ETF price with its holdings so they are close in sync, they will arbitrage options.
Something important to note is that the cost of this synthetic share will take into account the cost of money (close to zero these days) and the dividend. So no free lunch by buying the share, and selling a synthetic share to pocket the dividend with no risk. :)
Given that formula that we just discovered:
1 share = 1 call - 1 put
You will notice that:
1 call = 1 share + 1 put
On the way up, this moves the same way as a call (due to the long share)
Lose theta like a call (due to the long put)
On the way down, it cannot lose more than the premium (due to the put offsetting the long share).
And this:
1 put = 1 call - 1 share
On the way down, this moves the same way as a put (due to the short share)
Lose theta like a put (due to the long call)
On the way up, it cannot lose more than the premium (with long call offsetting the short share)
So when you buy a call, the market makers will do the opposite side of the trade and will hedge in a way that they have no risk. The MM will buy / sell shares/calls/puts as needed, arbitrage constantly, earn money on the slippage between the bid and the ask, and each of their trades will partially cancel each other, so at the end of the day, they have little to no risk, nor even a position.
Now that we deconstructed a share with puts and calls, you could build a trade like this:
SELL -1 ABC 100 17 JUL 20 26.0 PUT @ 0.60
BUY +1 ABC 100 17 JUL 20 40.0 CALL @ 0.60
This is a bullish position. Theta and volatility neutral. You will lose money only if the share price drops below $26 by expiration, you will get assigned the share if you don’t sell before. It won’t move 1:1 with the share price though, but depending on the range you pick, you can still make some good profit with a lower risk. Note that despite the value being correlated with the share price before expiration, it won’t be 1:1 especially if the strike difference is big, and both are OTM.
So if you look at this synthetic share, you should realize by now that you don’t need cash to profit from a share price going up. As long as you are not assigned, no need for margin anymore. You can even do this trade with additional credit, at a greater risk for assignment though.
Collars
A collar is the opposite of a synthetic share:
BUY +1 ABC 100 17 JUL 20 26.0 PUT @ 0.60
SELL -1 ABC 100 17 JUL 20 40.0 CALL @ 0.60
It is used to protect against the drop of your existing shares (through the put), and the protection is paid by selling the covered calls against your shares. Years ago, company execs would build collars on their existing, or soon to be vested, stock options and RSUs so they would have a steady income with little risk. Nowadays, most companies’ policies prevent you from trading options with company shares.
Straddle and Strangle
A straddle is buying a call and a put at the same strike and expiration.
BUY +1 ABC 100 17 JUL 20 33.0 PUT @ 1.80
BUY +1 ABC 100 17 JUL 20 33.0 CALL @ 1.85
The idea is to profit from the movement in the share price. It is theta negative and vega positive (both due to the double long). The hope is that the stock will move faster in one direction than the theta loss. This position is regularly used by gamma scalpers and they will go in and out and adjust as the stock moves. The strike is usually around the ATM strike, to reduce the intrinsic value that you may waste as the stock moves.
A strangle is similar except that the strikes are not the same between the call and the put.
BUY +1 ABC 100 17 JUL 20 26.0 PUT @ 0.60
BUY +1 ABC 100 17 JUL 20 40.0 CALL @ 0.60
Because you use OTM strikes, the cost is cheaper, with less sensitivity to theta and vega. Depending on the strikes you pick, you can also have a bullish or bearish bias in your position.
If the volatility is very high, and you like to yolo, you can actually build a short straddle or strangle. You expect that the share price will not move more than the implied volatility and that the double theta will provide a good income. Because only one of the legs will be at risk if the share moved up or down at expiration, you improved your profit/risk profile because you got a double premium. However, you are also exposing yourself to two risks. Don’t do it, unless you are looking forward to being ruined. It will work until it won’t, and you will blow up your account.
Also, straddles and strangles have a special tax treatment, another reason to avoid them.
Iron Condors and Butterflies
I am going to add two last strategies, mostly for completeness.
I played with Iron Condors in the past. I used to say “I could get a 5% return pretty much every month”, and that is true (although with the current volatility that would be more like 7-10%). However, my next sentence was “But once in a while, I would lose most of it.” That part is also true. :)
It is built with 2 credit spreads, one bullish, one bearish, both OTM:
BUY +1 SPY 100 17 JUL 20 245 PUT
SELL -1 SPY 100 17 JUL 20 250 PUT
SELL -1 SPY 100 17 JUL 20 330 CALL
BUY +1 SPY 100 17 JUL 20 335 CALL
This position can be sold today for $0.32 per share with a $4.68 risk. As long as by expiration the share price is between $250 and $330, you would keep the premium, so around 7% (minus trade fees) for 3 weeks, so around 120% annualized profit. It is a bit more advantageous right now because the volatility is quite high, and we kind of have some bounds between the top and the bottom of these 6 last months, but you can still blow up the trade, and lose everything. If you did an Iron Condor in February for a March expiration, you would have incurred the maximum loss.
This can be a very stressful position, as the market goes up and down constantly. As it gets closer to the edges, the Iron Condor gets more expensive. Then what do you do? Do you buy it back? Do you hope it gets back to the middle? If it passes the edges, do you buy it back at 50% loss? But what if you close, and the market reverses suddenly and you would have been in the green if you kept the position? Very stressful. Avoid. :)
However, if the market goes up on and on, you may want to build a far OTM bearish spread (thinking that the market could revert to the mean). Then when the market drops back and continues dropping, again and again, you could build a far OTM bullish spread. You would end up with an iron condor with a much better profit/risk profile than if you built it on a given day. This situation happens rarely though. Remember, as indicated in part 3a, to close the side of the spread that reached 90+% profit. No need to keep some risk there for a few more dollars of profit.
A butterfly has a similar behavior as an Iron Condor but expects even less movement:
BUY +1 SPY 100 17 JUL 20 300 PUT
SELL -2 SPY 100 17 JUL 20 310 PUT
BUY +1 SPY 100 17 JUL 20 320 PUT
This can be built with PUT and CALL, it can be extremely profitable if the stock ends in your middle strike by expiration. But it won’t, and you will probably lose your money. :)
The names of Condor and Butterfly are after the shape of their profit curve for the long version that (very) loosely looks like a condor and a butterfly. :)
Again, they are fun for shit and giggles, but can be very stressful. Just don’t do it. You have been warned.
The next post will explain the various trades I made recently using these strategies, and taking advantage of this very volatile market.
---
Post 1: Basics: CALL, PUT, exercise, ITM, ATM, OTM
Post 2: Basics: Buying and Selling, the greeks
Post 3a: Simple Strategies
Post 3b: Advanced Strategies
Post 4a: Example of trades (short puts, covered calls, and verticals)
Post 4b: Example of trades (calendars and hedges)
submitted by _WhatchaDoin_ to investing [link] [comments]

