Bogleheads.org

Are all options in your example settled into the same futures contract? No they are not. Yes, I made sure of that. I pick the same thing for different dates based on same underlying future ES June future June 16 options are of American style March 24 options are of European style Note: there is one more European option for June 16 that settle to September future. I didn't pick it. I think American exercise style FOPs have a different pricing formula. Different from equity index options which are always suboptimal to exercise early, it can make sense for the owner of the long position to exercise FOPs early. Do some reading. I think your formula is also somehow missing the risk-free rate. Thank you. Yes the difference is due to American sty...

Are all options in your example settled into the same futures contract? No they are not. Yes, I made sure of that. I pick the same thing for different dates based on same underlying future ES June future June 16 options are of American style March 24 options are of European style Note: there is one more European option for June 16 that settle to September future. I didn't pick it. I think American exercise style FOPs have a different pricing formula. Different from equity index options which are always suboptimal to exercise early, it can make sense for the owner of the long position to exercise FOPs early. Do some reading. I think your formula is also somehow missing the risk-free rate. Thank you. Yes the difference is due to American sty...

Are all options in your example settled into the same futures contract? No they are not. Yes, I made sure of that. I pick the same thing for different dates based on same underlying future ES June future June 16 options are of American style March 24 options are of European style Note: there is one more European option for June 16 that settle to September future. I didn't pick it. I think American exercise style FOPs have a different pricing formula. Different from equity index options which are always suboptimal to exercise early, it can make sense for the owner of the long position to exercise FOPs early. Do some reading. I think your formula is also somehow missing the risk-free rate. Thank you. Yes the difference is due to American sty...

comeinvest wrote: ↑Sat Mar 18, 2023 2:21 pm Are all options in your example settled into the same futures contract? No they are not.

Yes, I made sure of that.

I pick the same thing for different dates based on same underlying future
ES June future

June 16 options are of American style
March 24 options are of European style

Note: there is one more European option for June 16 that settle to September future. I didn't pick it.

Hi,

The formula for options on futures is:
Futures price - Call price + Put price - strike = zero

I pick the same thing for different dates based on same underlying future
ES June future

Please explain if this is an arbitrage opportunity or what I am missing. It might be zero coupon interest for some difference.

Even if the transaction is made at bid, it will credit $2 (*50, multiplier)

Hi, All the discussions were around long dated DITM call options. I haven't seen much discussion around short dated, say 1 to 3 month away DITM call options and rolled every 1 to 3 months. These have very low time value(embedded put cost is very low) compared to Long dated DITM call otpions. March 31 2000 SPX Put is $0.05 Dec 31 2000 SPX Put is $2.25 $8.35 So rolling once every month seems to loose less compared to long dated call options. Futures need good amount of cash buffer to handle days like Feb 2020/Covid, we can't keep cash in t-bills or some treasury etf for daily MTM settlement in IRA. So using DITM call options seems to remove the cash drag of futures(lost/low interest on cash buffer), but it comes with a higher bid-ask spread....

Hi, All the discussions were around long dated DITM call options. I haven't seen much discussion around short dated, say 1 to 3 month away DITM call options and rolled every 1 to 3 months. These have very low time value(embedded put cost is very low) compared to Long dated DITM call otpions. March 31 2000 SPX Put is $0.05 Dec 31 2000 SPX Put is $2.25 $8.35 So rolling once every month seems to loose less compared to long dated call options. Futures need good amount of cash buffer to handle days like Feb 2020/Covid, we can't keep cash in t-bills or some treasury etf for daily MTM settlement in IRA. So using DITM call options seems to remove the cash drag of futures(lost/low interest on cash buffer), but it comes with a higher bid-ask spread. ...

If you still have some assets with them say like taxable account. Just ask for a good faith reversal of fee as you are moving due to low cash interest rates. They will do it

That is interesting. I assume you have IBKR Light then (not Pro). Because to get a price between bid and ask when the spread is the minimum tick size, you have to enter a marketable order right? Which costs about $0.007 with IB Pro including exchange fees, which is more than the spread on a round trip. On the other hand, I tried using limit orders, but it's very hard to get filled as most trades are off exchange between bid and ask (putting the retail investor at a disadvantage) unless the market moves against you. I feel that the system is rigged. Anyway, zero commission plans might be better with highly liquid stocks or ETFs, but I think IB Pro is better with some thinly traded securities. I need IB Pro because you get better credit and ...

