tag:blogger.com,1999:blog-5389144729834496735.post1637003079455585790..comments2024-03-17T05:15:55.634-04:00Comments on The Brooklyn Investor: Sony Disaster ContinuesUnknownnoreply@blogger.comBlogger9125tag:blogger.com,1999:blog-5389144729834496735.post-4106635241764543892012-08-20T11:05:47.913-04:002012-08-20T11:05:47.913-04:00Oh, OK. You can check out my BAC LEAP post too wh...Oh, OK. You can check out my BAC LEAP post too which is similar to what Greenblatt wrote about WFC. <br /><br />http://brooklyninvestor.blogspot.com/2012/03/taking-leap-into-bac.html<br /><br />The key is to value the LEAPs based on your own assumptions and not on some option model. For example, I looked at the BAC LEAP as a binary sort of trade even though it's not really a binary event. You can look at whatever stock and make your own assumptions about where something might be trading in 18 months or so and see what the LEAP would be worth and put some odds on it. <br /><br />The difference between this LEAP trading and regular option trading is that it is based on a longer term view, so in that sense is less speculative (even though it's still speculative as time works against you). <br /><br />The other way to use LEAPs is to gain leverage; you can buy in-the-money LEAPs, for example, a levered way to gain exposure to a stock. The math here is simple too; your cost / risk (compared to owning the stock) is going to be the premium you pay over instrinsic value of the LEAP (current stock price minus strike price is the instrinsic value of the LEAP; this excludes the value of the optionality). <br /><br />Maybe I will make a post about this in the future... <br />kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-20467789881152284032012-08-19T22:04:47.204-04:002012-08-19T22:04:47.204-04:00Yes, I read both Greenblat and Klarman. In actual ...Yes, I read both Greenblat and Klarman. In actual fact, when I asked about option "trading", I had Greenblat's use of LEAPs in mind. This leads back to my original question: if I buy LEAPs instead of the common stocks, apart from the unit price, there are two additional variables I need to consider: maturity and strike price. This is the bit I don't have a good handle on. <br /><br />I'm definitely not interested in McMillan's trading strategies. Johnhttps://www.blogger.com/profile/14682393043392310140noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-65568006030509357652012-08-17T09:28:57.783-04:002012-08-17T09:28:57.783-04:00Yes, that's what I would suggest. I don't...Yes, that's what I would suggest. I don't know if you read "You Can Be a Stock Market Genius" by Greenblatt and Seth Klarman's "Margin of Safety", but if you haven't, I would highly recommend it. These guys have put up really good performance figures over the years without options trading or shorting (other than arb-type trades). There is a section in the Genius book where Greenblatt talks about using LEAPs, and that's one thing I do too; buy LEAPs (again, within strict limits) on stocks I think are highly undervalued. <br /><br />There are experts that trade options exclusively, but I don't know that equity managers' performance is ever enhanced by options trading. We know how Buffett has done with no options, Klarman, Greenblatt, Ackman and many others and we know the approach they take. <br /><br />On the other hand, I have never seen a track record of anyone that follows the options trading methods of, say, McMillan (Options as a Strategic Investment). I have never seen a really long term, audited track record of these guys. <br /><br />Oh yeah, and Benjamin Graham too has a nice long track record so we know his method works and has worked over time. <br /><br />So if you look at the evidence, I think it's pretty clear what a good path to take is. <br /><br />Of course, some will argue that since we are not as talented as Greenblatt or Buffett, that we can't do what they do. Well, even if that's true it's even less likely that we'd be able to put up a long term track record trading options! <br /><br /><br />Anyway, that's something to think about. kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-76960678018371127602012-08-16T23:15:49.930-04:002012-08-16T23:15:49.930-04:00Thanks kk.
