What's the secret?

[Anonymous]

Anonymous wrote:OP. Thanks for all of the comments, and for giving me some perspective. Sounds like I need to appreciate what I have and continue my slow and steady approach. Sometimes it just seems that everyone is out there vacationing away, and having these fab lives, but perhaps it isn't always what it seems.

I think part of our problem is that we used to save a lot more. We had a goal of having a 20% down payment for a house (850K). We finally bought the house, so now just scary to not see that money in the account anymore, plus we have a bigger house payment that I would like. We have a healthy emergency cash fund, we save for college each month, and we max out retirement accounts, so guess we need to just buckle back down, and start saving again for the next phase...

Thanks DCUM friends.

Well now it is clear why you are not feeling well off ... you are carrying a $600k+ mortgage on $225k HHI. If you are also maxing out retirement and saving for college, then there isn't going to be much leftover. Not everyone with that income chooses to carry that high of a mortgage, and conversely, not everyone with that high a mortgage makes $225k (i.e., they make more). So while you may not be vacationing away and have other fab stuff, you presumably have a nice, close-in house with good schools that others at your income level do not have.

[Anonymous]

For us the "secret" is living below our means. But that's just part of the picture. A lot more is luck, and time. I was very lucky to buy my house in 2003 in a very transitional neighborhood, that is now a "hip" neighborhood. As a result I have more than $500k in equity and a mortgage of less than $200k. Plus more than 10 years of regular retirement savings is finally turning into a sizeable sum. And finally, the big difference that has taken place in the past year was (sadly) a sizeable inheritance when one of our parents died.

[Anonymous]

Tip of the day.

Buy the Jan. 2015 Bank of America, Call Option.

It wil cost you about $1.70 per share at the strike price of $15.

Buy 10,000 = $17,000

Present Real Time Price 14.64.

You would be buy the rights to purchase 10,000 Shares of BAC at $15 in roughly 510 days from today. In order for you to break even the share price during the next 510 day must rise to $16.70. Beyond that price would be making a profit. Any price below $16.70 and you'd be taking a loss.

For every dollar it sells for over $16.70 in January 2015 you'll be making a profit of $10,000. If BAC ran up to $26.70 (and it will) during the next 510 days your profit will be $100,000 minus the $17,000 you paid today for the Call Option for a net profit of $83,000.

[Anonymous]

Stop trying to compete with friends. If you do that, your life will become less stressful.

[Anonymous]

OP, I feel I could have written what you wrote. Same income, somewhat cheaper ($650K) house, and also feeling like our peers have more than we do. But - we have no family money, no help of any kind, paid for college ourselves (just paid off my loans last year), now child-related expenses. And we have more conservative views of finances (no credit cards, no car loans, etc.) We are also saving aggressively, to the tune of 6K/month. Some day it will pay off, I hope. Or we'll just die saving.

[Anonymous]

Anonymous wrote:OP, I feel I could have written what you wrote. Same income, somewhat cheaper ($650K) house, and also feeling like our peers have more than we do. But - we have no family money, no help of any kind, paid for college ourselves (just paid off my loans last year), now child-related expenses. And we have more conservative views of finances (no credit cards, no car loans, etc.) We are also saving aggressively, to the tune of 6K/month. Some day it will pay off, I hope. Or we'll just die saving.

Bah, they can just go ahead and bury me in my pile of debt when I'm gone.

[Anonymous]

OP, we have slightly lower income than you but a similar mortgage. A $500K inheritance a few years ago made all the difference.

[Anonymous]

Anonymous wrote:Tip of the day.

Buy the Jan. 2015 Bank of America, Call Option.

It wil cost you about $1.70 per share at the strike price of $15.

Buy 10,000 = $17,000

Present Real Time Price 14.64.

You would be buy the rights to purchase 10,000 Shares of BAC at $15 in roughly 510 days from today. In order for you to break even the share price during the next 510 day must rise to $16.70. Beyond that price would be making a profit. Any price below $16.70 and you'd be taking a loss.

For every dollar it sells for over $16.70 in January 2015 you'll be making a profit of $10,000. If BAC ran up to $26.70 (and it will) during the next 510 days your profit will be $100,000 minus the $17,000 you paid today for the Call Option for a net profit of $83,000.

Could you elaborate? I'm really curious if this is reliable.

