query: What does a high theta mean for an option position?

positive: Option prices consist of two parts: the intrinsic value (the difference between the strike and the current price of the stock) and a time premium, representing the probability that the stock will end up above the strike for a call (or below for a put).   All else being equal, options decline in value as time passes, since there is less uncertainty about the expected value of the stock at expiration and thus the time premium is smaller.  Theta is the measure of the change in value in one day.  So for every day that passes, the calls you sold are going down by $64.71 (which is positive to you since you sold them at a higher value) and the calls you sold are going down by $49.04. So your position (a short spread) is gaining $15.67 each day (assuming no change in stock price or volatility). In reality, the stock price and volatility also change every day, and those are much stronger drivers of the value of your options.  In your case, however, the options are deep out of the money, meaning it's very likely that they'll expire worthless, so all you have left is time premium, which is decaying as time goes on.

negative: There's a key assumption made in the calculation of theta: that the future price movement of the underlying is a random walk. The amount of life left in the option times the volatility of the underlying creates a probability distribution of the price of the underlying at expiration. At any given price point, you can calculate the theta of the option. The at-the-money values are the most likely. The way-in-or-way-out-of-the-money values are much less likely. Theta is constructed mathematically to decay linearly over time. So the strikes with the most theta lose the most theta each day. If you are looking for a more intuitive answer, the OTM calls have less theta than the ATM calls because, while they are both 100% time value, the OTM calls cost much less. So it's 100% of a smaller number. Remember decay is linear.

negative: No, it means what it says. Prices change, hence price of the derivative can go down even if the price of the underlying doesn't change (e.g. theta decay in options).

negative: "You'd need to know the delta and the theta of the option. You can either calculate them yourself using a model like Black-Scholes (assuming you have a market price and can imply a volatility, and know the other factors that go into the model) or, you can see if your broker quotes ""greeks"" as well (mine does). The delta is the sensitivity (rate of change in value) to the underlying stock price, and the theta is the sensitivity to time passing (usually expressed in $/day).  So if your option has a delta of .5 and a theta of -.04, when one day passes and the underlying stock goes up $3, the option will gain roughly $1.50 due to the underlying stock price and lose $0.04 due to time passing."

negative: When we 'delta-hedge', we make the value of a portfolio 0.  No - you make the risk relative to some underlying 0.  The portfolio does have a value, but if whatever underlying you're hedging against changes slightly the value of your portfolio should not change. But, what is the derivative of a portfolio?  It's the instantaneous rate of change of the portfolio) relative to some underlying phenomenon.  With a portfolio of many stocks, there's not one single factor that drives the value of your portfolio. You have sensitivity to each underlying stock (price and volatility), interest rates, the market as a whole, etc. For simplicity, we might imagine a portfolio that has holdings in .... a call .... a stock .... and a bank account (to borrow and lend money).  You will have a delta relative to the stock and a delta relative to the underlying instrument on the option, etc.  Those can only be aggregated for each factor (e.g. if the call is an option on the same stock) Theta is the only one you can calculate for the portfolio as a whole - it will be the aggregate theta of all of your positions (since change in time is constant across all investments).  All of the others are not aggregatable since they are measuring sensitivities to different phenomena.

negative: Think of options as insurance. An insurance company makes money by selling the policies at a rate slightly higher than the average payout.  Most options expire worthless. This is because most options are purchased by hedge funds. To 'hedge' means taking out insurance in case your position goes against you. So the sellers of options obtain a price that covers their (averaged) losses plus provides them with a profit for their trouble.  An option has an amount that it declines in value each day (called theta). At the expiration date the option is worth zero (if it is out-of-the-money). So it is option writers that, typically, make money in the options market (as they are the sellers of insurance). If they didn't make money selling options they would not sell them.  For example, the February call option on SPY strike 200 traded at 8.81 on 12/30. Since then it has crumbled in value to 0.14. The option writer currently stands to make a huge profit.  So, just as with insurance, you (generally) never make money by buying insurance. But the sellers of insurance tend to make money as do the writers of options.  Edit: Theta @ Investopedia

negative: The liquidity is quite bad. I have seen open Intrest drop from thousands to zero.  Theta and the lack of liquidity are strong reasons not to buy options. Instead, consider selling them.  They say that most Option purchases expire worthless. Why is this so? Because hedge funds buy those out-of-the-money puts in case their position goes against them (like insurance).  Make money selling insurance. No one makes money buying insurance.

