Nidhi Shodhane - Market favors the prepared Mind

Test again

2008-07-24T17:40:00.000-07:00

Testing the annotated chart ..

testing

2008-07-24T17:39:00.000-07:00

Testing the linkable charts ..

http://stockcharts.com/c-sc/sc?s=$SPX&p=D&b=5&g=0&i=p67662308315&r=5033

testing charts

2007-11-29T20:46:00.000-08:00

There should be a chart visible below this line. If so, then Google spreadsheet charting works.

Did you see the chart?

Now you should see a table below.

Did you see the table?

China Sell-off - one day blip or one month blip?

2007-06-04T12:10:00.000-07:00

My last week’s article about China being overly heated was just a coincidence with today’s 8% drop in China market. Anybody could have bet that Shanghai composite index, the most widely watched indicator, has grown at an unsustainable pace of 60% this year. This is in addition to the huge run-up in excess of 130% in year 2006. Clearly, Chinese government is concerned with this pace and it wants to slow down this.

One step towards this direction was to increase the tax on stock transactions from 0.1% to 0.3% by the Chinese government last week. A ministry official said the measure is intended to help promote the healthy development of the securities markets. This may possibly dampen the market in the short term, but the effect of stamp tax hike is yet to be seen. Historically, the Chinese ministry of finance has altered the stamp tax to exert its influence on the stock market and usually the hike in the stamp tax has triggered downturn in the stock market.

It was not just the Chinese government that was concerned with stock market frenzy, even the former fed chairman had expressed concern over Shanghai market few days back. Asia’s richest man, Li Ka-shing, had shared similar sentiments and also had mentioned that prices will decline. Of course, we don’t need an economist to tell us about this bubble, just because such a huge growth is unprecedented and needs extra ordinary support from the economy to sustain the growth.

So how much of correction to expect in Shanghai market? Is this going to be similar to that late February correction? Or is a long term slowdown looming ahead?

Nevertheless, the resiliency of bulls in recent days is so high, as witnessed by March recovery of late February sell off, that we may not see a big slump without any additional depressing information coming in. The US market did not even budge much from today’s Chinese market sell-off. I guess the US market has been learning to ignore short term noises, and only react to sustained pressures (so I hope). However, further slump in China can affect the US and rest of the world markets, as the markets are now so influenced by each other.

How can I trade this market? For bulls in the US, we can certainly look for a good dip in the next few days to get into emerging markets. For bears in the US, I am not sure if we have enough reasons to be happy about, other than the revised low GDP of 0.6% for first quarter and the usual suspect, Housing. However, below expectation results for the second quarter is possible and can potentially give a good boost for bears to take over for the remainder of the year.

I plan to do some work on possible trade setups with china sell off today and I will keep you all posted.

-Nidhi

Profiting from India’s economic growth

2007-05-30T18:38:00.000-07:00

Is China market too HOT for your portfolio? Do you want to tap into another emerging market than China? There is another developing market that is not extremely hot, but can provide some classic growth to your portfolio for the next few years. And that can be Indian stock market.

Why do you want to invest in India? The GDP of India is growing around 8% each year for the past few years, the government policies have been relaxing for foreign investment, employment rate has been increasing and average salary has grown by approximately 25% annually. This has resulted in the surge of middle class population and also the purchasing power of middle class. Besides, India is a democratic country with liberal economic policies being pursued by governments of all political parties. Currently being the home of largest number of IT professionals, India seems a promising market for high ROI investment for years to come.

Now that you have been contemplating about fitting Indian market into your overall portfolio, you might wonder about the possible options that you have in order to participate in India’s economic growth. The choices are to either invest in the Indian ADRs that are traded in the US markets or to invest in the Mutual funds or ETFs that have exposure to Indian companies.

American depositary receipts (ADR) are available for Indian companies like Infosys, Satyam, Wipro, Cognizant, ICICI bank, etc. Many of these companies are large cap and are capable of getting listed in the US markets due to their size and due to few other advantages they have because of the nature of the business they are in. IT companies have natural advantage to list themselves in the US since much of their revenue is derived from the US companies, hence making process easier to get listed in the US stock markets. However, you would be missing out on many mid and large cap companies with potential for explosive growth if you were to just go with these ADR Indian stocks. Unless you are very certain that Indian ADRs can yield the desired returns for your portfolio, you might be better off choosing Exchange Traded Funds (ETF) or Closed End Mutual funds or Open end mutual funds, with exposure to all growing sectors.

Here are the main options to get into spicy Indian market action.