Anti bioterror play for huge long term gains

Thesis: SIGA Technologies, an anti-bioterror pharmaceutical company, will double their stock price in a year and triple or quadruple it in two years. They are in an incredibly strong financial position: zero debt, future US government purchases that may be greater than their market cap, and low expenses for operations and forward research. They also have amazing future growth prospects as foreign governments will buy their meds to prepare for future pandemics. Their drugs treat smallpox which is both more contagious and deadly (IFR ~30%!) than the Wuhan plague.
Do you think absolutely no political or military leader will learn their lesson about pandemic preparedness? Do you think business leaders are going to put the pressure down since the cost of unpreparedness is orders of magnitude greater than preparedness? That’s what this play is all about.
The play: Buy $SIGA stocks and hold for 2 years.

Quick facts

Market cap: $560 million
Style: Value, when compared to other biotechs
Products: Their primary product is an FDA approved oral antiviral (TPOXX) that treats all orthopox viruses (e.g. the dreaded smallpox). They are currently developing additional products for IV and pediatric treatment, another small molecule drug for treating orthopox viruses, and are developing therapeutics that use orthopox viruses for delivery of anticancer antigens.
How SIGA makes money: 1) US government contracts to supply the Strategic National Stockpile, 2) US government contracts for research, 3) sales to foreign governments and potentially private parties. Note that their business doesn't care about prevailing market conditions and all of these are multi-year contracts.
Debt: $0. They paid off an $86 MM loan in March.
Cash holdings: $77.4 MM
Total assets: $118.6 MM
Net cash flow 2019: -$18.2 MM, as discussed below, 2019 was a transition year between govt contracts hence the low income. They made $400MM from closing contracts in 2018.
Net cash flow 2020, my estimate: +$53 MM, see cash flow section below for how I got this figure

How this play can win

- The US govt through BARDA accelerates their purchasing of TPOXX to be and look more prepared for future pandemics.
- Foreign governments purchase TPOXX for their own pandemic preparedness. Canada announced an intent to purchase in December. Others are likely to follow. IMO, the stock will hit $10 when 3 additional countries announce purchasing and $20 when they have a network of 10 purchasing countries plus additional research. The US gets a discount on TPOXX because they funded the initial research, others will likely pay three times as much per dose.
- The US govt offers much more research funding to SIGA to design antivirals for other possible pandemic viruses. 10 years ago they had a small BARDA contract to look into antivirals for Lassa fever, a nasty rat flu boogaloo. They might renew or add to this type of research.
- TPOXX gets additional approvals for IV use and prophylactic use (i.e. give to people in contact with infected, first responders or first city) and US buys more. They recently received a new $23 MM contract for developing this use.
- A larger pharmaceutical company announces that they will purchase SIGA for $10-$15 share in a year. SIGA already has connections with Pfizer.
- Large amounts of additional income help them pump with stock buybacks or fat dividends. I am totally convinced they are going to buyback or spit dividends in a year from now.

Risks

- Foreign governments don’t purchase TPOXX or don’t approve its safety/efficacy and rely on the vaccine for smallpox (but 1 in 5 people can’t take the vax and lots of deaths in first wave without TPOXX).
- US govt does not add to stockpile, only keeps refreshing expired TPOXX.
- US govt does not invest in additional pandemic preparedness research/invests only in competitors.
- TPOXX may later be discovered to have a severe side-effect. (Oral formula is already FDA approved though).
- There’s more risks listed in their 10-K, but I do not think they are significant enough to list here.