Depending on your rebalancing frequency and on how diligently you want to minimize your cash drag, I think zero-commission money-market mutual funds that almost every broker has can be the best option for investing cash and still having it readily available within 1 day settlement. Another option are index ETFs with very low bid/ask spreads, like VTI or BND; but changes in cash would then also ever so slightly alter the asset allocation, and they also have 2-day settlement. When I trade BIL through IBKR, I've been getting filled right at the midpoint for both purchases and sales. $91.725 when the bid is $91.72 and ask is $91.73. Also with securities lending, it makes the expense ratio effectively less than 0.05%. That is interesting. I ass...

.....

Does anybody here know, when I do a traditional to Roth IRA backdoor conversion every year, both traditional and Roth IRA at IB, the traditional IRA serves only to feed into the Roth and will otherwise have zero or a very low balance most of the year, how long will it take IB to close the zero balance traditional IRA? When I asked them they said they will eventually close it, but they couldn't tell me after how much time. I'm considering leaving $1 in the traditional and converting it in December, then funding it with the new year's contribution in January, then converting everything except $1 later in January. Rinse and repeat every year. Do you think $1 will be enough to keep it open for the year, or should it be $10 perhaps? I don't wan...

Hi, The biggest risk is margin call for this strategy. Will using a portfolio margin account help as it has power margin requirements and will have extra buffer before generating a margin call compared to regular reg-t margin account ? Any pros or cons for using a portfolio margin account? Thank you As I said above, if you're doing the strategy right there shouldn't be a risk of margin call. Use rebalance bands to stick close to 2x if you are in phase I. If you're in phase II you need to map out what your leverage level will be at certain net worths. For example, at 300k I will have 1.5x, at 200k 1.8x, below 150k back to phase I 2x leverage. ... etc. You should rebalance frequently enough that you can stay pretty close to your targets. But...

Hi,

The biggest risk is margin call for this strategy.

Will using a portfolio margin account help as it has power margin requirements and will have extra buffer before generating a margin call compared to regular reg-t margin account ?

Any pros or cons for using a portfolio margin account?

Thank you

secondopinion wrote: ↑Fri Feb 03, 2023 4:47 pm

sharukh wrote: ↑Fri Feb 03, 2023 4:28 pm

Daryl wrote: ↑Sun Jan 17, 2016 7:07 am
The highest interest rate that I'm paying on any of my debt (investment related or other) is 2.25% fixed for the next decade. That also happens to be tax deductible. Your situation may be different.

Hi,

Can you please tell how to get fixed interest rates for a decade ?
Is it by shorting 10 year Treasury futures? If so how do you slowly ramp down?

Thank you

This might be better asked in a different thread rather than an old one. It is a good question, though.

I tried, couldn't get a definitive answer. I shared in that thread my half baked solution.

viewtopic.php?p=7080918#p7080918

Daryl wrote: ↑Sun Jan 17, 2016 7:07 am
The highest interest rate that I'm paying on any of my debt (investment related or other) is 2.25% fixed for the next decade. That also happens to be tax deductible. Your situation may be different.

Hi,

Can you please tell how to get fixed interest rates for a decade ?
Is it by shorting 10 year Treasury futures? If so how do you slowly ramp down?

Thank you

Johm221122 wrote: ↑Sun Jan 29, 2023 9:22 am Just watching Stan the Annuity man and he said you can only put 50% maximum in a single premium immediate annuity.

So if you put 50% in a single premium immediate annuity on the day you retire can you buy more later down the road?

Immediate annuity companies can go bankrupt. Don't put all your money in one company. Buy two or three insurance from different providers to spread your money.

Johm221122 wrote: ↑Sun Jan 29, 2023 9:22 am Just watching Stan the Annuity man and he said you can only put 50% maximum in a single premium immediate annuity.

So if you put 50% in a single premium immediate annuity on the day you retire can you buy more later down the road?

Immediate annuity companies can go bankrupt. Don't put all your money in one company. Buy two or three insurance from different providers to spread your money.

anon_investor wrote: ↑Mon Jan 30, 2023 9:50 pm

sharukh wrote: ↑Thu Oct 27, 2022 8:38 pm Etrade has lockdown feature, that will disable all kinds of outgoing of assets. It is not advertised well.
That was the reason I moved to etrade compared to other brands

Is this something you can activate online, or do you have to call in?

You have to call and ask for it

adamhg wrote: ↑Wed Jan 25, 2023 2:22 pm

km91 wrote: ↑Wed Jan 25, 2023 1:45 pm What convention do you use to calculate the finance rate on a box, as an APR equivalent, IRR, or something else?