One popular fund is Morgan Stanley India Investment Fund (IIF) which is rated 5 star by Morningstar ratings. It is a closed end management fund established in 1994 and current expense ratio is at 1.35%. However, the managers for the fund changed in 2001 and 2005. Today, the fund is available at a very good discount of 12% to its NAV. Good discount to move in if you find a good dip. Its three year and five year performances are 35% and 37% respectively.

Equally old is a four star rated closed end fund, Blackstone group’s India Fund (IFN). This fund started in 1994 and the current manager has been with the fund since 1997. With a distribution rate of 8% and a discount of 12% to its NAV, this fund is attractively priced at present. Like IIF, IFN’s three year and five year performances are 35% and 37% respectively. Exp. Ratio=1.41%

One of the highest returns among Indian funds for this year (so far) is by Matthews India fund (MINDX) with 17% return for the first five months of 2007 alone. Though the fund is just 2 years old, it has performed very well so far. This is a regular mutual fund, which benchmarks the BSE 100 index. Exp. Ratio = 1.41%

With a very good 3 year and 5 year track performance is the fund Eaton Vance greater India A fund, ETGIX. Though this fund had superior returns, it has few items that need to be carefully watched and they are: high expense ratio at 2.14%, front load of 5.75%, and a new manager starting March of 2007. I personally don’t like to pay extra to the operation of the fund unless the fund manager really justifies the high expense ratios and the load that they are demanding.

Recent addition to the family is a special fund, an Exchange Traded Note, iPath MSCI India Index ETN (INP). This fund is linked to the MSCI India Total Return Index with YTD (as of May end 2007) return of 15%. However, unlike ETFs this is an unsecured debt instrument that carries the credit risk of the issuer, Barclays Bank.

The First Trust Family of ETFs has rolled out a new ETF, FNI, for investing in China and India together. The fund seeks investment results that correspond to the price and yield of equity index called Chindia index. This fund started this May 11^th and the weightings of the companies in this fund is done very creatively. The Index consists of a portfolio of American depository receipts (ADRs) selected from a universe of all listed depositary receipts of companies from China and India trading on the United States exchanges.

Whether you want a piece of the action from Indian market or China market or Chindia market, try to buy the securities on a dip and ride the wave for a while.

-Nidhi

XHB - S&P Home builder Spider ETF

2007-05-25T13:54:00.000-07:00

XHB - S&P Home builder Spider ETF

Opportunity: The fund uses a passive management strategy that is designed to track the total return performance of the S&P Homebuilders Select Industry index. Generally speaking, this fund has a narrow focus of home building companies and its lack of diversity is not very encouraging for an investor looking for a broadbased index. However, knowing that housing market has been in slump for almost a year now, it presents an opportunity to expose yourself to a good growth when Housing finally recovers.

Dilemma: How do you know when the ETF has bottomed? Nobody knows. Housing has delivered enough bad news for almost a year now, enough to discourage most people. The sales have been dwindling and so did the median price. And the Sub-prime loan debacle has added to the complexity. The lending practices have been tightened by the banks now, which has discouraged buyers with 0% or even 5% down payment. This has caused the inventory to pile up in most cities in the country. Right now, we are not seeing bright light at the end of the tunnel yet. Question is, how far yet go without seeing light at the end of the tunnel.

But there is another segment of optimists already lining up in the hope that we have already seen the bottom. Not sure, if I can concur this view except for the surprisingly positive news from New Home sales for April that shot up to 14 year high. But one month data means just volatility and not a real substantial move upwards. Moreover, we are not sure if we are done with the ALL the bad news yet.

No matter when it recovers, the overly heated markets of Florida and Southern California will need substantial time to recover its economy to be in commensurate with its housing market.

XHB Trade: Saw some bulls moving in at $34 mark few days back. I think with so much liquidity around, bulls will buy-in at any small dips now. I don't regret not being a participant in that move upwards from $34 to $35.5 since my view of housing is to wait for a much better opportunity. Despite my "wait" approach, I probably will move into XHB for the price range of $28 - $32.

May be another thought to consider is: If I have enough money, should I buy a housing company stock/ETF or a HOUSE?

-Nidhi

Froth in the Market

2007-05-14T10:00:00.000-07:00

I do like froth in my capuccino, but not in my market investment. But thats the inherent nature of the market, to toggle between overvalued and undervalued conditions.

The will of the free market reigned in yet again. This time too like always, the message of the free market was, as John Mauldin puts it, to prove that most people are wrong. So my prediction of some market correction in April due to shortfall of 1Q earnings was infact a popular assessment of the public. And the market disapproved the popular sentiment by rewarding the investors with whopping returns in April.