negative: I agree that high volatility just means the underlying stock price fluctuates more, and it does not imply if the stock is going up or down. But a high volatility in the price of an underlying also means that there is a higher chance that the underlying price could reach extreme prices (albeit in either direction). However, if you purchased a call option then if the underlying price reached an extremely high value, then you will be richly rewarded. But if the underlying price reached an extremely low value, you won't lose any more than the initial premium that you paid. There is no additional risk on your side, it's capped to the premium that you paid for the call option. It's this asymmetric outcome (Heads - I win, Tails - I don't lose) combined with high volatility that means that call options will increase in value when the underlying price becomes more volatile. If the optionality wasn't there then the price wouldn't be related to the volatility of the underlying. But that would be called a Future or a Forward :-)

negative: I understand that ITM have little time value, so they will have small time decay(theta), but why OTM has a lesser theta than ATM? The Time value represents uncertainty.  That uncertainty decreases the farther away from ATM you get (in either direction).  At-the-money, there is roughly a 50% chance that the option expires worthless. As you get deeper in-the-money, the change that is expires worthless decreases, so there is less uncertainty (there is more certainty that the option will pay off).  As you go deeper OTM, the probability that the option expires worthless increases, so there is also less uncertainty. At the TTM decreases, the uncertainty (theta) decreases as well, since there is less time for the option to cross the strike from either direction.  Similarly, as volatility decreases, theta decreases, since low-volatility stocks have a less change of crossing the strike.

negative: Options reflect expectations about the underlying asset, and options are commonly priced using the Black-Scholes model:  N(d1) and N(d2) are probability functions, S is the spot (current) price of the asset, K is the strike price, r is the risk free rate, and T-t represents time to maturity.  Without getting into the mathematics, it suffices to say that higher volatility or expectation of volatility increases the perceived riskiness of the asset, so call options are priced lower  and put options are priced higher. Think about it intuitively. If the stock is more likely to go downwards, then there's an increased chance that the call option expires worthless, so call options must be priced lower to accommodate the relative change in expected value of the option.  Puts are priced similarly, but they move inversely with respect to call option prices due to Put-Call parity. So if call option prices are falling, then put option prices are rising (Note, however, that call prices falling does not cause put prices to rise. The inverse relationship exists because of changes in the underlying factors and how pricing works.) So the option action signifies that the market believes the stock is headed lower (in the given time frame). That does not mean it will go lower, and option traders assume risk whenever they take a particular position. Bottom line: gotta do your own homework! Best of luck.

negative: "Just as a matter of research, apparently there is a way to find high option volumes such as a site here: https://www.barchart.com/options/volume-leaders/stocks However, that information is going to be heavily skewed by ""underlying security that moved a lot more than expected and probably got a lot of positions filled incidentally today"", but I think it is a good place to start building up a list of securities with a lot of option interest. There is also a tab there for ETFs. This will not tell you exactly that a particular stock always has high option volume, but most of the ones that show up there repeatedly and across multiple strike prices will meet your criteria."

negative: agreed. shorting the box kills you on commissions. your negative theta on a straight put position won't be a problem until you're at least 60 days from expiration. (i would even argue you're safe until 30 days out.) plus the positive vega can give you some extra juice if gold does end up falling.

negative: If you're talking about just Theta, the amount of decay due to the passage of time (all else being equal), then theoretically, the time value is a continuous function, so it would decay throughout the day (although by the day of expiry the time value is very, very small).  Which makes sense, since even with 15 minutes to go, there's still a 50/50 shot of an ATM option expiring in-the-money, so there should be some time value associated with that one-sided probability. The further away from ATM the option is, the smaller the time value will be, and will be virtually zero for options that are deep in- or out-of-the-money. If you're talking about total time value, then yes it will definitely change during the day, since the underlying components (volatility, underlying price, etc.) change more or less continuously.

