Business and Investing

[CALZALOL]

Was having a look around the forum for discussions surrounding this topic and I am surely not the only one with an interest in it.

As a result of the lack of discussion, I've taken the initiative to start this thread for advice and discussion.

I will get the ball rolling: I am looking at getting involved in the Stock Market using the investment vehicle of that of Options.

Options are contracts that can be purchased that stipulate a set price that shares will be purchased and at which time this action will be exercised (expiry date of option), each option being worth 100 shares. I have being looking into this for a decent amount of time and at great depth, and have come across something called a Low Exercise Point Option (LEPO).

A LEPO is an option that you pay a price (known as the Premium) close to that of the current trading price of the company to purchase 100 shares at around about 10 cents to 1 cent per share. My current bank (Westpac) doesn't allow for the trading of LEPOs, so, I was interested to know if anyone on this forum is aware of a brokerage firm or another bank that allows for trading of LEPOs. 

Edited April 3, 2015 by CALZALOL

[malloy]

Was having a look around the forum for discussions surrounding this topic and I am surely not the only one with an interest in it.

As a result of the lack of discussion, I've taken the initiative to start this thread for advice and discussion.

I will get the ball rolling: I am looking at getting involved in the Stock Market using the investment vehicle of that of Options.

Options are contracts that can be purchased that stipulate a set price that shares will be purchased and at which time this action will be exercised (expiry date of option), each option being worth 100 shares. I have being looking into this for a decent amount of time and at great depth, and have come across something called a Low Exercise Point Option (LEPO).

A LEPO is an option that you pay a price (known as the Premium) close to that of the current trading price of the company to purchase 100 shares at around about 10 cents to 1 cent per share. My current bank (Westpac) doesn't allow for the trading of LEPOs, so, I was interested to know if anyone on this forum is aware of a brokerage firm or another bank that allows for trading of LEPOs.

Unless you have experience in investing in lower risk investment methods I would steer well clear. I don't know much about LEPOs, but they sound very similar to binary options (something you should stay away from as it is practically gambling)

Do you have any education in a related field (economics, finance or commerce)?

Alot of people throw away alot of money when 'investing' in options, futures or CFDs.

[CALZALOL]

 

-snip-

Unless you have experience in investing in lower risk investment methods I would steer well clear. I don't know much about LEPOs, but they sound very similar to binary options (something you should stay away from as it is practically gambling)

Do you have any education in a related field (economics, finance or commerce)?

Alot of people throw away alot of money when 'investing' in options, futures or CFDs.

 

Okay that is noted, the way I have read into LEPOs is that they differ from Binary Options in the sense that you can choose to exercise it or not and will definitely receive the securities regardless of market movement, if you exercise the option.

Not officially, just self-taught and gaining information from trusted individuals.

Very interesting to know. Will be something to consider.

Added Note: The options I am looking at are called European Options and are considered a different type of option to Binary Options all together. In fact, I have not seen Binary Options listed anywhere on the ASX website.

Edited April 3, 2015 by CALZALOL

[Tesla]

-snip-

Unless you have experience in investing in lower risk investment methods I would steer well clear. I don't know much about LEPOs, but they sound very similar to binary options (something you should stay away from as it is practically gambling)

Do you have any education in a related field (economics, finance or commerce)?

Alot of people throw away alot of money when 'investing' in options, futures or CFDs.

Okay that is noted, the way I have read into LEPOs is that they differ from Binary Options in the sense that you can choose to exercise it or not and will definitely receive the securities regardless of market movement, if you exercise the option.

Not officially, just self-taught and gaining information from trusted individuals.

Very interesting to know. Will be something to consider.

Added Note: The options I am looking at are called European Options and are considered a different type of option to Binary Options all together. In fact, I have not seen Binary Options listed anywhere on the ASX website.

Binary options won't be on the ASX website because they're not really securities, it's basically just a bet like malloy says.

'European Option' just means it can only be exercised on expiry (which is also a feature of Binary Options), as opposed to American Options which can be exercised at any time upto expiry.

Anyway, dont know much about these LEPOs, but sounds to me like they are more a futures contract than an option. You may be able to choose to exercise it or not, but when the exercise price is low while the premium is high, it's very much approaching a futures contract (which is basically a european option with zero exercise price and since the exercise price is zero it's automatically exercised).

I think the key question is how far away is the expiry date on these LEPOs?

Edited April 3, 2015 by Tesla

[Tesla]

Dont think I'll have much like, but on the off chance someone here does a bit of trading and can recommend someone better than IG to use? Looking for a more reputable option, and wouldn't mind having access to 0.25% margin on Forex as IG is increasing to 0.5% in a couple of weeks.

