Author Topic: Most Intriguing Investment Idea of the Day Thread  (Read 29270 times)

Financial.Velociraptor

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #250 on: December 13, 2023, 07:54:22 AM »
weekly at the money bear put spreads on VXX.

[snip]

I'll report here the results of the next six weeks or so of trading this strategy here.

wk1 - 24NOV2023 - +2,720 - 51.5%
wk2 - 30NOV2023 - (2,800) - -28.0%
wk3 - 07DEC2023 - (6,076) -  -60.9%
wk4 - 13DEC2023 - +8,502 - 122.5%
wk5 - 9,976 capital at risk for 8 days
TOTAL +2,346

I closed this week's trade early as I could get 98% of the full price.  That takes some risk off the table and gives next week's trade a few extra days to work.  Bought the 22DEC2023 expiry 15.5/16 strikes bear put spread for 29 cents a spread.  I need 2.5% price decline to make the maximum profit of 7,224 or 72.4%.


ChpBstrd

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #251 on: December 13, 2023, 01:05:51 PM »
@Financial.Velociraptor you might be interested in this research on options trading results since 2017:
https://www.schaeffersresearch.com/content/analysis/2023/12/13/vix-plunge-presents-opportunity-for-options-traders

Basically, an ATM straddle has a lot better chance of being profitable if you buy it when VIX is low, as it is now. Calls are driving these returns during low-VIX times, because:

Quote
At VIX levels below 12.81, one-month calls on the SPY have averaged a gain of 62.5%, with 61% positive, and an impressive 35% doubling. Puts performed poorly at these low VIX levels, averaging a loss of more than 30% per trade. Perhaps the strategy is to play calls until the VIX turns higher, moving closer to 13.

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #252 on: December 13, 2023, 02:36:15 PM »
Just reporting back on the US bond trade discussion from up thread.

It's up 16% as of today. Of course almost everything in my portfolio is up since then, I don't think anything else is up that much though. So, thanks for the topic.

ChpBstrd

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #253 on: December 13, 2023, 03:15:35 PM »
Just reporting back on the US bond trade discussion from up thread.

It's up 16% as of today. Of course almost everything in my portfolio is up since then, I don't think anything else is up that much though. So, thanks for the topic.
Indeed. As everyone was excited about today's record high in stock indices, I was watching my long-duration bonds appreciate twice as fast as the stock market indices!

I think 10Y and 30Y treasury bonds will soon break through the 4% barrier. After that happens, it will be harder to justify the expectation for rates to continue falling.

If the Fed's dot plot is anticipating a 4.5%-4.75% Federal Funds Rate at the end of 2024, will the yield curve still be inverted, with the longer bonds below 4%? Or does the longer term trajectory of the dot plot - toward the 2.5%-2.75% range - suggest where longer-term bonds need to go, plus a typical 1-2% term premium on top?

So probably as the 30Y yield goes under 4%, I'll start taking some risk off the table and go back to shorter-term instruments or higher yield with less duration/convexity. This transition leaves me vulnerable to the "soft landing" scenario. I don't think a soft landing is likely, but it is my main vulnerability. So if I'm going to stay fixed-income heavy, it might make sense for me to buy relatively cheap SPY call options now that VIX is in the low 12-13 range. The problem is... I'd have to sell bonds to raise the funds, and that's hard on days like today! Hence my urge to draw a line in the sand and take my gains.   

IMO the most intriguing investment idea today is SPY calls.

ChpBstrd

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #254 on: December 14, 2023, 09:22:10 AM »
Asset: IWM bull put spread at 170 and 197 strikes (buy put at 170, sell put at 197) expiring Jan. 26
Price: 4.56 for the 197 put, 0.23 for the 170 put, = $4.33 net credit
Rationale:
A Russel 2000 ETF like this would not be a bad asset to own. Small cap valuations are historically reasonable and they've been neglected for years as big tech sucked all the oxygen out of markets. At $197.70, IWM is up 10% since November, and is suddenly on a tear as interest rates fall. That could continue for a while if a soft landing scenario becomes more likely.

If IWM goes down, this 43-day spread will get you assigned at $197, less than a dollar below today's price. However you will have accepted a $4.33 net credit, providing a 2.2% discount on the price. 2.2% is not a bad return in 43 days.