negative: "Specifically, what does my broker mean when they say an asset or investment strategy is high risk?  In this context, it is a statement based on past events and probability. It is based on how confident s/he is that the investment will perform to certain benchmarks. This is a math question, primarily (with some opinion mixed in, granted). This is where the Sharpe ratio and others fit well. How am I supposed to answer a question like ""rate your risk tolerance from low to high""? This is the hard question, as you have seen. In this context, risk tolerance is derived from your current position and future plans (goals). This is a planning, goal setting, and strategy question, primarily (with some math mixed in, granted). How vulnerable is your current position and future plans to an under-performing investment? If you answer ""very"", then you choose investments that have a lower probability of under-performing.  The Sharpe ratio has little to do with answering this question. It is a tool to find investments that better match your answer to this question."

negative: "So, if an out-of-the-money option (all time value) has a price P (say $3.00), and there are N days... The extrinsic value isn't solely determined by time value as your quote suggests. It's also based on volatility and demand. Here is a quote from http://www.tradingmarkets.com/options/trading-lessons/the-mystery-of-option-extrinsic-value-767484.html distinguishing between extrinsic time value and extrinsic non-time value: The time value of an option is entirely predictable. Time value premium declines at an accelerating rate, with most time decay occurring in the last one to two months before expiration. This occurs on a predictable curve. Intrinsic value is also predictable and easily followed. It is worth one point for every point the option is in the money. For example, a call with a strike of 30 has three points of intrinsic value when the current value of the underlying stock is $33 per share; and a 40 put has two points of intrinsic value when the underlying stock is worth $38. The third type of premium, extrinsic value, increases or decreases when the underlying stock changes and when the distance between current value of stock and strike of the option get closer together. As a symptom of volatility, extrinsic value may be greater for highly volatile underlying stock, and lower for less volatile stocks. Extrinsic value is the only classification of option premium that is unpredictable. The SPYs you point out probably had a volatility component affecting value. This portion is a factor of expectations or uncertainty. So an event expected to conclude prior to expiration, but of unknown outcome can cause theta to be higher than p/n. For example, a drug company is being sued and the outcome of a trial will determine whether that company pays out millions or not. The extrinsic will be higher than p/n prior to the outcome of the trial then drops after.  Of course, the most common situation where this happens is earnings. After the announcement, it's not unusual to see a dramatic drop in the extrinsic portion of options. This is why sometimes a new option trader gets angry when buying calls prior to earnings. When 'surprise' good earnings are announced as hoped, the rise is stock price is largely offset by a fall in extrinsic value giving call holders little or no gain! As for the reverse situation where theta is lower than p/n would expect? Well you can actually have negative theta meaning the extrinsic portion rises over time. (this statement is a little confusing because theta is usually described as negative, but since you describe it as a positive number, negative here means the opposite of what you'd expect).  This is a quote from ""Option Volatility & Pricing"". Keep in mind that they use 'positive' theta to mean the time value increases up over time: Is it ever possible for an option to have a positive theta such that if nothing changes the option will be worth more tomorrow than it is today? When futures options are subject to stock-type settlement, as they currently are in the United States, the carrying cost on a deeply in-the-money option, either a call or a put, can, under some circumstances, be greater than the volatility component. If this happens, and the option is European (no early exercise permitted), it will have a theoretical value less than parity (less than intrinsic value). As expiration approaches, the value of the option will slowly rise to parity. Hence, the option will have a positive theta. Sheldon Natenberg. Option Volatility & Pricing: Advanced Trading Strategies and Techniques (Kindle Locations 1521-1525). Kindle Edition."

negative: Based on what you wrote, you would be better off with no position to start, and then enter a buy stop 10% above the market, and a sell stop 10% below the market, both to open positions depending on which way the market moves. If the market doesn't move that 10%, you stay flat. However, a long option straddle position requires that the market moves significantly one way or the other just so you recover the premium that you paid for the straddle. If the market doesn't move, you will lose money on your straddle due to theta decay and a drop in volatility. Alternatively, you could buy a strangle, with a call strike 10% out, and a put strike 10% out. The premiums would be much much lower, and these wculd take the place of the stop entries. Personally, I would never buy a straddle, but I do sometimes sell them, especially when implied volatility is very high.

