Journey

Melancholic

2010-04-17T09:04:00.000-07:00

Met up with a couple of good friends from my secondary school days - been 17 years since we known each other.

We had dreams to make it big and to retire rich, but it seems that we are going to be settled into the rat race. Typical Singaporeans - graduate, get married, get a HDB flat yada yada yada.

This is far from my dreams and ideals.

Got to stop being in my comfort zone!

The Pen is mightier than the Sword 2

2009-10-12T04:01:00.000-07:00

Well, with reference to my earlier post http://dowzjourney.blogspot.com/2009/07/pen-is-mightier-than-sword.html, i got my free Mont Blanc pen.

Not too bad. Total interest incurred 11 dollars (plus some transport cost to claim the pen), and i am the proud owner of a 'branded' pen.

So, some good things are quite cheap too.

Do note that i am not advocating a 'materialistic' or 'high roller' kind of life. Just wish to illustrate that when someone offers a good deal, grab it!

Side note: i was a bit worried that UOB would emboss 'UOB' into the Mont Blanc pen. Turns out that the fear was unfounded. Great!

Bull thoughts 2

2009-09-14T01:25:00.000-07:00

The recent bull run also has inspired some thoughts in me.

I had added to my portfolio a little when the market was down. And i am currently now benefitting from it.

Unfortunately, i did not have the guts/conviction to purchase further when the market dropped more.

I am reading Snowball [the latest biography on Warren Buffett], and all the lessons which i read about kept flooding back... i need more intelligence as an investor.

Bull?

2009-09-14T01:20:00.000-07:00

The last 2 weeks had been a time where the stocks are rising... like a mini-bull. A year has past since the Lehman incident, and the market is back at where it was since a year back. The bleak times in March etc is currently all but forgotten.

Stocks have gain noticeably the past few weeks - exhilarating to see your networth inching up.

Since i have also started a little on options 3 months ago, i made a quick comparison.

I made about 5% on my options capital for the past 3 months. Annualized [assuming all things constant], that would be about 20%. Not too shabby on its on.

However, if one had bought stocks, and had ridden along with the bull, 20% would have been trouced easily.

My thoughts ~ if the market is sideways or moving up/down slowly, the options strategy would be more fruitful. In a sharp rise or decline, longing or shorting stocks would have been the way to go

Wacky market

2009-09-10T21:26:00.000-07:00

Clearing leave nowadays, hence a little more free to monitor the market.

Just realized that it's a wacky market nowadays. The swings/market gyrations is really really exciting. The screen tickers changing numbers every few seconds. If i'm a trader, i would be MOST tempted to buy/sell. So convenient, within a few clicks of a buttom.

One of my holdings - Sinwa Limited, rose sharply. Just within 2 days, my holdings went up by around 2k based on Sinwa alone - and i have no inkling as to what happened.
No announcements, no nothing.

Well, i'd just continue holding on. This is my all time favourite. I figured that i must have been holding this for at least 5 years. Everything still looks good.

Mediaringing up

2009-08-31T07:21:00.000-07:00

Well, got a pleasant surprise today when i went to check the price of one of my holdings.

Mediaring went up 8 cents today. That represents a near 50% increase in a single day.

This made me backtrack and see what has changed.

The result?

Spice Innovations Technologies Pte Ltd is on the way to be one of the major shareholder in the company.

What changed?
The underlying business has not changed - only the shareholders changed. Will the new shareholders/management bring the company to greater heights? I am not sure.

But the increase in price is way too much for a (to me) non substantial reason.

Verdict? Sell. i'm going to exit tomorrow

Nothing much exciting

2009-08-29T09:53:00.000-07:00

Well, haven't been updating much. Market's been up and rising.

I did not enter into new positions, or exit any.

Only thing i did was again to sell another 2 options contract, on the same underlying. The market's rising too fast, my options selling had some difficulty catching up.

Optionsxpress require a 100% cash security on my put options, and as my strike price is getting higher and higher, i had difficult in meeting their security requirements. I did not allocate enough play money into Optionsxpress.

This has resulted in me writing contracts at a lower strike price (so that if exercise, i can still afford to fulfil the contract). However, due to the low strike price, i am unlikely to get exercised. The index has to drop > 10% in a month for me to get exercise. Premiums, naturally are getting lower and lower for me then.

Option expired

2009-07-28T07:46:00.000-07:00

The first option i sold was successful. It expired out of the money.

USD 175 into my pocket. I promptly went to sell another option. This second one was more difficult. I was not able to get as good a risk/reward trade-off as the first trade, hence i erred on the side of caution, and sold the put option at a lower price [thereby decreasing the chance of being exercised] instead.

