# What's your largest single investment holding?



## jargey3000 (Jan 25, 2011)

just curious....what is your largest single investment holding , by dollar amt? not counting your home of course.
in any account, reg. or non-reg. Stock, mutual fund, etf, whatever...?
Mine? FTS. ....has been, for quite a while.
yours?


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## james4beach (Nov 15, 2012)

My largest single holding is XBB, the iShares bond fund.

I spread my fixed income allocation into various things like GICs and individual bonds, but inside my RRSP, my fixed income is entirely done with XBB as it's simpler and easier to rebalance. And when I benchmark all my other fixed income efforts, I find that they almost always underperform XBB.


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## AltaRed (Jun 8, 2009)

Seems we have this kind of thread somewhat regularly. My top 4 are all equity ETFs (VTI, VTV, XWD, VGK), well above my largest stock holding which is RCI.B, but not by much over a few banks.


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## Beaver101 (Nov 14, 2011)

Fixed income


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## OnlyMyOpinion (Sep 1, 2013)

As a largest 'single' investment: MAW104, VBAL, then TD, followed by other individual equities. 
Individual FI strips still remain our largest allocation though.


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## agent99 (Sep 11, 2013)

BCE just ahead of RBC - both just under 6% of total portfolio and 10% of equities.


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## like_to_retire (Oct 9, 2016)

If I look at my software that lists each investment I have over my entire portfolio of Non-Registered, TFSA and RRSP, then the winner is BCE @ 3.87%. 

The next down is a GIC from Manulife and then a GIC from HomeEquity.

Meh.............

ltr


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## Flugzeug (Aug 15, 2018)

Visa was my largest holding until I sold recently. Now it’s Fixed Income.


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## agent99 (Sep 11, 2013)

jargey3000 said:


> just curious....what is your largest single investment holding , by dollar amt? not counting your home of course.
> in any account, reg. or non-reg. Stock, mutual fund, etf, whatever...?
> Mine? FTS. ....has been, for quite a while.
> yours?


FTS? I have quite bit in utilities too. Saw an article in Investment Reporter about utilities - here is an excerpt:



> *Taking money off the table*
> The prices of utilities stocks are high and will likely remain so through the rest of 2019. Utilities are earning fat profits and interest rates are low.
> 
> Thanks to the favorable situation and outlook for utilities, their shares have jumped, of course. In fact, utilities now make up a larger percentage of the S&P/TSX composite index. As a result, if utilities once accounted for, say, 30 per cent of your portfolio, chances are they now carry a greater weighting. This exposes you to worse potential losses if utilities drop.
> ...


I will check and see what my % allocation to utilities is across all accounts. Interest rates affect a number of sectors, so maybe author should have taken a broader look?


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## Dilbert (Nov 20, 2016)

I’m pretty even across six of them: RY, BCE, TRP, ENB, PPL and IPL.


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## Rusty O'Toole (Feb 1, 2012)

My largest investment holding is real estate and rental housing. 

As for the stock market I am more of a trader than a long term investor. Right now I have a position on in TQQQ. This is an ETF that mimics the NASDAQ 100 X3. Long 1500 shares. Have been in the trade since August 21, building a position, so far am up $1408.95. Took advantage of today's dip to buy some more at 63. Expect it may dip as low as 61 before it takes off. If it does I will buy 500 shares at 62, and again at 61. If it drops below support @ 55 I'm out. If it takes off will keep raising my stop until I get stopped out or get a sell signal.


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## james4beach (Nov 15, 2012)

Wow, 1500 shares TQQQ is $96K but with leverage is actually exposure to $380,000 of QQQ (NASDAQ)

That's some serious stuff Rusty. Don't you worry about an overnight crash? Even a relatively small 5% overnight drop in QQQ would be a $19,000 loss (CAD).


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## kcowan (Jul 1, 2010)

My biggest holdings at the moment are AAPL at 12%, real estate at 11% and TBD3079 at 7.3%. Everything else is under 5%. Most under 2%.


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## Rusty O'Toole (Feb 1, 2012)

I have orders in to add another 1000 if it drops to 61. It might do this to close the gap between Sept 4 and 5 but I doubt it will go any lower, it may not go down that much.

My analysis indicates very little chance of going below 55. If I am wrong, will get stopped out with a loss. If I am right, can make quite a bit of money. I don't like to count chickens before they hatch. But the last move went from46.13 to 70.05, a 51.85% gain in 7 weeks. The previous move went from 30.32 to 67.85 for a 37.53 point gain or 123.77% in 4 months. The low of the present move is 53.68. 50% would put it between 75 and 80.

I doubt anyone caught the whole of those moves but what if you could catch half? Look at the chart and you will see regular opportunities.

This is an ETF that parallels other indices like the Dow, S&P etc. None of them are prone to sudden large moves like you get in individual stocks. If you compare the charts they look practically the same. The advantage of the TQQQ is leverage. The disadvantage is, they get the leverage through the use of options that cost money which is a bit of a drag long term. So, it works best as a trading vehicle.

So yes, it is risky and I wouldn't risk more than a small part of my account. But I consider the risk/reward advantageous.

PS Just raised my stop to 57.85. Since my average cost is 62.93 this limits my possible loss to $5 a share, roughly. Expect to raise this to break even next week.


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## Eder (Feb 16, 2011)

BCE is ~18% ...that's my biggest unless a sailboat can be considered an investment.


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## Topo (Aug 31, 2019)

XAW


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## doctrine (Sep 30, 2011)

IPL here, especially after jumping 25% in ~3 months. Next would be FTS.


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## twa2w (Mar 5, 2016)

Biggest holding is cash at the moment. About 750k, then RBC at about 700k. Don't really pay much attention to percentages, nor dollars for that matter.


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## agent99 (Sep 11, 2013)

agent99 said:


> FTS? I have quite bit in utilities too. Saw an article in Investment Reporter about utilities - here is an excerpt:
> 
> I will check and see what my % allocation to utilities is across all accounts. Interest rates affect a number of sectors, so maybe author should have taken a broader look?


I checked and across all accounts, we have a total of 12.6% in utilities (21% of equities). More in banks which also can be interest rate sensitive. We are more interested in them maintaining dividend cash flow, not so much in market value.


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## Rusty O'Toole (Feb 1, 2012)

Buy stop got hit this morning so am long another 500 of TQQQ @ 62. Total 2000 shares average cost 62.698. Have one more buy stop on the books for 500 @ 61. We shall see what we shall see.


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## RBull (Jan 20, 2013)

VYM
VXUS
VTI
IDV
Cash
ZAG 
then individual CDN stocks, bonds, GICs


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## Benting (Dec 21, 2016)

TD, 70% of my portfolio.


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## fireseeker (Jul 24, 2017)

Benting said:


> TD, 70% of my portfolio.


Why does a single stock represent 70% of your portfolio?


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## birdman (Feb 12, 2013)

1,000 RY
800 TD
600 CM
1250 FTS

The above represents 60% of my stock holdings.


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## like_to_retire (Oct 9, 2016)

Benting said:


> TD, 70% of my portfolio.


So if your portfolio was a modest 2 million dollars, would you have 70% in TD stock?

ltr


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## scorpion_ca (Nov 3, 2014)

XEF


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## dubmac (Jan 9, 2011)

MAW104, BCE, RY, BNS, T


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## gardner (Feb 13, 2014)

VTI
XIC
VUN (unless you lump it with the VTI)
BNS385
XQB
VEA
ZAG
many individual stocks, cash, GICs


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## Mechanic (Oct 29, 2013)

My largest holding was BNS but I sold it on Friday as I don't see this uptrend continuing. Will buy it back though at some point.