I take it that your suggestion is to f...Thanks kk.<br /><br />I take it that your suggestion is to focus on fundamental analysis and forget about synthetic trading strategies. Johnhttps://www.blogger.com/profile/14682393043392310140noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-18054150250368740182012-08-16T09:17:54.433-04:002012-08-16T09:17:54.433-04:00Hi,
Off the top of my head, I can think of McMil...Hi, <br />Off the top of my head, I can think of McMillan's "Options as a Strategic Investment" (or something like that) and Natenburg's "Option Volatility and Pricing". They explain the basics pretty well. <br /><br />There are a lot of 'spread' strategies explained in the book, calendar spreads, put spread, call spread, straddles, strangles, butterflies and whatnot, but I personally don't have any interest in those spread trades. <br /><br />Anyway, to bet against a stock, shorting is still the best way even if expensive. If you think shorting is expensive, option premiums can really cost you a ton of money over time too. Most of the time you are paying a premium (like insurance) and the market will go against you so it's good to only put a small amount into options overall. <br /><br />I bet most people who play options lose money on them over time, so it's not such a great idea. <br /><br />Time is probably way better spent just reading company filings and learning about business and practicing to value companies etc. kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-40331945275567219022012-08-15T23:39:57.261-04:002012-08-15T23:39:57.261-04:00Another brilliant post!
Btw, kk, I'd like to ...Another brilliant post!<br /><br />Btw, kk, I'd like to ask a favor from you. <br /><br />I'm currently a long-only investor. I wanted to expand my tool set to include shorting. But for a small retail investor, maintaining a short account is expensive. I've been thinking of using puts. But options introduce 2 additional variables (maturity and strike price) in the decision making process. I still haven't come up with a framework to think about it or value options from the perspective of an value investor. (Apparently, Ben Graham's Security Analysis, one of the primary source of my investing knowledge, is of no help.)<br /><br />Would you be able to point me to some right readings/resources?Johnhttps://www.blogger.com/profile/14682393043392310140noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-91563700196062111062012-08-03T17:20:10.927-04:002012-08-03T17:20:10.927-04:00I just saw last Saturday the uniqlo store in Franc...I just saw last Saturday the uniqlo store in France next to the Opera and it was really packed, so I'm a bit positively biased ;), but definitely not long the stock also out of price issue. very good points with the inconistency internationally, with the concern relating to the one man show and capital allocation. Peronally, I think also the goals are too aggressive. But maybe when they really disappoint the expecations of the market, the stock could become cheap...who knows.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-71886966571755649162012-08-03T15:14:03.147-04:002012-08-03T15:14:03.147-04:00Hi, thanks for the post. Yes, Uniqlo is one of th...Hi, thanks for the post. Yes, Uniqlo is one of those Japanese companies that are not like Japanese companies. They have done really, really well over the years. These companies do exist in Japan (look at the financials of Yahoo Japan, for example, and there is another rare high return on equity, high margin, well-managed company which is rare in Japan). <br /><br />But unfortunately, Fast Retailing has never really been that 'cheap'. I looked at it over the years and love to follow it but never pulled the trigger. That guy Yanai stepped down from the CEO position and it didn't really work out and he had to come back. That's a concern; is it a one man show? <br /><br />Also, he has made very ambitious comments about wanting to get sales by a certain date (it was a huge increase in sales, the figure escapes me at the moment), so the concern for shareholders is that he may make a huge overseas acquisition. <br /><br />We have seen their inconistency internationally (unlike, say, H&M that seems to do well consistently everywhere) so that is a big worry for me. If they do a major acquisition, will they be able to handle it? I am skeptical about that a little. It may work, but it's a big risk. <br /><br />But anyway, yes, it's a great company for sure that has done really, really well, but I don't own it (I don't own H&M either, but again, it's a price issue)kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-73169385404812819592012-08-03T15:02:14.045-04:002012-08-03T15:02:14.045-04:00Hi
thanks again for your very interesting post!
...Hi <br /><br />thanks again for your very interesting post!<br /><br />"I look at company after company and see the total incompetence of managements and the government and it makes me wonder if things will ever change in Japan. This is not a macro call, really. It's a call on the corporate cultures, managements etc."<br /><br />I just wanted to add a Japanese company,which I personally think is really well managed. Fast Retailing with its brand Uniqlo is in my opinion very well managed, also when I go into the stores in Europe or Japan. Although too expensive at the moment. <br /><br />best and thanks again for your posts!Anonymousnoreply@blogger.com