Tuesday, 25 February 2014

Cairns trip, the Great Barrier Reef, a memorable experience

I traveled to Cairns (CNS) alone last year. Solo traveling is not something 'miserable' as I've thought, as I've got chance to meet other solo travelers along the trip, which is part of what making this trip to be memorable. . Cairns is located in Queensland (QLD), Australia, very far north from Brisbane (BNE), a city that would not become a city without tourism industry. Great Barrier Reef is the main attraction in Cairns, a natural gift for Australia with more than 1000 km of reef along the ocean. This is something that I've long sought after for, a place that I would go regardless of how much it would cost.

In travelling, it is always a good idea to rent a car with friends so that it is always easy to go anywhere. In Australia, I would always go for VroomVroomVrrom (click here for website) for car rentals. It combines many car rental companies in Australia so that you can compare them in a click, is really convenient to use.

The first day trip is to Green Island, where turtle can be easily spot. What is wonderful about this trip is the sub-marine tour, where I got a chance to observe the reef through glasses. The view on that day was not excellent, due to the rains few days ago.

great barrier reef

great barrier reef 2

In the city, on the way to Cairns Central, a shopping centre, you will walk by this bar with a creative, humorous sign board:

creative sign board


The second day trip is about a Daintree Rainforest and Cape Tribulation. The tour guide is in his 30s, very outgoing, sociable and passionate about his job. This is what makes him a good tour guide. On the journey to the destination, which took about 2 hours, he explained some history, the locations past by and sharing some of his personal experience. He mentioned about how he traveled around Australia with his girl friend (now wife) in his 20s, and finally decided to settle down in Cairns. The way he sounds when sharing this story reveals how much affections he has to Cairns, the same feeling that I have to my home country Malaysia. 

Cassowary, a big eater, only in Australia and Papua New Guinea


cassowary

WALUWURRIGA Alexandria range lookout point

Alexandria range lookout point

Another look out point:


The tropical climate in Cairns is humid, which somehow compensates the dryness in other parts of Australia. This is part of what making Australia to be a great place: a seasonal climate in the southern part, a tropical climate in the northern part. 

The last day trip is to great barrier reef, which I purposely planned for, which didn't disappoint me. The event crew on the boat are all very helpful, fun and humorous, a typical way many Australians would behave. The coral sea is so beautiful. I opted for a helicopter scenic flight. The view of Great Barrier Reef from the helicopter is just spectacular and amazing.

Crystal clear water:


a fish

Life experience - helicopter scenic flight!


helicopter

Nice view from the helicopter:

spectacular view

 This is just spectacular:


spectacular view 2

How beautiful is this?


spectacular view 3

Staying 4 nights in a backpacker resort, people come and go. Each and every day I will meet new travelers staying in the same room. We always talk and exchange experience. The next post will be about people met along the trip.

Wednesday, 19 February 2014

A past experience, a reminder to myself

There are several types of stock account. One of the most common is a cash upfront account, in which you are only able to buy shares with the money in your trust account, i.e. trading limit = cash available. Another common one being the margin account, which allows you to trade, e.g., 2X based on your cash available.

Having mentioned margin account, once I saw a "joke" in Investalks, saying that for those working in Singapore, they don't even need to have a margin account to trade 2X of the cash available, because what they are earning already has the marginal trading effect in Bursa Malaysia. Kind of cold jokes, but it reflects how the continuous depreciation of MYR erodes its value against other currencies.

Back to story. When I opened my account, I opted for cash upfront account. I know that, deep in my mind, this will prevent me from "gambling", as my weaknesses will be completely reflected in stock market, of how greedy I am, of how uncontrollable I am, of how unsatisfied I am, when the crucial moments come. By only forcing myself to use cash upfront account, I can avoid gambling on trading limit which may be over my financial affordability.

This decision DID save me from some losses. Back in 2011, I have a cash value of about 10k in my account. It happened at that time that PROTON (now delisted, took over by DRBHCOM), came the news about take over by DRBHICOM. Read a related news here.

Due to the news, PROTON gap-up open on 6 Dec 2011, from RM 4.50 previous close to open at RM 4.75. Its call warrant, that I was aiming at, PROTON-CG, open at RM 0.430 from a previous close of RM 0.370. Seeing such a strong positive sentiment, I plan to hantam (ALL-IN) all my cash to buy this call warrant.

PROTON-CG


I remember vividly that, I key in BUY RM 0.435 for 250 lots. ORDER DECLINED. I don't know why the order was declined. I tried a second time IMMEDIATELY (such a rash decision), same amount same price. ORDER DECLINED. Only then I calculated the total amount I wished to trade = RM 0.435* 25000 = RM 10875, which is over my trading limit for about RM 1k. I gave up buying.

