Saturday, 24 January 2015

How to choose a call warrant?

The last time I wrote about call warrant fundamentals was years ago, see CW Fundamentals 1, CW Fundamentals 2, CW Fundamentals 3 for details . Words couldn't describe how fast time flies. Today I am going to write about how I determine which CW to buy.

Make sure you do some homework before buying call warrants. Every one knows it is of high risk. Before choosing CW, I choose mother share. First, mother share must have strong fundamentals, making profits. E.g., I will not buy KNM call warrants. Second, mother share has potential upside. By only having the right mother share, you can expect to have a positive return, because call warrants follow mother share movement.

Lazy people like me will go to i3investor to have a glimpse of all structured warrants available for a particular stock. It contains useful information about warrants listed in a form of table. For example, if I am looking at MYEG CW, search for MYEG, then go to warrants drop down menu. Easy.

MYEG Call Warrant
(Figure print-screened from i3investor)

How to decide which one to go for? For me, I look at the following preference in order.

1. Expiry. No long expiry date no talk. This is so important. Preferably at least six months. Under special conditions (e.g. negative premium, high gearing etc, will consider 3-6 months. Under any condition, I will not touch CW with less than 3 months expiry)

2.1 Premium & gearing. Low premium and high gearing are preferred.

2.2 In my opinion, volume has the same importance as premium and gearing. Liquidity is important (without "so" as in expiry). First, it ensures that the CWs are easy to buy and sell. Second, the buy-sell spread is small if it is traded actively, good for us.

3. Issuer. CIMB always has the "best valued" call warrants. Recently I see that Macquarie releases a lot of structured warrants in KLSE. Isn't this the Macquarie Group, the largest investment group in Australia?

OK. By looking at the first priority, CB, CC, CE and CF are out of consideration. Then, CD has the lowest premium, which is the best among itself, CG and CH (I look at premium more than gearing). But if you look at the graph of MYEG-CD:

Listed for 6 months, it is traded for less than 20 days. Clearly, I will not buy this kind of CW. You will find it hard to buy and sell. So, we are left with CG and CH.

CH has a longer expiry date, a lower premium and s higher gearing than CG. CH is also traded more actively than CG. So the choice is clear. Actually, given its low premium, CF is a good choice too. But it is expired in 4 months. So, I would go for the safer choice with longer expiry date.

Next thing to do? Prepare money, find a target buying price and queue. For call warrant, I will be very particular, even a price bid of 0.005 difference matters to me, because it is bought in quantity.

Saturday, 3 January 2015

2014 Review

3 months return: -46.8%

OK. Faced reality. The fact is, I lost all my 9-month profit (unrealized) in the last 3 months of 2014. I vomit out all profit.

The good thing is, the capital is still there.
The bad thing is, I lost a full year of time and opportunity to grow my capital.

The number of transaction is high. The main reason is, after the "crash" in early Oct, I am completely lost, don't know what I am doing at that time. It would have been much better if I just don't look at the market, but I failed to refrain myself from doing so. I look at it even more frequently than I used to, and trade at a rate that I've never done it before. And the outcome is as expected: I lost even more.

Two big lessons learnt: 1. how to sell a share 2. not looking at the market everyday. I am even surprised at myself that I can now refrain from looking at the market for the whole day. This is really good. I don't plan to make any transaction anyway, why look at it so frequently?

Saturday, 27 December 2014

Book review: The Five People You Meet In Heaven

I realize that not looking at the stock market is a good decision. Now, I don't look at it as frequently as I used to be. It has been "a while" since I don't write non-investment stuff, today I am writing a book review, a book written by my favorite author.

Title: The Five People You Meet In Heaven
Author: Mitch Albom
Category: Fiction (Philosophy)
Year: 2003
ISBN: 978-0-7515-3614-0

The first time I saw this book was in 2008, where I have a glance through the Chinese-translated version of this book. I skimmed over it very quickly, have a feeling that this will be a good book to read. My feeling could not have been more accurate. I am impressed by the author's writing skill. Later on, I bought the English version.