Well, i prefer to be safe than sorry.

Contracts for Difference

2009-07-20T04:53:00.000-07:00

Recently, i got posted a question on Contracts for Difference ("CFD") and i thought i'd give some thought to this topic. I did a small thoughts analysis on CFD when it was launched a few years back [2-3 years back] and while i did open an account for CFD, it was not utilized as all.

Now, let's take a look at CFD

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Extracted from
http://www.phillipcfd.com/beforeyoutrade.asp
"What is CFD?Contracts For Difference (CFD) has been a popular trading tool for the active investors in many countries like the United Kingdom, United States, Australia, and is now making inroads to Singapore.

Phillip CFD is an investment instrument that allows you to participate in the price movement of an underlying share. The CFD contract is an agreement to buy (Long) or ‘short-sell’ (Short) an underlying share. Investors increasingly look to CFD to profit in both the rising and falling markets.

Benefits of trading Phillip CFDTrading CFD is similar to share trading. However, no share ownership is involved as it is a derivative suited for investors who want to benefit from the price movements of the underlying share. Therefore, CFD trading overcomes the hassle of share clearing and settlement, offering investors greater trading convenience and better features as to normal share trading."

CFD vs Shares - as described by Philips Financial
(1) T+30 settlement vs T+3
If you are going on contra, CFD gives you a longer time frame to contra as compared to outright shares purchase

(2) Low margin requirements (around 6.67 times your capital) vs 3 times leverage

(3) Short sell using CFD vs Shares borrowing from broker to short sell

---------------------------------
If you ask me, looking at the 3 differences provided by Philips, who is the target market for this product group?
(1) These are for shares traders looking for an instrument to contra
(2) CFD is for people who wish to have a lower margin requirement [hence trading on large volume]
(3) Short sellers

Is CFD useful for long term investors then?

Personally, i don't really think so because long term investors do not usually borrow to invest. Invest only money you can lose, as at the maximum, you cap your losses at the amount you put in. With CFD, it's different, you incur margin interest, and you may be required to top up further.
If i can afford to buy the shares outright [hence no margin interest], i would rather do so, as it would mean i own part of the business, rather than buying a contract with the brokering house. Plus i get to keep the dividends and get invitations to AGMs of the company. [this comes with free food, by the way]

By nature of the CFD as well, the mentality encouraged is short term [contra]. Looking to buy and sell for a trading profit.

However, to be fair, i think CFD is rather useful for short sellers, as CFD circumvents the need to borrow the scrips from the exchange/broker to short sell.

Of course, the above opinion is my personal opinion, and you should evaluate the pros and cons of any decision you wish to undertake.

5 mins - 10 dollars

2009-07-16T04:26:00.000-07:00

I had forgotten to transfer funds into my bank account earlier for the deduction of my credit card bills, and i incurred service fees of $10/=.

I took 5 mins to draft an email to the bank, and the fees is waived. That is an instant $10 save. That sounds cheapo... but i urge everyone to make that call/write that email.

No point letting the bank earn more than they should. [well, this could be prevented if i had been more diligent in checking my bank account balances, but. Well]

And i wouldn't even talk about how i appealed to URA to waive off a $50 summon for a parking offence. Now, that rate of return on my time is even greater. =)

The Pen is mightier than the Sword

2009-07-13T04:05:00.000-07:00

Got a mailer recently from UOB Cashplus.

Essentially the deal is one will get a free mont blanc pen worth $300 if one maintains a minimum debit balance of $1,000 with UOB at the promotion interest rate of 1% per month.

I was thinking, this doesn't sounds right, and i'm tempted to take UOB up on their offer.

Imagine, if i withdraw $1,000, i incur interest charge of $10 [1% * $1,000]. In return i get a free mont blanc pen. [i wouldn't put much faith in the $300, but i'm sure it's worth more than $10]

What's the catch? i read all the fine prints, don't think i can see anything. All i have to do, is remember to credit back all the money i've withdrawn, and voila. Good business for me.

I suppose the bank wishes for people to start using their revolving facilities, so that they can earn more interest from common folks like me.

Time Decay

2009-07-03T01:26:00.000-07:00

Checked the price of the underlying of my options this morning, and the price (of the underlying) has dropped.

If you were to look at my position, i am short 2 put options. If that's the case, a drop in price of the underlying should result in a corresponding increase in price of the put option, thereby increasing my loss.

