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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: I'm thinking of trying writing a call on positions I own (covered calls). I know I would be putting a limit on my upside in exchange for some income. I'm thinking of trying it on one or two large caps thinking that they have a low chance of a big swing or takeover bid, which means low income of course. Any suggestions or things for to watch for on doing this?
Also I'm wondering the best way to handle the situation if on expiry day that it was in the money. Do I let it expire (and then my shares will be auto sold?) or would it be best to buy the same call options to offset the write?
Read Answer Asked by Mike on July 07, 2021
Q: My investment income has been bumping up against the OAS clawback level the last couple years (damn that dividend gross-up!), so I have moved some investments into reits and ETFs with high return of capital to keep reportable income down. Aside from the obvious - that ROC becomes capital gains when the stock is sold - are there some negatives about ROC or high ROC stocks of which I should be aware?
Thank-you
Read Answer Asked by grant on July 07, 2021
Q: July 2nd I asked if NEXE was a buy sell or hold . your reply ,was that you do not give that type advice. you did not give that same answer today about a similar question regarding STOR why??????? I will ask in a different way ___ my break even price on NEXE is 1.37 other sites have said this will go to .92 cents is this 5i opinion; is this worth keeping in hope that their wrong
Read Answer Asked by gary on July 07, 2021
Q: My daughter is just beginning to develop a portfolio of ETF's as a substitute for a company pension which she doesn't have. She has 20 years of work ahead of her before needing to withdraw funds from her RRSP. Please suggest a diversified portfolio of ETFs that hopefully will increase in value by the time she needs the retirement income.
Read Answer Asked by Les on July 07, 2021
Q: Dear Peter:

In November/December 2015 issue of CMS, you wrote an excellent article on "Setting up a US Income Portfolio with call options". Even though I was/am not "into" options trading this has stayed with me as an idea for a "later time".

Now that I have retired and looking at enhancing my income, I decided to revisit this topic. Hence reviewed 5i Q&A section plus CMS archives.

It doesn't seem that you have written any follow up articles in CMS or for that matter in 5i. At least my search didn't yield any "hits".

My questions:

1. Do you think your article from 2015 is still valid? If you have written any follow through articles in FP or other magazines, will you be kind enough to share the links.

2. This strategy is good only to generate USD income? Any thoughts on Canadian stocks?

3. What are the optionable ETFs that I can write calls like you have mentioned in your article? My "boring" holds incl. VGRO/VEQT. I hope NOT to sell them for a very long time!

4. Any videos that you can suggest to a beginner who wants only a safe way entering this rather risky area of options? You had suggested two books to a subscriber's question in January 2021. I am looking for something that is visual.

5. Finally, internet groups seem to suggest that with impending correction it is better to employ "Puts" as opposed to "calls". What is your opinion?

Feel free to take as many credits as you see fit.

Many thanks.
Mano
Read Answer Asked by Savalai on July 07, 2021
Q: Gritstone Bio (GRTS) is a small, early-stage biotech company to which Gilead Sciences has provided some funding under an agreement announced on Feb 1, 2021:

"Under the terms of the agreement, Gilead will make a $60 million payment at closing, consisting of a $30 million upfront cash payment and a $30 million equity investment at a premium. Gilead will be responsible for conducting a Phase 1 study for the HIV-specific therapeutic vaccine and holds an exclusive option under the collaboration to obtain an exclusive license to develop and commercialize the HIV-specific therapeutic vaccine beyond Phase 1. Gritstone is also eligible to receive up to an additional $725 million if the option is exercised and if certain clinical, regulatory and commercial milestones are achieved, as well as mid single-digit to low double-digit tiered royalties on net sales upon commercialization."

GRTS share price has established a baseline after falling steadily since the funding announcement. Presumably Gilead did some due diligence before investing its own money, but the stock price could go to zero if Gilead walks away. However, it could also soar if the trials are successful. Would you consider GRTS to be a worthwhile speculative buy? What has been your experience of investing in early-stage biotech companies that have drawn the attention of Big Pharma?
Read Answer Asked by David on July 07, 2021
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