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## peterk (May 16, 2010)

My largest is AAPL, at 9% of all stock holdings.


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## doctrine (Sep 30, 2011)

My largest holdings are now TOG and WCP after today.


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## 1980z28 (Mar 4, 2010)

bns ema still buying


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## humble_pie (Jun 7, 2009)

doctrine said:


> My largest holdings are now TOG and WCP after today.



ouf i just read that TOG along with a bunch of formerly high flying energy includng birchcliff & precision drilling are being dumped out of the TSE 300 index lineup.

generally stock de-selection from the index means downturn for the delisted companies because index funds will have to sell them, at least those index funds that are not in process of selling already.


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## doctrine (Sep 30, 2011)

TOG is up 30% including today's drop since news leaked it was officially being dropped from the index a few weeks ago, which was predictable anyway because of the float adjusted cap was below the threshold. Index funds have already adjusted. The index gaming is usually quite far ahead of the official announcement.


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## Rusty O'Toole (Feb 1, 2012)

In case anyone cares... I raised my stop to just above break even on my TQQQ position, 62.7. Got stopped out on Monday when it dropped to exactly 62.7 then bounced up. Didn't like being sold out right before it took off up again. This bummed me out until Tuesday when it continued dropping, as of today, low is 59.23. If you weren't following I had 2000 shares so 1 point = $2000.

So the trade didn't work out but I got out without a loss. My method works. It's hard to remember the secret is not to guess right all the time, which is impossible. The secret is to have a method that works and stick with it.


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## doctrine (Sep 30, 2011)

National Bank is my new top investment holding. All time high yesterday and today. Also I took profits on much of my energy, although may get back in if there are new seasonal lows.


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## Benting (Dec 21, 2016)

fireseeker said:


> Why does a single stock represent 70% of your portfolio?


Well, it works for me over 20+ yrs. By the way, in addition to TD, I have over 25% in RY :excitement:


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## Benting (Dec 21, 2016)

like_to_retire said:


> So if your portfolio was a modest 2 million dollars, would you have 70% in TD stock?
> 
> ltr


Yes, as long as the dividend is higher than GIC.


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## newfoundlander61 (Feb 6, 2011)

Cash but thats not really an investement, after that Suncor.


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## Pluto (Sep 12, 2013)

GSY.t largest by growth, not by purchase cost.


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## james4beach (Nov 15, 2012)

Benting said:


> Well, it works for me over 20+ yrs. By the way, in addition to TD, I have over 25% in RY :excitement:


I think you should consider diversifying so that you're not so heavily concentrated in single stocks.

Just because it worked well for decades doesn't mean it's a good idea.


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## Topo (Aug 31, 2019)

Rusty O'Toole said:


> In case anyone cares... I raised my stop to just above break even on my TQQQ position, 62.7. Got stopped out on Monday when it dropped to exactly 62.7 then bounced up. Didn't like being sold out right before it took off up again. This bummed me out until Tuesday when it continued dropping, as of today, low is 59.23. If you weren't following I had 2000 shares so 1 point = $2000.
> 
> So the trade didn't work out but I got out without a loss. My method works. It's hard to remember the secret is not to guess right all the time, which is impossible. The secret is to have a method that works and stick with it.


How do you choose your stop? Is it based on your break-even or a limited percentage loss? It is a fixed stop or trailing stop? On the chart, I see support at about 55.00. Personally, that would be where I would set my downside-protection.


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## larry81 (Nov 22, 2010)

VUN !


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## Rusty O'Toole (Feb 1, 2012)

Topo said:


> How do you choose your stop? Is it based on your break-even or a limited percentage loss? It is a fixed stop or trailing stop? On the chart, I see support at about 55.00. Personally, that would be where I would set my downside-protection.


I expected it to take off upwards but didn't like the action. It seemed sluggish, as if running into a lot of resistance. So I raised the stop to the break even point because I don't like to lose money. In the event I got stopped out and the price continued down. Then it turned around and gave another buy signal but the signal was not confirmed.

I do use resistance and support levels. I also look at moving averages and the TTM squeeze. I don't think there is any hard and fast rule, you have to use your own judgement and go with what you are comfortable with. I know I am a lot more cautious than I used to be.


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## dotnet_nerd (Jul 1, 2009)

My biggest holding is ZAG

A classic couchpotato package. Roughly:

40% ZAG
18% VIU (Global eq)
18% VTI (US eq)
18% VCN (Cdn eq)

6% assorted stuff like REI and some energy dogs I don't want to sell because they're way underwater


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## m3s (Apr 3, 2010)

Qualcomm and AbbVie at 5% each

VCN/VTI/VIU ETFs are larger now though and getting the contributions these days


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## humble_pie (Jun 7, 2009)

... for folks who like holding collections of derivatives each:


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## dotnet_nerd (Jul 1, 2009)

humble_pie said:


> ... for folks who like holding collections of derivatives each:


Hardly _"collections of derivatives"._

Typical fear-mongering.


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## kcowan (Jul 1, 2010)

dotnet_nerd said:


> Hardly _"collections of derivatives"._
> 
> Typical fear-mongering.


Does the truth hurt?


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## humble_pie (Jun 7, 2009)

dotnet_nerd said:


> Hardly _"collections of derivatives"._
> 
> Typical fear-mongering.



read their prospectuses, the truth is buried in their prospectuses

why would anyone with even rudimentary knowledge of investing believe that multinational ETFs are holding millions of actual shares located in 30 or 40 countries around the world, some of whose public stock exchanges are notoriously corrupt?

further, that said ETFs are continuously balancing & re-balancing those millions of shares every single day by redeeming & creating baskets of shares to exchange with their authorized participants? in countries like colombia, peru, hungary, roumania, poland, russia, dubai, where in fact shares sometimes trade without being in existence?

plus paying for professional custody of said shares in corrupt countries? because proper custody would be absolutely essential?

all this for unbelievably low MERs of .15%?

not a chance

the "representational" nature of international ETFs is a story that is only just starting to emerge


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## Calmoney (Dec 19, 2013)

In order at the moment: CM, BNS, EMA, FTS, BCE, SLF, and about another 12 div stocks. Presently I have quite a bit of TDB8150 waiting for dip / pullback purchases.


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## hfp75 (Mar 15, 2018)

MNT 14%
VAB/HBB 8%
MAW104 6%
MAW130 6%
VGRO 4%

planning this fall to increase my PSA to 5-10%, at the cost of some VGRO and trim a few others..... just to level things out with a good cash holding....

(I heard there is a recession coming...)


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## Eder (Feb 16, 2011)

I also have been stuffing PSA...over 6 figures and increasing. Recent election will be hard on non Quebec equities so am selling some (maybe 10%) winners before an increase in the capital gain tax hammers us too much. Scary times and I want my cash bucket to last 4 years.


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## Topo (Aug 31, 2019)

Rusty O'Toole said:


> I expected it to take off upwards but didn't like the action. It seemed sluggish, as if running into a lot of resistance. So I raised the stop to the break even point because I don't like to lose money. In the event I got stopped out and the price continued down. Then it turned around and gave another buy signal but the signal was not confirmed.
> 
> I do use resistance and support levels. I also look at moving averages and the TTM squeeze. I don't think there is any hard and fast rule, you have to use your own judgement and go with what you are comfortable with. I know I am a lot more cautious than I used to be.


I find the concept of limiting losses for trades fascinating. Theoretically, if one limits their losses, all they need is to catch one big momentum move and they are in the green. One can do the protection using options, but they are pricey. Using stops, on the other hand, does not incur a cost other than commissions. The risk of whipsaw is higher when using stops, but losses are limited.


