Trade Stocks Commission Free with Robinhood

It used to be 9.95 per trade, then 8, and now 4.95. Commissions can add up and suck the profitability out of your stock portfolio, especially if you want to make multiple trades per year or had in mind to trade in smaller batches of shares.

Robinhood has leveled the playing field with $0 commissions on trades. You can check out Robinhood at https://robinhood.com from your smartphone to sign up. You can also ask someone who already has Robinhood to give you a referral link and you both will receive a free share (usually of a cheap stock).

I personally like using Robinhood the most for option trades, where commissions really eat into my profitability especially if the options only cost under $100. The tools to research are missing from Robinhood so you will have to find some other tool to do your stock research before trading. Regarding the tools I like Fidelity and Charles Schwab better.

Good luck!

Activision Blizzard (ATVI) is a Good Buy

What’s Going On?

Activision Blizzard came out with their Q1 2018 earning reports exceeding estimates by over 10%. Despite Fortnite and PUBG claiming much gaming market share over that same period, it appears it hasn’t pushed people into abandoning their World of Warcraft subscriptions or uninstalling Call of Duty.

I’ve been a long time holder of this company, and do not plan on selling anytime soon. Even though the dividend rate is on the low side (34 cents this past quarter), their revenue climbed over 13% for the same quarter last year.

Potential trades:

Write (Sell) put option for June 22 at $70.5 dollars per share at $2.00 per option. As long as ATVI does not go below $68.5 by June 22, 2018 you will be better off for it. If the price goes below that point then you will be forced to buy shares at that price, which I still think is a good thing long term. Otherwise, I’d put this stock on a watchlist and buy long if the shares go under $69. With the volatile stock market of the past few months this will probably happen and give you a nice discount on a great company.

Current trading price of ATVI: $71.66

Other Thoughts

While EA Games is also a profitable company which looks good on paper, as a gamer myself I’d have to say that EA has thrown many gamers under the bus with their pay as you go, or pay for item strategy. It’s hard to imagine the frustration seeing items for sale in a game after you’ve already paid between $60 to $80 for a AAA game. EA Games helped create the in-game content purchase model, which unfortunately has spilt to other developers.

What the F is Wrong with Ford?


Ford is entering dangerously cheap territory. P/E ratio of 6, dividend ratio of over 5%, and healthy return on equity. Either someone knows something the financials are not telling us, or people are worried they can’t catch up to newer car companies and their technologies. I’ve got an idea for Ford, buy back some shares while your stock price is so cheap. I think the news of releasing the Bronco and Ranger again in the US is a great one, and there is positive news out of China of Ford starting to make EV there through a 50/50 joint venture with Zotye Auto (Chinese company), in addition to it’s existing joint venture Changan Ford. That being said, Ford’s China market is still much lower than GM’s.

I am long Ford with a few Call options expiring in June @ 11.87 / share. I still think Ford will be a better investment at the current price of 11.36 (Jan. 29, 2018) than Tesla at 341.50. Tesla has extreme leadership but I think they have over-promised at this point and due for a correction. I am also long GM which has a favorable P/E ratio of 9.44 and dividend of 3.48%. Tesla currently has no dividend and is not a profitable company.

Making Your Own Volatility Bets – Option Spreads and Straddles

A lot of talk is going on about the VIX, also known as the CBOE Volatility Index. This index will track and correspond to the market’s expectation of 30 day volatility. What does that even mean?

I can show you how to make your own volatility bet by using options for a single company. For example Ford.

Ford is one of those companies that I believe will either prove itself as relevant in the coming years or fade into obscurity.

So I can make a bet that Ford will be either go past 15 dollars or slide down past 8 dollars by January 18th, 2019. For a relatively low bet of just 32 dollars I can make a decent profit if the stock dips below

Option Spread

Ford Spread Profit Chart

Stock Price Strike Price C Strike Price P Option Cost Gain Profit
0 15 8 32.00 800 768.00
1 15 8 32.00 700 668.00
2 15 8 32.00 600 568.00
3 15 8 32.00 500 468.00
4 15 8 32.00 400 368.00
5 15 8 32.00 300 268.00
6 15 8 32.00 200 168.00
7 15 8 32.00 100 68.00
8 15 8 32.00 0 -32.00
9 15 8 32.00 0 -32.00
10 15 8 32.00 0 -32.00
11 15 8 32.00 0 -32.00
12 15 8 32.00 0 -32.00
13 15 8 32.00 0 -32.00
14 15 8 32.00 0 -32.00
15 15 8 32.00 0 -32.00
16 15 8 32.00 100 68.00
17 15 8 32.00 200 168.00
18 15 8 32.00 300 268.00
19 15 8 32.00 400 368.00
20 15 8 32.00 500 468.00
21 15 8 32.00 600 568.00
22 15 8 32.00 700 668.00
23 15 8 32.00 800 768.00
24 15 8 32.00 900 868.00