If IWM goes up or stays flat, both options expire worthless and you keep the $4.33 credit, which you earned by tying up (197-170=) $27 in cash or margin. This outcome represents a 16% return on your cash in 43 days.

The reason for buying the 170 put is to reduce the amount of cash or margin you must set aside. You could be assigned at $197 and go into margin to buy IWM at that price while your 170 put sits idle, but to avoid this outcome just close the 197 put a day before expiration, or simply accept the possibility of having to pay a few bucks in margin until you click "sell". Not a big deal. If anything you're converting idle margin capacity into cash.

So if you wouldn't mind owning IWM and/or are willing to risk (27-4.33=) $22.67, then here's a chance to earn (4.33/27=) 16% on your money by the end of next month. And if things did go sideways, IWM's option liquidity allows you to make a graceful exit or dig out of a small hole by selling covered calls.

Financial.Velociraptor

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #255 on: December 19, 2023, 09:28:26 AM »
weekly at the money bear put spreads on VXX.

[snip]

I'll report here the results of the next six weeks or so of trading this strategy here.

wk1 - 24NOV2023 - +2,720 - 51.5%
wk2 - 30NOV2023 - (2,800) - -28.0%
wk3 - 07DEC2023 - (6,076) -  -60.9%
wk4 - 13DEC2023 - +8,502 - 122.5%
wk5 - 19DEC2023 - (6,192) - -62.1%
wk6 - 29DEC2023 - took week off due to shortened Holiday week
wk7 - coming soon
TOTAL (3,846)

EDIT - Decided to not run the strategy in the holiday shortened week with 29DEC2023 expiry.
« Last Edit: December 22, 2023, 01:42:55 PM by Financial.Velociraptor »

Financial.Velociraptor

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #256 on: December 26, 2023, 09:06:02 AM »

weekly at the money bear put spreads on VXX.

[snip]

I'll report here the results of the next six weeks or so of trading this strategy here.

wk1 - 24NOV2023 - +2,720 - 51.5%
wk2 - 30NOV2023 - (2,800) - -28.0%
wk3 - 07DEC2023 - (6,076) -  -60.9%
wk4 - 13DEC2023 - +8,502 - 122.5%
wk5 - 19DEC2023 - (6,192) - -62.1%
wk6 - 29DEC2023 - 289 mark to market profit
wk7 - Ending experiment
TOTAL (3,846)

So, I gave this strategy a lot of thought since closing wk5 for a loss.  VXX is a dog that should be able to be consistently successfully shorted.  Its fundamental misconstruction becomes more evident over time as contango causes the underlying to decay.  But there is no contango intraday.  With only five opportunities to have contango decay on a weekly, the result is going to be much closer to a random walk (as evidenced by my weekly returns).  My current thinking is that if you have the stomach to do this trade 52 times a year you will likely win.  But on the order of 29 or 30 trades out of 52.  Going out a month or longer improves your win rate materially.  Sure, get more compounding periods by trading weekly but with a Beta of -50x; there is no way your risk adjusted return in say terms of Sharpe Ratio justifies the risk. 

I have a smaller position open this week left over that was outside the experiment and it was opened deeper in the money.  I expect 928 profit on Friday and am sitting on a 289 MTM gain.  I'll be starting a new experiment with just out of the money bear put spreads on the 3rd Friday expiries going forward.  This gives time for contango to work its magic and has good percentage returns.  I'll start a new accounting with January being "month 1" and carry the experiment through year end month 12.  I'll target 75% monthly gains with 50% stop losses honored.

Financial.Velociraptor

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #257 on: December 27, 2023, 01:07:29 PM »
My "old" VXX bear put spread expiries Friday and has 649 mark to mark profit (and will return 928 without a sudden 11.8% or move in the wrong direction between now and then.)

I went ahead and opened my intended go forward strategy of 3rd Friday expiry BPS purchased out of the money.  With the underlying at 15.65, I bought the 14/15 strikes 19JAN2024 expiry spread for 33 cents net debit (34 cents if you count the commission)  I need a 10.5% move in 16 trading days to earn the full profit of 203%.  On 9,996 capital at risk that is just shy of 20k in profit for about 3.5 weeks of being at risk.  My stop loss is 50% or about 4 to 1 upside versus downside.  I like this a lot better than what I was doing with 1.5/1 gearing and roughly even odds on being right.  Success rate should be much higher with more time for contango to work.