Soon after that, PROTON turned from green to red, and PROTON-CG closed at RM 0.315 on that day. Had the transaction been successful, I would have suffered a loss of 3k in a day. Although it has gone up finally - 1 month later, I wouldn't have waited until that should I have the call warrant, I would have cut lost on the first day of my purchase.

My cash upfront account SAVE me from the loss. Of course, it did "prevent" me from some earning, but using margin trading limit for me is risky currently, as I am still learning how to control myself. In addition, past experience has shown that even though I may win some money at first, I might have lost even more at a later stage due to uncontrolled trading. I still feel comfortable using this cash upfront account. The feeling of "not earning enough" abates as my experience accumulates.

This experience also proves the well-known quote "buy on rumours and sell on facts". When news have already been announced, don't chase, is time to sell if you hold the shares. Anyway, this is an experience for me to remember, which will hopefully remind me to avoid the similar mistakes in the future.

Friday, 14 February 2014

NYSE: Selling call options: some basic stuffs

This time is the seller of call options. Selling options will always earn you premium, as you get the chance to be the "insurance company", as if collecting premium from buyers who wish to protect their shares. 
Case 1: Out of money

Buy: AMD JanWk5 3.5
Strike price = $ 3.5
Expired date = 31 Jan 2014
Cost: 0.13/options = 0.02*1000 = $ 20 + ($ 15.35 brokerage)
AMD cloased at 31 Jan 2014 = $ 3.43

AMD @ 30 Jan 2014 = $ 3.45. It has little chance to close above $ 3.50, hence the premium is very small. At the expired day, AMD closed below strike price, so premium was collected free by call seller.

Case 2: In the money

Buy: AMD JanWk5 3
Strike price = $ 3.5
Expired date = 31 Jan 2014
Cost: 0.13/options = 045*1000 = $ 450 + ($ 15.35 brokerage)

Call options is in the money at the expired date, i.e. call options will be exercised. I am required to sell the share @ $ 3 to the call options buyer. If I will to buy back immediately, this will cause me a loss of $ (3-3.43) = - $ 0.43 / share. But I collected premium from selling the call. So is a different story.

Based on yesterday closed price of $ 3.70, if I buy back to close my position, my net loss will be:

+ $ 450 - $ 3000 + $ 3700 = - $ 250.

There is something known as Sell Covered Call, which is pretty common in options. Covered here means that you own the mother share, and at the same time, selling call options to earn premium. If the shares go down, the premium collected will be yours. If the share rises, you still earn from having the upside of the mother share. This looks to be a good deal, although still need some time to have a deeper look on it.

Thursday, 13 February 2014

KLSE: without a target price, what triggers a sell?

I top up pne two weeks ago, during the washing period, a very good chance to top up: steady price with low volume. My top up price isn't that beautiful, because at the end of Jan when US market plunged 2%+ in a day, it came down to as low as 0.490. That day causes quite a shock in global market, but the heavy selling abates few days after that.

Today has proven that my top up decision was right - 28%+ a day, where to find such a huge return in one day?

I observed very carefully during the trading hours. This is a very good chance to see how the big fish push up a stock. At 0.700, there is a very obvious washing process - last for a good 10 minutes before continuing buy up.

When the queue is:

Buy Qty   Buy       Sell    Sell Qty
   100     0.700     0.705   200

Then sell down transaction will occur, either traded in 27 followed by 73, or 100 lot in a single transaction. This will result in:

Buy Qty   Buy       Sell    Sell Qty
   XXX     0.695     0.700   200 (or 100)

Then the 200 ( or 100 lots) of 0.700 will be eaten in a minute again. And then the same scenario repeat for 10 minutes at 0.700, to create volume. I do not know the intention of this, but clearly, the big fish holds most of the share. This phenomenon is observed at other prices as well, but not that obvious.



A very beautiful trade detail, showing a strong buy rate of 82%, this is extremely high! With today KLCI sentiment, this share is just too strong. The volume is beautiful, but is a little bit huge already?



1000 lots of buy volume - I have never seen this happened in this share, something must be coming very soon? All buy up transactions, showing how strong is this share although the market is going down today.

What I am worry is the huge volume today. But the candle is very good though. I still doesn't have any target price for this, kind of losing direction in selling.

If tomorrow is a big gap up, I would run.
If tomorrow continue rising, I would see until which point it will go. Perhaps sell half?
If tomorrow small volume, forget about it.

Hopefully my previous experience learned from stock market will help in making the decision this time.

