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Phuket Investor: Insure your stock holdings

Legacy Phuket Gazette

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PHUKET: Some readers of the Phuket Gazette who have stock market investments may feel I ignore them, because of a personal bias against equity investments right now.

For those of you who feel you have a knack for choosing good companies, or would like to participate in any upside in the broad markets, but would like to limit your exposure, one way to hedge against the downside risk that comes along with such an investment is to use “put” options.

I like to think of options, when used this way, as an insurance policy for stocks but you can get them on other financial assets as well. The cost of purchasing an option becomes almost a sunk cost, although you could sell the option and recover some of its original purchase price if your stocks go way up in value.

Just like an insurance policy, you hope you never have to “make a claim”, or make a gain from the option, as this would mean your stock market holdings lose their value. Ideally, your share prices sky rocket and you forget about the options while sipping fruity drinks on your yacht.

The way to hedge with options is to match the contract amounts to the number of shares you hold for a specific stock, or if you hold a diversified portfolio you can use a broad index such as the S&P 500 or FTSE 100 and match the value. The second option will not give a perfect 1:1 hedge but will do a pretty good job.

The next thing to do is determine what “level of insurance” to get.

Put options are available, which give you the right, but not the obligation, to sell at various prices. An “in the money” put option is one where the current price is below the “strike” price, or the price that it allows you to sell at.

An “out of the money” put option is one where the strike price is currently lower than the market price, and thus you could make more money by selling in the market.

Obviously the lower the strike price the cheaper it is to buy the option, so there is a tradeoff between how much money you are paying to insure the price and how much you pay for the option.

Another thing to keep in mind is that options have expiration dates, and the further away you are from their expiration, the more expensive they are. As the old saying goes, ‘there is no such thing as a free lunch’.

A very practical strategy is to purchase options which lock-in an “acceptable loss”, one where you keep the bulk of your capital in the event of a crash.

You can usually buy options online with a discount broker, and it needn’t be the same broker you use for your other investments.

David Mayes MBA lives in Phuket and provides wealth management services to expats around the globe. He can be reached at 085-335-8573 or david.m@faramond.com
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— David Mayes

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Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

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Governments & old media versus social media – who will win? | VIDEO

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Governments & old media versus social media – who will win? | VIDEO | The Thaiger

We look at the recent changes made by the Australian and Indian governments to except control over the world’s biggest social media platforms. India has issued strict new rules for Facebook, Twitter and other social media platforms just weeks after the Indian government attempted to pressure Twitter to take down social media accounts it deemed, well, anti social. There is now an open battle between the rise of social media platforms and the governments and ‘old’ media that have been able to maintain a certain level of control over the ‘message’ for the last century. Who will win?

The rules require any social media company to create three roles within India… a “compliance officer” who ensures they follow local laws; a “grievance officer” who addresses complaints from Indian social media users; and a “contact person” who can actually be contacted by lawyers and other aggrieved Indian parties… 24/7.

The democratisation of the news model, with social media as its catalyst, will continue to baffle traditional media and governments who used to enjoy a level of control over what stories get told. The battles of Google and Facebook, with the governments of India and Australia will be followed in plenty of other countries as well.

At the root of all discussions will be the difference between what governments THINK social media is all about and the reality about how quickly the media landscape has changed. You’ll get to read about it first, on a social media platform… probably on the screen you’re watching this news story right now.

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The social media giants in battle with ‘old’ media and world governments | VIDEO

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The social media giants in battle with ‘old’ media and world governments | VIDEO | The Thaiger

“The rules signal greater willingness by countries around the world to rein in big tech firms such as Google, Facebook and Twitter that the governments fear have become too powerful with little accountability.”

India has issued strict new rules for Facebook, Twitter and other social media platforms just weeks after the Indian government attempted to pressure Twitter to take down social media accounts it deemed, well, anti social.

The rules require any social media company to create three roles within India… a “compliance officer” who ensures they follow local laws; a “grievance officer” who addresses complaints from Indian social media users; and a “contact person” who can actually be contacted by lawyers and other aggrieved Indian parties… 24/7.

The companies are also being made to publish a compliance report each month with details about how many complaints they’ve received and the action they took.

They’ll also be required to remove ‘some’ types of content including “full or partial nudity,” any “sexual act” or “impersonations including morphed images”

The democratisation of the news model, with social media as its catalyst, will continue to baffle traditional media and governments who used to enjoy a level of control over what stories get told.

The battles of Google and Facebook, with the governments of India and Australia will be followed in plenty of other countries as well.

At the root of all discussions will be the difference between what governments THINK social media is all about and the reality about how quickly the media landscape has changed. You’ll get to read about it first, on a social media platform… probably on the screen you’re watching this news story right now.

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Never miss out on future posts by following The Thaiger.

Continue Reading

Business

Turbulence ahead for Thailand’s aviation industry | VIDEO

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Turbulence ahead for Thailand’s aviation industry | VIDEO | The Thaiger

When the airlines, in particular, were asking the government to put their hands in their pockets for some relief funding in August last year, it was genuinely thought that international tourists would be coming back for the high season in December and January. At the very least local tourists and expats would head back to the skies over the traditional holiday break. And surely the Chinese would be back for Chinese New Year?

As we know now, none of that happened. A resurge in cases started just south of Bangkok on December 20 last year, just before Christmas, kicking off another round of restrictions, pretty much killing off any possibility of a high season ‘bump’ for the tourist industry. Airlines slashed flights from their schedule, and hotels, which had dusted off their reception desks for the surge of tourists, shut their doors again.

Domestically, the hotel business saw 6 million room nights in the government’s latest stimulus campaign fully redeemed. But the air ticket quota of 2 million seats still has over 1.3 million seats unused. Local tourists mostly skipped flights and opted for destinations within driving distance of their homes.

As for international tourism… well that still seems months or years away, even now.

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