BicycleB

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #258 on: December 28, 2023, 03:09:30 PM »

weekly at the money bear put spreads on VXX.

[snip]

I'll report here the results of the next six weeks or so of trading this strategy here.

wk1 - 24NOV2023 - +2,720 - 51.5%
wk2 - 30NOV2023 - (2,800) - -28.0%
wk3 - 07DEC2023 - (6,076) -  -60.9%
wk4 - 13DEC2023 - +8,502 - 122.5%
wk5 - 19DEC2023 - (6,192) - -62.1%
wk6 - 29DEC2023 - 289 mark to market profit
wk7 - Ending experiment
TOTAL (3,846)

So, I gave this strategy a lot of thought since closing wk5 for a loss.  VXX is a dog that should be able to be consistently successfully shorted.  Its fundamental misconstruction becomes more evident over time as contango causes the underlying to decay.  But there is no contango intraday.  With only five opportunities to have contango decay on a weekly, the result is going to be much closer to a random walk (as evidenced by my weekly returns).  My current thinking is that if you have the stomach to do this trade 52 times a year you will likely win.  But on the order of 29 or 30 trades out of 52.  Going out a month or longer improves your win rate materially.  Sure, get more compounding periods by trading weekly but with a Beta of -50x; there is no way your risk adjusted return in say terms of Sharpe Ratio justifies the risk. 

I have a smaller position open this week left over that was outside the experiment and it was opened deeper in the money.  I expect 928 profit on Friday and am sitting on a 289 MTM gain.  I'll be starting a new experiment with just out of the money bear put spreads on the 3rd Friday expiries going forward.  This gives time for contango to work its magic and has good percentage returns.  I'll start a new accounting with January being "month 1" and carry the experiment through year end month 12.  I'll target 75% monthly gains with 50% stop losses honored.

Thanks for the thoughtful update on this, including the weekly returns and the thoughtful analysis of the initial trial. Good luck on the monthly approach!

ChpBstrd

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #259 on: January 04, 2024, 12:59:57 PM »
Asset: VIX bull call spread at 12 and 12.50 strikes, expiring 2/14/24
Price: $0.43 per 50 cent spread (mid price, executed trade just now)
Rationale:
Unless VIX falls below 12.43 - a level it rarely reaches - this option play will yield 14%. It may seem bold to bet 43 cents in order to win 7 cents, but this perspective ignores how much less likely it is that VIX falls to successively lower and lower levels.

My idea is that House Republicans have a mandate to shut down the government again in this election year, with the economy and stock market showing strong growth. Mike Johnson had to capitulate just a couple of months ago, after winning the House Speaker role by criticizing his predecessor for compromising. He has no incentive to strike an early bargain this time.

This means a partial government shutdown of at least 15 days is a near certainty in early February. The uncertainty will keep VIX up - well above 12.5. During last summer's standoff, VIX hovered in the 17-18 range.

ChpBstrd

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #260 on: January 05, 2024, 04:28:44 PM »
Asset: Healthcare Realty Trust (HR)
Price: $16.86
Rationale:
HR is an REIT of medical properties, which are not always direct competitors to regular office buildings because of the clustering of buildings on medical campuses, layouts, and utilities like oxygen pipes or wiring to support an MRI machine. Falling rates will be a positive for REITs in two ways - by lowering their cost of borrowing and by raising their multiples. I don't foresee a rising trend in vacancies in the not-cyclical healthcare sector, but bankrupt clients are a risk.

HR has a 7.3% yield that is covered by a 12.47 price to cash flow ratio (i.e. 8% cash flow yield). Price/book is 0.92. Debt/equity is 78% and debt/capital is 44%. Revenue is expected to grow 37% this year.

HR bought Healthcare Trust of America in July 2022, more than doubling their square footage. They paid former HTA shareholders a share of HR plus a $4.82 special dividend. This $4.82 dividend shows up in the record for HR shares and makes it look like they had a dividend cut in 2023! Actually, that dividend only applied to former HTA shareholders, but people taking a superficial look across one year will think it's a dividend trap / sinking fund cutting its payment. That's not the case. The regular dividend has been at least 30 cents per quarter since 3Q2016. For the last 4 quarters it was 31c.

