Sunday Morning Coffee

This week’s Striking Price column in Barron’s (the column about options) had a recommendation from some brokerage firm of buying Bank of America (BAC) common and selling the January 10 call and selling the January 7.50 put for a total premium of $1.59 with common currently at $8.83. That all sounds like very juicy options premium but anecdotally speaking it seems like with trade ideas like this the frequency with which the stock goes way above the $10 strike price plus the premium (so in this case $11.59) or way below the $7.50 and factoring in the premium is shockingly high. This typically results in being stuck in the position if this starts to occur fairly early on when the volatility can go up (thus increasing the price) but before there is any meaningful decay in the option premium sold. And as a function of Murphy’s law the stock won’t come back in between the strikes until the options are rolled forward (meaning rolling forward frequently does not go well). I wrote about this same thing a few years ago with a trade on Mastercard and selling calls that was recommended on CNBC. This is just anecdotal so do with it what you want. Alan Abelson had his funniest line ever in this week’s column: Silver, on the other hand, strikes us an awfully good hedge against capital gains. Yesterday the fire department had its annual pack test. This is where each of the firefighters must go three miles on a track wearing 45lbs in 45 minutes or less. This is an annual requirement for fighting wildfires. I beat...

Sunday Morning Coffee

This week’s Striking Price column in Barron’s (the column about options) had a recommendation from some brokerage firm of buying Bank of America (BAC) common and selling the January 10 call and selling the January 7.50 put for a total premium of $1.59 with common currently at $8.83. That all sounds like very juicy options premium but anecdotally speaking it seems like with trade ideas like this the frequency with which the stock goes way above the $10 strike price plus the premium (so in this case $11.59) or way below the $7.50 and factoring in the premium is shockingly high. This typically results in being stuck in the position if this starts to occur fairly early on when the volatility can go up (thus increasing the price) but before there is any meaningful decay in the option premium sold. And as a function of Murphy’s law the stock won’t come back in between the strikes until the options are rolled forward (meaning rolling forward frequently does not go well). I wrote about this same thing a few years ago with a trade on Mastercard and selling calls that was recommended on CNBC. This is just anecdotal so do with it what you want. Alan Abelson had his funniest line ever in this week’s column: Silver, on the other hand, strikes us an awfully good hedge against capital gains. Yesterday the fire department had its annual pack test. This is where each of the firefighters must go three miles on a track wearing 45lbs in 45 minutes or less. This is an annual requirement for fighting wildfires. I beat...

HELOCs to pay for gas?

A friend shared this picture on Facebook and I got a nice chuckle from it. Chances are everyone has made similar jokes about getting loans for certain day to day items but still it is pretty funny. It also reminds us that no matter how much planning we do there will be certain costs that get away from us. Something like the price at the pump seems like an obvious candidate although this can be mitigated somewhat. I’m not one who thinks it makes sense to buy a new car to save some number of dollars at the pump. I think reducing this expense might be more efficiently achieved by planning the week out a little better to try to reduce drive time. Then maybe when a vehicle needs to be replaced, go more economical at that time. While a little ingenuity might be able to help minimize actually paying out an extra $200 per month for gas, this may not be the case with health costs. A large and annual increase in insurance premiums, as one example, may not be so easily mitigated. Some expenses go down in retirement but those will likely be finite. If you have a $1500 mortgage then once you pay that off you stop making a $1500 payment. This year we are paying $331/month for a high deductible HSA. Since we’ve had this plan our premium has gone up 10-20% per year and in my opinion there can be no certainty the future increases won’t be larger which makes future planning for this expense very difficult. On one of my posts on Seeking...

HELOCs to pay for gas?

A friend shared this picture on Facebook and I got a nice chuckle from it. Chances are everyone has made similar jokes about getting loans for certain day to day items but still it is pretty funny. It also reminds us that no matter how much planning we do there will be certain costs that get away from us. Something like the price at the pump seems like an obvious candidate although this can be mitigated somewhat. I’m not one who thinks it makes sense to buy a new car to save some number of dollars at the pump. I think reducing this expense might be more efficiently achieved by planning the week out a little better to try to reduce drive time. Then maybe when a vehicle needs to be replaced, go more economical at that time. While a little ingenuity might be able to help minimize actually paying out an extra $200 per month for gas, this may not be the case with health costs. A large and annual increase in insurance premiums, as one example, may not be so easily mitigated. Some expenses go down in retirement but those will likely be finite. If you have a $1500 mortgage then once you pay that off you stop making a $1500 payment. This year we are paying $331/month for a high deductible HSA. Since we’ve had this plan our premium has gone up 10-20% per year and in my opinion there can be no certainty the future increases won’t be larger which makes future planning for this expense very difficult. On one of my posts on Seeking...

Dakar Rally 2012

For anyone who forgot, the 2012 Dakar Rally has started, there is daily coverage on Versus NBCSports Channel. If you care about this you might want to record the coverage as it is on at odd times. The big news is that Volkswagen is out of this year’s rally which I am guessing is a business decision and not a competitive decision because they have dominated the race for years. Among others displaced by the Volkswagen decision is last year’s winner Nasser Al-Attiyah. He has joined up with Robbie Gordon’s Hummer team for 2012. Last year I mentioned the extent to which the H3 appears to be the wrong vehicle for the Dakar’s terrain of dunes and mountain roads. Obviously this is based on the performance turned in by Gordon year after year. It would be very funny if Al-Attiyah somehow won the race in the H3. The coverage on NBCSports is starting out much better than last year. Last year they gave the studio host a lot of face time and had what amounted to a sideline reporter who did a segment every day on the town that the race was near or something like that and of course any time devoted to the studio host or the cultural segment was time not spent covering the racing and actually the racing not covered was my favorite class which is the big trucks (pictured above). Speaking of the big trucks they’ve updated some of the vehicles and this Vladimir Chagin is not in the race. I think he won that last 30 Dakar’s in a row (slight hyperbole) so...

Dakar Rally 2012

For anyone who forgot, the 2012 Dakar Rally has started, there is daily coverage on Versus NBCSports Channel. If you care about this you might want to record the coverage as it is on at odd times. The big news is that Volkswagen is out of this year’s rally which I am guessing is a business decision and not a competitive decision because they have dominated the race for years. Among others displaced by the Volkswagen decision is last year’s winner Nasser Al-Attiyah. He has joined up with Robbie Gordon’s Hummer team for 2012. Last year I mentioned the extent to which the H3 appears to be the wrong vehicle for the Dakar’s terrain of dunes and mountain roads. Obviously this is based on the performance turned in by Gordon year after year. It would be very funny if Al-Attiyah somehow won the race in the H3. The coverage on NBCSports is starting out much better than last year. Last year they gave the studio host a lot of face time and had what amounted to a sideline reporter who did a segment every day on the town that the race was near or something like that and of course any time devoted to the studio host or the cultural segment was time not spent covering the racing and actually the racing not covered was my favorite class which is the big trucks (pictured above). Speaking of the big trucks they’ve updated some of the vehicles and this Vladimir Chagin is not in the race. I think he won that last 30 Dakar’s in a row (slight hyperbole) so...