A Comment -- General Comments From an Expert (A Commentary)

If you don’t have sufficient volume you can get significant fluctuations that aren’t that meaningful so technical analysis does not work as well. Min $100,000 traded each day.

RESP until next Sept.: Either an ETF or Mutual find. He would like his own fund – HAC.

Gold. Has fallen back because people want safety and they are not moving to gold but are moving to the US$. Also, there are some larger US funds that have been underperforming so have sold off some of their gold holdings. Also people are taking profits as gold has done better than other things this year.

Market: In studying the numbers coming out of China and the rate of change, he feels China is in for a hard landing and that will impact commodity demand. We are going to see a recession in Europe that is already in the markets, but China is not.

Silver Bullion. Buy Sell or Hold? He would be inclined to hang on to it now. It is the volatile cousin of Gold. He is not really bullish on the US$ right now. Feels these metals are getting oversold right now.

Gold. Buy now or wait until 2012? Thinks you are fighting the tape a little bit right now, which means the trade is going against you and this may go on a little bit longer. Would rather play the gold stocks here as they didn’t follow the move up of gold bullion.

Commodities. There are probably 2 or 3 that really stand out as being attractive including copper. Mine supply will not keep up with demand. In 2009 Chile, the #1 producer increased their production by around 60,000 pounds in that year alone but China demanded almost 1,000,000. Diamonds and silver look attractive. Oil will be the 2nd one and gold would be another one. Weak ones would include natural gas, aluminum and the weaker camp could even include nickel and zinc.

Identifying a high data stock and buying a Put and Call at same strike price on the stock ahead of earnings announcement? A really good idea if you are not afraid of losing money. What happens on these is that the option buyer’s enemy is time. You have to know the option expiry date relative to the earnings announcement. Also, what is the X-dividend date? If you are buying both sides of the option, the time value can erode very quickly.

ETF for the fixed income portion for a RESP account for a 4-year-old child? There are a lot of products out there but you might consider either the Royal Bank’s or BMO’s Target Maturity Bond. They go on to a specific date and as they approach the maturity date, they start rolling the bonds over into T-bills. That tends to eliminate a lot of the risks.

Naked Put Writing strategy? Identifying a stock, selecting an entry price and then writing put options, backed by cash or margin for that strike price. This is a really good idea. If you are buying $50,000 worth of stock, you should have $50,000 in cash minus the value of the put premium. A lot of people use margining, which is a really good idea unless the market drops.

In an RRSP or TFSA, can we only write covered calls and not puts? You can only write covered calls on any registered account because there is no way of separating out the money. And what do you think of the strategy of writing deep in the money covered calls when we feel a stock is toppy? If you already own the stock, and you feel it is toppy, just sell it.

Buy a stock for around $10 and sell a Covered Call about 3 months out for roughly $1 and then sell a Naked Put for $1, 3 months out with the same Strike so if the caller gets called away, it is like getting $12 for a $10 stock. If he gets Put he is buying a $10 stock for $8. Good strategy? To do this, you have to have a marginal position for the Naked Put, which always makes him feel a little uncomfortable. This is essentially a straddle. There is an element of risk if you are using margin. Good strategy but it has risks.

Straddle? Fairly simple strategy where on a $50 stock you buy a $50 Call and a $50 Put. Whichever way it goes, hopefully you will make money, provided that whichever direction it heads, it moves enough to cover the costs of both sides of the trade. He uses these but only around a particular event where there is going to be extreme volatility and you know roughly what day it is going to be such as a court decision, etc. If you are buying out a couple of months, you will get killed because of erosion of time.

Selling Short or using a Put Option. What's the difference? It depends on what you could benefit and how much you are willing to risk. When buying a Put you at least know up front how much you are going to lose. With shorting, you don't know. A Put is a lot less risky than Shorting.

Options. Hasn't been a lot of movement because the market is in a trading range so being able to write options and collect cash flow seems to be the strategy of choice right now.