The big news in this industry lately has been smaller competitor MPW falling on its face. MPW was concentrated 23% in one client, and that client has been skipping rent on a lease with 22 years remaining. Write-downs were announced today, and could get worse as MPW is now loaning their renter money. MPW dropped 30% on the news.

I view MPW's problems as a sign of mismanagement rather than sector-wide issues. They underdiversified, held the rent too damn high, and doubled down on a delinquent tenant. Arrangements with tenants in trouble are common in this industry, but MPW's divergence from its peers is something else. MPW is down 70% in the last year. With its relatively low leverage, HR could be scavenging their bones in a couple of years - though HR tends to prefer multi-tenant buildings with less risk than MPW took.

Financial.Velociraptor

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #261 on: January 07, 2024, 02:52:41 PM »
Asset: VIX bull call spread at 12 and 12.50 strikes, expiring 2/14/24
Price: $0.43 per 50 cent spread (mid price, executed trade just now)
Rationale:
Unless VIX falls below 12.43 - a level it rarely reaches - this option play will yield 14%. It may seem bold to bet 43 cents in order to win 7 cents, but this perspective ignores how much less likely it is that VIX falls to successively lower and lower levels.

My idea is that House Republicans have a mandate to shut down the government again in this election year, with the economy and stock market showing strong growth. Mike Johnson had to capitulate just a couple of months ago, after winning the House Speaker role by criticizing his predecessor for compromising. He has no incentive to strike an early bargain this time.

This means a partial government shutdown of at least 15 days is a near certainty in early February. The uncertainty will keep VIX up - well above 12.5. During last summer's standoff, VIX hovered in the 17-18 range.

@ChpBstrd  this: is in the news - https://www.cnbc.com/2024/01/07/congressional-leaders-reach-1point59-trillion-deal-on-top-line-spending-pave-the-way-for-deal-to-fund-the-government.html

Will you close the position in light of government funding news?

ChpBstrd

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #262 on: January 07, 2024, 06:31:17 PM »
Asset: VIX bull call spread at 12 and 12.50 strikes, expiring 2/14/24
Price: $0.43 per 50 cent spread (mid price, executed trade just now)
Rationale:
Unless VIX falls below 12.43 - a level it rarely reaches - this option play will yield 14%. It may seem bold to bet 43 cents in order to win 7 cents, but this perspective ignores how much less likely it is that VIX falls to successively lower and lower levels.

My idea is that House Republicans have a mandate to shut down the government again in this election year, with the economy and stock market showing strong growth. Mike Johnson had to capitulate just a couple of months ago, after winning the House Speaker role by criticizing his predecessor for compromising. He has no incentive to strike an early bargain this time.

This means a partial government shutdown of at least 15 days is a near certainty in early February. The uncertainty will keep VIX up - well above 12.5. During last summer's standoff, VIX hovered in the 17-18 range.

@ChpBstrd  this: is in the news - https://www.cnbc.com/2024/01/07/congressional-leaders-reach-1point59-trillion-deal-on-top-line-spending-pave-the-way-for-deal-to-fund-the-government.html

Will you close the position in light of government funding news?
So Schumer and Johnson met, sketched out a compromise that would work in a world without the house freedom caucus, and I can guess the next chapter of this story.
Spoiler: show
House Republicans get pissed that a conversation occurred behind their backs and congressional leaders issued a press release in an power play to sideline them. The Dems gloating about how the framework preserves Dem priorities is pure bait for Republican infighting.


 There are plenty of other reasons to think VIX will be in a normal range anyway, so Iím holding.

Financial.Velociraptor

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #263 on: January 18, 2024, 04:56:00 PM »
So this is the "NEW" short term VXX bear put spreads tracking.

On 27DEC2023, I opened a 14/15 strike BPS with 19JAN2024 expiry.  That closed yesterday below my 50% hard stop loss.  I got out today with a 84.58% loss (8,429) on 9,966 at risk. 