negative: This depends on a combination of factors: What are you charged (call it margin interest) to hold the position? How does this reduce your buying power and what are the opportunity costs? What are the transaction costs alternative ways to close the position? What are your risks (exposure while legging out) for alternative ways to close? Finally, where is the asset closing relative to the strike? Generally, If asset price is below the put strike then the call expires worthless and you need to exercise the put. If asset is above the call strike then put expires worthless and you'll likely get assigned.  Given this framework:  If margin interest is eating up your profit faster than you're earning theta (a convenient way to represent the time value) then you have some urgency and you need to exit that position before expiry. I would not exit the stock until the call is covered. Keep minimal risk at all times. If you are limited by the position's impact on your buying power and probable value of available opportunities is greater than the time decay you're earning then once again, you have some urgency about closing instead of unwinding at expiry. Same as above. Cover that call, before you ditch your hedge in the long stock. Playing the tradeoff game of expiration/exercise cost against open market transactions is tough. You need sub-penny commissions on stock (and I would say a lot of leverage) and most importantly you need options charges much lower than IB to make that kind of trading work. IB is the cheapest in the retail brokerage game, but those commissions aren't even close to what the traders are getting who are more than likely on the other side of your options trades.

negative: With the netural position delta strategy under high IV returns short vega,there is a possibility to profit from a decline in IV. Of course, if volatility rises higher, the position will lose money. It is therefore best to establish short vega delta-neutral positions when implied volatility is at levels that are in the 90th percentile ranking.

negative: Just so I'm clear- the end result is a long call, and you think the stock is going up. There is nothing wrong with that fundamentally.  Be aware though: That's a negative theta trade. This means if your stock doesn't increase in price during the remaining time to expiration of your call option, the option will lose some of its value every day. It may still lose some of its value every day, depending on how much the stock price increases. The value of the call option just goes down and down as it approaches maturity, even if the stock price stays about the same. Being long a call (or a put) is a tough way to make money in the options market.  I would suggest using an out-of-the-money butterfly spread. The potential returns are a bit less. However, this is a cheap positive theta trade so you avoid time decay on the value of the option.

negative: I use over half my buying power of my portfolio for options, and I'm not a fan of any of the strategies listed above either (I stay away from negative theta trades for the most part), but I just listed them to point out that saying the reason someone wouldn't enter a short position is for fear of infinite losses is asinine. It's easy enough to make any trade risk defined if that is something the trader cares about.

negative: So this is only a useful strategy if you already own the stock and want protection. The ITM put has a delta closer to 1 than an OTM put. But all LEAPS have massive amounts of theta. Since the delta is closer to 1 it will mimic the price movements of the underlying which has a delta of 1. And then you can sell front month calls on that over time. Note, this strategy will tie up a large amount of capital.

negative: The only use of options that I will endorse is selling them. If you believe the market is going down then sell covered, out of the money, calls.  Buying calls or buying puts usually wastes money. That is because of a quality called Theta. If the underlying security stays the same the going price of an option will decrease, every day, by the Theta amount.  Think of options as insurance. A person only makes money by selling insurance, not by buying it.

negative: "This chart concerns an option contract, not a stock. The method of analysis is to assume that the price of an option contract is normally distributed around some mean which is presumably the current price of the underlying asset. As the date of expiration of the contract gets closer the variation around the mean in the possible end price for the contract will decrease. Undoubtedly the publisher has measured typical deviations from the mean as a function of time until expiration from historical data. Based on this data, the program that computes the probability has the following inputs: (1) the mean (current asset price) (2) the time until expiration (3) the expected standard deviation based on (2) With this information the probability distribution that you see is generated (the green hump). This is a ""normal"" or Gaussian distribution. For a normal distribution the probability of a particular event is equal to the area under the curve to the right of the value line (in the example above the value chosen is 122.49). This area can be computed with the formula:  This formula is called the probability density for x, where x is the value (122.49 in the example above). Tau (T) is the reciprocal of the variance (which can be computed from the standard deviation). Mu (μ) is the mean. The main assumption such a calculation makes is that the price of the asset will not change between now and the time of expiration. Obviously that is not true in most cases because the prices of stocks and bonds constantly fluctuate. A secondary assumption is that the distribution of the option price around the mean will a normal (or Gaussian) distribution. This is obviously a crude assumption and common sense would suggest it is not the most accurate distribution. In fact, various studies have shown that the Burr Distribution is actually a more accurate model for the distribution of option contract prices."

