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George Acs  

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  • That Ship Has Sailed [View article]
    That person on the other end of the trade, because there is no advantage from immediately selling shares, is likely to hold on top them in the hopes of some capital appreciation on the shares.

    What made this particular transaction different is that there was only intrinsic value in the option premium, despite having nearly two weeks of time value.

    When shares are deep in the money and offer a large dividend in absolute terms (rather than simply looking at the yield), in a low volatility environment, you will see less and less time value, making early assignment more and more likely, because they won't be likely to leverage their money on the option side of the trade, so they try to amass as many different components as there are - the dividend and then the shares.

    The likelihood is that the person buying your calls believed he was getting a bargain on the option because he probably believed that shares were heading higher and he didn't have to pay for time value.
    May 6, 2015. 12:16 PM | Likes Like |Link to Comment
  • That Ship Has Sailed [View article]
    It was Cecile.
    May 5, 2015. 02:57 PM | Likes Like |Link to Comment
  • That Ship Has Sailed [View article]
    To make matters worse, I meant $20.71, not $20.76
    May 5, 2015. 02:08 PM | Likes Like |Link to Comment
  • That Ship Has Sailed [View article]
    Well, it's not exactly free money.

    You may or may not get the dividend.

    The more a stock is in the money went it goes ex-dividend after you deduct the amount of the dividend, the more likely it will be assigned early by someone to capture that dividend.

    In this case, a closing price above $20.76 before it goes ex-dividend, the more likely it will be assigned early.
    The other factor is how much time value remains. In general, the longer the amount of time remaining on the contract, the less likely a stock will be assigned early at a given price above its strike price (after the dividend amount is subtracted).
    Since your particular position has essentially no time value (you got $1.71 premium for shares $1.71 above the strike), there is a pretty good chance that shares will be assigned early if closing above $20.71 on 5/6

    In your case, you would actually hope that the shares fell somewhere at least close to $20.71 before going ex-dividend. Otherwise the trade will be a net loser, due to transaction costs.
    To the final question you raise, can it fall below $20 before 5/15; there is only one answer.
    May 5, 2015. 01:36 PM | Likes Like |Link to Comment
  • That Ship Has Sailed [View article]
    Your counter argument that employers may take in the cost of housing may be valid in some parts of the country, but by and large is not a terribly important factor in elevating wages in the local economy. After all, it is only the local economy that counts. Otherwise an employer, can and often does, relocate to get to what is a more favorable local economy for their specific needs. What constitutes that more favorable local economy? Usually it is precisely the opposite of what you are presenting. Usually it is a low tax environment that offers little in the way of benefits to employees, but rather accedes to the needs of potential employers, in the hopes of creating a trickle down increase in the tax base on the backs of employees who generally don't receive the same benefits to relocate.

    "Always" is the test if there is no qualifier used.

    If you were to even mildly modify a statement such as "A better educated workforce "pays for itself" by being self-sustaining....," with an adverb such as "usually" or "generally," it would be difficult to disagree. However, when a blanket statement is made it is quite common to look for the exception to what is being presented as a rule.
    May 4, 2015. 05:11 PM | Likes Like |Link to Comment
  • That Ship Has Sailed [View article]
    The big concern that I have right now is seeing all of these large spikes higher. Those tend to occur during bear markets, or are a sign of one over the very near horizon.

    We have had many of those lately and they have also tended to come on relatively low volume as compared to the down side moves that have so often preceded the upside spikes.

    For the paltry pennies being offered by adding an additional week onto a weekly contract, there's very little reason to take that bait on most positions.
    May 4, 2015. 03:09 PM | Likes Like |Link to Comment
  • That Ship Has Sailed [View article]
    While on the surface some of those suppositions, such as the cascading of events that might be seen if using government presses or tax revenues to fund "better transportation facilities," seem logical, I think that the reality is far different.

    I don't believe that upward wage pressure would be relieved by a more efficient transportation system, as there are few employers that factor in such issues as cost of transportation. Most would simply say that it is a choice of their workforce as to where they live and how they get to work. If they select a more expensive method, so be it. That is a burden for them to carry and not the employer in the form of higher wages or benefits.

