In case anyone wants to read a takedown of Edward Jones. These guys are straight up criminals.
She had until May 17, 2021 to make a 2020 IRA contribution, which then would have been noted on her 2020 tax filing. So if her May contribution was actually a 2020 IRA contribution, then the later 2021 contribution is good. If the May contribution was for 2021, the second one has to come out. (Not necessarily today. I’m sure a good accountant can figure out how to get it out and fix it with the 2021 return, if necessary.)
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Question for people who are much smarter at stock trading than me.
Say I can buy a warrant for a company at $X and a strike price of $Y. At the same time, I can sell a call for this stock at a strike price that is effectively equal to X+Y and falls within the stock warrants exercise dates. The premium on this call is fairly substantial relative to everything else.
Is this a money printing machine, or is there something obvious I’ve overlooked?
Here’s a good thread to check out on bogleheads: Share your net worth progression - Bogleheads.org
Plenty of stuff like this (boldness added):
40 2009 $751,516
41 2010 $850,536
42 2011 $950,654
43 2012 $1,154,930
44 2013 $1,416,316
45 2014 $1,626,168
46 2015 $1,815,357
47 2016 $2,199,173
48 2017 $2,862,600 $150k 529 from Dad
49 2018 $3,901,505 $1m inheritance
50 2019 $5,084,233
51 2020 $6,347,115
52 2021 $8,089,847Combination of good career, LBYM, investing and inheritance/gifting. Folks practiced annual gifting to me and my wife ranging from 20k to $50k.
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, very common I’m sure
20-50k per year in gifts, lol ok. I’m assuming that’s some kind of tax avoidance shit from the parents?
Yeah, it’s a common technique for people with high net worth to avoid estate taxes. you can make a tax free gift to anyone of $15,000 per year, which reduces the size of your estate. so a married couple could easily transfer $100k or more per year to future generations without paying estate taxes. e.g., each member of the couple could give $15k to two children and two grandchildren each year.
You can gift up to like $11 million lifetime tax free, including doing it all at once if you fill out the proper paperwork, so there is no need to do it in dribs and drabs for tax purposes.
I thought the annual gift exclusion was in addition to the lifetime limit, but I could be wrong about that.
When my multi millionaire uncle with no kids died without a will his wife gave me $28k for “tax reasons”.
I guess you are right that you don’t have to file for anything up to $15k and the $11 mega is on top of that.
Would be interested to hear more about the details. A couple of things that I would ask:
- Is there any required holding period for the stock purchased via warrant?
- Can the warrant be exercised at any point in time, or only on the maturity date?
Edit: I looked at this way too fast and think I misunderstood what you’re asking.
I think you need to look at this in real world situation for what X, Y, and the call premium are, and what the transaction costs are. I suppose you might stumble on free money arbitrage situation but it’s more likely that this offsetting positions will yield a risk profile where you make a small amount of money most of the time but lose a larger amount of money once in a while. Kind of like a martingale betting system.
I put this together based on a situation a friend brought to me and what I found looking into the pricing. Warrants were selling at $14, strike price of $11.50. Warrant can be exercised at any point in time after a certain date. You could sell $25 calls on the underlying stock at a date past the exercise date at a price of roughly $25.
The underlying stock is extremely volatile, which I assume has to be a big part of why this weird situation exists. Basically what I was telling him, is that unless there was something in the rules regarding the warrants that he was missing that this would be a free money situation, where there’s no price the stock could be on the call date that would result in a loss.
I have nothing to add, I’m just following the discussion here. So here are some basic questions I’ve got.
- What is a warrant?
- Where do you buy them?
Meh, at least he’s upfront about that.
OP in that thread (which is the only post I read) is a true champ. Doesn’t sound like he makes much more than 70K/year if that. 33 yo. Worth about 1 million.
A warrant is issued by a company and gives the holder the right to buy the stock at a later date, usually anytime during a period of years, at a predetermined price.
So in the situation described, you would be paying $14 for the right to buy the stock at a later date for $11.50.
How is that different from a call option?
A call option is for a specific date and isn’t issued by the company. A warrant is issued by the company, and the initial fee goes to them. The time period that you have to exercise the option is usually years long.
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If we’re talking American options, then one can exercise the option anytime before the expiration date, so that doesn’t sound any different from the warrant. So, I don’t think I’m getting that part.
It still sounds like basically a call option written by the company that has an expiration date very far in the future.
Can you sell the warrant?