Resources for your own DD

Do your own research. Always.
Latest 10-K: https://investor.siga.com/node/13196/html
Latest 10-Q: https://investor.siga.com/node/13251/html
2020 Q1 earnings call: https://www DOT fool DOT com/earnings/call-transcripts/2020/05/07/siga-technologies-inc-siga-q1-2020-earnings-call-t.aspx
2019 Q4 earnings call: https://www DOT seeking NO SPACE alpha DOT com/article/4330138-siga-technologies-inc-siga-ceo-phil-gomez-on-q4-2019-results-earnings-call-transcript
Reddit doesn't like the above websites. Sorry for the garbled links
Press releases: https://investor.siga.com/press-releases
Smallpox wiki: https://en.wikipedia.org/wiki/Smallpox

Detailed DD

I’m going to start off this section by answering the arguments you’ve already thought of.
Who gives a shit about some old timey disease?
The world militaries. Smallpox is a nasty disease. It's basic reproduction number, R0, is between 3-6, like the Wuhan coronavirus. It similarly has a 7-14 day lag time before symptoms show, although it is not known to be infectious for the first several days.
Smallpox is also exceptionally deadly, ranging from 15-30% fatality rate depending upon the strain and in children and the elderly can reach a 75% mortality rate. Survivors are usually permanently scarred and may have life-long complications from the disease. A smallpox epidemic would actually make corona look like "just the flu."
Infection around day 20 mark. Bangladesh, 1973.
Bioterrorism or biowarfare with smallpox is a massive threat to the military and people and an obvious first choice of weapon for a bioterrorist. Careful governments will plan for it.
Isn't smallpox eradicated?
Yes. But. 1) There are still many samples across the world in government labs across the world. 2) The genome exists on computers in said labs. 3) Many other orthopox viruses exist such as cowpox and monkeypox. Monkeypox in particular has had more cases in subsaharan Africa in the last few years. There have even been small outbreaks in the US, UK, and Singapore within the last 20 years.
What about vaccines?
  1. Maybe you recall that in the 1790’s Edward Jenner discovered the first vaccine by giving people the milder cowpox to prevent smallpox. The state of the smallpox vaccine has not evolved significantly since then. The modern vaccine uses a two-prong poker to deliver a live smallpox virus that has been engineered to be very weak. However, it is still a real virus that can causes symptoms or spread the disease to others. One in five Americans have underlying conditions that prevent them from receiving this vaccine due to the symptoms it causes.
  2. What do you do when smallpox starts spreading rapidly? You need to be able to treat the potentially 100s of thousands of people who will be infected before the immunization takes effect. The US is well-prepared with the vaccine having 300 million doses, nearly enough for every American. But you need a treatment as part of the defense strategy.
  3. TPOXX is in the process of being approved as a prophylactic. I.e. if smallpox were to spread then people could be given both the vaccine and TPOXX at the same time to make sure they don’t get sick if they were exposed prior to vaccination. Prophylactic treatment could be extremely important to first-responders, military, and people in the most badly affected zones.

Fundamentals

I am no expert in reading 10-K filings, but SIGA's 10-K is not too complicated. I encourage you to do your own DD before making this play and if you've never read a 10-K filing before this is a great one to cut your teeth on. SIGA only has one key product line and their debt is uncomplicated (nonexistent); the only tricky parts is following the government money.

Balance sheet from most recent 10-Q
Balance sheet
So the things to look at here are:
  1. SIGA has plenty of cash. Enough for two years operating expenses without any sort of austerity. Even if the economic downturn affected their business model, they would weather it easily.
  2. They have $16 MM in inventory. That’s mostly TPOXX they’ve already manufactured. This is great because it means they will have low costs for meeting the current BARDA contract supply request for this year and that if they get more orders they can dedicate their supply chain to filling them.
  3. No debt. There’s no risk of them going tits up soon. Unlike your other favorite plays against highly-leveraged trash companies (looking at you Zillow), SIGA can ride out a credit crunch with ease.
  4. Stockholders’ equity aka book value. At a price to book of 5:1 this is a cheap biotech company, one of the reasons I see them as a value buy. Also of note, their property includes patents on TPOXX in virtually every country.

