Please rate these long term strategies

S

Sky123987

- You have a note for your house for 200,000 @ 6.25%
- You have 200,000 worth of S&P etfs (no gains)
- Tax Bracket 30%

Strategy 1) - Sell the Stock, put all the money into the home and buy 200,000 worth of ES future contracts.

Strategy 2) - Sell the Stock, put all the money into the home and buy 200,000 worth of S&P option contract.

Strategy 3) - Keep everything the same



My thinking is that why not put all the $ into the house so you don't have to pay the 6.25% and just borrow the $ using index futures which is like 3% now. But the probably is that I would have to pay tax on the future contracts (60% capital gains, 40% orid income ---> this is always true and doesn't depend if you hold the contract for > 1 year)

So then I started thinking of buying option contracts because I think if you hold for > 1 year, it is 15%, but I'm not sure if the time decay is worth it w/ options
 
Quote from Sky123987:

- You have a note for your house for 200,000 @ 6.25%
- You have 200,000 worth of S&P etfs (no gains)
- Tax Bracket 30%

Strategy 1) - Sell the Stock, put all the money into the home and buy 200,000 worth of ES future contracts.

Strategy 2) - Sell the Stock, put all the money into the home and buy 200,000 worth of S&P option contract.

Strategy 3) - Keep everything the same
More...

Where are you getting the $200,000 to buy the ES or SPX options after you sell the stock?
 
You definitely do not want to pay off the house loan. At the current inflation rate combined with your mortgage deduction you have a negative cost for that loan. Therefore stretch it out for the full term of the loan. Do not accelerate payment of principle. What you do with your investment money should depend on your investment skills, but in no case do you want to pay off the house note.
 
Sorry Sorry Sorry,

I mean buy 200,000 worth of market value... so roughly 3 contracts (ea. car is worth ~ 70,000)

I'm assuming you have the money necessary to post for these contracts
 
Quote from piezoe:

You definitely do not want to pay off the house loan. At the current inflation rate combined with your mortgage deduction you have a negative cost for that loan. Therefore stretch it out for the full term of the loan. Do not accelerate payment of principle. What you do with your investment money should depend on your investment skills, but in no case do you want to pay off the house note.
More...

Interest (paid) by buying a future contract is tax deductible too, so I'm not really sure why you'd make an arguement for keeping the loan for a tax deduction.

What does the current rate of inflation have to do w/ the 2 decisions?
 
Quote from Sky123987:

Sorry Sorry Sorry,

I mean buy 200,000 worth of market value... so roughly 3 contracts (ea. car is worth ~ 70,000)

I'm assuming you have the money necessary to post for these contracts
More...

Then eliminate choice #2 because options have to be paid in full when bought thus the question about where you were getting $200k.

Buying 2 or 3 cars is not a replacement for $200,000 in S&P stock (assuming SPY). Deltas are way different.
 
Quote from optioncoach:

Then eliminate choice #2 because options have to be paid in full when bought thus the question about where you were getting $200k.

Buying 2 or 3 cars is not a replacement for $200,000 in S&P stock (assuming SPY). Deltas are way different.
More...

What is Delta?


Also...

I know that for both futures cars & option cars, there is a built in interest cost.
Is it the same? if so?

then my question.
if it is assumed that the mkt goes up 10% / yr, then your EV (expected value is 7% / year) if you buy ES cars.

So... what I'm really asking is can you buy a certain # of option contract that will give you the same return as the future contracts w/ the same amount of risk.

Like you might have to buy more, but the risk / reward is it the same?

If it is... Then I'll effectively be borrowing $ @ 3% rather than 6.25%.
 
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