Where did I/we go wrong? One of the main reasons was the low earnings expectation for 1Q, but the 1Q earnings for SP500 companies came in above 7%. While the widespread anticipation of low numbers was defied, the stock market roared setting all time highs for Dow and just little short of a record for SP500.

I am glad that I was wrong. I would like to see stronger earnings for our companies. However, I do see that current condition of stock markets are exciting for ordinary public and the new records set in the market are done with "lesser" force than before.

This might have created some froth in the market. Be prudent in moving new money into the current market. If are already invested, enjoy the ride and move your stop losses appropriately. Nobody knows what is going to trigger the next correction, but when it does, sieze the opportunity. Because I am in long term bull camp now!

Nidhi

Is the perfect storm in the brewing?

2007-03-31T15:26:00.000-07:00

Is the perfect storm in the brewing?

Its always a tussle between the Bulls and the Bears; The victory for either of them is temporary, for it is determined by the combination of government actions (fed), Psychology of the masses and by free market forces. These forces can change their minds and act together or act one against the other. The final outcome is the sum of all the resultant forces and sum of all resultant directions. Sounds like, we need Newton to resolve this for us, huh?

So the forces on the bear side are:

1. Possible spillage of sub-prime woes to rest of the market. Though chairman Bernanke has testified that this has not happened so far, we will have to wait to see the sub-prime mortgage effect.

2. Oil price is spiking; mainly due to the Iran crisis escalation with British marines. Not sure where the Oil price will stabilize, but this is bound to affect the economy

3. What about the trade embargo that democrats have taken up against the Chinese. President Bush might VETO this out, but this can cause uncertainty in the market.

4. Q1 results are about to start in the second week of April; COuld this trigger the turmoil in the market. Corporate profits are widely expected to fall below 10% and if it does, that may tumble the market.

5. Consumer confidence declined last month.

6. Of Course, The yield curve still inverted or may be flat.

The BUll side line up includes:

a. Continued Bull run from last year. This has lot of resiliency left in it, as was evident in the recovery from Feb 27th free fall.

b. Hope of interest rate cuts in the Summer has cheered investors. The fed language this week did not include rate hike possibilities, but the fed will still have to fight the inflation in the light of rising energy prices.

c. Some surprising Manufacturing results from Chicago unit this month.

d. M&A activities and private equity take over still continuing to help Bulls.

Now, is there a correction in sight? what is going to trigger the correction. My speculation is that the Q1 results can answer this question and hence April may not be a easy ride. What say you?

Nidhi

MLP - Master Limited Partnerships

2007-03-22T20:21:00.000-07:00

Master Limited Partnerships (MLPs)

One overlooked corner of high income paying investments is in the once rarified air of master limited partnerships (MLPs).

These are limited partnerships that are publicly traded on the security exchanges. They combine the tax benefits of a limited partnership with the liquidity of publicly traded securities.

And these babies are only taxed once at the corporate level leaving plenty of cash to pay back in the form of dividends to its shareholders.

Master Limited Partnerships (MLPs)

Never heard of an MLP? That’s not unusual. They don’t show up on the radar screen of most individual investors.

From the outside, they look complicated. They don’t get played up by the talking heads on TV. And, they suffered a big reputation hit in the 80’s and 90’s when many MLPs were involved in a number of investment scams. Secret deals. Serious debt problems. A few big partners got left holding the bag.

MLPs were once only the investment playground for the rich and big institutions. All of that’s changed now.

Today, MLPs have been cleaned up and have gone main stream. Most of them are traded on the New York Stock Exchange.

You can purchase shares directly from your broker. Ownership is in the form of units as opposed to shares which in effect makes you a limited partner.

MLPs are limited partnerships whose interests (limited partner units) are traded on public exchange just like corporate stock (shares). MLPs consist of a general partner (GP) and limited partners (LPs).

Why Do I Like Master Limited Partnerships?

First, they pay a nice high yield. Usually 7% to 9% and most pay dividends on a quarterly basis. MLPs earnings are taxed only once, at the unit-holder level. By contrast, the earnings of most publicly traded corporations are taxed twice, once at the corporate level and once again at the shareholder level.

As a result, the MLP can pay out significantly more of its cash flow to you, the unit-holder.

Second, a number of MLPs are increasing their dividends. That’s because many MLPs are in mature, asset-rich businesses that generate large amounts of cash flow.

Third, they are relatively safe investments. Most MLPS are energy exploration and production companies, natural gas liquids businesses and pipelines. These businesses are not affected by the rise or fall of oil prices, and their rates are set by regulatory agencies, keeping them predictable and stable.

