don't know about taxes (i never do), but there is a penalty for early withdrawl

10/13/2010 9:59:50 AM

Scenario A is the traditional. You WILL owe taxes on that withdrawal. Why are we making this so difficult?

10/13/2010 10:01:50 AM

Yeah, but it seemed she was saying you'd pay taxes for scenario #2.

10/13/2010 10:12:49 AM

Quote :

"Why would you be paying taxes on the roth?"

I'm a moron, I treated the tax payment as something that could come right out of the IRA. The error only changes the breakeven period.

Quote :

"you are just commingling your money with the government's share"

It isn't the governments share until you actually take the distribution, which is what I have been saying all along.

Quote :

"I'm not sure exactly what is tripping you up here but its really much more simple than what you're trying to solve."

What is tripping everyone up is your willful ignorance to what triggered this debate. It wasn't a generic discussion on Roth vs Traditional, it was about a specific circumstance where one needs to roll from a 401k. As such, your hypothetical 20% when the money was put in versus 20% when it was taken out only has a little bearing here. Why? Because rolling the entire sum over at once will put him in a higher bracket TODAY.

But, I guess if we all retire at 70 and we all return 8% per year (which you argue in other threads isn't going to happen in real terms anyway because of the destruction of the economy), then the discussion makes sense. Given that, if investor A starts with 800k and draws down at 40k per year and investor B starts with 1000k and draws down at 50k per year (leaving him with the same 40k to live on that A has), he still has more in his IRA all the way until it is exhausted rendering both strategies EQUIVALENT as we'd expect at the same tax rate. This is the same whether they both earn 0% while being drawn down or 5%. Both accounts exhaust at the same time.

As correctly pointed out by me and everyone else, the deciding factor really is the future tax rate. The rate can go to 30% and the traditional still has 85k in it available in year 16. With both earning a modest 1%, the traditional has 64k in year 18, the Roth has 86 in year 20. I can give you the spreadsheet since you don't seem to believe math. Compounding interest really dampens the advantages of the Roth. This is before considering he might be single and have no mortgage payment meaning his present rate is in fact "artificially" higher compared to where it could be right now.

Quote :

"My roth should hit $50k in the next few weeks which will put me pretty close to the first million (tax free). Its really not that hard to save the first million if you start saving early..."

I'm not asking how hard it is to save the first million. I'm asking what kind of numbers should anyone following this thread, anyone that has a passing interest in retirement be looking at if they want to retire with the same funds you want to retire with. What type of yearly income is required, what rate of return, and how many years until retirement. It's a simple question, no need to dance around the answer. I can do the number crunching myself, but you obviously know off the top of your head as you've done the calculation.

10/13/2010 12:18:07 PM

With 50K in his roth he can retire with 5 million in 35 years if he receives 8% on his money and he contributes $21,500 a year.

10/13/2010 1:23:59 PM

I don't have the exact answers off the top of my head and of course it will depend on when the gains occur as my stock-bond ratios won't be the same throughout my life.

But you can use retirement programs online to put a plan together in 30 minutes or less.

Fidelity has one that is fairly all encompassing on their website.

I think 6-8 pct is a good range of values to use. I think us equities will be closer to the 6pct end of the spectrum and int'l possibly more towards the 8pct.

If returns are significantly lower than that you're still leaving yourself with $1-$2 million as a safety net to retire and just adjust your lifestyle down to accomodate.

10/13/2010 1:47:23 PM

BP dividend may be back in Q1.
http://www.moneycontrol.com/news/world-news/hope-to-restore-dividend-next-year-says-new-bp-ceo_488380.html

10/13/2010 7:13:51 PM

yeah, i've read a lot that has suggested that over the last few months. i'll be surprised if it isn't reinstated in Q1.

I'm also expecting a pop in my AAPL and VZ around that time, as I think that maybe this time there really is going to be a Verizon iPhone.

10/13/2010 9:40:12 PM

Isn't the anticipation of that figured into the price of VZ already? It's had a healthy little run lately, though so has T.

10/13/2010 9:49:46 PM

well, yeah, although i bought it 6 months ago or more...and i still bet it goes up some more whenever it actually gets announced.

10/13/2010 10:05:56 PM

http://www.etfroundup.com/?p=4398

10/14/2010 11:01:48 AM

Are there any certain brokers that are recommended if I want to get into a bit of options trading, or are scottrade, etrade, etc all pretty standard with fees and platforms?

10/14/2010 11:22:19 AM

i don't know much about them,. but it might be worthwhile to look into Options Express.

10/14/2010 1:57:31 PM

As far as I know, some of the more mainstream brokers are fairly restrictive on your option level unless you straight up lie on your years of experience in trading them. I know when I traded options with scottrade, all I could do was covered calls. If this is all you are looking for, then you're set. I'm currently with thinkorswim and have full options capability. I can't remember if I stretched the truth a bit on my options experience or if they are just less restrictive.

