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Pfizer Inc. Message Board

  • fizrwinnr11 fizrwinnr11 Aug 29, 2012 11:16 AM Flag

    Crazy high return on this new naked put investement in the I'm Loaded #1 account

    With the stock at $26,05, sold 50 of the 10-strike naked puts out to Jan. 2014 for JCP. Sales price of 483 per contract. Net proceeds after commissions of $4,115 with cash margin requirements being $9,650. Nominal return of 42.6%n for 72.6 weeks if the margin-safe price all the way down to $11.25 holds. The annualized rate is 27.1% if held to expiration but with the almost-certain early out, the actual annualized rate of return should be in the low 30's. How incredible for TEN-strike naked puts with the stock at TWENTY-SIX.

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    • Double & triple ouch for I'm a lot less loaded now!

    • In case the questions were too tough for you, here are the correct answers:

      1) 250K
      2) 100K
      3) 100K
      4) 350K
      5) 350K

      The cost basis for the entirety of my holdings couldn't possibly have been more than 350K until such time as I actually deposited more money.

    • If you think that is so, certainly you ought to be able to answer clearly the few simple questions I'll have for you at the end.

      From late 2004 through late 2008, I had invested 350K of which 250K went into a diversified stock portfolio and the other 100K went into long Pfizer call spreads. While the call spreads didn't generate a dime in margin availability, the stock DID generate margin availability - 70% of the amount of the stock - or 175K. I decided to avail myself of about 100K of that and write Pfizer naked puts. So with these actual, real-life facts, answer these questions:

      1) What was the cost basis that I had in the diversified stocks?

      2) What was my Pfizer component cost basis before selling the naked puts?

      3) What was my Pfizer component cost basis after selling the naked puts?

      4) What was the cost basis of the entirety of my holdings before selling the naked puts?

      5) What was the cost basis of the entirety of my holdings after selling the naked puts?

    • You don't know what you're talking about and are just obfuscating.

    • I always include returns on the entire portfolio - I call it "combined portfolios updeate." Whereas I now no longer have the stock that I had through most of 2008, I DO have CASH sitting there as reserves which is even BETTER collateral than stock. Because I always have the necessary collateral to sell naked puts - whether it's stock or cash - the denominator does NOT change unless I add more money.

      If I have requisite margin availability in the account, selling naked puts doesn't increase the cost basis or denominator by one iota. How many times do I have to keep saying that before you finally get it?

      Stop the nonsense about "obfuscating" - the system allows me to take advantage of margin availability and when I do use some of that availability, it simply adds to the risk and the leverage but it doesn't add one penny to the cost basis.

    • <<It is YOU all along who has been talking about returns on the entire portfolio>>.

      Of course. Have you computed the return on the entire account, including the stock needed to margin the Pfe naked puts? Of course not.

      Stop obfuscating. You're dead wrong and you're not getting away with it.

      Your denominator for the calculations of Maniacal Methods 100K portfolio has always been 100K (putting aside funds added much later). It SHOULD be the entire account, including the assets needed to margin the naked puts.

    • Here is an excerpt from your post:


      You can't use Pfe naked puts to increase the return on a denominator of 100K of Leaps when you need other stock in the account to provide the margin. Talk about basic!



      With that comment, you stamp yourself as a HYPOCRITE of the first order. It is YOU all along who has been talking about returns on the entire portfolio.

      If a person deposits 350K in cash, buys 250K of stock with it and uses the other 100K to buy long call spreads and then uses up 100K of the 175K in margin availability allowed from the stock ownership to sell naked puts, are you going to try and tell me and this board that suddently the cost basis for my portfolio has gone up from 350K to 450K?

      Obviously if I buy 250K in stock and then use the margin availability to write naked puts on other assets, the cost basis for the stock has to remain at 250K.

      And if the cost basis of the entire portfolio remains at 350K after writing the naked puts and the cost basis of the stock is still 250K, by simple subtraction what doesn that mean that the cost basis of the Pfizer component must be? ANSWER THE QUESTION - and without going off on a tangent.

    • You are intellectually dishonest to the nth degree. I couldn't be more serious. I know you get my point, but you're so tied into your false calculations that you can't admit that you're wrong.

      You can't use Pfe naked puts to increase the return on a denominator of 100K of Leaps when you need other stock in the account to provide the margin. Talk about basic!

      Nobody seems to care about this any more than they do about any of your trades or bogus calculations.

    • Here is an excerpt from your post:


      You can leverage up all you want within the confines of the assets in the account. What you can't do is then use a denominator that ignores the added assets used for margin. You have to compute the return on the account.



      Of course I can use a denominator that reflects the amount that I put into the account. Unless I actually put in more, the cost basis can never be more.

      I started out with about 250K in diversified stocks and 100K in long Pfizer call spreads. My cost basis for the portfolio was 350K. I then took a portion of the margin availability accorded by the long stock and wrote Pfizer naked puts that required about 100K more of margin availability that I easily had.

      After writing those naked puts, the cost basis for the portfolio was the exact same 350K as it was BEFORE I wrote any naked puts. The volatility and the risk factor of course went up when I wrote those Pfizer naked puts but NOT the cost basis or denominator. That remained at 350K for the portfolio - comprised of 250K for the stock and 100K for the Pfizer component.

      This is absolutely BASIC and it's beyond me that you cannot see it.

      Do you really think that after I sold the Pfizer naked puts that the cost basis for all of my investments was 450K when I only deposited 350K and didn't add a dime of my own money?

      You need to focus, focus, focus on that last paragraph. Selling naked puts against availabile margin doesn't increase the denominator by one iota.

    • You don't have a clue. You can leverage up all you want within the confines of the assets in the account. What you can't do is then use a denominator that ignores the added assets used for margin. You have to compute the return on the account. You never did that. What you did would be laughed at by any investment professional.

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PFE
30.49+0.14(+0.46%)Jul 22 4:00 PMEDT

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