patrick.net

Nice try flipmeister, you have fooled no one!

Well, eventually some GF will take a hold of that flipped-out overpriced place and pour 50% of their gross income into the mortgage, so I don't feel for mr. flipmeister.

OT: Anyone here traded the new XSP mini S&P index options?

How can a people be so uneducated that they can’t see they are living in paradise? So ungrateful that 4 hours of your day aren’t adjudicated toward snow removal and grid-lock commute that you have to get HIGH? What a waste.

Whatever you "luxury" thing you are accustomed to having from birth just becomes an accepted part of the background scenery --i.e., nothing special. Island people may appreciate a good swim or surf now and then, but it's no big deal to them --kind of like gridlock, illegals and overpriced housing is to us :-) . Ditto for wealth. If you are born with it, you just take it for granted.

People do not appreciate the absence of problems they've never had in the first place, nor do they value luxuries they've always had (unless of course, they lose them). Just human nature I guess.

http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=1&mls_number=709138&type=property&name=

Here's a house in Willow Glen. Check out the kitchen, yee. Asking $619k. Sales history:

Sale History
04/26/2006: $582,600
08/02/2005: $645,000 - lost money on the '06 sale?
04/12/2002: $1,242,000 - has to be an error

They are European-style (exercise on expiration day only) cash-settled (no stocks change hands) options on the S&P 500 index.

The original SPX options are too large for many trades (each contract controls 145K worth of "stocks").

The new XSP options are 1/10th the size of SPX options.

Not investment advice.

Peter P,

The guys I know that trade the Mini's do so on "offshore" trading platforms where the leverage is HUGE! With like 5 grand you're trading 200k.

"gridlock, illegals and overpriced housing is to us"

HARM,

Remember, the only reason there are so many illegals in this country is because they are doing crimes Americans won't do themselves! :)

http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=1&mls_number=709138&type=property&name=

Here’s a house in Willow Glen. Check out the kitchen, yee. Asking $619k.

lunarpark,

Nice - trolling for flipper specials now, are you? Entertaining, nonetheless.

My comments: this is a subprime to Alt-A flip! They clearly added granite countertops to existing 1950-1960's style hardwood cabinets, the kind without rollers on the drawers (which I find a pain in the a$$ to use). I'm not even sure they replaced the hardware fixtures based on the pics. Is that tile or linoleum on the kitchen floors? They cheaped out to the point where they just extended the flooring from the kitchen into the livingroom!

New FP mantle, fresh paint on the exterior stucco, and a half-hearted staging job with the shower curtain, towels on the toilet, and non-descript paintings above the toilet round things out. To top it all off, check out the pic of the bathroom with the new granite counter - they didn't even finish the paint job around the window for the photo shoot!

Gotta get the place listed before the next mortgage payment is due! Gotta love it!

"Nice - trolling for flipper specials now, are you?"

Guilty as charged. :)

Another thing about this house - it's a "snout" house. There's a funny picture book/glossary for all things sprawl called "A Field Guide to Sprawl" that has some funny aerial pics and accompanying descriptions. A "snout" house is one where all you see from the front is the garage, so that it looks like a resting pig from above.

It also fails the "trick-or-treat" test of home design, where a kid (or most people for that matter) can't find the front door when visiting.

"the kind without rollers on the drawers"

I'm sure it was their intent to "retain as much of the original charm" as possible. That and $119.90 vanity from Flip Depot (TM) was beyond their budget.

It isn't so much that roller-less drawers don't work. They just don't work when they have an extra 1/4" of still tacky paint on them from the 3rd flip in 4 years.

It also fails the “trick-or-treat” test of home design, where a kid (or most people for that matter) can’t find the front door when visiting.

One of my Cali lifer friends tells me that his mom would drive him from home to home for trick-or-treat.

But then again he told me he had never seen a school bus.

My east coast parents were dumbfounded.

From: http://www.theconnection.org/features/sprawl/sprawl2.asp

Privatopia

A community-of-interest development (CID) where residents are legally bound to obey the covenants, conditions, and restrictions (CC&Rs) of a homeowner association may be called a privatopia. Author Evan McKenzie coined the term to emphasize how these associations assume many of the powers of private governments, providing such basic services as police, fire, or trash collection. They may use CC&Rs to regulate paint colors, landscaping, and tenant behavior. Some are gated communities, where all persons entering must pass a security gate. Privatopias appeal to many different income groups. According to planners Edward J. Blakely and Mary Gail Snyder, lifestyle communities focus on retirement and leisure with amenities such as golf courses. Elite communities protect social status. Security zone communities are composed of worried inner-city residents fearful of crime. The gated homes in the photograph of Littleton, Colorado, comprise an elite community, and the golf condos in Palm Desert, California, form a lifestyle community.