negative: "It depends on the volatility of the underlying stock. But for ""normal"" levels of volatility, the real value of that option is probably $3.50! Rough estimates of the value of the option depending on volatility levels: Bottom line: unless this is a super volatile stock, it is trading at $3.50 for a reason. More generally: it is extremely rare to find obvious arbitrage opportunities in the market."

negative: "If you look at the definition of time value on Wikipedia, you may notice this line: Time value ""can be thought of as the price an investor is willing to pay for potential upside.""  https://en.wikipedia.org/wiki/Option_time_value You are right to think that the time value is increasing as the moneyness increases from deeply OTM to ATM. Once the moneyness crosses the strike price threshold, per wiki's interpretation, the upside potential decreases as the underlying price moves away from the strike price. Think it as if an option is already deep in the money, the chance of it getting further ITM is slim. Hence the willingness to pay for that chance (aka. the upside potential) decreases."

negative: "You could buy options. I do not know what your time horizon is but it makes all the difference due to theta burn. There are weekly, monthly, quarterly, yearly and even longer duration options called leaps. You have decided how long of a time frame. You also have to see what the implied volatility is for the underlying because if you think hypothetically that the price of the spy is 100 dollars currently. Today is hypothetically a Thursday and you buy a weekly option expiring on Friday ( the next day) of strike 100.5 and the call option is priced at .55 cents and you buy it. This means that the underlying has to move .5 dollars in one day to be considered in the money but at time 0, the option should only be worth its intrinsic value which is the underlying, (Say the SPY moved 55 cents up from 100 to 100.55), (100.55) minus the strike (100.5) = 5 cents, so if you payed 55 cents and one day later at expiration its worth 5 cents ,you lost almost 91% of your money, rather with buying and holding you lose a lot less. The leverage is on a 10x scale typically. That is why timing is so important. Anyone can say x stock is going to go up in the future, but if you know ****when**** you can make a killing if it is not already priced into the market. Another thing you can do is figure out how much MSFT contributes to the SPX movement in terms of points. What does a 1% move in MSFT doto SPX. If you can calculate that and you think you know where MSFT is going, you can just trade the spy options synthetically as if it were microsoft. You could also buy msft stock on margin as a retail investor, but be careful. Like Rhaskett said, look into an etf that has microsoft. The nasdaq has a nasdaq-100 which microsoft is in called the triple Q. The ticker is qqq. PowerShares QQQ™, formerly known as ""QQQ"" or the ""NASDAQ- 100 Index Tracking Stock®"", is an exchange-traded fund based on the Nasdaq-100 Index®. Best of luck and always understand what you are buying before you buy it, JL"

negative: Don't know the name but it means you're long with conviction :P  Unlimited gains, maximum loss of 95$  + (8-6) = 97$.  Basically You are long @ 107  - -2 from 105 to 95.  You would have to be ULTRA bullish to initiate this strategy.

negative: Long convexity is achieved by owning long dated low delta options. When a significant move occurs in the underlying the volatility curve will move higher. Instead of a linear relationship between your long position and it's return, you receive a multiple of the linear return. For example: Share price $50 Long 1 (equals 100 shares) contract of a 2 year 100 call Assume this is a 5 delta option If the stock price rises to $70 the delta of the option will rise because it is now closer to the strike. Lets assume it is now a 20 delta option. Then  Expected return on a $20 price move higher, 100 shares($20)(.20-.05)=$300 However what happens is the entire volatility surface rises and causes the 20 delta option to be 30 delta option. Then The return on a $20 price move higher, 100 shares($20)(.30-.05)=$500 This $200 extra gain is due to convexity and explains why option traders are willing to pay above the theoretical price for these options.