[Edited on October 14, 2010 at 3:35 PM. Reason : .]

10/14/2010 3:35:10 PM

3:17 PM today (Cramer):

There once was a time when Google was a tech titan worth owning, right along with Apple, but that time is not now.

4 PM today (CNBC):

Shares of the online advertising giant leaped in extended trading Thursday as it reported an adjusted profit that blew past what analysts expected.

10/14/2010 4:54:29 PM

^^^^
^^^

I've used optionsxpress in the past. They are very good. I liked their layout. Commission was 14.95 for small options trades from what I recall, I switched over to etrade now though.

On a side note: http://www.reuters.com/article/idCNN1418739120101015?rpc=44 Hang on to your GOOG (up 9% after hours) folks and BIDU. BIDU comes out with earnings on the 18th. Might be time for some crazy profit taking. ridiculous

[Edited on October 14, 2010 at 9:21 PM. Reason : ^ Cramer is goddamn rifuckindiculous, can't stand listening to him.]

10/14/2010 9:11:21 PM

Just like 08. All is clear, there are no problem with the economy, companies are reporting record profits.

I can't help but think this whole thing is getting just a little bit ridiculous.

10/14/2010 10:15:52 PM

Man, but that's what I love about it, always keeps you on your toes.

Another thing, what in the Sam hell is wrong with motorola (MOT). Since mid-2008 that haven't done jack. I highly expected them to be doing much better with the whole droid scene and android market that Google is pushing. I mean obviously apple has many other products other than the iphone, but that's just it...MOT has got be making a killing in sales here with the droid, droidx, droid2, etc. etc.
More time maybe? Last 3 quarters earnings show and have beaten analysts predictions. Maybe this is the start of the MOT rise.

10/14/2010 10:41:42 PM

OptionsXpress was actually one of the ones I was looking at, along with tradeking and optionshouse. Tradeking and Optionshouse both seem to have really low rates, but I'm just skeptical about both of them. I'm leaning towards OptionsXpress but will do a little more research before deciding.

10/15/2010 9:05:57 AM

I used TradeKing, they are reputable.

14.95/trade for options is retarded unless you really have a large account and really need all the tools optionsexpress provides (IV/HV in particular).

Most of the cheaper brokers will do fixed price + fee/contract.

I pay 4.95 + .75/contract with thinkorswim. They gave me that pricing based on TradeKings structure which I switched from.

10/15/2010 11:40:11 AM

Synthetic long on BP expires today and nets me a 1200% return. It could have been a good bit higher had I closed it earlier this week.

New synthetic long on BP at 42.5 next April. Buying 5 calls for every 3 puts and coming out even.

10/15/2010 2:52:17 PM

^^I use TradeKing too. Really good.

10/17/2010 8:46:05 AM

i have set some trailing stops in order to lock in gains

10/18/2010 2:35:22 PM

Stupid work yesterday...I had full intentions to take a bearish vertical on Apple. Bleh.

10/19/2010 7:18:36 AM

curious - do you guys make a lot of money doing this? or do you just enjoy it?

10/19/2010 7:32:48 AM

I make a lot of money although most of it is unrealized gain.

10/19/2010 9:02:39 AM

I lose a lot of money, but I have a lot of fun and I'm learning a lot

10/19/2010 1:34:30 PM

wouldn't say a lot, but i do make some.

i do enjoy it.

10/19/2010 5:45:34 PM

I've made a lot this year by not trading very much

F and CREE have been good to me.

Flat on ETFC and C

haven't lost on anything other than unexercised/unvested stock options.


[Edited on October 19, 2010 at 6:00 PM. Reason : .]

10/19/2010 5:59:00 PM

Quote :

"curious - do you guys make a lot of money doing this? or do you just enjoy it?"

The answer lies in how much effort and time you put into research and study. If you enjoy it, then you do the work required to be successful. The market can rip you a new one, and it has chewed many investors out of every penny they own. Even the best most experienced investor can lose it all.

Cutting losses and capitalizing on gains is how you win. It's a psychological thing. You have to realize that you can't win every battle and that strategic moves that you make might ultimately be wrong. As long as you don't focus on what you "know" is right, then you win. The main goal is the win the war. That is how you make money, and man can you make a lot.

[Edited on October 19, 2010 at 6:59 PM. Reason : meh]

10/19/2010 6:59:30 PM

^^Me too. Bought Cree at 17 and sold at 80.

10/19/2010 7:54:37 PM

And wow - cree took a hit.

10/20/2010 9:51:32 AM

^ picked some up. the hit is overdone i think

10/20/2010 10:19:33 AM

I picked some up at $48.85 and sold Nov 50 calls at $2.2 each.

I'll take 7% in one month.

10/20/2010 10:26:01 AM

dipping my toes into the options pool...

wrote 2 November call contracts on SSO @ $0.15 with a strike price of $45.