Personally I think this is the future. We'll get rid of public schools, police, firefighters, and then it will be everyone for yourself - or live in a privatopia.

This must be a libertarian's dream.

The guys I know that trade the Mini’s do so on “offshore” trading platforms where the leverage is HUGE! With like 5 grand you’re trading 200k.

Offshore?

BTW, regulated futures and options here already have many times more leverage than I will even use.

I think the daytrading margin on ES is very generous.

You all may or may not have seen, but DR Horton's Q1 report looks very, very bad:

http://money.cnn.com/2007/04/10/news/economy/drhorton_warning/index.htm?postversion=2007041009

California is the worst for them:

"The worst declines were in California, where volume was down 59 percent, and value of the homes sold fell 56.8 percent."

I went to their website (not posting to avoid moderation), but they don't have a whole lot of housing stock in the Bay Area, but there are pockets: the new condos on El Camino at the old Hyatt Rickey's, a couple in the East Bay, and bunch in the Delta. Other than the PA development, it sort of mirrors the "subprime" geography, doesn't it? Besides, who the F wants to live on El Camino? I guess it's convenient for getting to Fry's or Compadres.

Other than the PA development, it sort of mirrors the “subprime” geography, doesn’t it?

What is the attraction in that part of PA? Fuki Sushi? Trader Vic?

OO says,

Almost all the professional couples I know who got into a home in the last few years locked in fixed rates, so higher rates won’t affect them.

I know of 5 co-workers in the past year and a half who bought new houses. They are the prototypical 200K dual income first time first-gen buyers. All 5 of them took ARM or IO loans. Higher rates will have an effect but luckily job market's been good and companies have been paying bonuses.

I told one engineer that I have a fixed rate mortgage and his response was "why, most people don't stay there for more than 7 or 8 years". I guess he is a poster child of the engineer that doesn't have a clue.

They are the prototypical 200K dual income first time first-gen buyers. All 5 of them took ARM or IO loans. Higher rates will have an effect but luckily job market’s been good and companies have been paying bonuses.

What is their price range? Does 200K dual income mean 2x 100K or 2x 200K?

Also, there was a discussion here yesterday about whether or not the subprime disaster is spreading to Alt-A. Well, there is a NYT piece today about this very subject:

http://www.nytimes.com/2007/04/10/business/10lend.html?_r=2&oref=slogin&oref=slogin

Login is needed, but here are key excerpts:

Defaults Rise in Next Level of Mortgages

The delinquency rate for Alt-A mortgages remains much lower than the rate for subprime mortgages, but it has been rising. In February, 2.6 percent of Alt-A loans were delinquent by 60 or more days, up from 1.22 percent a year before, according to FirstAmerican LoanPerformance. By comparison, 12.44 percent of subprime loans were delinquent by more than two months, up from 7.84 percent.

With regards to what will be effected - how about vacations? Will people be scaling back or giving them up as their mortgages reset and they can't tap the HELOC's anymore?

When will it be reasonable to get some discount flights to Europe - or do you think that prices will actually go up as airlines need to cover the cost of the flights?

@Peter P,

www.gcitrading.com

0.5% Margin Requirement!

(Not available to U.S residents)

NIA

Do you know where I can find a good summary of advanced option-trading methods that quant people use?

I thought they often trade exotic OTC options that are not available to retail customers.

GC,

Peter P is more informed to provide an opinion where options are concerned. FWIW I'm in the, 90% of all options expire worthless crowd. :(

RE: 0.5% Margin Requirement!

Oh. It trades forex, right?

I told one engineer that I have a fixed rate mortgage and his response was “why, most people don’t stay there for more than 7 or 8 years”. I guess he is a poster child of the engineer that doesn’t have a clue.

I have a single income friend who did something like that. But I think he had a pretty smart plan: he got a 30 year fixed with the first 10 years being Interest Only.

It seems to me like a good idea - lock in the low interest rate now, and assume that inflation will make the mortgage more affordable later. And maybe he'll have a second income too.

With regards to what will be effected - how about vacations?