Another option strategy that makes people feel better about themselves since they will almost always get something back, but costs more, is called a “straddle”. A straddle, in this case with Tesla, is a bet that the stock price deviates from a certain point. In the figure below, a bet is being placed that the price of TESLA will deviate away from $350 per share by January 18, 2018. The price looks big, $10,765 for this particular strategy. But look below and you will see the profit loss chart shows that nears $200 or goes over $430 per share you will start making money again. This particular example I would not trade because the option prices are too high.

Option Straddle

Tesla Straddle $350 Profit Chart

Stock Price Strike Price Option Cost Gain Profit
0 350 10,765.00 35000 24,235.00
10 10,765.00 34000 23,235.00
20 10,765.00 33000 22,235.00
30 10,765.00 32000 21,235.00
40 10,765.00 31000 20,235.00
50 10,765.00 30000 19,235.00
60 10,765.00 29000 18,235.00
70 10,765.00 28000 17,235.00
80 10,765.00 27000 16,235.00
90 10,765.00 26000 15,235.00
100 10,765.00 25000 14,235.00
110 10,765.00 24000 13,235.00
120 10,765.00 23000 12,235.00
130 10,765.00 22000 11,235.00
140 10,765.00 21000 10,235.00
150 10,765.00 20000 9,235.00
160 10,765.00 19000 8,235.00
170 10,765.00 18000 7,235.00
180 10,765.00 17000 6,235.00
190 10,765.00 16000 5,235.00
200 10,765.00 15000 4,235.00
210 10,765.00 14000 3,235.00
220 10,765.00 13000 2,235.00
230 10,765.00 12000 1,235.00
240 10,765.00 11000 235.00
250 10,765.00 10000 -765.00
260 10,765.00 9000 -1,765.00
270 10,765.00 8000 -2,765.00
280 10,765.00 7000 -3,765.00
290 10,765.00 6000 -4,765.00
300 10,765.00 5000 -5,765.00
310 10,765.00 4000 -6,765.00
320 10,765.00 3000 -7,765.00
330 10,765.00 2000 -8,765.00
340 10,765.00 1000 -9,765.00
350 10,765.00 0 -10,765.00
360 10,765.00 1000 -9,765.00
370 10,765.00 2000 -8,765.00
380 10,765.00 3000 -7,765.00
390 10,765.00 4000 -6,765.00
400 10,765.00 5000 -5,765.00
410 10,765.00 6000 -4,765.00
420 10,765.00 7000 -3,765.00
430 10,765.00 8000 -2,765.00
440 10,765.00 9000 -1,765.00
450 10,765.00 10000 -765.00
460 10,765.00 11000 235.00
470 10,765.00 12000 1,235.00
480 10,765.00 13000 2,235.00
490 10,765.00 14000 3,235.00
500 10,765.00 15000 4,235.00
510 10,765.00 16000 5,235.00
520 10,765.00 17000 6,235.00
530 10,765.00 18000 7,235.00
540 10,765.00 19000 8,235.00
550 10,765.00 20000 9,235.00
560 10,765.00 21000 10,235.00
570 10,765.00 22000 11,235.00
580 10,765.00 23000 12,235.00
590 10,765.00 24000 13,235.00
600 10,765.00 25000 14,235.00
610 10,765.00 26000 15,235.00
620 10,765.00 27000 16,235.00
630 10,765.00 28000 17,235.00
640 10,765.00 29000 18,235.00
650 10,765.00 30000 19,235.00
660 10,765.00 31000 20,235.00
670 10,765.00 32000 21,235.00
680 10,765.00 33000 22,235.00
690 10,765.00 34000 23,235.00
700 10,765.00 35000 24,235.00

Someone may have told you that in Blackjack insurance is a suckers bet, but if you ever looked into the counting strategy then in certain situations you should take the insurance. Currently I am only buying and writing call options at the time of this article and not utilizing spreads or straddles and have no intention of doing so in the next week or so. While the screenshots above are using market order types I strongly suggest to always trade using the limit order type on all option trades.

 

Invest in What You Understand

I’ve talked to a lot of co-workers and relatives who have invested heavily in businesses they simply don’t understand. This is a mistake.