Cash flow
In 2019, SIGA took a $7 million loss while in 2018 they punched a $422 million gain. How did that happen? Their entire business runs on multi-year govt contracts. 2018 saw an older BARDA contract end with the orders completely filled to stuff the strategic stockpile. 2019 was a transition year.They have a new contract with BARDA to replenish expiring TPOXX and research then purchase new formulations for IV and pediatric use. So, looking at their 201910-K their earnings look abysmal, but their forward looking earnings are much better given their recent news releases.
Let’s look more at that contract since it is a principal revenue source. SIGA’s most recent 19C contract gives BARDA (Biomedical Advanced Research and Development Authority) the ability to purchase up to $602.5MM worth of product. The base contract guarantees $51.7 MM and BARDA announced the exercise of an additional $127.1 MM in purchasing for the next year as of a few weeks ago. Due to drug expiration and future preparedness, my opinion is that BARDA will exercise all of the purchasing options over the next 10 years.
Here’s my 2020 cash flow estimate, I am inexperienced at this sort of analysis. Pro 10-K readers, please give me some criticism.
-$24 MM from expenses for sales, admin, research, services ,patents. Average of last 2 years -10% because research activity is shut down
-$7 MM from additional costs of terminating loan. 10-Q
+$2 MM from part 1 of Canadian order. Press release
+$75 MM from three quarters of $101 MM exercise of BARDA contract. Estimated because they will supply TPOXX the next three quarters of 2020 and Q1 2021, press release
-$3 MM additional costs to fulfill orders. Estimate from BARDA contract’s allocation for supply costs
+$10 MM from contracts for research. Estimate by Q1 research revenue x 4
? a new $23 MM research contract with the department of defense was announced in June, unclear when they will receive the money at this time
$0 from stock buybacks and dividends, they have never had a dividend, but did do $800k in buybacks last year. They might have paid down their debt to put them in a position to do a lot more buybacks, so this is subject to change.
Total: +$53 MM
I expect the next few years to be cash flow positive now that they are out of the development phase and into the deployment phase. As they get additional international buyers they will also need to service their expiring stockpiles. This puts them at a forward price to earnings estimate of 10:1, still a value play in the current environment.
The high future cash flow is why I expect them to start pumping dividends or buybacks in a year. Since their research activities are primarily supported by the US government, they won't have other useful activities for the cash other than to return it to shareholders. Also, the guys who founded SIGA in the 90's probably want to retire on a fat dividend pretty soon. Dividends and buybacks are a big factor in how many analysts calculate stock prices so either development will push the share price up a lot.

International Sales
This is where SIGA make us gigatendies. The US sales are the bread and butter that will keep them afloat for years to come. International sales are where they grow. Their contracts with the US government let them sell TPOXX at about $350 per course because they funded the initial research, whereas Canada is paying about $950 per course giving SIGA a massive estimated 95% margin.
Let's see who might be interested in buying TPOXX as the China flu crisis unwinds: we've got most of western Europe/NATO--UK, France,Italy, Austria, Sweden, Switzerland, Germany, Spain; Pacific countries wary of being in the China sphere--Taiwan, South Korea, Japan, Singapore, Australia,Malaysia, Vietnam, Indonesia; and wealthy Middle Eastern countries that need to hedge against instability--Israel, Turkey, Saudi Arabia, UAE, Qatar; a smattering of other countries getting wise to viral threats--Russia, India,Brazil, South Africa, Mexico. That's a lot of potential buyers and it will only take a few for SIGA's price to shoot up. Also note that SIGA does not market internationally themselves, they are partnered with Meridian, a Pfizer subsidiary, for international sales.
SIGA also has an excellent moat internationally. They have patents for TPOXX and its analogs almost everywhere but China. Of course, there are still risks associated with international expansion, but the upside potential is yuuge. Let's hear it from the horse's mouth and see what SIGA had to say on their 2019 Q4 conference call:
Now let's discuss the international markets. The pursuit of international sales for oral TPOXX is a key focus for us at SIGA. Our partnership with Meridian Medical Technologies that we announced last June has been excellent. However as I've said many times the sales cycle is long for international government procurement of these types of products and each country has its own set of internal dynamics. ... I have been asked why we do not provide a country-by-country update on sales progress. We do not comment on specific progress with countries for two main reasons. First, we respect the confidentiality of our customers who would not want their deliberations to become public. And second, we would not want to signal to competitors which countries may be undergoing an expansion in their spending for biodefense. With that context in mind, we are pleased to share a progress report regarding the Canadian military, who announced in December and intend to issue contracts to support a Health Canada, regulatory filing and thep urchase of up to 15,825 courses of oral TPOXX for the Canadian military. A procurement order of this size would represent about 25%of the active military forces in Canada. Although this is a relatively modest number of courses it is precedent for military preparedness by a U.S. NATO ally.
What can we gather from that? They've got multiple sales in the works, but are keeping mum about it. Also, that it takes time to cut through government tape and announce these sales. Here's the single largest risk for this play: that it takes too long for international contracts to be announced. For this reason, I recommend buying stocks and not calls. The near term future is too unpredictable.