[Anonymous]

OP - there is a lot of family money here and there are also a lot of people who are in debt/living on the edge in order to have the lifestyle they want. Also when you get to know people, you learn that often the SAHMs had significant successful careers of their own before they decided to stay home with the kids; I know more than one SAHM mom who was biglaw for 5+ years before kids -- some of them invested that money in the market, real estate etc. and lived off of their husbands' salaries for daily expenses, so they ended up in their mid to late 30s with quite a nest egg that they use for "extras" like private school or vacations or cars.

[Anonymous]

My sister and BIL have a similar HHI to ours, except that their ILs paid for her Ivy graduate education, pay for their int'l vacations every year, and they pay for anything my sister and fam buy at Target. The Target card is just paid, no questions asked, each month.

I'm envious, but happy for my sister at the same time. She is the best, and very hardworking herself.

We have no such help from either side, ever. We vacation close by with my ILs each year, and they pay, and this is for us to be very very grateful for, even though I hate that week.

My ILs act like they wrote the book on the correct way to do everything, so smug. They drive fancy cars, brag that they have no mortgage and buy everything in cash. I wonder if they are aware of what other parents do for their families. Sometimes I fantasize about mentioning the paid for cruises, Target cards to them, just to see their faces.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Tip of the day.

Buy the Jan. 2015 Bank of America, Call Option.

It wil cost you about $1.70 per share at the strike price of $15.

Buy 10,000 = $17,000

Present Real Time Price 14.64.

You would be buy the rights to purchase 10,000 Shares of BAC at $15 in roughly 510 days from today. In order for you to break even the share price during the next 510 day must rise to $16.70. Beyond that price would be making a profit. Any price below $16.70 and you'd be taking a loss.

For every dollar it sells for over $16.70 in January 2015 you'll be making a profit of $10,000. If BAC ran up to $26.70 (and it will) during the next 510 days your profit will be $100,000 minus the $17,000 you paid today for the Call Option for a net profit of $83,000.

Could you elaborate? I'm really curious if this is reliable.[/quote

There is not much more to say. If you have a brokerage account you can purchase shares in corporations e.g. Bank of America (BAC) closed at $14.65 today. To purchase 10,000 shares of BAC at the current price it will cost $140,650. That's quite a bit of cash or a large loan if you were to purchase them on margin. If you believe as I do that the economy is in recovery mode and when national economies expand the banking industry profits then you might ascribe to the notion that BAC which is only selling presently for 65% of its book value will grow in price over the next several years. Notable bank analyst Dick Bove believes BAC will double in price during the next two years to somewhere in the $28 per share range.

So, if you go to your investment broker's website and get a quote on BAC you'll find it closed at $14.65 and there will be a prompt asking you if you wish to make a trade. When you purchase shares you own them forever or until you sell them. When the market crashed in 2008-2008 the value of people's portfolios crashed as well, but for those who did not sell their shares, for the most part their shares have now returned to profitability. However there are exceptions like Citibank and G.E. the point is if you own shares you have the potential to weather the storm during down markets.

What I am suggesting is potentially more risky, but the upside is almost exponentially greater. Rather than purchasing 10,000 shares of BAC for $140,650, you would be purchasing a contract for $17,000 that guarantees you the right to purchase 10,000 shares in Jan. 2015, for $15 per share. You have to decide for yourself, but I believe on that date shares of BAC will be selling for at least $26.70.

My option contract guarantees me the right to purchase those 10,000 shares at the price of $15. I then purchase 10,000 shares times the options price of $15 equals $150,000. However, if my presumption of BAC share price appreciation to $26.70 is correct, times 10,000 shares the value of my purchase will be $267,000. Immediately after purchasing my 10,000 shares at $150,000, I will sell them at market price (Jan. 2015) for $267,000. Now I'll have, $267,000, but I have to strip away my costs of doing business which are as follows: the $17,000 spent to purchase the options contract is gone. I had use or borrow $150,000 to purchase the shares so that's not profit either. So now I've had to strip out $167,000 dollars from the $267,000 in proceeds from the sale leaving me with a $100,000 profit.

I like to use the number of 10,000 shares because it is easy to translate that any gain of $1 in share price translates into a $10,000 profit for me. Depending on the options you purchase they can expire as early as tomorrow or years into the future. In the scenario I've described the break even point is $16.70 in Jan. 2015. Anything below $15 and the trade will expire without being executed resulting in the total loss of the $17,000 spent to purchase the contract. However, the beauty of this kind of an options contract is the most you can possibly lose is your initial purchase price which in this scenario is $17,000, but the upside potential gain is only limited by the window of opportunity which in this case is more than five hundred days into the future.