And fourth, unit-holders, in turn, enjoy real tax deferment. You get enhanced distributions of cash because of the tax shelter provided by the pass-through of the non-cash expenses, at a time when tax shelters are particularly hard to find. This means you will not pay taxes until it’s time to sell the MLP . . . perhaps in retirement when you are in a lower tax bracket.

This tax deferment can be a big plus for investors. While the explanation behind the deferment is too complicated to go into in this article, it’s worth noting that you will receive a separate IRS form from the partnership outlining the tax deferments making it easy for you or your tax adviser include it on your returns.

That’s why MLPs are good long-term investments. You’re not going to want to trade in and out of these companies.

What Do I Look For in an MLP?

First, I look for a MLP that’s paying a big distribution.
Most of the MLPs that I follow all pay out between 6% and 10% annually. Take Dorechester Minerals LP (DMLP) for one, which paid 8.70% this past year and is looking at a 9% plus forward looking dividend.

I look at the financial strength of the partnership. In particular, I keep an eye out for debt. Any partnership carrying a debt-to-capital ratio below 60% is a safe play by me. Another company I follow, Energy Transfer Partners LP (ETP) carries less than a 50% debt-to-capital ratio while paying a growing dividend of 7.5%.

I also look for companies with good management.
Terra Nitrogen Co. LP (TNH) fits that profile. A company engaged in the business of manufacturing fertilizer, has a solid management team and a good long term growth record. TNH has doubled its stock price over the last year while paying out a nice 7.6% dividend.

And finally, I like to go with companies that are in the safe and mature businesses, less exposed to the wild swings in commodities. Pipeline companies are a good example of a relatively safe bet because their prices are regulated. A good name is Valero LP (VLI), a company involved in the energy production and pipeline business with a great track record, and it pays a decent 6% dividend.

MLPs—High Dividend Payments and Steady Price Appreciation

Like any equity, there are risks to MLPs including lack of capitalization, changing regulatory environment and any kind of major economic downturn.

Their prices could turn down if interest rates rise too rapidly. But unlike bonds, MLP prices are regulated, giving them a softer landing and slow rate of change.

So if you’re looking for an investment with reasonable price appreciation while getting paid a nice dividend and with less volatility than the average large cap stock, then consider Master Limited Partnerships.

Combine that with the ability to defer tax payments, MLPs look like one investment that should be in everyone’s portfolio.

- Excerpt from Bryan Perry's blog.

Sharpe Ratio

2006-12-19T11:50:00.000-08:00

Sharpe Ratio

A ratio developed by Nobel Laureate Bill Sharpe to measure risk-adjusted performance. It is calculated by subtracting the risk-free rate from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns.

The Sharpe ratio tells us whether the returns of a portfolio are due to smart investment decisions or a result of excess risk. This measurement is very useful because although one portfolio or fund can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been.

Here is an article from Motley Fool that explains how to calculate the Sharpe Ratio in your portfolio. You can do this calculation pretty easily with market data from Yahoo Finance and Excel. http://www.fool.com/Workshop/1998/Workshop980821.htm

The higher the Sharpe Ratio, the better. A lower number is worse. So for example:

NOTE: Volatility, also known as the standard deviation of return, is the statistical measure of risk in a portfolio.

This is for an asset class, not a portfolio, but the idea is the same. Stocks have performed better, on a risk-adjusted basis than Treasury Bonds, because the Sharpe Ratio on stocks is higher than Treasury Bonds. A negative Sharpe Ratio is considered very bad. It means you could have done better, on a risk adjusted basis, holding cash. The point of risk adjusted return is not to look at return in a vacuum, but rather to consider how much risk you had to take in order to generate "excess return" - the amount of return over a market benchmark or the risk free rate i.e. 10 year Treasuries.

Risk Adjusted Return

2006-12-18T18:08:00.000-08:00

Anyone hoping to make money on wallstreet has to keep an eye on the downside risk he is exposing his investment to. The following blog from Kim Snider at http://kimsnider.blogs.com/my_weblog/2005/12/risk_adjusted_r.html, makes us aware of the risk that we are taking on knowingly or unknowlingly.

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Risk Adjusted Return

A topic I haven't covered in a long time (and, based on a comment left by someone yesterday, some people don't get ) is risk adjusted return. We have been trained over our investing careers to obsess over portfolio performance when what we should be thinking about is outcomes. Forget the absolute number - will our portfolio do what we need it to do? Pay our bills when we can't work? Allow us to quit working at 45? Not run out of money before we run out of breath?