I priced a 4000/4500 3/17/2023 SPX Box at $496.95 credit received. I calculated a 4.33% APR and 4.48% IRR. Boxtrades.com prices that box at 4.48%

I run boxtrades.com. It uses the zero coupon bond calculation recommended by the OCC here https://www.optionseducation.org/refere ... -cash.aspx and the whole number DTE listed on the page

Hi adamhg,

Can you please consider adding quarter end ES boxes like mar 31, as we cannot use the 17 mar, 16 june, kind of boxes as no broker supports it for retailers.

Thank you.

I got it.

Move from ultra 10 year, to 10 year , to 5 year and 2 year.

According to my research, the MSCI EAFE and MSCI EM futures have relatively high implied financing cost relative to the risk-free rate of the currency they are denominated in (USD), in comparison to the futures on EUREX and the Nikkei futures. My results are not yet very conclusive, but I posted some preliminary comparisons of the implied financing costs a few pages up in this thread https://www.bogleheads.org/forum/viewtopic.php?p=6987262#p6987262 . I'll do some more backtests once I have time. For emini sp500 we can go long box spread on options for getting a yield on the margin ( I usually keep 60% of notional value). Similar things don't exist for MSCI index futures at NYSE Liffe. For eurex the yield is negative. So not sure if it help...

I don't have time right now to look it up again, but I did exactly that research. The major index futures on Eurex and in Osaka applied for approval. I don't care because I don't use equity index futures in taxable accounts. Let us know when you find the list. Why wouldn’t a US person use NYSE Liffe? With MSCI EAFE and MSCI EM futures, what more do you need? According to my research, the MSCI EAFE and MSCI EM futures have relatively high implied financing cost relative to the risk-free rate of the currency they are denominated in (USD), in comparison to the futures on EUREX and the Nikkei futures. My results are not yet very conclusive, but I posted some preliminary comparisons of the implied financing costs a few pages up in this thread h...

Hi,

Say someone short-ed a 10 year treasury, to lock-in the low interest for 10 years. How does one wind it down slowly.

i.e. after a year how to make it equivalent to 9 year treasury future and another year later equivalent to 8 year treasury and so on..


P.S. Wish I had shorted a 10 year treasury when interest rates were low. May be I will do that when a opportunity arrives next time. This is a theoretical exercise for now.

I think most major foreign equity index futures are actually treated as 1256 contracts. You assume that at your tax audit peril. It’s complex and the 6781 form instructions flag the issue. The foreign exchange has to make an application to the relevant US regulators and be approved for the legal status that enables US citizens to claim 1256. And many do not. As a minimum, one needs to do the research on whatever foreign contracts they are trading. I don't have time right now to look it up again, but I did exactly that research. The major index futures on Eurex and in Osaka applied for approval. I don't care because I don't use equity index futures in taxable accounts. Let us know when you find the list. Why wouldn’t a US person use NYSE Li...

parval wrote: ↑Sun Jan 22, 2023 9:35 pm Anyone have PM use this to lend out money? If you long a 1 yr box for 100k, does it take away from just your buying power or cash as well?

Little decrease in buying power. Full deduction from cash

Hi, I got some estimate quotes for a new Mortgage. I see ARM are more expensive than 15 year fixed. So 15 year fixed seem to be the best choice as one can always refinance if a lower interest rate shows up in future. Why would anyone choose ARM when ARM is expensive than 15 year fixed ? The estimate have 2 numbers, I think second number is called APR as it says. Dont know what the first number is. Which is the best mortgage to choose ? I have enough in taxable account to pay for house in cash (I have to liquidate VT/VXUS and pay capital gains). House cost $750k. with 20% down payment. Thank you. 15 Year Fixed 4.85% / 4.89% APR 30 Year Fixed 5.05% / 5.07% APR 10/6M ARM 4.85% / 5.74% APR 5/6M ARM 4.90% / 6.38% APR 7/6M ARM 4.90% / 6.11% APR 3...

Grt2bOutdoors wrote: ↑Wed Jan 11, 2023 5:42 pm

sharukh wrote: ↑Wed Jan 11, 2023 5:38 pm Treat HSA as if it is a regular taxable account for NJ taxes. All capital gains and dividends will be taxed every year.

options are:
1. Use treasuries as it wont be taxes by states
2. buy non dividend stocks like AMZN, GOOG, BRK.B. Pay capital gains tax when you sell. Nothing to do on yearly basis.

Is HSA administrator distributing a Form 1099? Otherwise how can one do their taxes for contributions only?

They dont give 1099. Contributions are from paycheck deduction done by employer and will be detailed in W2.
I just buy BRK.B and leave it there. Previously I used to buy treasury funds.

Treat HSA as if it is a regular taxable account for NJ taxes. All capital gains and dividends will be taxed every year.

options are:
1. Use treasuries as it wont be taxes by states
2. buy non dividend stocks like AMZN, GOOG, BRK.B. Pay capital gains tax when you sell. Nothing to do on yearly basis.