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## peterk (May 16, 2010)

humble_pie said:


> read their prospectuses, the truth is buried in their prospectuses
> 
> why would anyone with even rudimentary knowledge of investing believe that multinational ETFs are holding millions of actual shares located in 30 or 40 countries around the world, some of whose public stock exchanges are notoriously corrupt?
> 
> ...


Hmm, but what about the "regular" ETF? Less problems?

XIU, SPY? QQQ?

I'm planning on trying to put most of our money in these ETFs for the next few years, at least until the accounts are large enough to make a reasonably diversified portfolio.

What about mutual funds? Most of my wife's net worth is in the Tangerine Balanced fund... 40% CDN Bonds, 20% each CAD/US/INT stocks.


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## humble_pie (Jun 7, 2009)

peterk said:


> Hmm, but what about the "regular" ETF? Less problems?
> 
> XIU, SPY? QQQ?
> 
> ...




those ^^ are good questions. Nobody has the answers yet though. Only a very few far-out scouts are beginning to flash the signals. My guess is it will take 20 or so years for the stories to emerge. In the meantime the vast majority of investors will continue with the Kool Aid.

in the beginning the ETF industry in canada was created by folks who came over from the mutual fund industry. They'd seen the high fees writing on the wall. Howard Atkinson, for example, came over to ETFs where he set up horizons betaPro in canada, from mutual fund success story Altamira.

these folks knew that, with ETFs, they had to get costs down, because what the public would increasingly insist on buying would be low-cost MERs. 

TD with its pioneering indexation technologies in the 1990s helped to set the derivatives-based indexation industry on its feet.

as for mutual funds, nobody knows any longer who owns what. Me i have a personal "feeling" - note that it's just a "feeling" - that Mawer may actually be holding real old-fashioned stocks at an old-fashioned professional custodian, which is why their MERs at around 1% could be justified (includes custody)


* * * * *

recently i heard another detail that forms another fragment in the case. For years now i've been seeing mutual funds & professional investment managers move institutional custody of their securities from TD Securities to National Bank Securities. I'd always wondered why.

recently one of them told me that NatBank offers custodial services to institutions for free. This is why everybody has moved to NatBank, he said.

oh dear, i said. That means that NatBank is lending the securities out or otherwise mining the holdings for profit ...

peterk, when i first started writing about the derivatives coverup in the ETF industry, you might remember that one other cmf member posted the same theme. That other member was haroldCrump, an economist.

i remember e-mailing harold years ago about some detail having to do with custody of ETF "securities." I was referring then to what i'd been assuming was the pristine inviolablity of professional custodians. Securities sequestered in tight isolation, like gold in fort knox.

harold e-mailed back. HaHa, he wrote, You Think the Custodians aren't Lending Out the Securities?

.


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## james4beach (Nov 15, 2012)

peterk said:


> Hmm, but what about the "regular" ETF? Less problems?
> 
> XIU, SPY? QQQ?


From the evidence I've seen in the financial statement, I don't think XIU engages in much securities lending. Full details in this earlier post:
https://www.canadianmoneyforum.com/...ks-and-ETF-s?p=2047076&viewfull=1#post2047076

XIU has consistently had some of the lowest securities lending figures of the big Canadian ETFs. It's a reason I prefer it.

As for the other issues like foreign index replication, derivative trickery, yes, I have found evidence of that in some ETFs (mostly the giant global funds) but I'm not convinced it's as big a problem as humble describes. And I haven't seen any evidence of that kind of trickery in XIU or XIC.


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## humble_pie (Jun 7, 2009)

james4beach said:


> From the evidence I've seen in the financial statement, I don't think XIU engages in much securities lending. Full details in this earlier post:
> https://www.canadianmoneyforum.com/...ks-and-ETF-s?p=2047076&viewfull=1#post2047076
> 
> XIU has consistently had some of the lowest securities lending figures of the big Canadian ETFs. It's a reason I prefer it.
> ...



our views differ. Me i believe that XIU is a collection of options, this feature is where the MER savings come from since, as jas4 points out, the loan fee value of XIU holdings is too low to be lucrative.

you can see XIU institutional options, month after month, year after year after year, on the montreal exchange. Go forward a couple of months & there they always are. 60 to 90 days out. Close to a trillion $$ in institutional sized puts & calls. There's nobody in the world except for XIU itself & its authorized participants who could run XIU option accounts of that size.

right now, the big institutional option positions in XIU are in an unusual configuration. Normally the aggregate of puts & calls are roughly equal, although they're never paired to the same strike or even the same month.

but right now - & for the past several months - there are far more open put contracts than call contracts

a novice might think that is a bearish sign. But on the other hand it could be a cautious bullish signal. Hedged bullish strategy = long stock + long put.

XIU as options would explain why a higher MER than for XIC. Options cost more, as topo recently pointed out.

options are also far more secure, in that an option exchange itself acts as the counterparty, thus removing counterparty risk. This is why the professional trading volume is so high in XIU, the pros understand the XIU quality.

volume in XIC on the other hand is comparatively low. Trading volume is small retail. XIC is not based on options, it's only an index, we're back to futures & counterparty risk.


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## Topo (Aug 31, 2019)

humble_pie said:


> our views differ. Me i believe that XIU is a collection of options, this feature is where the MER savings come from since, as jas4 points out, the loan fee value of XIU holdings is too low to be lucrative.
> 
> you can see XIU institutional options, month after month, year after year after year, on the montreal exchange. Go forward a couple of months & there they always are. 60 to 90 days out. Close to a trillion $$ in institutional sized puts & calls. There's nobody in the world except for XIU itself & its authorized participants who could run XIU option accounts of that size.
> 
> ...


The options are derivatives of the ETF, not the other way around. The market makers use the ETF to hedge their option positions, for example if they sell a call, they would buy equivalent units of ETF. This is not related to the inner working of the ETF itself.


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## humble_pie (Jun 7, 2009)

Topo said:


> The options are derivatives of the ETF, not the other way around. The market makers use the ETF to hedge their option positions, for example if they sell a call, they would buy an equivalent units of ETF. This is not related to the inner working of the ETF itself.



but you don't really know, do you? in fact this is an area where nobody knows anything for sure, right?

what, exactly, do you think the ETFs are holding when they state in their prospectuses that they engage in representational trading? when they state that they hold options, futures, swap contracts & other derivative instruments? do you think they are disclosing such information purely for the sport of writing?

the investment counsel/portfolio manager i mentioned a few posts ago - the one who discussed NatBank Securities as offering custody of securities for no fee - also told me he was close to black rock the purveyors of XIU. Close enough for them to admit to him that XIU does not hold exactly the shares it claims to hold.


PS if i had a billion $$ i could easily create an XIU clone with options. It would not have to hold any shares whatsoever.

as a matter of fact with the cash i already own, i could easily create an XIU type 5-pack along the lines of what argonaut, jas4 & others have been discussing in this forum for very many years now.

i would not have to own any shares at all. I could simply sell puts & calls into the options market. Margin cash backing would be sufficient. My broker would allow it. If i were clever enough i'd be able to hedge my options to reduce risk to minimum or even zero.


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## Topo (Aug 31, 2019)

humble_pie said:


> what, exactly, do you think the ETFs are holding when they state in their prospectuses that they engage in representational trading? when they state that they hold options, futures, swap contracts & other derivative instruments?


Those are either options on the constituents of the index or on TSX60 futures. They are not options on XIU. That would be like buying XIU on the open market and holding it inside the ETF. 