Haven't you heard? Living in the Bay Area is so great it means you can save money by never having to go on vacation again.

http://www.burbed.com/2006/05/05/thinking-of-vacation-not-if-you-live-in-silicon-valley/

"-how about vacations?"

How about food and gas for your car to get to work?

It's hard to say which way these crazy carriers will go? They measure their market by ASRM (available seat revenue miles) so it's obvious they view this as a commodity. With any luck, resets, sub/Alt-A woes will grow as world peace breaks out and you'll have the plane to yourself! :)

I am NOT an options expert. But I can say that most books on options are simple descriptions of canned strategies and they are of little help.

Find a book that offers insight. If you see a book that focuses on payoff diagrams at expiration (hockey sticks), throw it away. You want a book that drills into gamma and vega. You want something that tells real-life stories of how traders fucked up in the past.

I am reading Options Trading: The Hidden Reality right now.

I glanced through Dynamic Hedging: Managing Vanilla and Exotic Options, which also seemed to be an interesting book.

Where can I get data on options? Data such as historical volatility, implied volatility, etc..

Try ivolatility.com. It is free.

You may also need software on option analytics.

I see concepts like “Saving for a Rainy Day” and “Living within your means” making a strong come back soon.

What country do you live in Lurker?

@Peter P,

Yeah, FOREX and what they call CFD (Contract For Difference) and as far as I can tell that basically means that you never actually take possession of the shares. Be that in certificate form or "street name". This way they can mimic the stock's price movements without all the luggage like proxy votes, ACAT's (account tranfers) etc. Kind of like Linden $'s only you play for keeps. They are giving the NYSE and FTC absolute fits!

Is it similar to peripheral betting?

It seems to me like a good idea - lock in the low interest rate now, and assume that inflation will make the mortgage more affordable later. And maybe he’ll have a second income too.

Problem is, the interest rate for a 10/30 I/O to FRM is not that different from a 30y FRM. The "how-much-a-month" difference is small. Worse yet, you are basically deferring any principal payment for 10 years, so the increase in the monthly payment will be substantial in 10 years, and there will have been no equity buildup (unless prices continue to skyrocket!). Yes, you're friend is hoping for either significant inflation or a significant wage increase by then.

http://sfbay.craigslist.org/pen/rfs/309410152.html

I believe this is one of the D.R. Horton models on the El Cam.

Peter P,

Exactly. It's interesting to note that the lottery in America started in Harlem and used the last four digits of the close for the day on the DJIA. It was perfect. They didn't even have to go to the expense and hassle of a drawing and then (quietly) circulating the numbers. There was a paperboy on every street corner.

Yep, Option Volatility & Pricing is a must-read.

I’ll consider myself well-versed in option theory when I can derive the B-S model myself.

I did that in a class at Stanford. That would not help your trading at all. The B-S model was a relatively simple/elegant set of partial differential equations. And they are only that.

eburbed,

Nowhere is more prone to the "Matrix collapse" than the PacNW! Everyone here is so convinced that anything you could possibly want (except sunshine) is within a few hours drive! So it's well worth the sacrifice.

This theory works well until you have to go to a wedding/funeral or stark raving mad!

Problem is, the interest rate for a 10/30 I/O to FRM is not that different from a 30y FRM. The “how-much-a-month” difference is small. Worse yet, you are basically deferring any principal payment for 10 years, so the increase in the monthly payment will be substantial in 10 years, and there will have been no equity buildup (unless prices continue to skyrocket!). Yes, you’re friend is hoping for either significant inflation or a significant wage increase by then.

Actually that was the whole point - to defer principal payment for 10 years so that he could afford to buy ramen. It had nothing to do with HMAMonth.

The bet is that inflation will soar in the next few years, and subsequently his wage will go up. Assuming just 4% inflation a year, his income in 10 years will be 42% greater than it is today.

I'm of the growing opinion too that inflation will soar.

I don't see how we will pay all the debts to China without it.

This theory works well until you have to go to a wedding/funeral or stark raving mad!

See this doesn't happen in California. It's so big that most weddings/funerals happen in state. Most of my Cali native friends have never spent more than 8 weeks total anywhere outside of California in their 30 years of life.

And when they do go, all they do is complain about how hot/humid/cold it is.

eburbed,

Seems your friend could use a "3rd leg" to his stool? Wage inflation (alone?) may not be the ticket if the home itself has flat lined or depreciated.

As skibum points out the difference in payments isn't all that substantial and when he should be at a point where he "should" begin chipping away at the principal he's in fact just getting started.