Research Activities
SIGA's main drug, oral TPOXX, is already completely FDA approved as safe in humans and effective in animals. A quirk of their niche is that since smallpox is eradicated, they can't ethically test the drug for effectiveness in humans. This helps their bottom line because they basically get to skip some of the trials of a typical drug development cycle.
SIGA's most important upcoming products are TPOXX for IV, liquid pediatric, and prophylactic use. Due to the current pandemic, all human trials are postponed, but the barriers for these trials are quite low. They only need to demonstrate human safety for the alternate ROA drugs. For prophylactic TPOXX, SIGA needs to demonstrate that TPOXX does not interfere with immunity acquisition from the smallpox vaccine. That way a potentially exposed person can both be treated and vaccinated at the same time. If they fail to meet these research goals, then I doubt the BARDA contract will be exercised for full value. Because of the delay in these results due to corona, I doubt that they threaten the trade that I'm proposing.
Orthopox viruses to deliver cancer therapeutics and older Lassa fever antivirals. I honestly don't know enough about their activities in these areas to make a comment. I think they are irrelevant to the base play, but could provide some surprise upside if there was a development.

Insider trading
The execs did more selling than buying last year which is perhaps bearish, but their most recent move was to buy a lot of stock in December after announcing the Canada deal. They sold stock at ~$5.80 in early 2019. Now, they're holding even though it is past $6. I think the COVID pandemic has massively increased SIGA’s value and their key people are holding at a price where they previously sold knowing that a lot more cash is coming in. I think there's also some possibility of acquisition at higher share price, being debt free makes them attractive to a buyer--just pick up all the shares, no liabilities to clean up.

Positions
I have 5% of my IRA in SIGA and a couple of long dated $10 calls (volume is shit FYI) in my funny money account.
Thank you for reading my novel.
Disclaimer: Just because I can write two coherent paragraphs on a play does not mean I know what I'm doing. Do your own due diligence.
submitted by hdigga to pennystocks [link] [comments]

Below are the winners and losers on the sharemarket, based on the reporting season to date. Did we miss anyone?

Refining NZ went $186.4m into the red over the first half to June 30 due to sharply lower margins and throughput.
Summerset Group's bottom-line profit plummeted 99 per cent from last year's $92.6 million to just $1m.
NZX said its net profit shot up by 40.9 per cent to $9.1m in the six months to June 30, reflecting a significant increase in demand for capital and an unprecedented lift in share trading during the Covid-19 lockdown.
Precinct Properties' operating income rose in the past year but net profit after tax fell due to devaluations from the pandemic, particularly on big inner-city Auckland office blocks.
Contact Energy said its net profit fell by 26 per cent to $125m in the year to June, due in part to lower wholesale power prices.
Vital Healthcare, a hospital, healthcare and medical property specialist, said its net profit fell 37 per cent to $58m.
Mercury Energy has kept the faith with thousands of its mum and dad investors by eking out an increased final dividend for the June year and predicting another increase in the payout in year ahead.
Fletcher Building won't pay a dividend and executive bonus packages were cut to zero after all divisional revenue and operating earnings fell in the last year.
Michael Hill said its full-year profit plunged more than 80 per cent as the Covid-19 pandemic forced its stores to remain closed between five and 13 weeks.
A2 Milk said its net profit hit a record $385.8 million in the June year, driven by a 34 per cent lift in infant formula sales.
Coming up next (annual unless specified):
Genesis Energy
Auckland Airport
EBOS
Seeka (half year)
Aug 21
Skellerup
Aug 24
Chorus
Freightways
Comvita
Aug 25
NZME (half year)
Aug 26
Meridian Energy
Metlifecare
Spark
Scales (half year)
Aug 27
Air NZ
NZ King Salmon
Vista Group (half year)
TIL Logistics
Vector
Aug 28
Port of Tauranga
Marsden Maritime
Steel and Tube
Sept 3
Sky City
Sept 4
Property for Industry (half year)
Sept 8
Briscoe Group
Sept 18
Tourism Holdings
submitted by Maxim_Sherstobitov to NZXStockMarket [link] [comments]

Ornate Neo-Ishgardian Gear is Terrible: An Analysis

Well the servers are down and I can't play Final Fantasy... so I'm going to write about Final Fantasy.
May I (regretfully) present:

The Probability, Costs, and Benefits of Obtaining Ornate Neo-Ishgardian Gear:

A Primer for Sellers and Buyers

By: Pavel Amastacia of Malboro

A link to the Jupyter notebook I used to create this. The formulas will show up cleaner (if you're on desktop).
The notebook also has a fun python calculator detailing the forumlas that you can play around with. If you're into that sort of thing.

Abstract

In Final Fantasy XIV, the ability to obtain the highest level sellable body piece, the Ornate Neo-Ishgardian Gear, is directly tied to the ability to complete Wondrous Tails, a weekly log where players attempt to complete nine out of a set of twelve challenges. Each challenge results in a "stamp" being placed on a 4x4 grid, with increased rewards being offered for each time the player creates a complete horizontal, vertical, or diagional line with four stamps. Ornate Neo-Ishgardian Gear is offered as an option when players connect three lines, the maximum line total resulting from nine stamps on the grid. There have been many writings discussing Wondrous Tails probabilities. This writing advanced upon those before it by revisiting the probability of obtaining three lines simultaneously but then follows by looking into the opportunity costs of doing so, the price of the resulting Ornate Neo-Ishgardian Gear, and the benefits offered by its sale and consumption.