> as a matter of fact with the cash i already own, i could easily create an XIU type 5-pack along the lines of what argonaut, jas4 & others have been discussing in this forum for very many years now.
> 
> i would not have to own any shares at all. I could simply sell puts & calls into the options market. Margin cash backing would be sufficient. My broker would allow it. If i were clever enough i'd be able to hedge my options to reduce risk to minimum or even zero.


If you want to create a synthetic long stock position you would need to sell one put and buy one call at the same strike price. Selling both puts and calls will not get you there. Your fees will also be higher, in terms of commissions and bid-ask spread.


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## humble_pie (Jun 7, 2009)

Topo said:


> Those are either options on the constituents of the index or on TSX60 futures. They are not options on XIU


indeed they are, i am talking about XIU options






> If you want to create a synthetic long stock position you would need to sell one put and buy one call at the same strike price. Selling both puts and calls will not get you there


there's that 10% differential that's slightly uncovered, as horizons says with their HXT





> Your fees will also be higher, in terms of commissions and bid-ask spread.


this will not matter since the madding crowd, with its unslakeable thirst for lowest MERs, will fall over itself en très grand nombre to buy my zero MER ETF & i will benefit from the volume. Its symbol btw will be 5PAK.

PS i am reasonably skilled at cracking B/A spreads.


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## Rusty O'Toole (Feb 1, 2012)

Topo said:


> I find the concept of limiting losses for trades fascinating. Theoretically, if one limits their losses, all they need is to catch one big momentum move and they are in the green. One can do the protection using options, but they are pricey. Using stops, on the other hand, does not incur a cost other than commissions. The risk of whipsaw is higher when using stops, but losses are limited.


That is the conclusion I came to. Especially now that you can trade almost instantly at very low cost. It helps if you are investing in something that makes big moves. You can afford to lose 5% a couple of times being stopped out, if you catch a 50% or 100% move. Not so good if you lose 5% a couple of times, then your big move is 10%.


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## humble_pie (Jun 7, 2009)

Rusty O'Toole said:


> You can afford to lose 5% a couple of times being stopped out, if you catch a 50% or 100% move. Not so good if you lose 5% a couple of times, then your big move is 10%.



sounds like playing a slot machine. That last example, trader has lost $60 in 3 double commissions plus he's also lost downward momentum whipsaw. Repeat a few times a day & it's an expensive habit.

perhaps slightly better than the casino though since the house is not rigged to win over time. Or is it.


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## Rusty O'Toole (Feb 1, 2012)

Humble Pie if you know of an investment that makes good returns with NO possibility of loss I would love to hear it. Absent that, I will continue bailing out when a trade goes against me. I know there are those who will hold a losing trade for years and watch half their account melt away, I prefer to cut losses and let profits run.

I also don't believe in day trading. My preferred holding period is forever, unfortunately I can't seem to find any stock that keeps going up for more than a few weeks or months at a time.

In evidence of this I just bought some CVS pharmacy stock on the 10th @ 62.136. It is now up nicely @ 65.11 but I still have a stoploss order in at my break even. I hope to hold it forever as a dividend payer and to buy more on dips. But if it crashes I'm not going to sit there and watch my money disappear.


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## humble_pie (Jun 7, 2009)

Rusty O'Toole said:


> Humble Pie if you know of an investment that makes good returns with NO possibility of loss I would love to hear it.



but there does appear to be the possibility of loss w the stop/loss slot machine strategy. The player will lose not only 2 commish every time, but he will also lose the amount by which the stock drops *after* his stop is triggered but *before* his sell can be executed.

you had an example w 3 launches. Lose 5%, lose 5%, gain 10%. This trip at a standard broker would cost $60 in commish plus whipsaw delay $$ each time. Total losses could run $60-$100 or more.

assuming trader does this every day, how is the above strategy any kind of zero loss deal?


* * * * *

there is at least one option strategy that guarantees a profit. It is very rare to find, although i have one quasi-professional option friend whose math program hunts in the background for these opportunities every single day.

it goes like this: buy the stock, put on a collar at or very slightly above stock price. When all the stars, entrails, omens, portents & prices line up correctly, the net slightly discounted cost will allow trader to get out at a profit either by the short call or else by exercising the long put.

favourable price formations of stocks, calls & puts which allow the above are extremely rare. Once in a blue moon i stumble upon such a triad. I only actually ever did one, once, a number of years ago. It worked out perfectly, i was indeed out at a profit via the long put.

options as we know are guaranteed by the exchange itself, not by a counterparty, so they are extremely safe. The returns for a trio of the above type - stock plus collar - are typically low, so a fairly large number of shares improves the picture. Investors working this strategy are usually looking for returns only slightly better than T-bill rate.





> I just bought some CVS pharmacy stock on the 10th @ 62.136. It is now up nicely @ 65.11 but I still have a stoploss order in at my break even. I hope to hold it forever as a dividend payer and to buy more on dips. But if it crashes I'm not going to sit there and watch my money disappear.


mille félicitations! but this sounds like a proper well-thought-out investment, not a slot machine gamble


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## Rusty O'Toole (Feb 1, 2012)

"you had an example w 3 launches. Lose 5%, lose 5%, gain 10%. This trip at a standard broker would cost $60 in commish plus whipsaw delay $$ each time. Total losses could run $60-$100 or more.

assuming trader does this every day, how is the above strategy any kind of zero loss deal?"

That is why I would NEVER take such a trade and NEVER suggest one to anyone else. I don't day trade for the same reason.

I want to see a stock or ETF that makes big moves, and is in an up trend, and gives me a buy signal confirmed by one or 2 other signals. Then I will take a position and if it moves against me, will get out but if it goes in my favor ride it as far as possible. I want to see the odds in my favor before I do a deal.

CVS is a good company but they got in a little trouble due to a merger some time back which caused the stock to drop. But they seem to have gotten over it. The stock dropped from 113.65 in 2015 to 51.72 last May, since then has been gaining steadily and is now 64.85. It is a steady dividend payer, in fact declared a 50 cent dividend yesterday. This is the kind of stock I like.

Needless to say I would NOT have ridden it down all the way from 113 to 51, and am not interested in losing money now.

There are other stocks that will give you more action. When Obama brought out Obamacare a few years ago American health care stocks took off straight up and kept going without a break for several years. Wish I could find a few more stocks like that.


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## like_to_retire (Oct 9, 2016)

Rusty O'Toole said:


> I want to see a stock or ETF that makes big moves, .........


Do ETF's ever make big moves?

ltr


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## Rusty O'Toole (Feb 1, 2012)

TQQQ does. 30.32 - 67.97 between December 24 2018 and April 29 of this year, a 124% gain in four months. Then from June 3 to July 26 it went from 46.13 to 70.49, a gain of 52.8% in two months. I'm not saying you could have caught the whole of those moves but if you caught half of them you would have been up 88% for the year and taken the last 5 months of the year off, all in one ETF.

Or, if you allow compounding, you could have been up 104%. By that I mean, take half the gain on the first move - 62%. If you caught just that much of it, every $100 turns into $162. If you caught half the second move, with the whole $162 it would have turned into $204.


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## humble_pie (Jun 7, 2009)

Rusty O'Toole said:


> I want to see a stock or ETF that makes big moves, and is in an up trend, and gives me a buy signal confirmed by one or 2 other signals. Then I will take a position and if it moves against me, will get out but if it goes in my favor ride it as far as possible. I want to see the odds in my favor before I do a deal.




ah, i see

then would you say that yours is basically a buy-lo-sell-hi strategy, except that you've polished & optimized the strategy to a fine degree with your special bells & whistles?

nothing wrong with that, i'm certainly glad to see that you are not doing a mindless stop/loss-stop/loss-stop/loss-stop/loss number.

i think the iron discipline on the quick sell side is something every investor could & should have a good think about. Yes it does seem to mean that, other than a few commish plus a bit of downside whipsaw for every launch that doesn't take off, such an investor is never going to lose. Notice, though, that you have a few sophisticated criteria in place to generate a "buy" or launch signal for yourself in the first place.

thankx very much for explaining.


