Monday, 12 December 2016

This goes against my dividend ideology but consider…...

So as most people I talk to regarding stocks, investing, money management probably know that I am a strong advocate of dividend investing.  Buying quality stocks that pay a good dividend, raises its dividend regularly, has a good dividend payout ratio, has a good P/E ratio, and is a good DRIP candidate.

But after 31 stocks that I have purchased over time and have been dripping for a while now, things need to be more entertaining.

In my talks with many individuals, I engaged in conversation with 1 person regarding options trading.  Amazing returns in short periods of time, sometimes in minutes such as when you buy calls or puts right before an earnings report.  So basically,  buying either puts or calls is your gamble on whether the stock goes up or down.  With dividend investing, you are basically only betting on the stock going up, going up means you are making money.  When a stock goes down, you lose money.

With call options, you make money when the stock goes up.

With put options, you make money when the stock goes down.

Now options trading requires an entirely new type of trading account, an account on margin, basically you are trading on credit.  Now to me that is too much work, I am happy with my regular trading account where I can buy stocks and ETFs.  But how can my regular trading account benefit from something going down.

Consider Horizon ETFs, in particular commodity leveraged ETFs and commodity leveraged inverse ETFs.  Here is there link Horizon ETFs

The 4 or in this case 8 ETFs that I have added to my watch list are HOU.TO, HOD.TO, HGU.TO, HGD.TO, HZU.TO, HZD.TO, HNU.TO and HND.TO

So to understand what each ETF does, look at the letters in the ticker.  The "H" simply means its an Horizions ETF, the next letter is either U or D, up or down.  The 3rd letter tells you what this ETF is tracking, O is Crude (Oil), G is gold, Z is Silver, and N is Natural Gas.  All of these commodities are tracked daily on sites like CNBC and BNN .

So after you add to these to your watch list and start to see how they react to commodity prices.  If the price of crude goes up 4% then the HOU etc goes up about 8%.  Yes that right, you can make 8% in 1 trade.  Remember the ETF is leveraged so anything the commodity does, its 2 times.  Now if the price of Crude drops 4%, the HOD ETF will gain 8%.  How is that possible, remember its inverse leveraged, the "DOWN" ETF likes when something goes down.

These ETFs can be used as a day trade only, do not hold these any longer.  The leveraged aspect of them is very powerful.

So add these tickers to your watch list if you want to gamble a bit without opening an options account.

Disclaimer : I have traded all of the ETFs above.