[Jovan]

Thanks fellas just wasted few minutes there.

[Jimmy]

Good thread.

Have dropped some $$$ into a crud oil ETF trading as OOO on the ASX.

Waiting for OPEC to choke out all the inferior oil producers so I can cash in.

Also have a nice little portfolio of blue chips that is growing all the time.

Made a good 110% return in 9 months off QANTAS stock not long ago as well.

:up: :up:

[Tesla]

Good thread.

Have dropped some $$$ into a crud oil ETF trading as OOO on the ASX.

Waiting for OPEC to choke out all the inferior oil producers so I can cash in.

Also have a nice little portfolio of blue chips that is growing all the time.

Made a good 110% return in 9 months off QANTAS stock not long ago as well.

:up: :up:

This is going to end badly.

[KSK_47]

Rule #1 in business and investing.

 

Dont take advice on business and investing from an internet forum. Particularly a football forum.

[Tesla]

Rule #1 in business and investing.

 

Dont take advice on business and investing from an internet forum. Particularly a football forum.

Nah mate, you're just mad you don't have them Qantas shares or LEPOs.

[Jimmy]

Cashed out of Qantas lol. I'm quite happy, was easy money.

[KSK_47]

 

Rule #1 in business and investing.

 

Dont take advice on business and investing from an internet forum. Particularly a football forum.

Nah mate, you're just mad you don't have them Qantas shares or LEPOs.

 

 

[Tesla]

Cashed out of Qantas lol. I'm quite happy, was easy money.

It's the only time in your lifetime you will make money on Qantas so that's probably for the best.

[Jimmy]

Cashed out of Qantas lol. I'm quite happy, was easy money.

It's the only time in your lifetime you will make money on Qantas so that's probably for the best.Was never going to be buying QANTAS as a long term staple of my portfolio rofl.

Bought in after the price droped after they announced record losses and were about to cull staff or whatever as the price wasn't going to go much further south and sold nine months later after the price corrected.

The majority of my money is in blue chips with my dividends paid in stock when applicable as I'm young and it has plenty of time to grow. Nice retirement fund. But I also have the occasional "speculative punt" when something juicy comes along and I've been right pretty much every time so I'm quite happy.

Edited April 4, 2015 by Jimmy

[Tesla]

Cashed out of Qantas lol. I'm quite happy, was easy money.

It's the only time in your lifetime you will make money on Qantas so that's probably for the best.

Was never going to be buying QANTAS as a long term staple of my portfolio rofl.

Bought in after the price droped after they announced record losses and were about to cull staff or whatever as the price wasn't going to go much further south and sold nine months later after the price corrected.

The majority of my money is in blue chips with my dividends paid in stock when applicable as I'm young and it has plenty of time to grow. Nice retirement fund. But I also have the occasional "speculative punt" when something juicy comes along and I've been right pretty much every time so I'm quite happy.

You've done well and I'm sure you're happy with the return, but the question is is 10% return in 9 months an abnormal return given the risk of the stock? I'd say it isn't TBH, it was already a high risk stock and it was in bad shape before the restructuring, in a way it was their last hope, so I'd say that 10% in 9 months is pretty fair return given the risk assosciated (restructuring could easily have not gone as well as it did, I'd argue the outcome was about as good as was possible, and then there are all the other standard factors that can send an airline's stock plunging eg world events, world economy, etc)

The fact of the matter is, it's been shown that even Hedge/mutual funds and things like that, on average, barely make any return above the normal return for the risk they hold. This 'alpha', on average, is less than the average fees these funds charge. So the average person is better off just buying a stock index than investing their money with a fund. Anyway, the point is, if these funds barely make any alpha, given that the field attracts the brightest minds, with at least undergrad degrees if not postgrad and/or industry qualifications, years of experience, all the best technology and tools, etc., it's pretty unlikely anyone reading or posting this thread is going to be making excess returns above what is appropriate for the risk they hold, on average. Unless they have a really solid reason as to why they can beat the market, such as inside information (which is obviously illegal).

That's not necessarily directed at you Jimmy, just a general point for anyone reading this thread and interested in stocks. By all means, if you've done some sort of analysis and think you're right then I dont want to discourage any one from taking a calculated risk and following their gut. Even if you fuck up you'll at least learn something. But it's easy to overestimate your success, whether investing yourself or investing via a fund, since most the time you're going to make a positive return, especially if well diversified.

The real moral of the story is just to save and invest as early as you can, like young Jimmy is doing, because over the long run you're going to make money regardless, even without any skill/knowledge, just by investing in a stock index for example.