I rolled down and out to 13/14 strikes BPS with 16FEB2024 expiry.  My pricing is 23.99 cents per share on 434 contracts.  I have 10,410 at risk for 30 days.  Breakeven is an 11.84% decline and full profit is at 15.5% decline.  I'm risking 50% (plus whatever it takes to close the position after breaching that) for a chance at a 316.9% gain or 32,990 in profit.

ChpBstrd

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #264 on: January 31, 2024, 03:28:08 PM »
Asset: NYCB-PA
Price: $20.25
Rationale:
Analysts were surprised by NYCB's 4th quarter loss and massive dividend cut, which was due to (1) a drop in revenue, (2) increased loan loss reserves, and (3) increased capital requirements now that they've crossed over into being a >$100B bank.

NYCB common stock dropped 37.5% and their callable preferred stock fell 14.5% today despite its dividend not being cut. NYCB-PA now yields (1.59/20.25=) 7.85%.

Now let's look at those 3 reasons and ask which are real long-term issues for the business?

#1 is a bad quarter, but hardly a reason for the bank to lose a third of its market cap.
 
#2 suggests the bank thinks more of their loans will default and net charge-offs rose from 0.03% in the 3rd quarter to 0.22% in the 4th. NYCB is heavily invested in multifamily building loans in New York City, many of which are rent controlled, so those tenants and cash flows aren't going anywhere. Their office portfolio may be riskier, especially if rates aren't cut soon. In response to a $161M increase in charge-offs from Q3 to Q4 the bank increased loss provisions to $490M, leading to a $-252M loss. Had the bank set aside a smaller loss provision, they'd have been profitable. Instead they're stockpiling cash, which increased by $4.56B between the quarters! In addition to meeting capital requirements, I think NYCB is looking ahead to an environment where the BTFP is no longer available and the Fed discount window isn't taking up the slack for overextended lenders. They were rewarded for being opportunistic in 2023, so if the SHTF in 2024 they want to be positioned to either survive loan losses or sweep in and buy more assets, or both. They're preparing a strong defense for... something... but this doesn't necessarily make the bank worth less than a bank leaning hard into risk or a bank with $20B less in assets that wouldn't have to raise cash. Instead, all this cash-raising makes them less risky. My explanation also describes why revenue decreased - they dialed back on activity to raise capital. So NYCB-A's risk has actually gone down as the yield has gone up. With a bold dividend cut and aggressive loss provisioning, NYCB has probably assured its own survival. Also consider that in a SHTF moment, NYCB might fall back below the $100B regulatory threshold, freeing up billions of dollars to acquire rivals' assets on the cheap.

#3 is simply a growing pain and essentially one-time cost of doing business for a bank that had doubled in size over the past 3-4 years, although higher capital requirements could hurt ROE in the absence of better economies of scale. If the analysts did not foresee the need for NYCB to raise more capital it's their fault, not NYCB's. The bank could avoid these requirements by selling assets until they are only a $99B bank, but I agree with management that it is better for NYCB to grow. They laid the foundation for that growth through the sacrifices of the 4th quarter.

NYCB-PA is callable at $25 after 3/17/2027, which is 23.45% higher than the price this afternoon. In 2027 the bank would have to find an alternative source of long-term capital considerably less expensive than (1.59/25=) 6.36% for a call to make sense. We, on the other hand, can pick up a 7.85% yield on the cheap.

The biggest risk at this point, other than a real estate collapse or severe recession in which the non-cumulative dividend could be cut, would be if an activist investor came in advocating the sale of assets to get below the $100B line and free up billions in reserves. I think NYCB management can make the case they are acting prudently and with growth in mind rather than dividends.

If more banks were willing to slash common dividends to deal with challenges, bank failures would be a lot rarer, and growth more common. So I actually like the courage of NYCB management, and would consider buying from the panicked short-termers.
« Last Edit: January 31, 2024, 03:39:31 PM by ChpBstrd »

Financial.Velociraptor

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #265 on: February 06, 2024, 12:43:03 PM »
So this is the "NEW" short term VXX bear put spreads tracking.

On 27DEC2023, I opened a 14/15 strike BPS with 19JAN2024 expiry.  That closed yesterday below my 50% hard stop loss.  I got out today with a 84.58% loss (8,429) on 9,966 at risk. 