You don’t have to know everything there is to know about a company to invest in it, but you should have a general understanding of their products and market. Warren Buffet famously invested in Coca-Cola since 1987 and currently owns around 10% of Coke stocks. He loved this company because of its iconic name, and well known product. He found a company he knew and understood and was able to make sizable returns on his investment. Coke stocks went up from $2.45 per share in 1988 to it’s current price of $47.38, paying good dividends along the way. Walmart, Best Buy, and Kroger are all publicly listed companies that any average Joe can understand.

Walmart 5 year return: 72.5%

Best Buy 5 year return: 490.8%

Kroger 5 year return: 132.7%

If you’re a gamer you know names like Activision Blizzard, responsible for games such as World of Warcraft, Call of Duty, etc. which all have their own cult following. If you bought this company 5 years ago and held it you would return 555% on your investment. Walmart and Kroger are included as examples of companies that have stiff price competition and do not have an “economic moat” such as a company like Activision Blizzard. Best Buy has been a go-to place for electronics and has been well positioned to capture what I call the Apple Tech revolution, not having to deal with rivals that have gone under such as Circuit City and Ultimate Electronics.

Now companies that you don’t understand, stay away from! For example, “exploratory mining companies”, small no-name drug companies, and Greek shipping companies are all stock investor pitfalls that usually end up going bankrupt. This is why for all of my serious investments I make sure the company has at least a 400 million market capitalization. You can certainly play with penny stocks, but I’d never suggest putting any amount you can’t lose into them. It’s my same advise with gambling at a casino.

Now you may be asking, “I knew Circuit City and their products, but those lost money!”. You’re right! Besides knowing the business you also have to do some research on the company’s cash flow and growth. Those are outside the scope of this article, as the “secret sauce” for successful investors is largely dependant on their cash flow figures in comparison with this stocks outstanding and stock price.

Getting the ROI on Rental Properties

Everyone knows that Real Estate is one of the major ways to make income. Like stocks, you have to put money in to get a return which will either be positive or negative. Unlike stocks, it isn’t so simple to figure out how much your return is. Online brokerages like Fidelity, Merrill Edge, and Charles Schwab have nifty graphs and reports that can tell you exactly how well you’re doing over a specified time frame.

If you have considered buying a real estate property, measuring your return is one of the most important factors to identify your successes and failures. I found a great video by BiggerPockets.com which goes through the process in a simple way that will help you manually compute your return on investment. Of course, as you build your real estate portfolio it is important to find a good way to keep all the information together which can be done using a myriad of tools out there.

 

Black Friday – Economic Scarcity Reason for Violence

 

 

 

 

 

Black Friday may mean a black eye for some shoppers. Black Friday deals are a recipe for violence in many parts of the US, and while I can’t deny this is unacceptable, I will comment that it is more common around the world than you might think.

Why do large defence contractors, for example Lockheed Martin (NYSE: LMT), make billions of dollars per year? What makes these types of companies fabulous investments? Conflict. Conflict around the world is essentially either fought for dominance of a certain group of people for a certain set of resources. Resources can be land size, energy, food, manpower, etc.

Black Friday is creating mini wars in parts of the United States where resources are scarce, generally speaking those who get involved in brawls really need these black Friday deals as their chance to get a unit of a limited supply of something – PS4, XBox, Flatscreen TV, etc. If you make people have to compete to get the resources, fights will happen.

Mining Stocks for 2018

The Bingham Canyon Mine in Utah, USA

The following is a list of a few mining stocks to consider coming into 2018. Some investors are eyeing mining stocks as an unappreciated sector in the past few years, and are looking to diversify their portfolio from overpriced stocks to some bargains. I have reallocated some gains from 2017 into the first option below in anticipation for a gold price increase to follow the recent commodity price increases.  Please comment below if you have any other suggestions.

  1. Barrick Gold (Nasdaq: ABX)  – the largest gold mining company in the world.  With a PE Ratio (TTM) of only 7.00 trading at $14.00 this is a steal. The dividend is weak though, so the hope would be that the gold price rises or they can cut expenses and improve efficiency. This would probably be one of your best bets on gold prices. With the US dollar starting to decline against other currencies and commodity prices starting to rise this stock is essentially a bet on gold. The expected output of gold in 2017 is 5.3 million ounces and the expected output of copper is 420 million pounds. The size of the company means it is more likely to be able to weather an extended gold price trough. Another positive is that this company has not issued more shares for the past few years, meaning they are less likely to dilute the price. The drawback to this company is that is heavily dependant on gold and copper mining, so more or less betting on these two commodities. Today’s price is $14.00.
  2. GoldCorp (Nasdaq: GG) – another Canadian company, GoldCorp is essentially a smaller version of Barrick with a higher pricetag. GoldCorp estimates to mine 2.5 million ounces of gold in 2017 but claims to have plans to grow by 20% by 2021. If you want to invest in gold miners and want to spread across multiple companies, you can consider buying some of this stock. Today’s price is $13.22.
  3. BHP Billiton Limited (Nasdaq: BHP) – The world’s largest mining company. We aren’t talking gold – we are talking coal, iron, copper, potash, and petroleum. This company currently has a “average” P/E (TTM) ratio of 19, but boasts and excellent dividend of 1.72 or 4.1%. Today’s price is $42.30. Investing in this company is sort of like investing in the global economy, as the raw materials are used around the world. This company was hit by the economic slowdown of 2008, falling to $36, but then peaked in 2013 at over $94 per share. From 2011 to the end of 2015 the shares slowly slipped down to $22 per share but have since risen to their current price of $42.29.