Table of Contents

  1. Probability of Success
  2. Time Requirements
  3. Opportunity Costs
  4. Valuation
  5. Conclusion
  6. Limitations
  7. Calculator

Probability of Success

Defining the liklihood of lining up three rows in Wondrous Tails is multi-step process. There are nine "stamps" which are awarded and subsequently placed on a 4x4 grid. The liklihood of putting a stamp in the correct place requires an examination into the total number of obtainable combinations as well as the total number of winning combinations. It is easier to explain the process by highlighting what Wondrous Tails is not.
We will contrast Wondrous Tails with another Final Fantasy XIV staple, the Jumbo Cactpot. The cactpot requires the player to select four numbers, each one being 0-9, as part of a lottery announced every Saturday. Because there are ten possible numbers for each selection, and four numbers to choose, the chance of winning the cacpot can be expressed as:
1 / n^k or 1 / 10^4 = .0001
Given that you are allowed to purchase three cactpot tickets per week, your odds are actually:
3 / 10000 or .0003
In the case of the cactpot, the values are independent; they can repeat. If you choose a nine as your first number, you are not prohibited from choosing nine as your second number (as opposed to many real-life lotteries that only allow a number to be chosen once). Likewise, if the winning numbers of this week’s cactpot are “4321”, there is nothing prohibiting next week’s numbers from being “4321” as well, though the chances of the winning numbers being the same two weeks in a row are diminutively small.
1 / 10000^2 or 1/ 100000000
All of this is to say that the variables are able to repeat. In the case of Wondrous Tails, they cannot.
The variables in Wondrous Tails (or WT) are dependent. On a 4x4 grid, if one space is occupied by a token, then another space cannot simultaneously be occupied by another token. Using 1 / n^k is no longer applicable. Using diminishing numbers such as (1 / n^k) * (1 / (n-1)^k) * (1 / (n-2)^k) … to model a space removed after each stamp would also be incomplete because it fails to account for the fact that there are twelve spaces on the board but only nine stamps.
The solution is found in combinatorics, specifically the solution is found as a k-combination which, itself, is equal to the binomial coefficient. The formula for a k-combination is:

C(n,k) = n! / k!(n-k)

where there are k distinct objects and n samples.
Plugging the numbers for WT in, we are given:

C(16, 9) = 16! / 9!(16-9)! = 20922789888000 / 1828915200 = 11440

There are 11,440 total stamp arrangements in WT.
As with the cactpot, there are multiple opportunities for success with WT. Though you only receive one grid per week, the only requirement is that three rows are made; their orientation, position, or shape is irrelevant. A winning shape on a 4x4 grid can be rotated 90, 180, and 270 degrees as well as mirrored to produce multiple placements of the same shape.. If we examine all of the ways to create three 4-point lines with nine points on a 4x4 grid, we are left with 24 solutions.
3 line wins in Wondrous Tails
source
Because we have 24 chances for success, our odds are then:
24 / 11440 ≈ 0.21%
The pressing question now is, "is it even worth it?"

Time Requirements

The first value to consider in this question is the time needed to complete a series of WT. Individual times will differ, but I will use my own for purposes of demonstration. I look for one box that I can unsync repeatedly with second chances (if you run your dailies and/or have newer people in your FC that you help, you should have a problem with too many second chance points in any given week).
On any given book, the top row is reserved for Main Scenario dungeons of various levels. This leaves 4x3 slots for various trails, raids, Deep Dungeons, etc. to populate. I will not go into calculating averages for this population, but I can usually guarantee an ARR extreme dungeon that I can unsync quickly. Going for Garuda, King Moggle Mog, or Ramuh are in the 1:30 range for me (and you could surely optimize that number down more). On the worst end, there may be no trials and I end up running Sastasha at 4:45 (this is rare though). I’ll stick with my 90-second number for now.
We now have the assumption that I will run WT nine times at 90 seconds per run. Not counting acquisition, turn in, and duty selection, I spend 810 seconds running WT content (or 13.5 minutes). Given that I have a 0.21% chance of achieving three rows on any given week, I will, on average, take 100 / .21 ≈ 476.19 weeks to reach my goal and I will spend 13.5 * 479.19 = 6,428.57 minutes doing so.

Opportunity Costs

These numbers are nice to have, but they still don’t answer the question “is it even worth it?” Provided you’re on FFXIV, and you have 13.5 minutes each week, what’s to say you shouldn’t? In order to find that number, the opportunity cost of pursing WT must be determined.
The opportunity cost of any activity is the sum of what other activities are forgone by making that choice. If a person has a dollar to spend on a candy bar or soda, if they choose the soda then the candy bar is their opportunity cost (if they're required to spend that dollar). For the purposes of this evaluation, we’ll ignore estimating intagibles, sunk costs, etc.
To determine one’s own opportunity cost, evaluate how much gil could be made on other activities in the same time. For analysis purposes, I will once again use my own results; If I am concentrating on money-making, I can earn around 300,000 on average in an hour. This breaks down into about:
Given that 13.5 minutes is 22.5% of an hour, we’ll reduce my earnings per 13.5 minutes to 300000 * .225 = 67,500. It’s not a perfect conversion, but I’ve never approximated my money-making capabilities per 13.5-minute period.
Foregoing the 67,500 gil that I could make each week with the 479.19 weeks that I would need to obtain three rows, I find that my opportunity cost is 67500 * 479.19 = 32,345,325. A single piece of Ornate Neo-Ishgardian gear should be a little over 32 million gil. So, we now have an approximation of the item's value; the final question is, “how much can I actually get for it?”