I rolled down and out to 13/14 strikes BPS with 16FEB2024 expiry.  My pricing is 23.99 cents per share on 434 contracts.  I have 10,410 at risk for 30 days.  Breakeven is an 11.84% decline and full profit is at 15.5% decline.  I'm risking 50% (plus whatever it takes to close the position after breaching that) for a chance at a 316.9% gain or 32,990 in profit.

JAN result (8,429)
FEB result (5,140)
Running total (13,569)

I hit my stop loss yesterday mid day.  Last time (jan) I waited for end of day confirmation on the stop and saw another 3 thousand or so in value run off.  So, this time, I rolled mid day.  This also appears to have been disadvantageous as the price fell sharply in the few minutes I was out of the trade.  In fact, if I had waited for End of Day, I'd still be in the Feb trade with a mark to market profit!  I rolled down and out to the 12/13 bear put spread with 15MAR2024 expiry.  I have 38 days to bleed off 15.9% to earn the full profit of 33,418.

Financial.Velociraptor

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #266 on: February 14, 2024, 12:50:30 PM »
Short dated out of the money VXX bear put spreads.

JAN result (8,429)
FEB result (5,140)
MAR result (3,472) [note - that is March expiry puts closed early in Feb due to stopping out]
Running total (17,041)


I stopped out at close of trading yesterday (50% hard stop loss).  I recovered about 1500 dollars with the favorable movement at open and when I closed for a loss of 3,472.  I rolled UP and out to the 19APR2024 expiry and 13/14 strikes for 57 cents a share net debit.  With the underlying at 14.85, I need 12.5% decay over the next 65 days to earn the full potential profit of 7,525 on 9,975 capital at risk.  That is, I can't break even until at least May at this point.  I decided to be a little less aggressive as opening with three losing trades suggests I need to be more focused on win rate than knocking it out of the park.

Concerned the market is 'topping' short term and April may not be enough time but the strategy is to buy monthlies and I'm not going to try to 'time it'.

ChpBstrd

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #267 on: February 14, 2024, 01:22:40 PM »
Asset: VIX bull call spread at 12 and 12.50 strikes, expiring 2/14/24
Price: $0.43 per 50 cent spread (mid price, executed trade just now)
Rationale:
Unless VIX falls below 12.43 - a level it rarely reaches - this option play will yield 14%. It may seem bold to bet 43 cents in order to win 7 cents, but this perspective ignores how much less likely it is that VIX falls to successively lower and lower levels.

My idea is that House Republicans have a mandate to shut down the government again in this election year, with the economy and stock market showing strong growth. Mike Johnson had to capitulate just a couple of months ago, after winning the House Speaker role by criticizing his predecessor for compromising. He has no incentive to strike an early bargain this time.

This means a partial government shutdown of at least 15 days is a near certainty in early February. The uncertainty will keep VIX up - well above 12.5. During last summer's standoff, VIX hovered in the 17-18 range.

@ChpBstrd  this: is in the news - https://www.cnbc.com/2024/01/07/congressional-leaders-reach-1point59-trillion-deal-on-top-line-spending-pave-the-way-for-deal-to-fund-the-government.html

Will you close the position in light of government funding news?
So Schumer and Johnson met, sketched out a compromise that would work in a world without the house freedom caucus, and I can guess the next chapter of this story.
Spoiler: show
House Republicans get pissed that a conversation occurred behind their backs and congressional leaders issued a press release in an power play to sideline them. The Dems gloating about how the framework preserves Dem priorities is pure bait for Republican infighting.


 There are plenty of other reasons to think VIX will be in a normal range anyway, so Iím holding.
I won this bet today and earned 14% on 100 fifty cent spreads. My long calls at 12 appreciated 4.7% and my short calls at 12.5 appreciated at 3.97%.

My NYCB-PA idea was premature, but I didn't buy it. Instead I sold a put option on NYCB at the $3 strike for 27 cents and paid for more than half of a nice family takeout dinner.

Alternatepriorities

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #268 on: February 20, 2024, 05:29:08 PM »
ENERGY TRANSFER L.P. (ET)
Price: 14.64
https://investor.vanguard.com/investment-products/stocks/profile/ET

Rationale: I don't see fossil fuels disappearing as fast as a lot of pundits would like. It seems to me the push to invest in green tech is overlooking the massive improvement that gas is over coal as well as how important it is for reserve power to stabilize the grid. To my way of thinking it seems odd for a company in the middle of that industry to trade for a PE of 13.3 with an 8.5% dividend. There is also the ongoing surge in American gas production as we attempt to replace some of Russia's gas for allies...