The background is about an old man, Eddie, working in an amusement park for most of its life. He felt bored of the work and useless about himself for not accomplishing anything in his life. This book describes Heaven as a place where you seek answers for unanswered questions in your life. After Eddie's death, he met five people in the heaven. These people answered the questions that he has been seeking in his life, as to why these people crossed his path, as to how these people altered his life and as to why things happened as they did.

The first people he met is a guy that died for him. The whole point of this lesson is: Everything happens for a reason. I believe in this:  that what goes around comes around;  that there are no random acts; that all things are connected; This has nothing to do with religions though, is just a way of looking into life.

I like a quote in this chapter, that Eddie said it isn't fair that why the guy has to die for him and why he doesn't have to pay for his "sin". The guy replied:
"Fairness, does not govern life and death. If it did, no good person would ever die young."

The second people is Eddie's captain during war time.  Eddie lost one leg in the war. Everything changed after that. This lesson tells us that we have to make sacrifice in our lives.

Sacrifice. We made choices everyday, big and small. We inevitably need to sacrifice something to gain another. You win something, you lose something. Give and take. There is a balance to it all. The important thing is we can't keep thinking about what we've lost or what we should have chosen instead.

Another quote:
"Sometimes when you sacrifice something precious, you are not really losing it(the thing that you've sacrificed). You are just passing it on to someone else."

What a quote! This is strengthening what the author wrote for the first lesson, that all lives intersect.

The third person is a stranger to Eddie, yet she is connected with Eddie somehow. Eddie was angry with his father for the whole life, thinking that his father is accountable for all of his losses. But holding anger is a poison which eats you from inside. Hatred is a curved blade, the harm we do, we do to ourselves. That's why we need to forgive.

I like the analogy of curved blade. This is similar to people saying, when you point one finger to other, you are pointing three fingers to yourself.

The fourth person is his wife. His wife died early. Eddie lives by himself after that. His lost wife is the person that he has ever loved. This lesson is about how love goes on, even after death. Death merely ends a life, not a true love.

"Lost love is still love. It only takes a different form -- memory."
"Life has to end, but love does not."

Eddie's job is to maintain the rides in an amusement park. He felt his job is useless, boring and accomplished nothing. Therefore, the fifth person is to let Eddie knows that his job is important to maintain the safety of others, to kept the rides in the park functioning properly. The message conveyed is: Do not belittle yourself, do not feel unimportant for what you are doing. You may not know it at the time, but you will, in the future.

This is a very short review of the book. There are still a lot of great quotes and stories in the book. This is a great book. Totally awesome. However, on the way reading the story which leads to the lesson may be boring. Give it some patience, you will find the time spent is worthy.

Monday, 3 November 2014

Global market adjustment, what am I doing? (end)

I think Oct has been a roller coaster for a number of investors. Looking back for just 1 month, how many people has been played by the V-shaped rebound?

Several things to take note of:

1. If looking at the lowest point of adjustment makes me feel fortunate that I've sold my shares earlier, then what should I feel right now (i.e. as of market closed on 31 Oct)? Remember this experience.

2. The lesson of how to sell a share. To learn to let go, not to have any emotional connection with any share. This is not the first time I know this, but I didn't take it seriously. Selling INSAS 1.5 month ago taught me a lot. People say you need to forgive yourself, for all the things we didn't do, for all the things that we should have done. This is even more true in the stock market. It doesn't help if I keep on lamenting things like "I should have bought this share earlier" or "I shouldn't perform this transaction". Make peace, move on.  

3. The importance of capital protection. One of the reason why I sold INARI is that it has come to the point with the minimum acceptable profit. Of course, looking back now seems so stupid of me, but what if? No one knows what's going to happen.
As what people usually say: the stock market is always there, but will you always be ready for the market?