negative: "I have traded options, but not professionally. I hadn't come across this terminology, but I expect it counts how far in-the-money, as an ordinal, an option is relative to the distinct strike prices offered for the option series — a series being the combination of underlying symbol, expiration date, and option type (call/put); e.g., all January 2015 XYZ calls, no matter the strike. For instance, if stock XYZ trades today at $11 and the available January 2015 XYZ calls have strike prices of $6, $8, $10, $12, $14, and $16, then I would expect the $10 call could be called one strike in the money, the $8 two strikes in the money, etc. Similarly, the $12 and $14 calls would be one and two strikes out of the money, respectively. However, if tomorrow XYZ moves to $13, then the $10 previously known as one strike in the money would now be two strikes in the money, and the $12 would be the new one strike in the money. Perhaps this terminology arose because many option strategies frequently involve using options that are at- or near-the-money, so the ""one strike in"" (or out) of the money contracts would tend to be those employed frequently? Perhaps it makes it easier for people to describe strategies in a more general sense, without citing specific examples. However, the software developer in me dislikes it, given that the measurement is relative to both the current underlying price (which changes quickly), and the strike prices available in the given option series. Hence, I wouldn't use this terminology myself and I suggest you eschew it, too, in favor of something concrete; e.g. specify your contract strikes in dollar terms — especially when it matters."

negative: If we assume constant volatility, gamma increases as the stock gets closer to the strike price. Thus, delta is increasing at a faster rate as the stock reaches closer to ITM because gamma is the derivative of delta. As the stock gets deeper ITM, the gamma will slow down as delta reaches 1 or -1 (depends if a call or a put). Thus, the value of the option will change depending upon the level of the delta. I am ignoring volatility and time for this description.  See this diagram from Investopedia: Gamma

negative: Someone already mentioned that this is a risk-reversal, but as an aside, in the vol market (delta-hedged options) this is a fundamental skew trade. (buying calls, selling puts or vice versa). Initially vega neutral, the greek that this trade largely isolates is vanna (dvega/dspot or ddelta/dvol).

negative: "What are you trying to do Exactly?  What is a covariance ""profile""? (Cov Matrix)?   Also lose the jargon.  From my understanding you want the same covariance in the portfolio, however it doesn't work like that as covariance is an observed matrix. It's hard enough to target variance in a portfolio (see GMV) and to target covariance would be even more difficult. You can attempt to use the weights you have right now in terms of exposures, but LEAPS may give you unwanted theta.   Are you long short or long only? if you're long only the interplay between the positions is rather irrelevent, as right now all that matters are the weights."

negative: Yeah, so people would buy it high.  I'm short SNAP. I said it so suckers would buy. And then my options would be worth more when earnings come and they tank.  The first tank came at earning just a week ago. Next earning it will tank more.


query: How to rescue my money from negative interest?

positive: I'd prefer having it (more or less) fluent at any time, if possible... And the Swiss National Bank (SNB) will do their darndest to make this a costly option. That's exactly the point of negative interest rates. They don't want to help you saving money. So you will have to choose what to give up: liquidity, or profitability.  But for now, you still have alternatives. The way you described it one could think that all banks will soon start to charge all their clients. That's just a distortion of facts.  If you are happy with a (close to) 0 income, you might consider opening multiple bank accounts. Many banks charge the negative interest only from certain thresholds (i.e. CHF 100k). Since you're clearly a Swiss resident, that's easy to do for you.  If you don't want to give up making an income, then you have to sacrifice liquidity. There simply aren't any short term (less than 2-3 years) instruments in Swiss Franc that are both safe and yielding a positive income. Which means that you will have to take much more risk then you had with a savings account. Ask your advisor for an investment proposal, but also consider bank independent advisors.

positive: Withdraw your savings as cash and stuff them into your mattress? Less flippantly, would the fees for a safe deposit box at a bank big enough to hold CHF 250'000 be less than the negative interest rate that you'd be penalized with if you kept your money in a normal account?

positive: "You obviously pay your taxes in Switzerland and are employed (judging from your comments on your maximum possible contribution to the 3. Säule). Under these circumstances, your best best may well be to pay into the occupational pension system (""Einkauf in die 2. Säule""). Essentially, you can add funds to your pension plan to match non-existent employer contributions from times you spent studying etc. The 2. Säule is usually defensively invested in bonds, so it's not a completely secure investment. In addition, it's a pretty fixed investment, since you can only get your money out if you buy a house or leave Switzerland for good. However, your entire payment into the 2. Säule is tax deductible, so the tax effect in itself should be a very attractive bit of ""interest"". Your pension plan can inform you about the maximum possible Einkauf."