I just happen to like the banks right now. Options such as this can be purchased on just about any corporation listed on the stock exchanges. Just to reiterate. To use $17,000 to purchase BAC shares you could purchase roughly 1,250 and if the price runs up $10 during the next five hundred days your profit will be $12,500. However, if you used $17,000 to purchase options contracts under the same scenerio your profit will $100,000 minus the cost of the options.

It seems a lot more complicated than it really is. You can do this!!! Be a proud and unabashed capitalist!!!

[Anonymous]

Anonymous wrote:

Anonymous wrote:Tip of the day.

Buy the Jan. 2015 Bank of America, Call Option.

It wil cost you about $1.70 per share at the strike price of $15.

Buy 10,000 = $17,000

Present Real Time Price 14.64.

You would be buy the rights to purchase 10,000 Shares of BAC at $15 in roughly 510 days from today. In order for you to break even the share price during the next 510 day must rise to $16.70. Beyond that price would be making a profit. Any price below $16.70 and you'd be taking a loss.

For every dollar it sells for over $16.70 in January 2015 you'll be making a profit of $10,000. If BAC ran up to $26.70 (and it will) during the next 510 days your profit will be $100,000 minus the $17,000 you paid today for the Call Option for a net profit of $83,000.

Could you elaborate? I'm really curious if this is reliable.

What the poster neglects to mention is the downside. If you buy $17,000 worh of options and it doesn't go over 16.70, you loose $17,000. All of it. So, unlike stock, it's truly a full-on bet for $17k. You can also buy some puts to hedge the downside but increase the volatility you need to see to make a return.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Tip of the day.

Buy the Jan. 2015 Bank of America, Call Option.

It wil cost you about $1.70 per share at the strike price of $15.

Buy 10,000 = $17,000

Present Real Time Price 14.64.

You would be buy the rights to purchase 10,000 Shares of BAC at $15 in roughly 510 days from today. In order for you to break even the share price during the next 510 day must rise to $16.70. Beyond that price would be making a profit. Any price below $16.70 and you'd be taking a loss.

For every dollar it sells for over $16.70 in January 2015 you'll be making a profit of $10,000. If BAC ran up to $26.70 (and it will) during the next 510 days your profit will be $100,000 minus the $17,000 you paid today for the Call Option for a net profit of $83,000.

Could you elaborate? I'm really curious if this is reliable.

What the poster neglects to mention is the downside. If you buy $17,000 worh of options and it doesn't go over 16.70, you loose $17,000. All of it. So, unlike stock, it's truly a full-on bet for $17k. You can also buy some puts to hedge the downside but increase the volatility you need to see to make a return.

I believe I did include the risk, but if not I'll try again and clarify a mistake you seem to have made. The premium price for the options is $1.70 per share sold in 100 share blocks and the strike price is $15 in Jan. 2015, giving you the right to purchase a quantity of BAC shares equal to the number of options you own. So today, you've invested $1.70 for the right to purchase shares at $15 in Jan. 2015. The goal you are trying to achieve is for BAC shares to be selling in the market for a price greater than $16.70 in Jan. 2015.

Anything above $16.70 you are making a profit. Anything between $16.70 and $15 and you are incrementally losing the $1.70 premium times the number of options you've purchased until you reach the $15 per share price where the entire 1.70 per share premium will be permanently lost.

So the upside is infinite, however realistically bank analyst Dick Bove expects the price of BAC to double in two years. With the share price currently at $14.65, if you believe in our ecoconomic recovery it's not too difficult to imagine the share price of BAC being greater than $16.70 in Jan. 2015 where you would begin to make a profit.

Where the PP is mistaken is that the option gives you the right the execute your trade in Jan. 2015 at $15 regardless of the market price at that time. So, if you did not profit from the price being above $16.70, you could still mitigate your loses by executing the trade at any point above $15 per share. If the price on the expiration date was $16.00, you would still make the trade because it would reduce your loss from $1.70 per share to $.70 per share. So in larger terms of 10,000 options at $1.70 the cost is $17k where it is reasonable to believe over the course the next 500 plus days the share price will appreciate $12 to the $26.70 range at which time the owner of said options will enjoy a profit of roughly 10,000 times $10 (the difference between $16.70 and $26.70) equaling a gain of $100k. Clearly, depending on the share price in Jan. 2015 the gains could be less or even greater, and the potential for losing money always exists, but potential for loss will never be any greater than the options premiums you have spent to purchase the options.

Also, options are traded in the market daily just like shares themselves so at any point when you feel you've made enough profit or you feel the risk is too great and you want to get out, you just trade/sell the option to someone else. As the price of the stock appreciates the price of the options appreciate as well. So, you are not stuck in the trade until in this scenario until Jan.2015.