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## jargey3000 (Jan 25, 2011)

....soooo.......which stocks or ETFs (or stock's & ETF's, if you prefer)...are poised to make big moves (move's) going forward from here....????
das what i want to know....


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## agent99 (Sep 11, 2013)

Which kind of big moves - up or down?

Quite a few here had BCE as their major holding. Maybe that would be one.


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## Dilbert (Nov 20, 2016)

^yeah, who doesn’t want to know that, Jargster? :very_drunk:


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## kcowan (Jul 1, 2010)

humble_pie said:


> ai think the iron discipline on the quick sell side is something every investor could & should have a good think about. Yes it does seem to mean that, other than a few commish plus a bit of downside whipsaw for every launch that doesn't take off, such an investor is never going to lose. Notice, though, that you have a few sophisticated criteria in place to generate a "buy" or launch signal for yourself in the first place.


Yes I agree that you must have an iron will to sell those things you thought you would love! That makes the difference in the long term. And the next downturn will teach us how much will we really have?


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## My Own Advisor (Sep 24, 2012)

VYM


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## Rusty O'Toole (Feb 1, 2012)

jargey3000 said:


> ....soooo.......which stocks or ETFs (or stock's & ETF's, if you prefer)...are poised to make big moves (move's) going forward from here....????
> das what i want to know....


I wish I knew. Anyone who claims to be able to predict the stock market is a fool or a liar. All you can do is play the odds. I believe TQQQ has the potential to make big moves because it has in the past and it is designed to move 3 times as much as the NASDAQ. But it has been making a monkey out of me for the last 3 months. I mentioned how it made a couple of big moves early this year, since the end of July it has given me 2 buy signals that were not confirmed and made only modest moves. I broke even on the first, and ignored the second. Will it take off and leave me looking like a fool? Or will it drop back and give me a real signal and then take off? Time will tell.

If I was smarter with computers I could automate the search process and zero in on some good candidates. 

But I am spending some time learning about dividend stocks. They seem to be a lot less profitable but a lot less work too.


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## Rusty O'Toole (Feb 1, 2012)

agent99 said:


> Which kind of big moves - up or down?
> 
> Quite a few here had BCE as their major holding. Maybe that would be one.


There is a lot of money to be made on the short side. You get some good down moves and fast too. But I seem to be temperamentally unsuited to shorting stocks, no doubt I could learn though. There are a lot of high flyers these days that are basically worth 0 as far as I am concerned.


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## james4beach (Nov 15, 2012)

Rusty O'Toole said:


> There is a lot of money to be made on the short side. You get some good down moves and fast too. But I seem to be temperamentally unsuited to shorting stocks, no doubt I could learn though. There are a lot of high flyers these days that are basically worth 0 as far as I am concerned.


Rusty, since you've studied O'Neil as well, I'm curious what you think of my short observation on AMZN?
https://www.canadianmoneyforum.com/showthread.php/8571-Amazon-(AMZN)/page12


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## Rusty O'Toole (Feb 1, 2012)

I know nothing about Amazon except that it is one of those market darlings I expect to take a beating in the next bear market. Like a lot of stocks it peaked a year ago which suggests we might be at the beginning of a slow slide into a bear market. But I don't see an immediate sell signal. If you have a strong feeling you might buy a few long dated out of the money puts just to make it interesting.


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## peterk (May 16, 2010)

humble_pie said:


> but you don't really know, do you? in fact this is an area where nobody knows anything for sure, right?
> 
> what, exactly, do you think the ETFs are holding when they state in their prospectuses that they engage in representational trading? when they state that they hold options, futures, swap contracts & other derivative instruments? do you think they are disclosing such information purely for the sport of writing?
> 
> ...


Sounds like something I shouldn't bother dedicating any brain power to thinking about then. All the smart people did already, and the answer is still unclear.

Sounds like my path forward is - Stick with investing in simple ETFs, and look toward a time in the future when these can be converted into diversified stock holdings when the size is large enough to warrant 30+ different companies in the broker account, >$200k or so.

Most of my investments are already individual stocks anyways, but I'm trying to shift towards more passive investing with new funds going forward, without getting overly complicated. 

KISS

RRSP - SPY (to shield US divs), TFSA - QQQ (Growth + low US divs), Unregistered - XIU (div credit)


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## Topo (Aug 31, 2019)

Sometimes the losses could be bigger than a few percent. For example, if the stock gaps after earnings or a material announcement, the opportunity to exit the position at a small loss or scratch may not be there.

For example, TSLA had a 17% gap on Thursday.


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## humble_pie (Jun 7, 2009)

Topo said:


> Sometimes the losses could be bigger than a few percent. For example, if the stock gaps after earnings or a material announcement, the opportunity to exit the position at a small loss or scratch may not be there.
> 
> For example, TSLA had a 17% gap on Thursday.



but how could Tesla be a "for example" of how a stop/loss strategy can trigger significant losses?

yesterday TSLA soared a meteoric 17% rise. It was a gap up, not a gap down. It was a successful example of precisely the kind of cannonball action Rusty's strategy is seeking.


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## Rusty O'Toole (Feb 1, 2012)

One reason I like ETFs is that they are not prone to such sudden unexpected moves. Would rather see a steady climb over weeks or months. I am thinking of shorting tesla if it gets a good bounce. The trouble is I prefer to use puts for this and they are very expensive for tesla. Much as I admire tesla cars I don't think much of their chances of staying in business long term and I don't think much of Elon Musk.


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## humble_pie (Jun 7, 2009)

Rusty O'Toole said:


> One reason I like ETFs is that they are not prone to such sudden unexpected moves. Would rather see a steady climb over weeks or months. I am thinking of shorting tesla if it gets a good bounce. The trouble is I prefer to use puts for this and they are very expensive for tesla. Much as I admire tesla cars I don't think much of their chances of staying in business long term and I don't think much of Elon Musk.



well u could do a calendar in TSLA, some kind of pair to raise premium on the sell side ...

meanwhile the world awaits further chapters in the saga. Evidently the US subsidy for tesla EVs ends this year but it does still apply to rival EV manufacturers whose models entered the market later. It's thought that this will cause buyers to spring for the rivals.


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## Rusty O'Toole (Feb 1, 2012)

humble_pie said:


> well u could do a calendar in TSLA, some kind of pair to raise premium on the sell side ...
> 
> meanwhile the world awaits further chapters in the saga. Evidently the US subsidy for tesla EVs ends this year but it does still apply to rival EV manufacturers whose models entered the market later. It's thought that this will cause buyers to spring for the rivals.


I don't know. Chevrolet came out with a rival to the Model 3 that is just as good but cheaper, and backed by GM dealer service nation wide. They couldn't sell enough to keep them in production even though the Model 3 is back ordered and hard to get.

Tesla fans don't seem to be interested in any other car than Tesla. Whether this can continue and whether it is enough to keep them in business remains to be seen.


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## Topo (Aug 31, 2019)

humble_pie said:


> but how could Tesla be a "for example" of how a stop/loss strategy can trigger significant losses?


If you had shorted the stock at 253 with a stop loss at 260, your stop will be executed at 299 this morning. That's a loss, isn't it?


