Hi guys, Often clients ask me what's my strategy and I just can't tell them. Why? well its difficult to explain and frankly my dealer group will not let me reccommend the product, so why bother. so I thought I share it here, as I'm interested to know what other advisors/investors think of its merrits. Its one of the few investment strategies (and not widely known) thats positively geared from day one... My strategy is essentially writing rolling covered call options over low volatile stocks. Essentially I write over just one and thats the streetTRACKS S&P/ASX 200 Fund or STW. I use the Macquarie Hi-Notes facility as this is the lowest cost option for sums I have invested and is quite simple to use. Tailored Equity Soluions - Macquarie Hi-Notes how it works is as follows: 1. select an ASX 200 share or STW. 2. Select a term you wish to invest 30, 60 or 180 days. 3. Select the opening level 80% - 100% 4. Macquarie will give you a quote for the value of the option you are selling or check the rate sheet hinotes_interest_rates.pdf 5. At the end of the term there are 2 possible outcomes. The first: If the share price of the underlying investment i.e. BHP, STW, ANZ, CBA is > opening level(%) x initial share price($) you get your initial investment back + the option premium. the second: If the share price of the underlying investment i.e. BHP, STW, ANZ, CBA is < opening level x initial share price you get the value of the underlying investment (in $ or shares) + the option premium. so for example using the rates sheet say you purchase $100,000 of the STW hi-note for 90 days at an opening level of 100%. the premium on this is 26.82% pa. and for arguments sake the value of STW is currently $55.80 Scenario 1 STW goes from $55.80 to $56.00 after 90 days: in this scenario you get back your $100K + $6,705 (90/360 x 26.82% x $100K) Senario 1 STW goes from $55.80 to $55.00 after 90 days: in this scenario you get back $98,566K + $6,705 (90/360 x 26.82% x $100K) The way the premium is roughly calculated is as follows: - the shorter the term the higher the interest rate. - The greater the chance the underlying investment will fall in value the higher the interest rate. - The higher the opening level the higher the interest rate. Tips on this strategy are: - Don't chase the high interest rates, they are high for a reason. - Choose low volitile stocks - if your underlying investment falls in value take the proceeds in cash not shares and reinvest. (better tax treatment for a loss) - don't invest in stocks that have high growth potential as your better off just owning these shares outright. (Trust me on this, Damn you BHP & WPL!) A little about Macquarie Hi-Notes: Fees - Nil (but MQ makes money from you, trust me) entry / exit fees - Nil Advisor fees - Nil if you don't have one & 0.5% per trade if you do. Minimum investment $20,000 per Hi-Note Other things to note: this strategy limits your upside but reduces your losses. So at the start of each period you will know the maximum profit of your investment which is equal to premium you will be paid. So if your underlying investment doubles, you won't see any of that growth, you'll only get your money back and the premium. This strategy I believe is lower risk than owning shares but can provide a superior return. If you can average a compond return of 25%pa - 30%pa per month over the long you will be doing pretty bloody good! It's a gold mine these HI-Notes and they are not very well know either.