This brainwashing has lead us to focus on only one number to the exclusion of all others - return percentage. But you cannot examine return percentage in a vacuum. There are other very important considerations including conflict of interest, fees, and risk. Conflict of interest and fees are a topic for another day but let's talk about risk.

There are two approaches to risk. One is to ignore it completely (which is what the financial services industry wants you to do) and HOPE it doesn't bite you in the butt. That sounds like a good strategy, doesn't it? The second is to manage risk and performance as two inter-related pieces of an equation. This is the way big institutions, foundations, trusts, pension plans, and insurance companies manage their portfolios.

When we focus on performance numbers alone, we tend to focus on THE NUMBER - which is an average return over time. You may hear that a mutual fund has returned 8.% over the last four years, or the stock market has returned 10% over long periods of time, or the Snider Method has yielded 13%. By themselves, those numbers mean zilch.

Do you know why? Because you are never going to be the average!

By definition, when we talk about averages, we are saying that 50% of the sample are above that number and the other 50% are below that number. What you want to know is how far above or how far below. This is the definition of risk - the standard deviation of return. In other words, how much variability is there in that return?

So let me just give you an example. If I have a return in a mutual fund of 35%, on first blush that would be good, right? But if I tell you the standard deviation is ±90%, that wouldn't be so great. That means that 2/3rds of the time, the return would fall between 125% and -55%! That is a massive swing and is by definition a ton of risk. There is no telling where you might end up from month to month, year to year, with a distribution of returns like that!

Now let's go to the other extreme. Let's say I had a bond portfolio with a return of 4% and a standard deviation of ±0.2%. Now that would be incredibly safe. You always know what your return is. There is almost no uncertainty there!

Now let's go to some real numbers so you can get a feel for this idea. According to the 2005 Yearbook published by Ibbotson Associates, the long-term average return from the stock market is 10.4% (pg. 29). Depending on how you measure it, the standard deviation is roughly ±30%. Again, a big swing - lots of risk - particularly if you happen to need your money during a period in which the market has taken a big hit!

The standard deviation of the Snider Investment Method yield over the documented portion of our history has been 13% with a standard deviation of ±6%, significantly lower risk. Now let's take the two concepts - risk and return - and put them together. This is something called risk adjusted return.

Risk adjusted return looks at how much return did you make for each unit of risk that you took on. It can be measured several ways but the most common is something called the Sharpe Ratio. If I look at one portfolio that has returned 15% and another that has returned 13% and all I look at is return percentage, I would think the 15% portfolio was better.

But think again. If the 15% portfolio has a risk level of ±30% and the 13% portfolio has a risk level of ±6%, on a risk adjusted basis, the 13% is actually better than 15% because of the consistency of the return. If you would like to know more about the value of consistency, in absolute dollars, see my post on the Fred Fiasco.

Sycophants of average return numbers seldom talk to you about risk. Show me the statistical measure of the risk in your portfolio from one of the big brokerage firms. But the only way to measure two investments or two portfolios side by side is to compare them on a risk adjusted basis. Otherwise, you are comparing apples to oranges and are likely to fall into the trap of high risk, "here today gone tomorrow" type investments.

As always, I'd like to hear your thoughts. Are you familiar with risk adjusted return? Do you think of your investments in terms of risk AND return? Has anyone ever shown you how to blend the two concepts together into a number that can be measured empirically? Leave your thoughts and comments below.

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Covered Call Writing

2006-12-13T20:32:00.000-08:00

Came across this Covered call Plan (at http://coveredwriter.blogspot.com/) by Mike Artobello, that is very detailed, with appropriate reasoning and moreover, seems realistic. I liked this writing; can be a good guidance for a covered writing portfolio.

------- Plan -----------

Covered Call Trading Plan

A covered call strategy is basically a modified version of buy and hold with a defined selling date at option expiration if the call option is ITM. For this reason, it's a long term strategy and you should only invest funds that aren't needed on a day-to-day basis or for emergencies. You should have other accounts for those purposes.

The following is an overview of my trading plan. Some specific details have been omitted, but this overview should provide the basic idea behind the plan and the methods used to implement it.

INVESTMENT PRINCIPLES

The following investment principles form the basis for this trading plan.

1. The stock market will be higher in the future than it is today.

Throughout its history, the stock market has appreciated in value, but there have been long periods of time where the market has been down or flat. However, the long term trend for the market has been up.

2. Nobody knows which stocks will go up or down.

Many professional stock analysts attempt to predict the future value of a stock. Most predictions turn out to be wrong. No amount of fundamental or technical analysis can predict, with any degree of certainty, the future value of a stock.