How Much is the Item Worth?

An Ornate Neo-Ishgardian Gear piece allows five materia slots to be melded to it by default. Without the ornate piece, five slots can still be melded, but the success rate becomes lower for each piece beyond the allowable slots. Further, as the standard Neo-Ishgardian Gear has only two slots, any slot beyond the third must be of a material quality one less than the preceding slots. On an ornate piece, all five slots can be socketed with the highest materia available for that item level. This leaves us with two variables to examine: the average cost of creating a non-ornate piece with max melds and the stat difference between an ornate piece with max melds and a non-ornate piece with max melds.
The average price for an Ornate Neo-Ishgardian Gear piece is 6,464,286 on Malboro as of the time of this writing (August 8, 2020). This is far below the 32,345,325 that we value the item at when contrasted against its cost to produce; this also includes zero markup, or profit, for our time. This low-pricing phenomenon might stem from lack of information regarding the item’s estimated value (unlikely in an entire population) or from the notion that sellers adjust their prices until they find the prevailing rate at which buyers will purchase their goods (that's economics, baby).
In this case, it would be a closed-book matter to say that acquiring an item at 6,464,286 / 32,345,325 = 20% of its real value is a steal as a buyer (and ruin as a seller)… but, of course, this assertion also must be challenged. Specifically, the question becomes, “how much benefit will I get from consuming this item?”

Valuation

The average price for a standard Neo-Ishgardian Gear piece is 73,036 on Malboro at the time of this writing (August 8, 2020).
The average price for the “big three” materias (Savage Aim, Savage Might, Heaven’s Eye VIII) is 14,442.
The average price for the comparable Materia VII counterparts is 1,980.
Melding a Neo-Ishgardian piece with 3x VIII materia and 2x VII materia will product the following success rates:
Materia Level Successful Meld Chance
VIII 100%
VIII 100%
VIII 17%
VII 10%
VII 7%
Taking averages for each success, here is the estimated gil cost to overmeld the gear to five slots:
Materia Level Successful Meld Chance Avg. No. of Attempts Materia Cost Total Cost for Slot
VIII 100% 1 14,442 14,442
VIII 100% 1 14,442 14,442
VIII 17% 6 14,442 86,652
VII 10% 10 1,980 19,800
VII 7% 15 1,980 29,700
The performance differences must be taken into consideration as well. Each of the big three provide +60 of their respective stat at the 8th level, and +20 of their stat at the 7th level so the difference is +300 vs + 220 respectively. The costs of purchase and meld each piece is as follows:
Gear Equipment Price Materia Price Total
Standard 73,036 165,036 238,072
Ornate 6,464,286 72,210 6,536,496
The stat bonus of the standard gear is 1,823 for tanks and non-magical DPS and 1,767 for magical DPS and healers. We’ll average it to 1801.
The total difference of power between these gears is as follows:
Gear Unmelded Melds Total % Increase
Standard 1801 220 2,021 0%
Ornate 1801 300 2,121 4.95%
Compared with Price
Gear Price % Price Increase % Performance Increase
Standard 238,072 0% 0%
Ornate 6,536,496 2,745.6% 4.95%
For a 2,745.6% increase in price, you can take home a 4.95% gain in performance for this item.
So, what can be said to the question of “how much benefit will I get from this item?”
Only that “it depends”...
Most players will not realize a benefit from the increased gear. I would model that increase as the time saved by increased damaged output as a function of gil-making potential, i.e. “How much time will I save by doing extra damage, getting dungeon drops, and selling them for additional gil?” If that amount is greater than 6,536,496-238,072 = 6,298,424, then you should, of course, make the purchase.

Summary

Given the probability of obtaining three rows in WT versus the opportunity cost of doing so, it is not worth the pursuit strictly as a method of obtaining Ornate Neo-Ishgardian Gear to sell. Secondary rewards and benefits may outrank that decision for you.
Given the percentage state increase versus the percentage price increase, there are very few players that would recuperate their investment in Ornate Neo-Ishgardian Gear versus overmelded HQ Neo-Ishgardian Gear.