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## james4beach (Nov 15, 2012)

Topo said:


> If you had shorted the stock at 253 with a stop loss at 260, your stop will be executed at 299 this morning. That's a loss, isn't it?


I think this is a great example of how stop orders can go wrong. Stocks can gap up (or down) past the stop price. So now your stop has triggered, but it *fills* at a much worse price than you assumed.

People use stop orders with the idea that it caps their loss, or locks in a certain profit. But that only happens when the price moves continuously.

Method#1 to avoid this problem is to use a stop-limit order, which becomes a limit order instead of a market order. You can then control the worst possible fill price, but also run the risk that nothing fills at all. At the very least this insulates you from the surprises where the stock has gapped in a crazy way.

Method#2 is to use a soft mental stop where you write your stop price on a post-it note. Then you manually monitor the price, and it's kind of approximate. There is no automated order. One advantage here is that you're not communicating your pain point to the market and aren't going to become part of the running-of-the-stops game. In my experience this also encourages me to set _wider_ stops (which is a good practice) to avoid getting shaken out of positions due to short term volatility.

For example in the recent TSLA example trade I suggested, I used a soft mental stop of 23%.

When I was short selling failing bank stocks in 2008, I had mental stops as much as 50% away from the current price. This is to allow for huge volatility in the stocks, to not get shaken out prematurely.


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## Topo (Aug 31, 2019)

james4beach said:


> I think this is a great example of how stop orders can go wrong. Stocks can gap up (or down) past the stop price. So now your stop has triggered, but it *fills* at a much worse price than you assumed.
> 
> People use stop orders with the idea that it caps their loss, or locks in a certain profit. But that only happens when the price moves continuously.
> 
> ...


I prefer your method#2 in terms of execution. Our hypothetical shorter of TSLA would have to re-evaluate this morning if they wanted to close the position and take a loss or if at current prices TSLA is even a better short and hold on.

Stop loss orders seem to work best with ETFs, as Rusty O'Toole stated above, because they are less likely to have violent moves. The same also applies for futures, particularly that they trade most hours of the day.


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## humble_pie (Jun 7, 2009)

Topo said:


> If you had shorted the stock at 253 with a stop loss at 260, your stop will be executed at 299 this morning. That's a loss, isn't it?



but in the section of this thread, just upthread, where Rusty was setting forth his buy-long-w-stop/loss strategy, he was never mentioning a short side. It was only a buy-long strategy.

topo u took part in that discussion so you knew what Rusty was talking about.

under the buy-long-w-stop strategy, what happened in Tesla would have been an opportunity sent straight from heaven. Not a chance of a loss.

on the other hand, if TSLA had plunged to $199 a buy-long-w-stop story would have played differently. Jas4 has a good explanation.


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## Topo (Aug 31, 2019)

humble_pie said:


> but in the section of this thread, just upthread, where Rusty was setting forth his buy-long-w-stop/loss strategy, he was never mentioning a short side. It was only a buy-long strategy.
> 
> topo u took part in that discussion so you knew what Rusty was talking about.
> 
> ...


All you say is absolutely correct. I was making the same point under a different scenario.


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## humble_pie (Jun 7, 2009)

Topo said:


> All you say is absolutely correct. I was making the same point under a different scenario.



the scenario wasn't clear but wouldn't you agree that the old saying is 100% correct, alas there's no free lunch ...

PS here's my strategy in TSLA. For half a year now i've been selling cowardly custardly far OTM puts. TSLA is so volatile that even custardly options still have decent premium, so they are worth selling.

a while ago when tesla was around 240 i rolled from dec 180 puts to jan 175 puts for a nice sweet vanilla credit. These as of today were fabulously profitable but i'm not changing em since tsla could take an earnings/eulphoria revision hit any time soon. I will just putter on in my custardly way, collecting a few thousand $$ in premium, minding my sweet dessert business & dusting it quietly w broiled brown sugar crackles now & then.

the good thing about cowardly custardly OTM puts is that there's always plenty of room to shake the pan. I watch my stove-top from afar in a relaxed kind of war, casually but alertly, always ready to rescue the dish quickly if the menu changes.


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## Topo (Aug 31, 2019)

humble_pie said:


> the scenario wasn't clear but wouldn't you agree that the old saying is 100% correct, alas there's no free lunch ...
> 
> PS here's my strategy in TSLA. For half a year now i've been selling cowardly custardly far OTM puts. TSLA is so volatile that even custardly options still have decent premium, so they are worth selling.
> 
> ...


I think it is a good strategy, given the rich premiums. 

Unless you are very bullish on TSLA, why don't you sell OTM calls at the same time? You won't need additional margin beyond what you need for the puts, and you collect more premium. It is a more neutral stance and you can't lose on both sides at expiration.


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## humble_pie (Jun 7, 2009)

Topo said:


> I think it is a good strategy, given the rich premiums.
> 
> Unless you are very bullish on TSLA, why don't you sell OTM calls at the same time? You won't need additional margin beyond what you need for the puts, and you collect more premium. It is a more neutral stance and you can't lose on both sides at expiration.




u would mean sell a strangle i believe?

as it happens i do frequently sell strangles. Most are partly covered in that i long the underlying stock, so the options are merely cherries in the cake.

i only sell one naked strangle. it's been my go-to steady strangle for at least a decade. We are an old comfortable couple together. Year after year, hand in hand we stroll along. The underlying (which i've never owned) pumps up & down in a constant band between 25 & 45, so there's enough vol to generate premium to make the option selling worthwhile.

however when it comes to TSLA, this is some wild unstable young thing that i want to keep at a distance. At any time musk could have another relapse. I really shouldn't be selling puts at all.

as you know, a naked OTM call is far riskier than a naked OTM put. The put's risk is limited to total loss of $$ if the stock is assigned under the put & subsequently bankrupts. But the call's risk is unlimited. Because of the volatility a naked call is more dangerous than a short stock.

it's true that in my sole naked strangle (above) i am short 12 OTM naked calls, but this is a longtime partner & walking friend i'm comfortable with. I like strolling around the Old City, looking at the sights with him. We go out regularly together several times a year.

the same isn't true of TSLA. I could arrange a date for a promenade in the Old Port but who knows if he'd even show up? or if he'd bolt without a word? i mean one minute we could be sitting in the sunshine on the outdoor terrace at the bistrot, ordering delicious lunch, then suddenly he streaks off & i'm left to pay the bill for both of us.


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## Topo (Aug 31, 2019)

humble_pie said:


> u would mean sell a strangle i believe?


You are correct.



> as you know, a naked OTM call is far riskier than a naked OTM put. The put's risk is limited to total loss of $$ if the stock is assigned under the put & subsequently bankrupts. But the call's risk is unlimited. Because of the volatility a naked call is more dangerous than a short stock.


It is true that naked calls have unlimited risk in theory, but for most stocks (such as TSLA) there is a limit in the sense that the price is unlikely to jump to 1000 in 2 months. It is, however, different for some biotechnology companies for example; they could jump thousands of percents in a week. These could be very dangerous to short.

One could buy a further OTM call to limit the loss (in other words sell a call spread). That would bring in some extra premium without the prospect of unlimited loss.



> i only sell one naked strangle. it's been my go-to steady strangle for at least a decade. We are an old comfortable couple together. Year after year, hand in hand we stroll along. The underlying (which i've never owned) pumps up & down in a constant band between 25 & 45, so there's enough vol to generate premium to make the option selling worthwhile.


And who is this lucky, charming underlying?