3. There are only a limited number of price changes that can occur.

Over a period of time a stocks price can only remain the same, go up a little, go up a lot, go down a little or go down a lot. Most investment strategies only make money when a stock goes up. An investment strategy that can make money in 4 out of the 5 possible outcomes has a better chance for success.

4. Stocks are a long term investment.

To take advantage of the long term trend in the stock market, funds need to be available for the possibility of long holding periods. If the funds are needed now or in the short term, then they should not be invested in stocks.

5. Never lose money.

Stock value will go up and down, but losses are only realized if you sell the stock for less than your cost basis. Whenever you take a loss you need to gain a greater percentage just to break even. As long as you’ve invested in good quality companies, you should hold the stock for the long term and should not sell at a loss unless absolutely necessary.

OBJECTIVE

The primary objective of this trading plan is to generate current income while preserving capital. The goal is to generate an average income of 1-2% per month or 12-24% annualized on invested capital.

Daily account balance is expected to fluctuate while there are open positions. Results will be determined by the amount of income generated (realized profit/loss) and not on the actual account balance (unrealized profit/loss).

STRATEGY

Covered calls on individual company stocks will be used to achieve the objectives. Each initial covered call position will consist of buying 100 shares of stock and selling 1 call option.

The major risk factor in trading covered calls is a sharp decline in the stock price and/or company bankruptcy. In order to minimize that risk stock selection and position sizing are critical. Companies will be selected using the principles of value investing (see Benjamin Graham's "The Intelligent Investor"). Three key elements of value investing are:

1. A thorough analysis of the company and the soundness of its underlying business, by reviewing the company’s Income Statement, Cash Flow Statement, Balance Sheet, and analysts reports, before purchasing the stock.

2. Protection against loss under all normal or reasonably likely conditions or variations. Declining positions will be held long term and managed, according to the management rules (see Position Management), until they can be closed at a profit. In order to preserve capital, no position should be closed at a loss unless absolutely necessary.

3. Setting realistic goals and not expecting extraordinary returns. As stated in the Objectives, the goal will be to generate an average annualized return of 12-24%.

TIMEFRAME

• Trading will be done in an IRA account, where the funds must remain for the next 10 years. Therefore, this is a long term account and suitable for stock investment.

• Each initial position will have an option expiration between 1-6 months out.

• Positions where the stock has declined may be held for 1 year or longer and will be managed according to the management rules (see Position Management).

POSITION SIZING

• Each initial position will consist of buying 100 shares of stock and selling 1 call option.

• Each position will be limited to between 1-5% of total capital. Only one position will be taken in any given stock. So, even if that stock would fall to zero, which is highly unlikely, it wouldn't kill the account nor wipe out all the gains.

• Dollar cost averaging will add 100 additional shares at a time up to a maximum of 5% of total capital. Exceptions will be considered on a case by case basis.

• Each month 80-90% of available capital will be invested. Cash reserves will be 10-20% of available capital. The objective is to stay as fully invested as possible and still have enough cash available to either recover existing positions or establish new ones.

• Compounding: Generated income will be re-invested, thereby compounding the returns, until such time as the income is needed (e.g. at retirement).

TRADE SELECTION

This is a high level overview of the trade selection process. I use a combination of Morningstar and PowerOptions to scan for potential trades.

Initial covered call positions should return at least 12% cash back (option premium) and a 24% annualized return if called.

Positions that meet the above requirement will be selected after reviewing the Income Statement, Cash Flow Statement, Balance Sheet, Key Ratios, Valuation Ratios, and Analyst Reports for each potential company. Companies will be selected in different sectors to diversify the portfolio.

POSITION MANAGEMENT

This is a high level overview of the position management process. For more details I recommend signing up for the free trial at Systematic Covered Writing, where they teach similiar methods for managing covered call positions.

There are only two possible outcomes for the call option at option expiration:

1. The option is exercised.
2. The option expires worthless.

At option expiration, if the stock price is higher than the option strike price, then the option is said to be in-the-money (ITM). If the stock price is lower than the option strike price, then the option is said to be out-of-the-money (OTM).

There are only five possible outcomes for the stock price at option expiration:

1. The stock price is unchanged.
2. The stock price is slightly higher.
3. The stock price is significantly higher.
4. The stock price is slightly lower, but above the strike price.
5. The stock price is significantly lower and below the strike price.

In order to meet the 12% cash back requirement on an initital position, in most cases, ITM calls will be sold. This will result in a winning trade in 4 out of the 5 possible stock outcomes.

If the option closes ITM (outcomes 1-4), then it will most likely be exercised and the stock will be called away. This is the ideal situation as it results in receiving the projected profit and a return of the invested capital.