Limitations

If you've made it this far, you've probably had a few instances where you've thought, "but what about ..." and you're probably onto something. In any case, there are a lot of assumptions and magic numbers at play. Namely, this estimate is predicated upon my own performance and deals only with gil-making. For this reason, I have detailed my calculations so that, if you were so inclined, you could channel your inner healer and adjust.
As I was writing this section, I realized that I could just quickly make a calculator inside of the notebook link here, so I have, in fact, adjusted for you. (did I mention that I main WHM?)
I've taken the time to list out a few more assumptions, limitations, and thoughts that I didn't have time to work out; feel free to create your own weights and formulas! :D
  1. Statistical outliers: provided you can get three rows ahead of the likelihood of 0.21%, how much time is worth it? At which attempt does profit move to breakeven? A good question, but this document is already too long.
  2. Only Malboro was sampled: I'm lazy. Well, that's not true; I don't like mindless tedium. I don't have the patience to log every transaction on every world over days. If mining MB data wasn't against ToS, I would've aggregated data over worlds and times.
  3. Intangible benefits: What if having the extra 80 points from the ornate meld is what helps you get a first world clear or join a static where you derive a lot of enjoyment? What if you care about prestige? There are only a handful of these things floating around; it certainly sends a wealth statement! In that case, assign values to those intangibles if you want to attempt a comparison. Make sure to factor in your opportunity costs foregone by spending that gil.
  4. I undercut by one gil but I'm not an asshat: you can lie to yourself but not me.
  5. I'm filthy rich and spending millions of gil is no problem, no matter the reason: your fuction of gil and time are probably much higher than mine and would increase the value of the item considerably from a seller standpoint; there are probably few situations where pursuing WT for money would be worth your while. If your were a buyer, then you might arrive at a point where your opportunity costs of purchasing are so low that you derive value from consumption. Most importantly, if you are that rich, are you hiring? I can do lots of things.
  6. Spending the time making gil rather than completing WT would likely not be a one-for-one tradeoff, money-wise. Every item has an aggregate demand curve and, if you spent 6,428 minutes flooding the market with a good (or an array of goods), you will affect supply. Provided supply exceeds demand at a given price point, the price will fall until equilbrium is reached (and marginal revenue equals zero and long-term economic profit equals zero and all those other perfectly-competitive assumptions because people are hard). Pursuing WT is a chance to diversify and sell something very much in demand: Sure, no question about that. If you're hitting the market so hard that a 0.21% success chance represents a worthwhile venture for you, then we are in different places in our game experience.
  7. I enjoy WT and that's got to count for something, right? Me too and that's why I do them. I play a video game to have fun and that's enough of a reason to fill in your stickers if that's what you want to do. This writing deals with efficiencies and probabilities, not life advice (except for the one-gil thing... going on the record pretty strongly about that one).
  8. If I'm already doing these runs as part of my dailies, helping FC members, etc., then doesn't that affect the outcome: yeah, definitely. Your opportunity cost is much lower because you're not trading off time that you would otherwise use to optimize making money.
  9. Using shuffle increases probability and reduces opportunity costs. By how much is a function of how easy it is to obtain second chances for you and how many repeats you use to complete your journal.
What's the opposite of a shitpost? I'm asking for a friend
submitted by GrayRainbows to ffxiv [link] [comments]

Introduction to Margin/Leverage Trading on Deribit WHAT IS MARGIN TRADING IN MARKET How To Calculate Margin Margin__Day Trading Margin! SHOULD YOU USE IT How to Calculate Margin? - TradingBanks

Trading on margin. Buying securities on margin allows you to acquire more shares than you could on a cash-only basis. If the stock price goes up, your earnings are potentially amplified because you hold more shares. Conversely, if the stock moves against you, you could potentially lose more than your initial investment. If the investor fails to cover the margin call within 3 trading days, Firstrade will have to liquidate their positions to meet the margin call. Here’s an example of how a Margin Call occurs: You have $20,000 worth of securities bought using $10,000 borrowed and $10,000 in cash. When the margin requirement is 30% and the value of the A margin account is a brokerage account in which the broker lends the customer cash to purchase assets. When trading on margin, gains and losses are magnified. more. Debit Balance. The broker’s maintenance margin Maintenance Margin Maintenance margin is the total amount of capital that must remain in an investment account in order to hold an investment or trading position and avoid a is 25%, meaning the investor’s own money must comprise at least 25% of the security. Trading on margin is a common strategy employed in the financial world; however, it is a risky one. Margin is the money borrowed from a broker to buy or short an asset and allows the trader to pay

[index] [98] [215] [178] [17] [337] [223] [266] [368] [150] [383]

Introduction to Margin/Leverage Trading on Deribit

--~-- What is Margin is a question many retail investors ask along with what is a margin account and what is margin trading. Today I am going to tell you wha... Introduction to Margin/Leverage Trading on Deribit ... 95% Winning Forex Trading Formula - Beat The Market Maker📈 - Duration: 37:53. TRADE ATS 1,275,053 views. 37:53. One of the ways to use borrowed funds is called margin loan. Let's look at how it works. ... Margin Trading 101: How It Works - Duration: ... Profit Markup vs. Margin - Simple Formula, Common ... Profit Markup vs. Margin - Simple Formula, Common Mistake - Duration: ... [LIVE] Zerodha Margin Leverage Up To 20X Times - TRADING 5000 for 100000 INR - Duration: 7:55. SK Advice 120,701 views. Margin trading in the forex market is the process of making a good faith deposit with a broker in order to open and maintain positions in one or more currencies. Margin is not a cost or a fee, but ...

#