I didnt watch much of these videos thinking it is already covered material in cfa program but boy was I wrong. This is invaluable knowledge from real world
Just stumbled upon your videos, Mark. So invaluable. I've been watching your CFA 1 equity valuation series all last week/this weekend. You're an excellent teacher. Keep up the great work and videos.
Great examples Mark, and I am glad I found this video. This is exactly what I've learnt from Phil Town as well. But here's the catch (at least for us Canadians). First, selling puts works only within margin accounts. Selling puts isn't allowed in registered accounts (TFSA, RRSP, etc.), despite how silly it sounds from the prospective of people who know this trick to buy at below market cost. Second, in order to place naked puts, brokers require significant amount of cash to be deposited in the account (min of $25,000 in Questrade margin account if I am not mistaken), so if you have less than that, your only option is limit orders or options strategies (vertical puts, Iron condors, etc.), which give you cash flow, but don't let you keep the shares. Third, you need to take into account commissions, and calculate your ROI on the premium you make over the length of the contract. Limit orders don't make any money, but if your ROI is only a few percent, free cash in your account may be more valuable than money tied up in a contract. And finally, don't forget about the taxes. Our lovely government will squeeze up to 40% from the premiums you make within the margin account. And, unfortunately dealing with short trades in US dollars is a nightmare when it comes to account for taxes (not that I don't do it anyway). I hope to learn more from your videos about other tricks. Perhaps, there are some additional tricks to overcome limitations of the silly Canadian system :)
Margin account - yes. Minimum account balance - broker specific. The 25k min is probably to avoid pattern day trader rules that turn your account into a cash account if you day trade more than 3x in a week. Taxes - all capital gains as of time of sale, not as of contract closing - unless assigned, then it just lowers ACB. Top cap gains tax rate is 26.5% if you are in the 53% tax bracket.
@@MarkMeldrum Thank you for your reply. If I understand you correctly, if shares are assigned, the premium received from selling a put does not increase capital gains, but rather reduces the cost basis for future capital gains calculations. I think, I've learnt something today :) Still, taxes eat a huge chunk of your capital in a margin account... Oh, another thing is assignment fees that can be high too. Are there any tricks for trading options in registered accounts? The only one I am aware of is selling covered calls when you are ready to sell your shares. Thank you again.
Another great REIT video with great insights... thanks again Mark for taking the time to share your valuable experience and further build the knowledge of your community. Talking about the tangible book value per share, Reuters currently reports $9,79. Should this not act as an attractor to the share price? I also noticed it was the average price target of both analysts you mentioned. One last question: why are there not more strike prices to chose from for ABR? AGNC has many more choices in comparison.
I do wish ABR had more strikes. ABR does turn illiquid, so selling options on ABR has a limited life. Not sure where Reuters is getting its data. The company does not report until May 8.
@@MarkMeldrum Hi Mark, I was waiting like many for the release today of the new GAAP book value which decreased from $9,73 at Dec 31, 2019 to $8,68 at Mar 31, 2020. I was surprised to see a 10% surge despite a decrease in the book value and the decision not to halve the dividend but to keep it at $0,30 despite a net loss per share of $0,54. Hope you will share your thoughts with your community on the first quarter results in a new video.
@@MarkMeldrum Hi Mark, ABR announced for Q1: "At March 31, 2020, GAAP book value per share was $8.68, as compared to $9.73 at December 31, 2019". I wanted to calculate the Net tangible value per share (NBVPS) as it should work as an attractor for the share price as you mentioned in the video. How do we go about this? Do we just remove the tangible / goodwill from the book value? Looking at the Balance Sheet on EDGAR website, I saw that goodwill and other intangible assets amount to $109,371,000 and that there were 109,706,214 outstanding shares, meaning the goodwill per share outstanding is approx. $1 (109,371,000/109,706,214). Would removing $1 from the book value of $8.68 then give us the NBVPS @ $7,68? Is there a quicker way, meaning is the NBVPS stated in the quarterly / annual filings? in that case where do we find this information? Look forward to your feedback.
hi Mark, so far I really enjoy the options application videos, just curious is there any interest/popularity among futures/forwards trading you can put a couple videos on for deepening understanding ?
I was wondering why ABR? It has a very bad fund from operation since 2016 and the CF is bad as well. From what I learned from level 2 is that we do not want to see a deteriorating on fund from operation when analyzing REIT right? Can you explain this a lil bit please? Thanks!
could you do a deep dive on reits and how you think the virus will change some of them (office and malls) also are certain reits more advantages (apartments vs mortgage)
Thank you so much...I must say I am really enjoying your real life application videos... I’m current studying CFA and it’s great to be able to apply the theory... makes it much more fun and helps with grasping concepts .. thank you
Hi Mark, considering the stock price is pretty low and each option contract is like 100 shares. Do you use similar strategy for stocks with higher prices, let's say 100-200$?? Thanks
hi Mark, i can only receive the option premium from the calls and puts i sell after they are bought by someone correct? if there is no buyer, then i won't have the premium but transaction cost?
@@MarkMeldrum then i guess the question would be how liquid are the positions. can i sell 50 put contracts with Approx $100 fee occurred from my broker and nobody buying those puts? that can happen right?
Yes. It is 90% of their net income over the course of the year - so any quarter can have a cut as long as the year meets that qualification. That can always be met with a special dividend. Since it is 90% of accounting income, not FFO, it is usually not difficult for a REIT to have a 70% DPR of FFO while still meeting the 90% of EPS qualification.
Hi Mark, you mentioned that the REIT is internally managed by the same team that went through the subprime crisis which I too feel is very reassuring. I also noticed that the ABR stock price crashed to $0,58 at the end of Feb 2009. What led to such a collapse and what would it take today to see a similar crash? Many thanks for sharing your experience. Much appreciated.
What caused that is an absolute freeze in credit markets. Further, ABR did not have the current servicing portfolio it has now, so it was lacking that source of income. The Fed has taken much more aggressive actions sooner this time in more credit and debt markets, so that event is highly unlikely to occur again for ABR.
@@MarkMeldrum But won't that defeat the purpose of getting a better position(price) for your stock? Because in that case you would be paying a lot higher price than current value
@@saharshbagaria , wouldn't it be same as the price dropping to $4 after your limit buy gets executed at higher price? A long term buyer would be okay with that, as long as the company fundamentals are not compromised in a major/permanent way.
@@sachinkansara3512 well it took me time to register. But if there is a long term buyer and he wanna own stock regardless of price it is good strategy.