If the option closes OTM (outcome 5), then the option will most likely expire worthless.

If the option is not exercised, then there are several possible actions that can be taken depending on the outcome of the underlying stock:

1. Sell a same strike call in a further out month.

2. Sell a lower strike call in a further out month. If the strike price is below the cost basis of the stock, you may need to buy back the call later, since you don't want the stock called away at this strike.

3. Sell a higher strike call in a further out month. You may also need to buy back the initial call before selling the higher strike call. This would be necessary to recover from #2 above.

4. Buy an additional 100 shares of stock (dollar cost averaging), and sell an additional lower strike call in a further out month. The invested capital for the entire position should not exceed 5% of total capital.

5. Close the position by either selling the stock or buying back the call and selling the stock. This should only be done at a profit. Remember, losses should be avoided, if at all possible.

That's the plan!

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Papaya - Home remedy for Dengue

2006-11-08T20:20:00.000-08:00

Heard a lot that Papaya juice can help in remedying Dengue fever. Spread the word around since North Indian cities have been greatly affected these days. Luckily, papaya trees are equally ubiquitous in India. Read on.

The following is an excerpt from an email that I received.

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Papaya Juice - Cure for Dengue You may have heard this elsewhere but if not I am glad to inform you that papaya juice is a natural cure for dengue fever. As dengue fever is rampant now, I think it's good to share this with all.

A friend of mine had dengue last year. It was a very serious situation for her as her platelet count had dropped to 28,000 after 3 days in hospital and water has started to fill up her lung. She had difficulty in breathing. She was only 32-year old. Doctor says there's no cure for dengue. We just have to wait for her body immune system to build up resistance against dengue and fight its own battle. She already had 2 blood transfusion and all of us were praying very hard as her platelet continued to drop since the first day she was admitted.

Fortunately her mother-in-law heard that papaya juice would help to reduce the fever and got some papaya leaves, pounded them and squeeze the juice out for her. The next day, her platelet count started to increase, her fever subside. We continued to feed her with papaya juice and she recovered after 3 days!!! Amazing but it's true. It's believed one's body would be overheated when one is down with dengue and that also caused the patient to have fever. papaya juice has cooling effect.

Accordingly it is raw papaya leaves, 2pcs just cleaned and pound and squeeze with filter cloth. You will only get one tablespoon per leaf. So two tablespoon per serving once a day. Do not boil or cook or rinse with hot water, it will loose its strength. Only the leafy part and no stem or sap. It is very bitter and you have to swallow it like Won Low Kat. But it works.

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BhinDi Curry Recipe

2006-11-03T23:10:00.000-08:00

I tried this bhindi recipe this week, came out good. Try it.

Recipe Okra (Bhindi)

It is made best from Fresh Okra. Bhindi has a sticky slime that oozes out of the pod when cut. Select medium size pods. Large pods are too woody.
Ingredients

Prep Vegetables
1. Okra: 2 Pounds
2. Onions: 2 Large
3. Green Chili Pepper: 4
Substitute: Fresh Serrano Peppers
4. Fresh Ginger: 1 Inch
5. Fresh Garlic: 4 Cloves
Saute / Cook

6. Ghee: ¼ Cup
Substitute: Vegetable oil
7. Turmeric Powder: ½ teaspoon
8. Cumin Powder: ½ Tablespoon
9. Coriander Powder: ½ Tablespoon
10. Fenugreek Seed Powder: ¼ teaspoon
11. Salt: 1 teaspoon
12. Cayenne Pepper Powder: 1 teaspoon

13. Water: 2 Tablespoons
14. Mango Powder: ¼ teaspoon
15. Garam Masala: ½ Tablespoon
Method
Step 1: Prepare vegetables

Okra: Cut the stem side head and tail off and discard. Slice each pod into half length-wise.
Onions: Peel, Cut length-wise ½" wedges.
Green Chili Pepper: Wash. Cut length-wise in half. Scoop out seeds with spoon. Discard seeds.
Ginger: Peel, chop about 1/16" thick
Garlic: Remove skin and mince
Step 2: Saute / Cook

1. In a heavy pan heat Ghee. Add Okra and sauté at high heat. The purpose is burn-off the sticky slime, but not to burn the Okra. If Okra turns slightly brown on edges its okay. Now spoon out the Okra from the pan and set aside for Step 3.
2. Add more Ghee if needed. Add onions, sauté till clear or almost as it starts to turn brown.
Step 3

1. Add Okra, Ginger and garlic, items 7 through 12. Stir well.
2. Add water, mango powder. Mix well. Add tomato slices for little more sour taste. Cover the pot. Cook on low for 3 minutes.
3. Remove lid. The preparation should not be sticky or watery. To remove any excess, turn up the heat high and sauté rapidly stirring to avoid burning to the pan. It may should not take more than two minutes. Shut off heat.