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## humble_pie (Jun 7, 2009)

Topo said:


> It is true that naked calls have unlimited risk in theory, but for most stocks (such as TSLA) there is a limit in the sense that the price is unlikely to jump to 1000 in 2 months. It is, however, different for some biotechnology companies for example; they could jump thousands of percents in a week.



it's true that prices are unlikely etc. But i would say that the very first rule is that Everybody must do what they're comfortable with, would you not agree?

it's interesting that you then mention possibility of gigantic jump in a week. This would be a speed i'm not comfortable with at all. Some people could handle it; but me i would avoid it like the plague.

my old steady naked call, for example, walks & strolls at a comfortable speed. Even if we're walking separately to a rendez-vous, if i know where he's at then i know from the greeks when & where we're likely to meet up.

but i don't have that feeling for TSLA. I'm held back by a few concerns about the CEO's relationships or lack of relationships with underwriters & by a few more about his mental state. For me the greeks get so wide & so far out that they become blurry. I end up saying No i won't go there, not even in a call spread, in fact i won't even buy the stock.

so why bother? i have short naked puts in AAPL & GOOGL as well, so TSLA forms a tech triad. Also Tesla represents that starry, leading, magical, endlessly creative edge of america that i'm still not willing to believe has disappeared under donald trump.





> One could buy a further OTM call to limit the loss (in other words sell a call spread). That would bring in some extra premium without the prospect of unlimited loss


you're right. There are always so very many possible strategies. But they all boil down to the Comfortable rule i think.

besides, so far my cowardly custardly far OTM TSLA puts seem to be quite sufficient as dessert notes in the menu.


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## Rusty O'Toole (Feb 1, 2012)

I wouldn't sell naked options no matter how far out of the money. The first options educational videos I bought, George Fontanill's Optionetics course in 1997, he said of selling naked OTM options ' you can get away with it for a month, a year, 5 years, but sooner or later you get killed'.

Have heard the same thing from different sources several times. On the other hand there is Karen "Supertrader" Bruton who has been selling junk puts in the SPY for years and gotten away with it. Of course, she only started after 2009. And I expect she keeps a bag packed and getaway money stashed in a foreign bank.

Would love to know your strategy in case your options get hit.


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## Topo (Aug 31, 2019)

Rusty O'Toole said:


> Have heard the same thing from different sources several times. On the other hand there is Karen "Supertrader" Bruton who has been selling junk puts in the SPY for years and gotten away with it. Of course, she only started after 2009. And I expect she keeps a bag packed and getaway money stashed in a foreign bank.


She got into trouble with the SEC for misrepresenting profits.

https://www.thestreet.com/story/135...ing-strategy-relied-on-fraud-sec-alleges.html

There just isn't enough premium in 5 delta options.


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## humble_pie (Jun 7, 2009)

Rusty O'Toole said:


> I wouldn't sell naked options no matter how far out of the money. The first options educational videos I bought, George Fontanill's Optionetics course in 1997, he said of selling naked OTM options ' you can get away with it for a month, a year, 5 years, but sooner or later you get killed'.



doing it all my life. I was lucky. Mentored very young (age 21) by also very young banker (age 27) at european bank known for centuries of leadership in futures trading (17th century insurance for ag crops + grape/wine harvests + early sailing ship cargoes)

we thought they were fun little things. I still think they are fun little things. I've never taken any options courses. But i did intern one strenuous quarter on the CBOE in chicago.

Rusty remember a few years ago how you were all about options in cmf forum. You hung on Tasty Trade, you said. You had nifty options in Alibaba you said. You were making plenty $$ in options you said.

but nowadays we don't hear anything about your option trades. Wondering what happened there. Nothing untoward i hope.


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## Rusty O'Toole (Feb 1, 2012)

I thought options were the thing but found out it was too much work and risk for too little reward. Delta neutral trading never worked for me. The trades I made money on were directional. So I started studying market direction. Then figured out, that if I could predict that, I could do better without the options.

Unfortunately I never had a Rothschild to mentor me. I had to figure out everything for myself. So far it's been 50 years but I may be getting close to catching a clue.

Tastytrade taught me a lot about options, all but how to make money off them. I no longer recommend them. They are exploiting new options traders for their own benefit. It took me long enough to figure it out, but I got there eventually.


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## Rusty O'Toole (Feb 1, 2012)

Topo said:


> She got into trouble with the SEC for misrepresenting profits.
> 
> https://www.thestreet.com/story/135...ing-strategy-relied-on-fraud-sec-alleges.html
> 
> There just isn't enough premium in 5 delta options.


I hadn't seen that article but it does not surprise me. I am a little surprised that such small dips in the market caused such large losses. Evidently the options she was selling, were as not as far out of the money as she let on. We have not had a bear market since she began her fund. I always figured the first real bear market would wipe out her fund and all her investors.


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## humble_pie (Jun 7, 2009)

Topo said:


> She got into trouble with the SEC for misrepresenting profits.
> 
> https://www.thestreet.com/story/135...ing-strategy-relied-on-fraud-sec-alleges.html



(note to Rusty) topo is right, she got into trouble for misreporting profit to her clients. There's nothing in this article saying she dealt in naked options or OTM options. In fact article doesn't even say whether she sold calls or puts.


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## Topo (Aug 31, 2019)

humble_pie said:


> (note to Rusty) topo is right, she got into trouble for misreporting profit to her clients. There's nothing in this article saying she dealt in naked options or OTM options. In fact article doesn't even say whether she sold calls or puts.


It's not mentioned in the article, but she has done interviews where she talked about her strategy of selling 5 (or 10) delta puts 56 days out. Sometimes apparently she would sell weekly calls too. Both naked options in the SPX, NDX, RUT. 

Somewhere she said that she used 50-60% of her capital, so I guess those would have been leveraged positions. If I recall correctly, she had close to a 50% profit in one of the years (maybe 2013). I don't know how much of that was true.


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## Topo (Aug 31, 2019)

Rusty O'Toole said:


> I hadn't seen that article but it does not surprise me. I am a little surprised that such small dips in the market caused such large losses. Evidently the options she was selling, were as not as far out of the money as she let on. We have not had a bear market since she began her fund. I always figured the first real bear market would wipe out her fund and all her investors.


The only way to make market-beating returns from such strategies is to use substantial leverage. Apparently, she got into trouble and had to adjust her positions during the flash crash (2010) and one other time when margin requirements for her changed. For most investors, those were non-issues.


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## Rusty O'Toole (Feb 1, 2012)

humble_pie said:


> (note to Rusty) topo is right, she got into trouble for misreporting profit to her clients. There's nothing in this article saying she dealt in naked options or OTM options. In fact article doesn't even say whether she sold calls or puts.


I first heard of her in a Tastytrade interview in 2014. She explained her method was to sell far out of the money puts in the S&P. AKA picking up pennies in front of a steam roller. In subsequent interviews she admitted she had to step lively to keep things on an even keel during market dips.


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## humble_pie (Jun 7, 2009)

Rusty O'Toole said:


> She explained her method was to sell far out of the money puts in the S&P. AKA picking up pennies in front of a steam roller.



oh no no no no selling OTM puts has nothing to do with picking up pennies

it's a worthwhile pursuit. Here's an example: 4 months ago i commenced a small OTM positon w 4 short puts in SLB. Since that startup in late june, i've rolled the position forward twice. I've spent a maximum of one hour on the three pair trades, ie 15-20 minutes for each trade. I've also spent perhaps two hours following SLB & rig sector news. Total 3 hours on the endeavour.

net profit so far is USD $1,452, or CAD $1,916. This works out to CAD $639 per hour of work. I would say that is jolly good _rentabilite._

or one could consider the return on cost base. But the cost base here is zero. There is a use of margin; but the account has considerable excess margin so the dollar cost is nil.


