Sell 5 March 9.49 @ 0.22

Wrote another covered call while driving to an appointment. That was probably poor form because I could have got $0.12 on a 9.73 call and that might have been a safer trade.

If I get exercised at 9.49 I’m at breakeven.

If the price firms and exercise looks likely I could buy the option back at up to $0.10 as that would be equivalent to commissions.

Property Myths Exposed

This article by Peter Thornhill for Westpac’s Online@W was challenging. Peter used to be General Manager of MLC and is definately biased toward equities. Westpac really should admit their marketing bias in presenting these stories too.

I ‘d like your reactions to the article as well.

I actually agree with the Peter 100% on the Myths. Especially never confuse familiarity with expertise. Folks, steal that slogan. Tape it above your monitors. It will keep you humble and save your bacon one day. I’ve just done it.

Myth 1: I know property
Nope! Remember “Nobody Knows Anything” by Willliam Goldman (I wrote on is 20 August 2002). That’s a motto to live by. Just like “If you can’t tell the sucker at the poker table, it’s you”.

Myth 2: Property is always a good investment
This one always comes from people who don’t own a lot of it. Lots of great property investors go through cycles where they say the can’t find deals that suites their criteria. Often they miss out on great deal because of it. But beware “always”.

Myth 3: You can’t lose money in property
hehehe try adding “…unless you have a bank loan”

Like I said I agree with the man. But I still like property investing.

BHPEL down to 0.075

OK, it appears that I have wondered from my trading strategy and am trading on emotion. Yes it is good to take insurance — in my case I did that by buying BHPEL back at 0.105 yesterday to close out my position.

I didn’t expect BHP to hit $9.49. For the record I don’t think it will hit it before 27 Feb 03 when the calls expire. But what if it did? So I closed out.

I need to document my trading strategy and follow it for a few trades.

Buy 5 BHP Feb 9.49 Calls

I bought them back at 0.105 (0.005 profit) to close out the position. That makes it my worst option trade to date. I’m out $230 in commissions. Something is going on with BHP and I have no idea. Neither does my broker. I could hold on, if BHP hits $9.49 I get exercised and pay selling commission, or the option expires worthless. Either way I have too much to do to hover over the markets hoping.

After calling the order, I changed my mind. I’ll tough it out and see what happens. I have the ALL trade’s profits as a buffer. Luckily (?) it was too late, the trade went through and my position is closed out.

If BHP continues to rally I’ll write a 9.97 call next and should get good premium.

Buy 5450 ALL @ $1.81

I couldn’t resist. Aristocrat has been suspended twice in a week, but it was trading at above $4.00! It may never see those highs again. But I do expect it to hit $2.00-$2.50. It was $2.30+ before the recent hault.

Aristocrat is the second largest manufacturer of gaming machines in the world. The US growth picture seems artificial in hindsight and the people I know who work at Aristocrat can’t stand the CEO. The SMH and the Australian speculated that the “CEO must go”. If that proves correct, there will be a huge benefit in morale at the company.

Australian sales seems reasonable and sustainable. That’s why I punted on it for a 10% gain.

Write 5 BHP Feb 9.49 Calls

OK after some needling I’ll blog when I do an option trade as well. Basically all I’ve done since November 2002 is write covered calls on my BHP holding. The deals were
5 December 10.21 BHP Call options
Each contract is 1053 shares so 5 = 5265 shares
Premium received $0.30 x 5265
bought them back to close out the position at $0.06
Income on deal is $0.24 x 5265 = $1,263.60 less commissions (~$240.00)

5 January 9.97 BHP Call option
Premium received $0.20 x 5265
bought them back to close out the position at $0.015
Income on deal is $0.185 x 5265 = $974.03 less commissions

Today wrote 5 February 9.49 BHP Call options
Premium received $0.11 x 5265
Income on deal so far is $0.11 x 5265 = $579.15

I don’t expect to buy them back to close out the position because
1) the options expire 27/2/02 – only 15 days away;
2) they are worthless unless BHP breaks $9.49 in that time;
3) I’ve become more bearish on BHP so I don’t mind being exercised.