Wednesday, 12 February 2014

NYSE: Buying call options: basic things to know

2 cases of call options are considered:

1. in the money: A call options is in the money when share price > strike price (opposite to put)
2. out of money: A call options is out of money when share price < strike price

Case 1: Out of money

Buy: BAC JanWk5 17
 (NYSE: BAC, Bank of America Corp)
Strike price = $ 17
Expired date = 31 Jan 2014
Cost: 0.13/options = 0.06*1000 = $ 60 + ($ 15.35 brokerage)
MSFT cloased at 31 Jan 2014 = $ 16.75

BAC price at 30 Jan 2014 = $ 16.93. As a call options buyer, I anticipate the share price to be higher than $ 17 on the expired date. This did not happen, so my premium is collected by the seller. The call options expires worthless.

Case 2: In the money

Buy: BAC JanWk5 16
Strike price = $ 16
Cost: 0.13/options = 0.87*1000 = $ 870 + ($ 15.35 brokerage)

This call options is most probably to be in the money, as BAC share price is higher than the strike price. Essentially, I paid a premium of  $ (16 + 0.87 - 16.81) / $ 16.81 = 0.4% as compared to buying the mother share directly. This is very much similar to buying call warrants, however, call warrants in Malaysia are all cash settlements, i.e. does not have the option to convert to mother share. 

Note: $ 16.81 is BAC opening price on 30 Jan 2014.

On 31 Jan 2014, this call options was exercised, so I can buy BAC mother share @ $ 16. 

BAC closed @ $ 16.72 on 10 Feb 2014. If I sell the mother share yesterday @ $ 16.71, I would make a profit of 0.71/share from the mother share = $ 710.

Then my net profit is
 = - $ 870 (call options) - 16000 (stock assignment @  $ 16/share) + 16710 + (brokerage)
= - $ 150

If I wouldn't want to incur any loss, I can hold BAC to wait the share price to go up until it breaks even my cost.

Friday, 7 February 2014

NASDAQ: Buying put options, what should you know?

I traded put options to see what happens to the contract when it expire either:

1. in the money: A put options is in the money when share price < strike price (opposite to call)
2. out of money: A put options is out of money when share price > strike price

Case 1: Out of money

Buy: MSFT JanWk5 36 Put
 (NASDAQ: MSFT, Microsoft Corp, everybody knows what this company does)
Strike price = $ 36
Expired date = 31 Jan 2014
Cost: 0.13/options = 0.13*1000 = $ 130 + ($ 15.35 brokerage)
MSFT cloased at 31 Jan 2014 = $ 37.84

At the expired date, MSFT stayed at $37.84, which is higher than the strike price, meaning that the options is out of money, i.e. worthless. It was brought to close automatically (zero cost).

As a put options buyer, I anticipate the share price to drop from $ 36.86 (30 Jan 2014) to $ 36, i.e. a fall of 2.3% in 1 day, which is rather a slim chance. The premium is collected free by the seller. Nobody will exercise his right in this case, as it would mean to selling the share @ $ 36 and then buy back @ current market price of $ 37.84, such a stupid action isn't it? 

MSFT options


Case 2: In the money

Buy: MSFT JanWk5 38 Put
Strike price = $ 38
Cost: 0.13/options = 1.59*1000 = $ 1590 + ($ 15.35 brokerage)
MSFT cloased at 31 Jan 2014 = $ 37.84

On 31 Jan 2014, MSFT share price is $ 37.84 < strike price $ 38, i.e the options is in the money, it will be exercised automatically. Hence, I can sell MSFT @ $ 38 to put options seller. But I don't have any MSFT share in my portfolio, this means that I will have to "short sell" MSFT to the seller, causing me to "earn" $ 38*1000 = $ 38.000 by selling the shares.

I need to buy back the share to close my position. At this time, MSFT share is trading at $ 37.84, which means that I earn a difference of $ 160 immediately. But then in purchasing the put options already cost me $ 1590, which means that I actually incur a loss of $ -1590 +  160 + (brokerage) = -$ 1430. As a put options of strike price @ $ 38 is highly possible to be in the money during expiry, which is why the price is so high. Being a put options buyer, I expect the share to go down, but MSFT is going the opposite direction against my prediction. In short, as long as your put options is in the money, you will be required to sell the share at the strike price.

Yesterday, MSFT closed at $ 36.18, due to bad market sentiment few days ago. This means that I will make a profit of $ (38 - 36.18)*1000 = $ 1820 if I close my position yesterday.

Net profit = $ -1590 + 1820 + (brokerage) = $ 230.

This is not surprising, a put options buyer will always benefit from a loss in share price.  Not a bad return in such a short time if the direction anticipated is correct right?