    Insofar as improved infrastructure can lead to improved or increased capacity, such as the ability to more cheaply ship products to end destinations, thereby increasing profits etc, etc.., then you have a self-sustaining situation, until the next unforeseen economic curve ball arrives.
    The argument that "A better educated workforce "pays for itself" by being self-sustaining..." is also compelling on the surface, but not always borne out in reality. Take a nation like Costa Rica, with nearly universal college graduation rates, yet without the government's ability to create and sustain a vibrant economy, those college graduates, educated as they may be, are hard pressed to keep their heads above water, much less sustain themselves. The fact that Costa Rica has among the lowest personal tax rates in the Americas may be associated with the lack of opportunity for college graduates in that country.
    May 4, 2015. 03:05 PM | Likes Like |Link to Comment
  • That Ship Has Sailed [View article]
    Oh, you should have seen some Apple-centric articles I wrote a couple of years ago. No one had any fear of the Dentist back than, but I'm not gloating about the calls in those articles. Funny, but when I turned positive the cat calls topped.
    May 4, 2015. 12:45 PM | Likes Like |Link to Comment
  • That Ship Has Sailed [View article]
    Yours was a wonderful assessment of the various permutations of looking at the problem, assuming that the problem can be identified.

    I would suggest, however, that the issue of raising taxes can be made moot by undertaking actions, including borrowing for infrastructure projects, that cause the economy to grow and generate tax revenues from an increased pie.

    That was an opportunity that was largely squandered in the preceding 6 years.

    Printing to spend also creates the kind of inflationary pressure that makes bonds even more attractive and also creates more discretionary passive income. Within reason, those are all positive things. The problem usually arises as the time period to actually see tangible results from fiscal policy is usually so far into the future that there tends to be over-action as results aren't seen quickly enough. That over-action ends up shortening the time span of the desired outcome and creating its own problems requiring their own resolutions.
    May 4, 2015. 12:00 PM | 1 Like Like |Link to Comment
  • That Ship Has Sailed [View article]
    I think if you re-read my comment, you'll see that we agree regarding the impact of impending earnings on option premiums. I wrote that "other than with earnings impending, most stocks have abysmally low premiums.

    My own preference is to sell puts in advance of earnings if I can get a 1% ROI for the week at a strike that is outside of the range implied by the option market. That you can do in IRA accounts
    May 4, 2015. 09:24 AM | 1 Like Like |Link to Comment
  • That Ship Has Sailed [View article]
    I really did think that Coach was going to surprise to the upside at its most recent earnings report. It had slowly been building support higher and higher and doing it in a healthy kind of way, taking some steps back after those gains.

    I didn't hear too much to scare me off from adding shares, but this has really been an unusually long time trying to make that climb
    May 4, 2015. 08:51 AM | Likes Like |Link to Comment
  • That Ship Has Sailed [View article]
    If you're selling calls, though, it does help to have some sharp movements in either direction keep everyone on their toes. That at least helps to support premiums. RIght now, other than with earnings impending, most stocks have abysmally low premiums, especially if going out much more than a week at a time.

    I like the slow and steady, as well, and especially like it if the market doesn't react too much, or at least does attempt to revert to its mean after large moves, but those large moves make it all possible.
    May 4, 2015. 08:46 AM | Likes Like |Link to Comment
  • That Ship Has Sailed [View article]
    Thank you.

    It's those previous 244 articles that keep my averages down.
    May 3, 2015. 03:09 PM | 2 Likes Like |Link to Comment
  • That Ship Has Sailed [View article]
    There's an option strategy to fit every sentiment and every temperament. I think most people who sell puts do so for stocks they like but just want to pay less for shares and get some income while waiting. I hope it works for you and it's good that you dip toes first.

    I go a step beyond, which is that sometimes I sell puts for companies that I would prefer not to own but want to get the option premium and am willing to try and keep rolling those puts in the event of an adverse price movement that would otherwise leave me owning shares. I do so in the hope that sooner or later that adverse price move will correct itself and I can extricate myself from the position.

    Sometimes it works and sometimes it doesn't.

    The only caveat I would add when selling puts, just like the seller of a call sometimes gets more than he should in premium when a stock goes ex-dividend, a put seller may get less in premium than they should when shares go ex-dividend. My preference when short puts that are in the money and likely to be assigned without a rollover is that I would take assignment before the ex-dividend date and then sell calls, if possible.
    May 3, 2015. 03:06 PM | Likes Like |Link to Comment
  • That Ship Has Sailed [View article]
    As an immigrant and the child of immigrants.........never mind.
    May 3, 2015. 12:08 PM | 15 Likes Like |Link to Comment
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