 

 

Set Your Target and Be Happy with a Profit

I purchased Twenty-First Century Fox (FOXA) for $26.77 near the end of September and sold it for just $29.00 yesterday. I could easily be upset about this sell, after all Fox is now trading at $31.15 with the news of Comcast’s supposed interest in purchasing a large stake of the company. Just last week Fox was in talks to sell some of its assets to Disney, so two potential suitors means a better price for Fox.

The reason I had to sell the shares I had for just $29.00 was because I had written a call option when I purchased they shares for exactly $29.00 per share with expiration date of November 17th. I figured an 8% gain within two months was a pretty good rate of return should I be forced to sell. My reason for buying FOX was due to it having a low P/E ratio and dividend, followed by the facts that it had fallen quite a bit from $32 per share in March. Having a profit margin about 10% and a return on average equity of over 20% this was a good candidate amongst other large media companies. Not to mention the “economic moat” that Fox has from its news competitors.

Writing the options yielded 64 cents per share, meaning the shares would have to exceed $29.64 for me to have to sell the stocks. The doubly whammy good news for Fox meant I had to sell the shares at a measly 10.7% profit  [($29.00 + $0.64) / $26.77] rather than a 16% profit [$31.15 / $26.77]. My conclusion is that I would have no idea of these pending acquisition talks, as I base my investment decisions usually on book value and economic moat evaluation. The option drove the stock sale, and now my liquidity is up.

It is easy to regret investments which could have made you more money. I regret not buying a whole bunch of bitcoin in 2011. However, instead as a investor you should be confident if your decisions are well informed and logical.

Is Freelancer full of Scammers?

Freelancer.com is advertised as a place to have content written for you, or software developed, etc. You can have someone write articles on your topic of choice, or even have bids for mobile apps you have ideas for.

I recently joined Freelancer and hired someone to write something for me.  I paid them about 20 USD to do a financial analysis piece on Kroger’s stock price after it had crashed 30.6% after two sets of bad news on July 15th and 16th. On the 15th Kroger’s management came out with some low expectations due to price cuts and competition from other grocery stores. On the 16th Kroger was hit with news that Amazon was buying Whole Foods. You can imagine the implications this move will have for the entire industry if it parallels the book market or retail sales market in the US. Take Borders and Sears as prime examples, Borders was bankrupted by Amazon and Sears is closing stores around the country in a death spiral towards bankruptcy. Basically what I wanted written is a current evaluation of Kroger as of it’s price drop and a valuation of the company as it stands now. What I got instead was a bunch of words which looked like they were written in a foreign language and freshly presented after a Google Translation!

Below are a few bits from this “native English speaker from England”:

  • The supermarket chain has direct subsidiaries, convenience stores, Jewellery stores, and online retails platform for their customers
  • The prices of groceries have broken the 60 years longest streak by a decline for straight 17 months
  • The discounts offering at Kroger are highly competitive of all its rivals which make it most favorable

In short, the entire article was a piece of trash. I’d rather have a Nigerian prince write my articles for me. A waste of $20, and proof that Freelancers are not who they say they are. This particular Freelancer had over 60 five-star reviews, most likely fake users.

Another story I have, one which thankfully didn’t cost me money, was when I put out a bid for a mobile game app. About 50 bids came back in with various quoted prices. When I contacted some of these bidders, they switched their price from around $300 to $5,000. When I said I’ll think about it, they come back with the standard line “What is your budget”? With swindlers like these I would not trust them to develop an app exclusively for me and not steal it for themselves afterwards. Again, if you think you can outsource work cheaply and turn a profit it’s probably time to look somewhere else besides Freelancer.com.

If anyone using Freelancer has had a good experience with content writing or having apps developed, let me know. For now I’ll avoid them like the plague and maintain thehighestreturn.com as a single author source for information. Once I have more time I’ll do my own mobile apps as well.