Investment Game: March 2011

Monday, March 28, 2011

Investment Related Websites

https://www.borntosell.com/portfolio
http://www.888options.com/resources/covered_call_calculator.jsp
http://www.etfcoveredcalls.com/covered-call-walkthrough/
http://coveredwriter.blogspot.com/

http://www.mymoneyblog.com/

Covered Call Candidates:
QLD, SQQQ
TQQQ -- SQQQ
QQQ -- QID,
XLK, IYZ

Sunday, March 27, 2011

US Equity History YTD (1st Quarter)

US Equity History YTD (1st Quarter) along with major events:

Japan ETF -- EWJ

=======================================
Five Myths About Asset Allocation
Richard A. Ferri, 06.11.10, 11:00 AM EDT

Forbes Magazine dated June 28, 2010
There is no perfect allocation and no absolute protection in a bear market. But it's still worth diversifying and rebalancing once a year.

Myth 1: Asset allocation protects you from the bear.

Myth 2: Tactical allocation is best in volatile markets.
Myth 3: There is an optimal strategic asset allocation.
Myth 4: Constant rebalancing is needed.
Myth 5: More funds equals more diversification.

========================================

http://www.bloomberg.com/markets/economic-calendar/

http://www.etfsecurities.com/us/securities/etfs_securities.asp
Perfect Portfolios: Updated
http://www.smartmoney.com/investing/stocks/the-perfect-portfolio-1294688341486/

http://online.wsj.com/public/quotes/browse_etfs.html
http://blogs.barrons.com/focusonfunds/?mod=BOL_other_tnav_blogs

Expected Retirement Account Acrument

Retirement Calculator

Current fund Amount: $260,000.00
Total fund Amount:		$1,377,230.04
Interest:		6%
Annual contribution:		$24,000.00
Age to reach your goal:		65

Fund Values for the Next 17 Years
Year	Total Annual Contribution	Total Fund Value
1	24,000.00	299,600.00
2	48,000.00	341,576.00
3	72,000.00	386,070.56
4	96,000.00	433,234.79
5	120,000.00	483,228.88
6	144,000.00	536,222.61
7	168,000.00	592,395.97
8	192,000.00	651,939.73
9	216,000.00	715,056.11
10	240,000.00	781,959.48
11	264,000.00	852,877.05
12	288,000.00	928,049.67
13	312,000.00	1,007,732.65
14	336,000.00	1,092,196.61
15	360,000.00	1,181,728.41
16	384,000.00	1,276,632.11
17	408,000.00	1,377,230.04

Friday, March 25, 2011

First Covered Call in 2011

1. Look at the 1 Yr Stock Chart for QLD. It looks like a chance to do covered call -- It has fallen from its Feburary high and started to rebound. Optimistically, there is chance it will bounce back to its Feburary high of $95.35. The stock is not at around $89. From $89 to $95, it is of ($95-$89)/$89=6.7% increase.

(http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Fund&symb=QLD&x=45&y=9&time=8&startdate=1%2F4%2F1999&enddate=3%2F27%2F2011&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=3&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&style=320&size=2&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=10)

2. Take a look at the Option Chain for option expiring on July 16. The bid and ask prices of the $89 call are $7.3 and $7.8 respectively. Conservatively, there is possibility of maximum return of $7.3/$89=8.2% within about 4 months.

3.To calculate the "Premium" of the "Net Debit", 

Premium = Bid Price of the Underlying Stock - Ask Price of the Call Option

= $89.23 - $7.85 + $0.05 = $81.38 + $0.05 = $81.43

Here is the order:

Here is the Review of the Order before submission:

4. Here is the Order Status before its being filled:

5. Here is the Order Status when it is filled:

Here is the History page after the order is filled:

6. Here is the Position and Balance page after the order is filled:

Price bought = $88.94
Premium received = $7.51


Total Cost = $88.94 * 100 + 20 = 8910$

----------------------------------------

Balance Before Covered Call Trading:

Cash balance         $0.00             

Money market         $10,841.80          

Long stock value     $3,386.56     (QLD= 89.12$/share * 38 shares) 

------------------------------------------------------------------------

Account value           $14,228.36       

Balance After Covered Call Trading:

Cash balance         $0.00             

Money market         $2688.04      $10,841.80-$8143-$10.76    

Long stock value     $12,273.72     (QLD= 88.17$/share * 138 shares) 

Short Stock Value    -$750        ($7.5 * 100 = $750)

------------------------------------------------------------

Account value           $14,105.5

7. Let's see what we will get as maximum possible gain and loss:


7.1 Maxium Possible Gain:
Final Banlance = ($88.94+$7.51)x100 = $96.45x100 = $9645
Total Rate of Return (TRR) = ($9645-$8910)/$8910 = 8.24%
Final Balance =  138x$96.45 + $2688.04 - $11 = $15,987.14


7.2 "Reasonable" Possible Loss: 
Final Balance = ($70+$7.51)x100 = $77.51x100 = $7751
Total Rate of Return (TRR) = ($7751-$8910)/$8910$ 
= -$1159/$8910 = -13.00%
If this happens, I will buy $750 worth of QLD, that will be
$750/($70/share) = 10 shares. 
Final Balance =  138x$70.00 + $2688.04 = $12,348.04.


Let's see if we will end up at $15,987.14 or $12,348.04. Most likely it will be at somewhere in between.



Here is the QLD option quote expiring July 16, 2011:

http://finance.yahoo.com/q/os?s=QLD&m=2011-07-15
8. Prediction of Best and Worst Cases in 5 Years:
Best Case:
4 Months: 8%;
12 Months: 1.08^3 = 1.259 ==> 25.9% anually
5 Yrs: 1.2^5 = 2.488
$14,000 ==> $8910 x 2.48 =  $34,832 in 5 years.


Worst Case:
The stock will go to $30/share 
10 shares bought whenever it drops 20$, so, 30 shares to be bought
Total Values (38+100+30)shares * 30$/share + $2500 cash 
= $5040+ $2500=$7540.
TRR =  (7540-14,000)  / 14,000 =  -6460/14000 = -46%


However, it reaches to $70, the portfolio will become:
168*70$ + 2500$  =  11,760$ + 2500$ = 14,260$