Watty wrote: ↑Wed Jan 11, 2023 4:56 pm

phisher4 wrote: ↑Wed Jan 11, 2023 4:17 pm Also is there a general website which is helpful to look for last minute deals on cruises?

https://www.vacationstogo.com/

Be sure to register using your real information since there are sometimes discounts for residents of nearby states or for other things.

Thank you for the link

Good point skier, I forgot about the impact of dividends. Agree 3% was a low selection based on the historical data. Two concerns I still have that I think are trickier to measure: I do not frequently rebalance - only annually or as little as possible when forced via margin call. So there could be substantial performance differences. In my backtesting, annual rebalancing performed significantly better than the daily rebalancing of LETFs. Since I do not have access to futures in this 401k account, it is inefficient for me to hold any ITT. This results in the account being significantly off from the overall asset allocation. While this is generally okay if managed at a portfolio level, it does have some downside in that it could experience m...

tonyclifton wrote: ↑Wed Dec 21, 2022 6:22 pm Wouldn’t the risks in trading with margin be greater and more likely than a fraudulent ACH transactions?

True, unfortunately now is not a good time for me to delever. Bad timing, bought a lot in Jan of 2022 due to fomo. Will delever in few years if and when market goes up.

jcchen wrote: ↑Wed Dec 21, 2022 7:26 pm would having 2 fidelity accounts solve your problem?
one account would be for trading. and the other account handles the ACH transactions.

The information of account number and routing number are not secret. So a fraud can ACH from any account

lakpr wrote: ↑Wed Dec 21, 2022 9:31 am Can you enable 2-factor authentication, and/or perhaps use the Yubikey solution so that only you can make any transactions within the Fidelity brokerage account?

ACH pull fraud wont need login to fidelity. they initiate a fraud ach pull from other institution.

This is what Fidelity's lock-down page says: "Place your accounts into secure lockdown mode, blocking the ability to electronically move money out of your accounts . Transactions protected - Outbound money transfers - Transfers between Fidelity accounts - Transfer of Shares and Assets to another institution - Individual Withdrawals Transactions not affected - Deposits or Transfers into your Fidelity accounts - Checkwriting and Direct Debit - Debit card/ATM transactions - Trading - Scheduled Required Minimum Distribution (RMD) or Personal Withdrawal Scheduled Plan - BillPay" OP: Are you worried about Direct Debit not being protected by lock-down? yes, "Direct Debit not being protected by lock-down" Ah hello? Cancel the m...

Hi,

I have a margin brokerage account at fidelity.
All fidelity brokerage accounts have associated bank account and routing number. A fraud can invoke a pull from outside of the fidelity account from some outside institution.

Fidelity Lock down doesn't protect from fraud ACH pull.

I have a margin balance (-ve balance) and probably will continue to hold on to the negative balance for five more years, slowly paying it off.
I cannot turn off margin.

Thank you.

livesoft wrote: ↑Mon Dec 19, 2022 2:29 pm The places that report percentage changes know about the dividend amount and the ex-dividend date. I have not looked at the actual prices these are trading at. Did you look at the prices and do your own calculations? I have not.

Thank you, after looking into yesterdays closing price and doing the calculation, I understood it.

The places that report percentage changes know about the dividend amount and the ex-dividend date. I have not looked at the actual prices these are trading at. Did you look at the prices and do your own calculations? I have not. Hi, Time 3:55 VXUS is trading at 51.36. only 0.15% drop IXUS is trading at 57.54 only 0.17% drop VXUS dividend is $0.63. it is approx 1.2% So I expect VXUS to drop 1.35%. But it is not. Maybe the exus market went up ~1.2% today, which shadows the rest of the dividend drop IXUS is the reference for exus, it dropped only 0.17%. IXUS is done with dividends for the year. Please go look at the actual closing prices from yesterday and do your own math. You keep repeating the reported percentages. Several people have alre...

rkhusky wrote: ↑Mon Dec 19, 2022 3:08 pm I have VXUS closing at 52.06 on 12/16. Today’s closing is 51.37, which is 1.33% lower, but the display is saying 0.12% lower.

Thank you for doing the math for me, understood now.

Mountain Doc wrote: ↑Mon Dec 19, 2022 3:07 pm The reported percentage change today is not calculated with yesterday's closing price in the denominator. It is using yesterday's closing price minus the dividend amount in the denominator.