However, the put options actually went down in value - means i'm making a slight paper gain. Why is that so? This brings us to the fact that options have a time value in it, the closer the option is to expiration [3rd Friday of July for this particular position], the less the option is worth.

Since i'm the seller of the option, it means if i were to cover my position [or buy back my short], i would have to pay less for it.

General

2009-07-01T19:40:00.000-07:00

Not much updates nowadays.

Quite boring, hence no updates.

But like what they say, passive investing should be boring and waiting for money to work hard, while i slack away. =)

Options Monitoring

2009-06-22T18:55:00.000-07:00

US market had a big slide yesterday...and SSO nearly reached the strike price with the options that i've sold last week.

While i am still in a gain position, a few more days like this, and i think the options will be exercised and i'd be 'put' the ETFs.

Let's see how it goes tonight

Love letter from IRAS

2009-06-21T20:18:00.000-07:00

Time to face the bullet. The love letter from IRAS was sitting on my table for at least 2 weeks, before i ~~bravely~~ had the time to open the letter.

I am flabbergasted by the amount of tax i had to pay. With the tax money, i could probably buy myself a brand new washing machine and a dryer (European brand some more!).

Anyway, to cut down on tax expenses, i think the popular method is using the SRS (Supplementary Retirement Scheme), where contributions to the SRS account are tax deductible.

Will i consider using SRS though? I don't think so.

The benefits for using SRS is that when retiring, you draw down on the SRS account (and the amount drawn down is taxed). Going by the current tax structure, as long as you draw below SGD 20,000 per year, you won't suffer any tax.

However, that works when people are planning to have a lower income when facing retirement. I am, however, planning to increase my income when retiring from my job, through passive income from paper and real estate assets.

Hence, for me to draw down on the SRS account. i could suffer higher taxation expenses than before. (Of course, this is the ideal situation, which i am planning from).

Different strokes for different people. So if you are keen on SRS, let me know, and i can point you to a few experts or websites on SRS.

First Options Trade

2009-06-18T00:42:00.001-07:00

Executed my first options trade last night on the US market. I sold 2 put contracts of Proshares ETF on the S&P 500.

Why did i do that?

I suppose i will have to admit that the market crash in the past half a year made me explore alternative investments to grow my nest egg. I lost around 40-50% of the portfolio value even though the fundamentals of my underlying stocks did not decay.

However, i realise that even though the underlying stocks did not decay, these investments still did not put any money into my pocket, and as such, i am unable to see any returns on my investment. Short term thinking, and a bit un-Buffett like (whom i always would like to try to follow in terms of investing style)

Why the put contracts then?

Sold SSOJSX at 0.95, strike price of $24.

Rationale
(1) With the then current price of SSO at $25.66, for the put to be exercised, SSO would have to decline by 6.4%.
(2) For me to start losing money, SSO would have to decline to 10.17%. Strike price of $24 less the premium which i pocketed of $0.95.
(3) If indeed i get placed with the SSO, i can immediately write a call option on the ETF, which would pocket me a few more bucks of premium.
(4) And should i really obtain the ETF, i would not mind it at all, since i think people can rarely go wrong with ETFs.
(5) The option requirements for this trade is $5.1k. Net of transaction cost, the premiums received is $175, giving a net return of investment of greater than 3% per month.

If the option were to expire worthless in July, i would have made 3% AND the interest generated on my cash margin placed with the broker. Then i will relook at the same kind of put options to sell again.

With these in mind, i entered into the trade.

What's the downside risk?
In an extreme scenario, i figured out that the price of SSO would fall drastically, and i get put the shares at with the price at maybe $10 (meaning i would suffer from the drop). I write a call for $11 and it got called away, and i am left with the scenario of buying high and selling low.

While this scenario might not be too likely, it got me thinking... of a way to mitigate the risk. I could then buy a put option way out of the money so that if the price reaches the ridiculous level, i can at least put it away too. Honestly, i am not too sure if this will strategy works yet, as this remains my 'play money', and i think 'insurance' for this put option would incur too much transaction cost to warrant such.

Now it's a matter of waiting to see if this would pan out well.

Introduction

2009-06-17T21:05:00.000-07:00

Following my recent creation of my gastronomical blog at http://www.gastromakan.blogspot.com/, i have started another blog to focus more on other areas where i am more interested in.

Basically personal finance (more investments actually) and books. Been a long while since i gave up on blogging, and i wonder how long would it be, before i give up due to lack of time again?

Anyway, i thought it would be a good idea for me to start sharing about my journey to financial independence, and to give a more defined structure of thought process for all the investments and personal finance decision that i make.