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Nokia and The Ford Company
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  • Nokia And The Ford Company

    Is Nokia using Henry Ford's strategy? It makes one think.

    It was Nokia's VP of Design Marko Ahtisaari description of the re-invention of the wheel attracted me with the idea. He had stated numerous times in interviews that innovation in the phone industry has just began. Reminding everyone that it took 15 years for the automobile industry to standardize on the steering wheel as the dominant interface.

    I believe there are great similarities between Ford's and Nokia's plight to victory. I am not referring to the Ford Company of today, but the year Ford incorporated the "Ford Motor Company" in 1903. Ford proclaimed, "I will build a car for the great multitude." He did so in 1908 offering the Model T for $950. In the Model T's nineteen years of production, its price dropped as low as $280. With Ford providing such discounted prices, 15.5 million Model T's were sold in the United States alone. Production of the Model T was the beginning of the Motor Age. It evolved from a luxury item for the well-to-do to essential transportation for the ordinary man.

    Henry Ford also revolutionized car manufacturing by the use of an assembly line. In 1914, a Ford Motor plant in Michigan applied a new innovative technique which enable them to turn out a new car chassis every 93 minutes. Using a constant moving assembly line led to huge gains of productivity. Now with Ford's triumphant strategy to provide affordable automobiles for the masses, all of who was part of his vision came out prosperous. Ford Motor Company was literally "Connecting People"

    Ford's Model T altered the American society. The United States suburbia was growing rapidly with the creation of national highway that ultimately lead to a high demand for cars. The U.S. population was entrance with the possibility of going anywhere anytime, similar on how NSN is creating numerous innovative infrastructure highways in the world.

    The Nokia Strategy:

    "We are increasing our focus on the products and services that our consumers value most while continuing to invest in the innovation that has always defined Nokia. We intend to pursue an even more focused effort on Lumia, continued innovation around our feature phones, while placing increased emphasis on our location-based services. However, we must re-shape our operating model and ensure that we create a structure that can support our competitive ambitions."

    Stephen Elop, CEO

    In conclusion

    Nokia finally realized winning becomes no longer a matter of getting "there way" (arrogance), or persuading someone to do what they want them to do, it becomes a way of achieving what's best for all.

    Disclosure: I am long NOK.

    Tags: NOK, F
    Feb 15 2:42 AM | Link | 20 Comments
  • Making Money W/ Nokia The "Long Leverage Way"

    NOKIA LEAPS OPTIONS STRATEGY

    Based on Life Cycle Investing and Leverage Concept

    -------------------------------------------------------------------------------

    THE SCENARIO

    Buying in-the-money Options Contract using "Margin" for leverage. NOKIA P/S will increase within 1 year and beyond. The provided strategy is a way to lock in at a lower price with positional advantage through leveraging (margin). You will have one year to pay-off the premium and during this time to pay off total cost when exercising shares at expiration (JAN2014).

    Life Cycle Investing Philosophy

    By employing leverage to gain more exposure to stocks when young, individuals can achieve better diversification across time. Using stock data going back to 1871, we show that buying stock on margin when young combined with more conservative investments when older stochastically dominates standard investment strategies-both traditional life-cycle investments and 100%-stock investments. The expected retirement wealth is 90% higher compared to life-cycle funds and 19% higher compared to 100% stock investments. The expected gain would allow workers to retire almost six years earlier or extend their standard of living during retirement by 27 years.

    GOAL

    The goal of the NOKIA OPTION STRATEGY is to purchase 3,000 shares (30 contracts) on margin and to pay off with very little out-of-pocket before options expiration date JAN 18, 2014. The total cost of the 3,000 shares when exercised will be $15,300. (10,500shares+4,800 premium)

    KEY STRATEGY

    NOKIA core holding equity used as leverage

    Exercise shares (3,000) before expiration

    Cover Margin w/ Options Ladder profits and weekly payment of $300 towards account from cash reserves

    Lowering out-of-pocket cost for purchase

    -------------------------------------------------------------------------------

    Why should I sell options call before expiration?

    Taking profit on a profitable options position rather than exercising can actually be more profitable than using the given strategy depending on time decay if stock increases in value. The value between intrinsic value (delta) vs extrinsic value (gamma) Exercising a position would instantly lose all extrinsic value remaining in the option.

    Why should I exercise my options contract?

    Instead of selling the options for profit, the investors will move from a short term options to a long term investment on the underlying stock. A stock such as Nokia presents an investing opportunity for the long term. "Buying in the Money" gives you more control of the underlying stock using lesser money to hold for long term gains until exercised.

    * Only American style Options can be exercised before expiration . European Style Options do not offer such flexibility.

    -------------------------------------------------------------------------------

    * Update 1/26/13 1:03am

    (click to enlarge)

    Cost basis (margin): 6,713.05

    Gain/Loss (1/26/13): -1,613.85

    * Update 2/5/13 1:24am

    (click to enlarge)

    -------------------------------------------------------------------------------

    * Update 2/25/13 Option Calls

    (click to enlarge)

    Options is a rough game..

    Margin Call for 1456.46 to maintain requirments. Answered it with a deposit to my account for requirment. Hope this pays off or break even. Toughest experiment I've ever conducted because money is on the line. I am still bullish for Nokia Oyj.

    -------------------------------------------------------------------------------

    * Update 3/19/13

    (click to enlarge)

    With latest drop of p/s. I averaged down my 3.50 ITM strike and added OCT 19 2013 $4 for good measure.

    -------------------------------------------------------------------------------

    1st position

    • NOK APR 20 2013 5.00 CALL OTM @ .36/20 contracts
    • Cost basis: 682.95 = .34 per share
    • posted in account 1/22/13
    • Selling for profits to pay-off 2nd position
    • Option ladder pay-off system

    2nd position: NOKIA OPTION STRATEGY BASIS

    • NOK JAN 18 2014 3.50 CALL ITM @ 1.60
    • Cost basis: 4,800.45 = 1.60 per share w/ fees
    • Position posted 1/23/13
    • Shares will be exercised. 30 contracts

    Buying in-the-money (NYSEARCA:ITM). It will allow me to buy the underlying stock at a lower than the prevailing market price when exercised/purchased. It is very effective at controlling risk while still providing reward / risk profile.

    3rd position (should be my last)

    • NOK JUL 20 2013 5.00 CALL OTM @.41/30 contracts
    • cost basis: 1,230.45
    • posted in account 1/25/13
    • selling for profit to pay-off 2nd position

    I'll provide charts, graphs etc. when I get the hang of iWorks.

    -------------------------------------------------------------------------------

    DISCLOSURES

    The Nokia Option Strategy is an experiment using real human/margin capital. I am well aware of the risk and exit strategy has been implemented. (e.g. paying for the shares outright with cash)

    The idea was based on LEAPS/Options research I've done this past week and reading "LIFE-CYCLE INVESTING AND LEVERAGE:
    BUYING STOCK ON MARGIN CAN REDUCE RETIREMENT RISK" www.nber.org/papers/w14094.pdf over the weekend.

    This strategy is based on my financial standing and risk assessment. The Nokia Option Strategy (MARGIN) is not recommended for anyone to follow, but for educational purposes only. Please do your own due diligence and consult with a licensed professional before making any investment.

    Disclosure: I am long NOK.

    Tags: NOK
    Jan 22 6:24 AM | Link | 101 Comments
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    Jan 25, 2014
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    Aug 19, 2013
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