| Title: | Market Investing |
| Moderator: | 2155::michaud |
| Created: | Thu Jan 23 1992 |
| Last Modified: | Thu Jun 05 1997 |
| Last Successful Update: | Fri Jun 06 1997 |
| Number of topics: | 1060 |
| Total number of notes: | 10477 |
Anyone heard of managed options?
My broker called trying to sell me a thing called managed
options. He was selling this as a investment opportunity that
moves completely separately from the stock, bond or fixed
interest markets. The reference to "options" in this case are
currency market options, hence the separate movement from the
other markets. Basically you are banking on a particular
manager's track record of gambling in the currency market
and ending up ahead at the end of the year. Want to get more
bizarre? OK.....
o This is offered as a "limited partnership" that CANNOT be
sold the first six months and then has a 3% decreasing rear
end load dissipating after 2 years.
o The "limited partnership" is liquid (after 6 months) though I
am not sure who makes the market.
o My broker is suggesting to put it in an IRA because the tax
liability is structured so that you are sent a tax bill on
gains of your holdings each year if you sell or not. Within
the IRA, this would not be a problem.
o He would not quote specific returns (of course) but said a
similar offering last year gained 30%.
I am not even thinking about investing without a careful
scrutiny of the offering prospectus but the temptation of a
separate market is interesting and may be worth a small
venture. Anyone out there have experience with an investment
of this nature?
| T.R | Title | User | Personal Name | Date | Lines |
|---|---|---|---|---|---|
| 461.1 | NOVA::FINNERTY | Sell high, buy low | Mon Apr 26 1993 16:39 | 3 | |
change brokers.
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| 461.2 | SDSVAX::SWEENEY | Patrick Sweeney in New York | Thu Apr 29 1993 12:02 | 12 | |
Individual investors should not be trading currency options. It is a
highly volatile and highly speculative market. It is a zero-sum game.
For each dollar of profit, someone else has a dollar of loss.
The capital markets pass through profits from operations to
shareholders. The difference is significant.
Investment advisors should not suggest to individual investors that
they should be trading currency options. The suggestion that they be
traded in an IRA account is ludicrous.
I agree with the suggestion to change your investment adviser.
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| 461.3 | Look elsewhere | VMSDEV::HALLYB | Fish have no concept of fire | Thu Apr 29 1993 17:07 | 28 |
OK, I'll bite.
"Managed futures" is the term given to commodity funds, sort of the
futures equivalent to stock mutual funds. They are typically set up as
Limited Partnerships. _Futures_ magazine rates these funds monthly;
a somewhat scaled down (both in size and scope) version of the sort
of thing _Barron's_ publishes quarterly.
"Managed options", which I've not heard of before, is evidently the
same technique, only trading options contracts instead of futures.
I'M NOT SURE THIS CAN BE TRADED IN AN IRA. There are rules about
trading options in an IRA; typically you can write covered calls
but not do much more. If the expiration is far enough out, though,
the option becomes legal. So you've got some legwork there -- don't
just take the salesman's word for it.
Performance of currency futures is indeed non- or anti- correlated
versus the stock market, but the volatility is high. It's also true
that the zero-sum nature of the business means futures funds tend to
fight with each other for money, as opposed to stocks where everybody
floats up together, until everybody wants out.
It might be better for you to consider diversivfication Within the
stock market. For example, two units of (fixed-income,utilities) and
one unit of (energy,gold). You have better liquidity and understanding
of exactly what you own.
John
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| 461.4 | NOVA::FINNERTY | Sell high, buy low | Thu Apr 29 1993 18:07 | 5 | |
re: -.1
you may trade calls in an IRA account, but I don't believe that you
are permitted to trade puts.
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| 461.5 | SAHQ::ROSENKRANZ | Rock with Gene & Eddy | Thu Apr 29 1993 20:44 | 11 | |
There are a set of federal rules (ARISA or IRISA or something) which
dictate what activity is allowed by the FEDs in your IRA. Brokerage
firms are required to adhere to these rules. Brokerage firms however
may other limits more restrictive than the federal rules which are
just part of their corporate policy.
For example, I've found a nice way to buy stock at a price below the
current market is to write a naked put, and then allow the stock to
be put to you. I believe, the federal rules allow this, however my
brokerage firm won't allow it.
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