Thank you, understood now.

nalor511 wrote: ↑Mon Dec 19, 2022 2:58 pm

sharukh wrote: ↑Mon Dec 19, 2022 2:56 pm

livesoft wrote: ↑Mon Dec 19, 2022 2:29 pm The places that report percentage changes know about the dividend amount and the ex-dividend date. I have not looked at the actual prices these are trading at. Did you look at the prices and do your own calculations? I have not.

Hi,

Time 3:55
VXUS is trading at 51.36. only 0.15% drop
IXUS is trading at 57.54 only 0.17% drop

VXUS dividend is $0.63. it is approx 1.2%

So I expect VXUS to drop 1.35%. But it is not.

Maybe the exus market went up ~1.2% today, which shadows the rest of the dividend drop

IXUS is the reference for exus, it dropped only 0.17%. IXUS is done with dividends for the year.

livesoft wrote: ↑Mon Dec 19, 2022 2:29 pm The places that report percentage changes know about the dividend amount and the ex-dividend date. I have not looked at the actual prices these are trading at. Did you look at the prices and do your own calculations? I have not.

Hi,

Time 3:55
VXUS is trading at 51.36. only 0.15% drop
IXUS is trading at 57.54 only 0.17% drop

VXUS dividend is $0.63. it is approx 1.2%

So I expect VXUS to drop 1.35%. But it is not.

Hi,

Today is the ex dividend date for VXUS.
IXUS already done with dividends for this year.

Today I expect VXUS to drop by additional 0.63 dollars (about 1.2%)on top of what IXUS does. But I see both of them trading with very similar price changes in percentage.

Please help me know what am I missing?
Time 3:55
VXUS is trading at 51.36. only 0.15% drop
IXUS is trading at 57.54 only 0.17% drop. IXUS is the reference, IXUS is done with dividends for this year.

VXUS dividend is $0.63. it is approx 1.2%

So I expect VXUS to drop 1.35%. But it is not.


Thank you

... In order to have a productive conversation around leverage, we really need to get back to basics and look at tilting from a different perspective. In most of the traditional tilts, people are trying to increase returns by adding a volatile and risky asset to the portfolio -- like REITs or SCV. It lowers the risk-adjusted return of the portfolio, but the investor is reaching for return and is willing to take on more risk. When we allow leverage in our portfolio, we can dial risk up to taste without needing to take uncompensated risk. ... Tilters argue just the opposite. Diversifying your sources of risk improves the risk-adjusted return of the portfolio. Swedroe famously argues that exposing your portfolio to more than just beta market ...

Hi, Please note: I have a standard bogleheads 3 fund portfolio. No intention of ever buying crypto. This is a theoretical question. Mods: Please dont see this a investing in crypto, it is not. This is just a theoretical question on stocks to get better understanding of stocks if one believes in efficient market hypothesis. If all the future expectations are priced in based on efficient market in the stock prices. Then the only reason to buy stocks is if someone else is willing to pay a higher price for it. How is it any different from crypto ? Similarly, If all the future expectations are priced in based on efficient market in the stock prices. Then the only reason to buy stocks over bonds is because stocks have more volatility, and you may...

Archie Bunker wrote: ↑Mon Dec 05, 2022 8:47 am

SuperTrooper87 wrote: ↑Mon Dec 05, 2022 8:45 am

livesoft wrote: ↑Sun Dec 04, 2022 7:00 pm Invest in your health. Buy some running shoes and use them.

I feel as though this is so very often overlooked. What's the point of outstanding returns, if you're no longer with us?

A+++++ advice!

Spend some money for spouse, it is a very good insurance for saving 50% of your portfolio.

Hi,

Question on settlement.

My current short box dated December 16 of 2022 will be closed tomorrow.
To carry over the borrowing.
When should a new box expiring Dec 15 of 2023 to be sold to not have any brokerage margin interest?

Thank you

Hi, A lot of assets used in this portfolio depends on OCC not going bankrupt. There is a risk similar to London metals exchange going bust(nickel market) , that OCC can face similar problem and our futures holding of ES and MES and futures options can loose value if OCC goes bankrupt. Is it a valid concern or am I worrying too much? Thank you It's a valid concern. Same for the SPX options that some of use for leverage in taxable accounts. Some folks earlier in this thread and in the HFEA thread had the opinion that realistically the OCC cannot go bankrupt due to support by the government in a catastrophic scenario. I don't know if that opinion is correct. However, for the long equity futures position holders: In a market crash, my account ...

Hi,

A lot of assets used in this portfolio depends on OCC not going bankrupt. There is a risk similar to London metals exchange going bust(nickel market) , that OCC can face similar problem and our futures holding of ES and MES and futures options can loose value if OCC goes bankrupt.

Is it a valid concern or am I worrying too much?

Thank you

.....