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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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the April newsletter is live

Devesh works very carefully through the operations of options in a portfolio ("Deep Dive," which might be read first) and the complexity of assessing their contribution ("The Options Conundrum"), both of which complement his March overview essay.

Lynn takes on tax-efficient long-term investing (two recs follow) and updates us on the disappearance of Fidelity New Millennium ETF and the launch of a new active ETF suite that incorporates and transforms a couple earlier funds.

The Shadow shares word on a slew of liquidations. a handful of "oh god, we're not green!" repositionings, some rechristennings and the industry's miscellaneous adventures.

I write a bit about happiness, satisfaction, envy, Kahneman, Munger, GoodHaven, Pinnacle, volatility ... and Trump Media's potential arrival in your portfolio.

Fairly major pieces on quality and infrastructure are pending. I'm incredibly frustrated by the consistent lack of professionalism among advisors and their media relations staff (looking at you GMO ... Lazard ... Impax ... and others). I'll continue outreach in hopes of offering more richly informed essays May 1 than I could April 1.

With cheers to all,



  • On the options articles, I had to trim a lot of charts and data to not overwhelm the reader. Even as it is, there is a lot of detail to absorb. If you have a specific fund in mind, message me privately and I can try to get you the required data.
  • Ben
    edited April 6
    Some of the jargon in the monthly commentaries is hard to understand but if I go slowly I can often work it out. But this sentence in the April Options article left me bewildered. "An investor is a long stock at whatever price they buy the stock."
    An investor is a stock? Is this a typo or am I missing something ? I think the intention of the sentence is to convey that the investor expects the share price to increase. Have I got that right? Sometimes investing jargon is like secret code to an ordinary person who is an outsider to the investing "industry".
  • Apologies @Ben.
    It should have been, "An investor is long a stock at whatever price they buy the stock."
    The a was misplaced.
  • Devo said:

    Apologies @Ben.
    It should have been, "An investor is long a stock at whatever price they buy the stock."
    The a was misplaced.

    Thanks! Did I understand the meaning of the sentence?
  • @Ben, let's just go through it together

    Here's the relevant para:
    A Twist in Strike/Price

    An investor is long a stock at whatever price they buy the stock. (i've fixed the "a" in here)

    Not so with Options. Each Option comes with a Strike Price. At the Option expiry, one compares the Strike price of the Option vis-à-vis the then Stock price to determine if the Option expires in-the-money or out-of-the-money.

    Here's the intent of the writing:
    Stocks and Options behave differently. While a stock investor buys a stock and that buying price becomes their Basis, that is not the same with Options.

    If I buy a Call Option on Apple, here's how the Basis works.
    Suppose Apple stock is at 169 right now per share
    Suppose I buy a call Option on Apple at 175 that expires next month.
    Next week Apple announces a great product and the stock goes to 190 per share.
    When my Call Option expires, I "exercise" my Call Option at 175.
    That means my stock Basis is 175. It is not 169 (when I bought the call option), nor is it 190 (where Apple stock is on Option expiry date).
    It's 175 because that the Call Strike of my option.

    What is Apple was to go to 150 next week and stay there until my Expiry Date instead of 190?
    Well, then I would not Exercise my call option on Apple. I would lose my Call Premium and walk away. I would have never bought Apple. Not at 169, not at 175, and not even at 150.

    Thus Stock Purchases and Option Purchases have a different paths.
    With Option purchases, the ending Stock Price and the chosen Strike Price matter.

    Is this a lot of jargon. It might be. Only each one of us can be honest with ourselves about what's too much jargon and terminology. In general, if I don't understand the jargon involved, I simply do not participate in the product offering. I don't have to know everything to make money. Just one or two things really well.

  • Ben
    edited April 6
    @Devo: thank you for taking the time and effort. My puzzlement and question was about one single sentence, not the context in which it appeared. I am a bit literal minded and a former English major oh so many decades ago. We agree that "an investor is a long stock" probably has no meaning in any context. But, yes, "An investor is long a stock", seems to me to be jargon. It is normal investment lingo but in other contexts it makes no sense. I understand what it means but the expression, to my literal mind at least, is odd. To be long can mean to stay away for a long time as in "Oh dear, what can the matter be? Johnny's so long at the fair". It can mean being tall. Comic genius Spike Milligan was asked by a television interviewer "How long were you in the army?". He immediately replied "Five feet, eleven inches".

    I agree with your assessment that it is better to invest in what one understands or is capable of understanding. I understand the concept of long and short as a type of bet on an expectation of a particular occurrence. It seems I am not capable of understanding why taking a long position on a stock would, should or even could be thought of as *being* that position. To my little mind "is long a stock" is an ungrammatical and strange expression. Being "long on a stock" or "long about a stock" makes colloquial sense. But to be "long a stock" registers as jargon.
  • Like other specialized areas, options have their own terminology and linguistic shortcuts. FWIW, I had no difficulty in understanding the articles by @Devo.
  • @Devo - thank you for the articles, informative and interesting.

    @YBB - It might just all depend one's familiarity and acumen in dealing with all matters re:options. I sometimes feel like I get it and then all the circuits seem to smoke all at once. However, if you want to ever talk about plants or wood deterioration in particular I'm your guy.
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