The information contained in my posts is just my opinion and general in nature. It does not take into account your personal situation. It should not be treated as financial advice. Any decisions made based on this information are strictly your own responsibility. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to in these posts are of a general nature only and are based on my interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice.

Edited April 4, 2015 by Tesla

[CALZALOL]

 

 

 

-snip-

Unless you have experience in investing in lower risk investment methods I would steer well clear. I don't know much about LEPOs, but they sound very similar to binary options (something you should stay away from as it is practically gambling)

Do you have any education in a related field (economics, finance or commerce)?

Alot of people throw away alot of money when 'investing' in options, futures or CFDs.

 

Okay that is noted, the way I have read into LEPOs is that they differ from Binary Options in the sense that you can choose to exercise it or not and will definitely receive the securities regardless of market movement, if you exercise the option.

Not officially, just self-taught and gaining information from trusted individuals.

Very interesting to know. Will be something to consider.

Added Note: The options I am looking at are called European Options and are considered a different type of option to Binary Options all together. In fact, I have not seen Binary Options listed anywhere on the ASX website.

 

Binary options won't be on the ASX website because they're not really securities, it's basically just a bet like malloy says.

'European Option' just means it can only be exercised on expiry (which is also a feature of Binary Options), as opposed to American Options which can be exercised at any time upto expiry.

 

Understood, I read an article a while ago which differentiated between all the different types of options so I was going by that information.

Anyway, dont know much about these LEPOs, but sounds to me like they are more a futures contract than an option. You may be able to choose to exercise it or not, but when the exercise price is low while the premium is high, it's very much approaching a futures contract (which is basically a european option with zero exercise price and since the exercise price is zero it's automatically exercised).

 

I have seen it mentioned (can't remember where now) that they do work in similar fashion to that of a futures contract. Basically the way I'm understanding this is, through the margin payments it can turn out very costly and essentially won't be worth it unless the option is purchased very close to the expiry date, correct?

In saying that I may have misinterpreted what you were saying.   

 

I think the key question is how far away is the expiry date on these LEPOs?

 

I believe one particular option I was looking at had an expiry date of approx. 5 Months, I have been looking at a few different companies but that is just one of the options off the top of my head. 

Edited April 4, 2015 by CALZALOL

[Tesla]

-snip-

Unless you have experience in investing in lower risk investment methods I would steer well clear. I don't know much about LEPOs, but they sound very similar to binary options (something you should stay away from as it is practically gambling)

Do you have any education in a related field (economics, finance or commerce)?

Alot of people throw away alot of money when 'investing' in options, futures or CFDs.

Okay that is noted, the way I have read into LEPOs is that they differ from Binary Options in the sense that you can choose to exercise it or not and will definitely receive the securities regardless of market movement, if you exercise the option.

Not officially, just self-taught and gaining information from trusted individuals.

Very interesting to know. Will be something to consider.

Added Note: The options I am looking at are called European Options and are considered a different type of option to Binary Options all together. In fact, I have not seen Binary Options listed anywhere on the ASX website.

Binary options won't be on the ASX website because they're not really securities, it's basically just a bet like malloy says.

'European Option' just means it can only be exercised on expiry (which is also a feature of Binary Options), as opposed to American Options which can be exercised at any time upto expiry.

 

Understood, I read an article a while ago which differentiated between all the different types of options so I was going by that information.

Anyway, dont know much about these LEPOs, but sounds to me like they are more a futures contract than an option. You may be able to choose to exercise it or not, but when the exercise price is low while the premium is high, it's very much approaching a futures contract (which is basically a european option with zero exercise price and since the exercise price is zero it's automatically exercised).

 

I have seen it mentioned (can't remember where now) that they do work in similar fashion to that of a futures contract. Basically the way I'm understanding this is, through the margin payments it can turn out very costly and essentially won't be worth it unless the option is purchased very close to the expiry date, correct?

I think the key question is how far away is the expiry date on these LEPOs?

 

I believe one particular option I was looking at had an expiry date of approx. 5 Months, I have been looking at a few different companies but that is just one of the options off the top of my head. 

yeah, it sounds to me like it's potentially a 'better' way to trade futures on margin and that's probably what this derivative was designed for. So if that's what you want to do (trade futures on margin) then LEPOs seem like a good way of doing it. Whether you'll be successful is a completely different question, you can easily lose a lot of money instantaneously when trading on margin so you'd want to be confident before you put any real money into it.

The information contained in my posts is just my opinion and general in nature. It does not take into account your personal situation. It should not be treated as financial advice. Any decisions made based on this information are strictly your own responsibility. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to in these posts are of a general nature only and are based on my interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice.