If you believe in the U.S. economic recovery this is a good options trade. However, if you feel dower about our economic recovery during the next year and a half this is a trade you should avoid.

The secret is to leverage your money wisely. This is just one option presented to you from the millionaire who lives next door. I'm not rich and there are many, many people who are much smarter than me, but I do okay.

You can do this!!!! You can be a successful capitalist!!!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Tip of the day.

Buy the Jan. 2015 Bank of America, Call Option.

It wil cost you about $1.70 per share at the strike price of $15.

Buy 10,000 = $17,000

Present Real Time Price 14.64.

You would be buy the rights to purchase 10,000 Shares of BAC at $15 in roughly 510 days from today. In order for you to break even the share price during the next 510 day must rise to $16.70. Beyond that price would be making a profit. Any price below $16.70 and you'd be taking a loss.

For every dollar it sells for over $16.70 in January 2015 you'll be making a profit of $10,000. If BAC ran up to $26.70 (and it will) during the next 510 days your profit will be $100,000 minus the $17,000 you paid today for the Call Option for a net profit of $83,000.

Could you elaborate? I'm really curious if this is reliable.

What the poster neglects to mention is the downside. If you buy $17,000 worh of options and it doesn't go over 16.70, you loose $17,000. All of it. So, unlike stock, it's truly a full-on bet for $17k. You can also buy some puts to hedge the downside but increase the volatility you need to see to make a return.

I believe I did include the risk, but if not I'll try again and clarify a mistake you seem to have made. The premium price for the options is $1.70 per share sold in 100 share blocks and the strike price is $15 in Jan. 2015, giving you the right to purchase a quantity of BAC shares equal to the number of options you own. So today, you've invested $1.70 for the right to purchase shares at $15 in Jan. 2015. The goal you are trying to achieve is for BAC shares to be selling in the market for a price greater than $16.70 in Jan. 2015.

Anything above $16.70 you are making a profit. Anything between $16.70 and $15 and you are incrementally losing the $1.70 premium times the number of options you've purchased until you reach the $15 per share price where the entire 1.70 per share premium will be permanently lost.

So the upside is infinite, however realistically bank analyst Dick Bove expects the price of BAC to double in two years. With the share price currently at $14.65, if you believe in our ecoconomic recovery it's not too difficult to imagine the share price of BAC being greater than $16.70 in Jan. 2015 where you would begin to make a profit.

Where the PP is mistaken is that the option gives you the right the execute your trade in Jan. 2015 at $15 regardless of the market price at that time. So, if you did not profit from the price being above $16.70, you could still mitigate your loses by executing the trade at any point above $15 per share. If the price on the expiration date was $16.00, you would still make the trade because it would reduce your loss from $1.70 per share to $.70 per share. So in larger terms of 10,000 options at $1.70 the cost is $17k where it is reasonable to believe over the course the next 500 plus days the share price will appreciate $12 to the $26.70 range at which time the owner of said options will enjoy a profit of roughly 10,000 times $10 (the difference between $16.70 and $26.70) equaling a gain of $100k. Clearly, depending on the share price in Jan. 2015 the gains could be less or even greater, and the potential for losing money always exists, but potential for loss will never be any greater than the options premiums you have spent to purchase the options.

Also, options are traded in the market daily just like shares themselves so at any point when you feel you've made enough profit or you feel the risk is too great and you want to get out, you just trade/sell the option to someone else. As the price of the stock appreciates the price of the options appreciate as well. So, you are not stuck in the trade until in this scenario until Jan.2015.

If you believe in the U.S. economic recovery this is a good options trade. However, if you feel dower about our economic recovery during the next year and a half this is a trade you should avoid.

The secret is to leverage your money wisely. This is just one option presented to you from the millionaire who lives next door. I'm not rich and there are many, many people who are much smarter than me, but I do okay.

You can do this!!!! You can be a successful capitalist!!!

Unfortunately, this post confirms the negative stereotype I have of modern "capitalists." It's all just a numbers racket of puts and calls and options, devoid of actually doing anything (building a factory, hiring people, creating a product). If you can navigate the analytics and tax laws, you can make money.

But, I guess that's why I've never figured out "the secret".

[Anonymous]

Anonymous wrote:

Unfortunately, this post confirms the negative stereotype I have of modern "capitalists." It's all just a numbers racket of puts and calls and options, devoid of actually doing anything (building a factory, hiring people, creating a product). If you can navigate the analytics and tax laws, you can make money.

But, I guess that's why I've never figured out "the secret".

+1