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## Rusty O'Toole (Feb 1, 2012)

Karen the Supertrader first became famous thanks to some interviews on Tastytrade in 2014. Here is a cut n paste from the Tastytrade web site in which they describe her methods. The original videos are available if you want to watch them. This is only part of a page on her, for more information link to the page here https://www.tastytrade.com/tt/karen-the-supertrader

KAREN THE SUPERTRADER - Strategies

Karen’s main trading strategies focus strictly on selling premium and using Bollinger Bands to view the standard deviations in a graphical form, preferring to put on trades outside of two standard deviations to current prices. She used to trade as many as 30 stocks at a time, but was continuously burned by the earnings announcements of the public companies she held in her portfolio. Karen revised her strategy to focus on selling wide Index strangles in SPX, RUT and NDX.

Today, she mainly trades the S&P 500 Index (SPX), which in addition to tax advantages has commission optimization, liquidity, and size, as opposed to SPY, which she says is too expensive for her to trade cost effectively.

Karen The Supertrader sells contracts at 56 DTE (Days To Expiration) and keeps the trade on for a few weeks, or sometimes, just a few days. She then takes the front month off and sells the back month, again at approximately 56 DTE. Around 40 days, if the options seem safe, she leaves the front month on, but more often than not she takes off her initial position 10 to 25 days later. For example, by October 30th she closes out of most of her November positions and already has positions open in December.

When volatility is high, Karen The Supertrader constantly trades, selling and collecting premium. If volatility is low, she often lets her front month positions expire worthless. For her, good volatility is when the VIX is between 18 and 20.

Karen also ladders out positions – opening positions at different expirations, and always trying to sell Calls and Puts 95% OTM (Out of The Money) or two Standard Deviations away.


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## Rusty O'Toole (Feb 1, 2012)

humble_pie said:


> oh no no no no selling OTM puts has nothing to do with picking up pennies
> 
> it's a worthwhile pursuit. Here's an example: 4 months ago i commenced a small OTM positon w 4 short puts in SLB. Since that startup in late june, i've rolled the position forward twice. I've spent a maximum of one hour on the three pair trades, ie 15-20 minutes for each trade. I've also spent perhaps two hours following SLB & rig sector news. Total 3 hours on the endeavour.
> 
> ...


Would love to see more details of this trade. As it is I have to guess some things but it looks like to take in that much premium you would have to sell options that are at the money or close to it? Does your decision process involve timing or predicting market direction?

I'm also curious why you would sell puts on a falling stock, wouldn't it be safer to sell them on a rising stock?


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## Topo (Aug 31, 2019)

Rusty O'Toole said:


> She used to trade as many as 30 stocks at a time, but was continuously burned by the earnings announcements of the public companies she held in her portfolio. Karen revised her strategy to focus on selling wide Index strangles in SPX, RUT and NDX.


This is interesting. Some people believe that it is better to sell premium on indexes or index funds, but buy options on individual stocks. The idea being that even though the premiums are higher in individual stocks, there is also a chance for major moves (5 SDs or more) in these types of underlyings. Indexes are unlikely to show big moves.


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## humble_pie (Jun 7, 2009)

Topo said:


> Some people believe that it is better to sell premium on indexes or index funds, but buy options on individual stocks. The idea being that even though the premiums are higher in individual stocks, there is also a chance for major moves (5 SDs or more) in these types of underlyings. Indexes are unlikely to show big moves.



broadly speaking this strategy is selling low-dollar premium while buying hi-dollar premium in the hope that one of the buys will be a gain superstar, no?

how is the psychology here really any different from the party who launches stock buy orders with stop/losses, on the grounds that he can't lose & surely one buy or another will turn out to be a gain superstar?

both look like gambling strategies. Keep trying & sooner or later the machine will pay out. What does this have to do with sensible, prudent, successful investing.

notice, though, that in Rusty's example above where he was trying to purchase a particular stock - CVS iirc - using the stop/loss strategy, in reality he had selected his candidate very carefully & he was timing his purchase very precisely. So the "stop/loss strategy" was, in fact, looking like more of a well-researched prudent buy w stop/loss protection added.


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## Topo (Aug 31, 2019)

humble_pie said:


> broadly speaking this strategy is selling low-dollar premium while buying hi-dollar premium in the hope that one of the buys will be a gain superstar, no?


Yes. No shame in trying to win big. 



> how is the psychology here really any different from the party who launches stock buy orders with stop/losses, on the grounds that he can't lose & surely one buy or another will turn out to be a gain superstar?


There are similarities. I don't see any problem with either strategy. As a matter of fact, if one could successfully limit their losses and let their gains run, they are going to do very well.



> both look like gambling strategies. Keep trying & sooner or later the machine will pay out. What does this have to do with sensible, prudent, successful investing.


Any investing/trading is a bet. So there are similarities to gambling. For example, when you sell OTM puts on SLB, you are betting that the stock will not fall hard and that the premiums you collect over time will be higher than the losses you will take by at least a risk premium.

Gambling is not all that bad. Just ask the casino owners.


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## james4beach (Nov 15, 2012)

Topo said:


> Any investing/trading is a bet. So there are similarities to gambling. For example, when you sell OTM puts on SLB, you are betting that the stock will not fall hard and that the premiums you collect over time will be higher than the losses you will take by at least a risk premium.
> 
> Gambling is not all that bad. Just ask the casino owners.


I think it's healthy to acknowledge that we investors are gambling. Framing it this way can create more realistic expectations about what might happen.

Advanced methods of investment modeling do, in fact, use Monte Carlo simulations to look at potential future paths one's investments can take. Randomness and gambling is intrinsic to stock and bond investments. On this topic, I highly recommend reading the book: Fooled by Randomness.

Consider your potential returns over the next 10 or 20 years, for example. Even if you invest in a couch potato portfolio, VBAL, or pure index fund, you could experience a very wide range of potential outcomes. One potential outcome is that you will perform _worse than cash_. At the other extreme is that you could get a real return of several percent.

Even weighting just a little more of one country versus another can dramatically change the outcomes. There is a pretty significant spread of potential outcomes and there's just about no certainty about what you will get.


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## Topo (Aug 31, 2019)

james4beach said:


> I think it's healthy to acknowledge that we investors are gambling. Framing it this way can create more realistic expectations about what might happen.
> 
> Advanced methods of investment modeling do, in fact, use Monte Carlo simulations to look at potential future paths one's investments can take. Randomness and gambling is intrinsic to stock and bond investments. On this topic, I highly recommend reading the book: Fooled by Randomness.
> 
> ...


Totally agree. The math is very similar between wagering and investing in stocks. The difference is that, in the long term, wagering in a casino has a negative expected return, while stocks have a positive expected return. But during any specific time frame, it is conceivable that one wins in the casino and loses in the stocks market. 

Bonds are different in the sense that a nominal return is virtually guaranteed. However, there are risk such as inflation, credit downgrades, etc.


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## humble_pie (Jun 7, 2009)

james4beach said:


> I think it's healthy to acknowledge that we investors are gambling. Framing it this way can create more realistic expectations about what might happen.
> 
> Advanced methods of investment modeling do, in fact, use Monte Carlo simulations to look at potential future paths one's investments can take. Randomness and gambling is intrinsic to stock and bond investments. On this topic, I highly recommend reading the book: Fooled by Randomness.
> 
> ...



me i would not use the words "gambling" or "betting" when it comes to lifetime investment management, since on the same broad plane one could also say that marrying is a gamble, or career selection is a gamble, or even having children is a gamble.

i think it's fair to say that investors should determine probabilities & consequences for each course of action they are contemplating.


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