4. Confidence. I have to admit that I lost confidence to INARI after seeing it free fall consecutively. I even thought of something wrong is happening within the company. The is the main reason why I sell INARI (which some people raised concerns about its financial credibility before) and GHLSYS (which I bought in without any good reason except GST). But during the panic sell moment, I kept SHH, because I have confidence in the company. How to have confidence? Do homework and understand the company more.

5. Be patient. Sometimes retail investors are like patients in the stock market, looking for some guidance. So, patient needs to be patient. Even if the market is going up and I am holding cash, that's ok. Return is not determined by 1 month, look for a long term perspective.

6. At the lowest point of adjustment, a lot of shares have dropped to below my target buying price. E.g., MMSV 0.45 (lowest 0.38, current 0.58), IFCA-WA 0.30 (lowest 0.285 current 0.59) etc. At that time, I not even thought of buying any share. Ironic isn't it?

This experience makes me realize that I have no difference from most of the others,to be emotionally controlled by the market. I followed the crowd to panic sell at low point. If this is the case, how can this makes a difference in my investment return?

7.  Where do I stand in the market? I need to know what I am doing, all the rationales in buying and selling, and the plans of what if, i.e. risk management. If I know what I am doing, and know where I am standing in the market, I wouldn't have lost myself if something happens.

It is what it is. Take it as a lesson. Move forward.

Saturday, 25 October 2014

Global market adjustment, what am I doing? (2)

In one week time, things can change dramatically. The things that I hold so tight to previously, all gone in a few days. It was so near to me, yet it is now far away from me.

Ironically, I told myself that my target price is RM 2.70 for INARI before. When it reached that price, I didn't sell.

Ironically, I sold some shares at RM 3.18 before, which at that time it went to a high of ~RM 3.30+, which I thought that I've sold it at a low price. Seriously? What happen to me, that I still crave to sell at the highest point? The tighter you cling to something, the faster it is going away from you.

It has been so ironic to me, that my final selling price is not even my target price previously. Even worse, this is not the first time I experience this (see here).

I also panic sell GHLSYS at the same day. It now seems so stupid of me, that I could have had a return of 30% a few days ago before I sold, and now it became 3%.

What am I doing? The market has not adjusted for sometime, and I indulge myself to this kind of situation, to have 100% shares at ALL TIME, thinking to grab every single cent from the market.

What am I doing? I take things for granted, as if I should always be making profit, although past experiences have taught me not to (never) take things for granted.

What am I doing? I did not let my capital to rest for even a single day. I let them to subject to the daily market fluctuation, watching the portfolio rise and down, until I lost myself.

What am I doing? This experience is similar to May-Aug 2013, of which I've written some reviews in Jan 2014. I was vindictive last year, which has cost me even more, so now I decided to rest for sometime. 

[to be continued]

Monday, 20 October 2014

Global market adjustment, what am I doing? (1)

Global markets drops consecutively in two weeks ago. As usual, Asian markets will follow the trend of western markets.  I believe these two weeks has been a turmoil for a number of investors. Unfortunately, I have to admit that I am one of them.

The first day was 7 Oct 2014.

I use the term adjustment, because at this point it is sure that this is an adjustment since KLCI index drop far below its 200MA, i.e. year line. I don't know if it is a bear or not at this point.

Small and medium capital shares adjust really a lot. In just a few days time, my buddy INARI has drop more than 30%. 

My profit has evaporated significantly. This is what happen to INARI price, and how my feeling is manipulated by the market all these days.

7-10-2014: First day drop, no feeling at all. Not even thought of selling.

8-10-2014: First day GAP DOWN, continue holding, hoping it to get back. I told myself
that if the coming rebound has no volume, I will sell it.

9-10-2014: Small rebound. It happened that this rebound did not have the volume I expected. 
Yet I convinced myself to hold. Why? I am longing it to get back to its 
"normal" position that it used to be, i.e. above RM 3.20. (mistake 1)

10-10-2014:  Second day GAP DOWN. It is painful, terribly painful. One day of plunge
can get back to the price which is 4 months ago, i.e. if I sell now, I lost 4 months of

opportunity cost. I am still too proud to lose at this point.