What is Chicken Gunya? Is there a cure?

2006-10-27T13:44:00.000-07:00

What is chickungunya?

New!Chikungunya Fever Fact Sheet

What is chikungunya fever?
Chikungunya fever is a viral disease transmitted to humans by the bite of infected mosquitoes. Chikungunya virus (CHIKV) is a member of the genus Alphavirus, in the family Togaviridae. CHIKV was first isolated from the blood of a febrile patient in Tanzania in 1953, and has since been identified repeatedly in west, central and southern Africa and many areas of Asia, and has been cited as the cause of numerous human epidemics in those areas since that time. The virus circulates throughout much of Africa, with transmission thought to occur mainly between mosquitoes and monkeys.

What type of illness does chikungunya virus cause?
CHIKV infection can cause a debilitating illness, most often characterized by fever, headache, fatigue, nausea, vomiting, muscle pain, rash, and joint pain. The term ‘chikungunya’ is Swahili for ‘that which bends up.’

The incubation period (time from infection to illness) can be 2-12 days, but is usually 3-7 days. “Silent” CHIKV infections (infections without illness) do occur; but how commonly this happens is not yet known.

Acute chikungunya fever typically lasts a few days to a couple of weeks, but as with dengue, West Nile fever, o'nyong-nyong fever and other arboviral fevers, some patients have prolonged fatigue lasting several weeks. Additionally, some patients have reported
incapacitating joint pain, or arthritis which may last for weeks or months. The prolonged joint pain associated with CHIKV is not typical of dengue. Co-circulation of dengue fever in many areas may mean that chikungunya fever cases are sometimes clinically misdiagnosed as dengue infections, therefore the incidence of chikungunya fever could be much higher than what has been previously reported.

No deaths, neuroinvasive cases, or hemorrhagic cases related to CHIKV infection have been conclusively documented in the scientific literature.

CHIKV infection (whether clinical or silent) is thought to confer life-long immunity.

How do humans become infected with chikungunya virus?
CHIKV is spread by the bite of an infected mosquito. Mosquitoes become infected when they feed on a person infected with CHIKV. Monkeys, and possibly other wild animals, may also serve as reservoirs of the virus. Infected mosquitoes can then spread the virus to other humans when they bite.

Aedes aegypti (the yellow fever mosquito), a household container breeder and aggressive daytime biter which is attracted to humans, is the primary vector of CHIKV to humans. Aedes albopictus (the Asian tiger mosquito)may also play a role in human transmission is Asia, and various forest-dwelling mosquito species in Africa have been found to be infected with the virus.

Where does chikungunya virus occur?
The geographic range of the virus is Africa and Asia. For information on current outbreaks, consult CDC’s Travelers’ Health website (www.cdc.gov/travel). Given the current large CHIKV epidemics and the world wide distribution of Aedes aegypti, there is a risk of importation of CHIKV into new areas by infected travelers.

How is chikungunya virus infection treated?
No vaccine or specific antiviral treatment for chikungunya fever is available. Treatment is symptomatic--rest, fluids, and ibuprofen, naproxen, acetaminophen, or paracetamol may relieve symptoms of fever and aching. Aspirin should be avoided

Infected persons should be protected from further mosquito exposure (staying indoors and/or under a mosquito net during the first few days of illness) so that they can't contribute to the transmission cycle.

What can people do to prevent becoming infected with chikungunya virus?
The best way to avoid CHIKV infection is to prevent mosquito bites. There is no vaccine or preventive drug. Prevention tips are similar to those for dengue or West Nile virus:

* Use insect repellent containing an DEET or another EPA-registered active ingredient on exposed skin. Always follow the directions on the package.
* Wear long sleeves and pants (ideally treat clothes with permethrin or another repellent).
* Have secure screens on windows and doors to keep mosquitoes out.
* Get rid of mosquito breeding sites by emptying standing water from flower pots, buckets and barrels. Change the water in pet dishes and replace the water in bird baths weekly. Drill holes in tire swings so water drains out. Keep children's wading pools empty and on their sides when they aren't being used.
* Additionally, a person with chikungunya fever or dengue should limit their exposure to mosquito bites in order to avoid further spreading the infection. The person should stay indoors or under a mosquito net.

Courtesy: http://www.cdc.gov/ncidod/dvbid/Chikungunya/chickvfact.htm