10/20/2010 11:40:14 AM

^ bravo. i am still a little to chickenshit for options & i don't trade large enough volume to justify options as a hedge

10/20/2010 12:01:30 PM

^^ Isn't the premium for that around $0.45?

10/20/2010 12:57:12 PM

yeah, $0.44. oops, I confused premium prices in my head when I typed that.


(I had tried to sell $0.15 November options on AINV at a $13 strike, but then I noticed that was the "ask", and there were no "bids")

10/20/2010 2:31:04 PM

Quote :

"dipping my toes into the options pool... wrote 2 November call contracts on SSO @ $0.15 with a strike price of $45."

Are those naked or do you have 200 shares of SSO?

10/20/2010 6:29:45 PM

i have 400 shares of SSO

10/20/2010 6:33:39 PM

Gotcha. Any particular reason you didn't go for 4?

I've recently learned to construct positions that have a mix of cashing in on the time decay while leaving myself the potential to keep winning on the upside in case I'm early to the trend change. This is a strategy that works better in a volatile market like we're having lately. That is, I'm typically really only using options these days to get discounts (or income as it be) at trend changes...stock gets punished, sell a put. Stock has had a long run (like GLD, like AAPL) sell a call. But, you can construct the trade in a way so that you can balance being too early on the trend change and capping your gains.

That is, your position is stuck where it is, if SSO finishes below 45, you make all .45 and you still have the shares. If it finishes above, your gains are capped.

However, you could play the game that you think either the trend is going to continue strongly or not at all. To do that, if you trade a vertical by selling the 44 and buying the 46, you make a similar .47 in premium. If SSO doesn't move, you get the same amount of premium less the extra commission on the second leg. If it moves up strongly in the near term, you'll get to keep cashing in on the 46 call that you bought. This strategy would underperform the basic covered call if the market continued moving up methodically over the course of the next month (because you're capped at 44 and the time decay would eat away at your 46, so you'd be out the $1 over the single leg covered call).

Any serious swing trader these days should be employing options as a discount/income mechanism.

10/20/2010 9:24:54 PM

My option play on SSO is to just close and reopen covered calls or naked puts as the SSO price fluctuates. The volatility creates some very attractive premiums.

I've considered devoting 10% of my portfolio to it, but I'm content keeping it at 5%.

10/20/2010 9:31:26 PM

Unfortunately, I can't manage my trades on a daily basis or I'd be doing that (and up much more than 5% on the year). Yesterday, I saw gold (and the proxy, GLD) had been hammered overnight and I tried to sell a $130 Nov P for $4 at the open that was already down to $2.20 by mid day but I can't trade on my work computer and my cell phone signal is spotty in the office.

10/20/2010 10:11:03 PM

Quote :

"Any particular reason you didn't go for 4?"

No balls.


Well, sorta...I had never traded options before, and figured I'd ease my way into it lest I fuck it away and lose money.

^, ^^ I'll have to read those posts sometime when my mind is fresh so I can wrap my mind around it and maybe use those approaches.

10/20/2010 10:33:25 PM

Is anyone predicting a correction any time soon? I just noticed that the DJIA chart looks just like it did when it peaked in late April.

10/21/2010 3:44:08 PM

The market is waiting on the election and the next FOMC meeting which is when we find out what QE 2.0 is all about.

The Fed has told us they are trying to inflate (or die) the economy and they will continue to do it. So in the short term, all assets will rise as the dollar gets pounded, but at some point the market will realize that this can not be sustained and the only equities left standing will be in emerging markets (where we have exported the inflation, but they aren't as loaded with debt, and they actually produce things) and commodities.

The gotcha is what happens with the new crop of Republicans. My guess is they won't actually touch the monetary side of things, instead, they'll spend the next 2 years jawboning about entitlements, repealing the health care bill, but the Fed will quietly continue their monetary easing.

Eventually, I hope it all unravels and whats left is a populace that finally gets it that not a single god damn person in DC gives a fuck about their well being and from the ashes of a shambled economy something better will arise.

10/21/2010 8:11:27 PM

Violated some of my trading rules. I've been typically shorting options at sentiment extremes to capitalize on the increased IV and generally stupidity of the herd. Thinking the Gold correction had run it's course and getting trigger happy I went ahead and randomly and against strategy sold puts and then leveraged that to buy calls - on an up day no less. Dumb dumb dumb. Of course today I got pinged and doubled down by catching one of the bottoms today to sell another put farther out. Hoping for a bit of an easing of the selling in the next few days so I can sell a call on the upside to further reduce my cost. The timing as always is more difficult for me than getting the direction and strategy right.

10/27/2010 10:15:32 PM

Quote :

"and the only equities left standing will be in emerging markets"

So what do you hold to have exposure out there?

10/28/2010 7:11:40 AM

Any of the etfs. You can also do some research and find which companies have higher exposure on their own via their business.

10/28/2010 7:13:30 AM

I'm up 20% on the EOD that I bought on the flash crash.

10/29/2010 2:41:08 PM