13-10-2014: Third day GAP DOWN. Horrible sell off. Price went back to 7 months ago.
I can assure you that seeing your profit evaporate day by day is an extreme 

14-10-2014: Fourth day GAP DOWN, cannot tahan (stand) anymore, SELL ALL. (mistake 2)

15-10-2014: Continue going down, totally out of my expectation. Of course I felt
fortunate that I've sold it yesterday.

16-10-2014: Fifth day GAP DOWN. A total drop of 35%+ from 3.18 to today's low.
All happen in 1 week time. The opening price is RM 2.04.

Even though I know that this is a bargain price;
Even though I know that technically, the price is completely out of BB lower band 
(i.e. a rebound is very soon);
Even though I know that it will not continue to gap down everyday; 
Yet the emotional fear has stopped me from buying. I am too scared to buy in.

I guess this gives me a taste of bearish market,
that no matter how low the price is;
that previously you've thought that you would have bought in (probably all in?) at this bargain price, 
that who is so stupid to sell INARI at RM 2.04;
But the market will scare you from doing so. I admit that I am completely scared by the market at that time.
After all, seeing what happened on 15-10-2014 is that it open greenly in the morning, 
and at the end of the market it went down from RM 2.50 to RM 2.22 to close at the lowest
price. How dare for me to buy in if I see this kind of transaction?

Logic says: hey, INARI 35% discount price, when will you see this bargain again? 
Emotion argues: OMG, it has been free fall for so many days, how dare you 
catch the falling knife? never die before? 

At the decision moment, this time, my emotion won. I lost my logical
thinking seeing the market can be red like that.

17-10-2014: Strong rebound, I couldn't believe what has happened. A big slap to 

people that have sold it in the past few days.

After selling, I felt fortunate that the price continue going down.
After the rebound on 17-10-2014, what is my feeling then?

The market is controlled by big fish;
My emotion is manipulated by the market;
My decision is controlled by my emotion;

So my decision is controlled by the market, which should not be the case.

[to be continued]

Thursday, 9 October 2014

2014 Q3 Review

Return: +4.5% vs KLCI -1.9% (3 months)

Transactions: 3

 1. Sell PNE
I've been holding this share for 1.5 years. Not a bad return. Fortunately I have enough patience to wait for it. Thanks PNE. But one thing I must remember is that luck is an important factor. Who knows if it wouldn't move until 3 or 5 years? So I am really happy with this transaction.

2. Sell INSAS
This share has been grueling to me, finally cannot tahan (cannoot stand) and Sell INSAS. I don't have the patience that I have for PNE. Maybe one day in the future I will return, who knows?

3. Buy GHL
I love this transaction. This brings back me the "feeling" of short-term trading. I used to have this feeling, but the experience seems to disappear when I indulge myself too much in the stock market. Luckily I've regained this "feeling". Needless to say more, look at the chart:

9-9-2014: gap up with volume. I refrained from chasing high.

10-9-2014 to 18-9-2014: consolidation with low volume. I observed the movement. Telling myself that my target entry price will be around RM 1.05. Why? Because the closing price before gap up is RM 1.04. A "sincere" consolidation process shouldn't go below RM 1.04.

17-9-2014 already went down to RM 1.03, is in my entry price. But I did not look at the stock market on that day.

18-9-2014 I have something to do in the morning. Wait until I look at the price was already trading at RM 1.07. I didn't budge on the entry price this time. I queued for RM 1.05 and I just do my own thing. And it did match after that. I enjoyed an immediate return in a short time. What more could I ask for?

This is the trading style that I am looking at: wait for consolidation, find an entry price, do not chase high. Just let it happens its own way. If the transaction is not matched, just look for other opportunity.