Question: Is there something fundamentally different about an LP that I should be wary of?

Financial.Velociraptor

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #269 on: February 21, 2024, 11:04:31 AM »
ENERGY TRANSFER L.P. (ET)
Price: 14.64
https://investor.vanguard.com/investment-products/stocks/profile/ET

Question: Is there something fundamentally different about an LP that I should be wary of?

They issue k-1 at tax time and your distributions are not on 1099.  They can be a real hassle.  I decided the various MLPs, despite high yield were not worth the tax time hassle.

ChpBstrd

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #270 on: February 21, 2024, 11:55:10 AM »
ENERGY TRANSFER L.P. (ET)
Price: 14.64
https://investor.vanguard.com/investment-products/stocks/profile/ET

Question: Is there something fundamentally different about an LP that I should be wary of?

They issue k-1 at tax time and your distributions are not on 1099.  They can be a real hassle.  I decided the various MLPs, despite high yield were not worth the tax time hassle.
I hold ET's 2038 bonds. Their yield today is 6.1%. The common stock as you point out yields 8.6%. Between these points on the risk / capital structure spectrum, ET preferreds can be had at 7.63%. I have a lopsided amount of my assets in IRAs, so I could effectively shield an ET allocation from taxes, making it tempting to move up in risk to seize an extra 1.5%-2.5% per year.

reeshau

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #271 on: February 21, 2024, 12:37:52 PM »
Be careful when talking about an LP in an IRA.  Earnings of $1,000 or more would trip UBTI limits, requiring your IRA to file and pay tax.

https://www.fidelity.com/tax-information/tax-topics/ubti

(I just learned from this link that Fidelity will fill out the 990-T.  But you are still paying tax out of the vehicle you have set up to avoid or delay paying taxes.)

ChpBstrd

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #272 on: February 21, 2024, 01:43:43 PM »
Be careful when talking about an LP in an IRA.  Earnings of $1,000 or more would trip UBTI limits, requiring your IRA to file and pay tax.

https://www.fidelity.com/tax-information/tax-topics/ubti

(I just learned from this link that Fidelity will fill out the 990-T.  But you are still paying tax out of the vehicle you have set up to avoid or delay paying taxes.)
Good point! As a bondholder, I avoid this, but if I chased the yield into the common and preferred stocks, then maybe not.

Alternatepriorities

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #273 on: February 21, 2024, 04:42:13 PM »
Be careful when talking about an LP in an IRA.  Earnings of $1,000 or more would trip UBTI limits, requiring your IRA to file and pay tax.

https://www.fidelity.com/tax-information/tax-topics/ubti

(I just learned from this link that Fidelity will fill out the 990-T.  But you are still paying tax out of the vehicle you have set up to avoid or delay paying taxes.)


Thanks that is really helpful to know. I knew they made taxes messy and just assumed putting it in and IRA would simplify things. After trying to figure out the K1s on my late fathers taxes last year I donít think itís worth it for me.

MustacheAndaHalf

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Re: Most Intriguing Investment Idea of the Day Thread
« Reply #274 on: February 26, 2024, 08:18:28 AM »
Be careful when talking about an LP in an IRA.  Earnings of $1,000 or more would trip UBTI limits, requiring your IRA to file and pay tax.
Earnings do not necessarily trigger unrelated business income tax (UBIT).  I've invested in venture capital inside a self-directed IRA (SDIRA), which is not expected to generate UBIT.  Some hedge funds employ leverage, and their profit from borrowed cash can trigger UBIT (if I recall correctly).  Other hedge funds offer a UBIT blocker which pays UBIT tax before passing the net proceeds to an IRA.

Fidelity, Schwab and Vanguard do not support hedge fund investing inside IRAs.  For those of us who are qualified investors (see SEC definition), that requires an SDIRA with a custodian.  Before I started investing in hedge funds inside my IRA accounts, I read "The Self-Directed IRA Handbook":
https://www.amazon.com/gp/product/B07DK3HC88/