Edited April 4, 2015 by Tesla

[CALZALOL]

 

 

 

 

 

-snip-

Unless you have experience in investing in lower risk investment methods I would steer well clear. I don't know much about LEPOs, but they sound very similar to binary options (something you should stay away from as it is practically gambling)

Do you have any education in a related field (economics, finance or commerce)?

Alot of people throw away alot of money when 'investing' in options, futures or CFDs.

 

Okay that is noted, the way I have read into LEPOs is that they differ from Binary Options in the sense that you can choose to exercise it or not and will definitely receive the securities regardless of market movement, if you exercise the option.

Not officially, just self-taught and gaining information from trusted individuals.

Very interesting to know. Will be something to consider.

Added Note: The options I am looking at are called European Options and are considered a different type of option to Binary Options all together. In fact, I have not seen Binary Options listed anywhere on the ASX website.

 

Binary options won't be on the ASX website because they're not really securities, it's basically just a bet like malloy says.

'European Option' just means it can only be exercised on expiry (which is also a feature of Binary Options), as opposed to American Options which can be exercised at any time upto expiry.

 

Understood, I read an article a while ago which differentiated between all the different types of options so I was going by that information.

Anyway, dont know much about these LEPOs, but sounds to me like they are more a futures contract than an option. You may be able to choose to exercise it or not, but when the exercise price is low while the premium is high, it's very much approaching a futures contract (which is basically a european option with zero exercise price and since the exercise price is zero it's automatically exercised).

 

I have seen it mentioned (can't remember where now) that they do work in similar fashion to that of a futures contract. Basically the way I'm understanding this is, through the margin payments it can turn out very costly and essentially won't be worth it unless the option is purchased very close to the expiry date, correct?

I think the key question is how far away is the expiry date on these LEPOs?

 

I believe one particular option I was looking at had an expiry date of approx. 5 Months, I have been looking at a few different companies but that is just one of the options off the top of my head. 

 

 

yeah, it sounds to me like it's potentially a 'better' way to trade futures on margin and that's probably what this derivative was designed for. So if that's what you want to do (trade futures on margin) then LEPOs seem like a good way of doing it. Whether you'll be successful is a completely different question, you can easily lose a lot of money instantaneously when trading on margin so you'd want to be confident before you put any real money into it.

The information contained in my posts is just my opinion and general in nature. It does not take into account your personal situation. It should not be treated as financial advice. Any decisions made based on this information are strictly your own responsibility. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to in these posts are of a general nature only and are based on my interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice.

 

Yep, understood thanks for that Tesla. Always good to see someone else's thoughts. Definitely will take what you have said on board.

Disclaimer acknowledged.

[Jimmy]

I said 110% not 10%. 10% is pathetic.

[Tesla]

I said 110% not 10%. 10% is pathetic.

Lol, never mind. I was actually thinking too myself surely it's gone up more than 10%. Strong investment / 10. Well played.

Edited April 4, 2015 by Tesla

[Jimmy]

This crude oil ETF is my next punt. Seems pretty safe to me. No way oil prices will stay this low.

[Tesla]

This crude oil ETF is my next punt. Seems pretty safe to me. No way oil prices will stay this low.

Based on what?

[AyeCee]

Anyone worked with bonds before? Worth my time?

Based off very little knowledge, I see them as a supercharged, indexed variety of a term deposit. Low risk, low return.

You buy as close to face value as possible, and hope it's market value goes up. However, if it doesn't, and I hold out to maturity, I haven't lost any money, have I?

I wouldn't be surprised if I'm horribly wrong here, so a bit of discussion would be fantastic.



 

[Tesla]

Government bonds?

CEOing off that 1.8%

Or like 0.1% real interest rate

Basically for pussies

And for theoretical models off course, need that risk free rate

And for financial planners so they can think they're doing something, adjusting the risk of your portfolio trolololol (dont think even they use them, think they use term deposits instead)

Edited April 17, 2015 by Tesla

[jw1739]

I've run my own superannuation fund for about 20 years. I wouldn't go near bonds because as Tesla says they have such a low real return.

 

Times of low interest rates are pretty tough for investors.

 

I would have a look at what are called "Hybrid Securities" http://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=HYBRID. I can be more specific on these if you wish.

 

These are not immune from market fluctuations but are much more stable than ordinary shares. On the sharemarket I'd be looking at Woolworth's - grossed up yield of 7% at current price, which is the lowest since sometime in 2012. People have to eat and consume other necessities, and with immigration running at around 400,000 per year it's hard to see the supermarket chains suffering a decline in business.

 

Usual caveat applies on the above of course as I don't know your circumstances, investment objectives, or current portfolio.

[Tesla]

Random post about something interesting I came across last night when running some numbers on ExxonMobil, a $1 change in the price of oil affects their sales by $2.7bn on average.

Thought that was crazy, especially since they are probably the most diversified / least risky oil company.

On that note, I dont understand why people in Australia aren't trading US stocks. Cheaper (like $1 broker fees if using a US broker), more efficient market (better for passive investing), more selection, etc.

Edited June 10, 2015 by Tesla

[Deviant]

do you get taxed on the profits? and how does it compare to asx tax

[Tesla]

do you get taxed on the profits? and how does it compare to asx tax

Well that might be part of the reason. Need malloy in here to give a full answer but:

As an Australian resident (for tax purposes), you are taxed on foreign income as well. Maybe you dont get the same capital gains discount though (malloy?)

2. You may be subject to double taxation (taxed in the US as well), but Australia and the US would have a double taxation agreement so it shouldn't be a problem.

3. A major benefit to investing in Australia stock is that you get franked dividends, which means the tax on them is already paid at 30% and then you either pay more or receive an offset based on your personal rate of tax. I beleive in the US dividends also work in a similar way, but in Aus franked dividends dont apply to foreigners (they have to pay tax on them again), while I'm not sure if dividends in the US are franked for foreigners.

[Deviant]

I was looking into purchasing investment properties overseas but decided against it. The rules imposed on foreign investors means it's very hard to manage anything. You need people acting on your behalf.

Is it the same with stocks?

[Tesla]

I was looking into purchasing investment properties overseas but decided against it. The rules imposed on foreign investors means it's very hard to manage anything. You need people acting on your behalf.

Is it the same with stocks?

No, not in the US and other developed countries at least.

You do need to use a broker regardless to do the transactions, even in Australia, but people that know what they're doing use a US broker even to buy Australian stocks because it's still cheaper.

eg use an Australian broker to buy Australian stocks is at least $20 per transaction, use an Australian broker to buy US stock could be like $40 per transaction.

Use a US broker to buy US stock will be like $1 per transaction, use a US broker to buy Australian stock may be like $15 a transaction.

[malloy]

do you get taxed on the profits? and how does it compare to asx tax

Well that might be part of the reason. Need malloy in here to give a full answer but:

As an Australian resident (for tax purposes), you are taxed on foreign income as well. Maybe you dont get the same capital gains discount though (malloy?)

2. You may be subject to double taxation (taxed in the US as well), but Australia and the US would have a double taxation agreement so it shouldn't be a problem.

3. A major benefit to investing in Australia stock is that you get franked dividends, which means the tax on them is already paid at 30% and then you either pay more or receive an offset based on your personal rate of tax. I beleive in the US dividends also work in a similar way, but in Aus franked dividends dont apply to foreigners (they have to pay tax on them again), while I'm not sure if dividends in the US are franked for foreigners.

Still get a get the cgt discount assuming held for more than a year. DTA exists, but they operate more so to stop you having to lodge a US tax return (or whatever they call it over there) and they largely determine the amount of tax withheld on income earned.

Any tax withheld in US is able to be claimed as a tax offset in australia (subject to certain rules).

Furthermore investing in US at the moment (and more so from 18 months ago) has the large positives of US stocks performing reasonable along with the AUD weakening which compounds your gains. Obviously this can work the other way to the investors detriment.

[Tesla]

Yeah the FX fluctuations can really fuck you up (or really work in your favour), so if you're investing a lot you need to hedge etc., and that's probably outside of the scope of an unsophisticated investor.

[Deviant]

Only hedge I know is the one in the front yard.

[CALZALOL]

http://www.bt.com.au/goinvest/

Very strange investment vehicle seems like a small, personal managed fund with you having majority control.

First of it's kind that I've seen...
 

Edited August 25, 2015 by Tesla
Format

[Nate]

interesting times.

[malloy]

interesting times.

this is just the start.

[strider]

Put all my money into wespac yesterday @ 26 a share. Did pretty well, up 5% already. 

 

Now's the time to invest into overseas stocks (American), they're booming. 

Working in financial PR you get a taste of the big boy trading 

[hedaik]

Put all my money into wespac yesterday @ 26 a share. Did pretty well, up 5% already. 

 

So what do you plan on doing with your $13?

[jw1739]

...

That's interesting - I also am unable to change the format. Would be interested to hear from any other moderator on whether they know how to do it.

Edited August 25, 2015 by Tesla

[strider]

So what do you plan on doing with your $13?

lel. 

it's still rising