positive: In Switzerland you should have access to many brokers with fair rates, e.g. Interactive Brokers. Going through them you then put the money in various Swiss stocks like Roche, Novartis, Swisscom, Credit Suisse, Logitech, etc. No stock should be more than 10% of the total. Since you pay 0% taxes on investment profits, you really should invest.  By going through a broker instead of your bank, you can cash out at any time without losing outrageous fees for the stock commissions (often 2% for banks, around 0% for brokers).  If you're employed you can also ask your employer to increase the amount of your salary that goes to the pension (2. Säule), which is not limited like the 7000 you mentioned (3.Säule).

positive: "The problem is that every option comes with risk - as you note, if you put money in stocks, you could lose (and many stocks are overpriced).  If you put money in bonds, you could lose (many bonds are overpriced).  If you buy precious metals, they could fall further currently.  If you hold cash, central banks might try to ban cash (we'll hear the typical ""This will never happen"" from financial advisers - and they'll be wrong).  Cryptocurrencies are an option, but boy do they fluctuate, so there's risk here too. Those are options and all come with risks, and here's my preferred approach to handling negative interest rates:"

positive: This does not really fit your liquidity requirement but consider buying a one or two room apartment to rent out with part of your savings. You will get income from it and small apartments sell quickly if you do need the money. This will help offset the negative interest from the rest. One downside is that other people have the same idea at the moment and the real estate prices are inflated somewhat.

positive: How about placing the money in a safety deposit box at the same bank? This will probably work out cheaper than the loss due to negative rates. Although, I'm quite sure the banks won't like this idea.

positive: You might want to talk with your financial planner about any or all of the following: as well as Some of these offer the guarantee of a minimal amount of interest, as well as the ability to take a loan out against the cash value, without lapsing the policy.  They may also offer certain tax advantages depending upon your jurisdiction and situation.

positive: "First off, the answer to your question is something EVERYONE would like to know. There are fund managers at Fidelity who will a pay $100 million fee to someone who can tell them a ""safe"" way to earn interest. The first thing to decide, is do you want to save money, or invest money. If you just want to save your money, you can keep it in cash, certificates of deposit or gold. Each has its advantages and disadvantages. For example, gold tends to hold its value over time and will always have value. Even if Russia invades Switzerland and the Swiss Franc becomes worthless, your gold will still be useful and spendable. As Alan Greenspan famously wrote long ago, ""Gold is always accepted."" If you want to invest money and make it grow, yet still have the money ""fluent"" which I assume means liquid, your main option is a major equity, since those can be readily bought and sold. I know in your question you are reluctant to put your money at the ""mercy"" of one stock, but the criteria you have listed match up with an equity investment, so if you want to meet your goals, you are going to have to come to terms with your fears and buy a stock. Find a good blue chip stock that is in an industry with positive prospects. Stay away from stuff that is sexy or hyped. Focus on just one stock--that way you can research it to death. The better you understand what you are buying, the greater the chance of success. Zurich Financial Services is a very solid company right now in a nice, boring, highly profitable business. Might fit your needs perfectly. They were founded in 1872, one of the safest equities you will find. Nestle is another option. Roche is another. If you want something a little more risky consider Georg Fischer. Anyway, what I can tell you, is that your goals match up with a blue chip equity as the logical type of investment. Note on Diversification Many financial advisors will advise you to ""diversify"", for example, by investing in many stocks instead of just one, or even by buying funds that are invested in hundreds of stocks, or indexes that are invested in the whole market. I disagree with this philosophy. Would you go into a casino and divide your money, putting a small portion on each game? No, it is a bad idea because most of the games have poor returns. Yet, that is exactly what you do when you diversify. It is a false sense of safety. The proper thing to do is exactly what you would do if forced to bet in casino: find the game with the best return, get as good as you can at that game, and play just that one game. That is the proper and smart thing to do."

positive: You could buy Bitcoins. They are even more deflationary than Swiss Francs.  But the exchange rate is currently high, and so is the risk in case of volatility.  So maybe buy an AltCoin instead. See altcoin market capitalization for more information. Basically, all you'd be doing is changing SwissFrancs into Bitcoin/AltCoin.  You don't need a bank to store it. You don't need to stockpile cash at home.  Stays liquid, there's no stock portfolio (albeit a coin portfolio), unlike in stocks there are no noteworthy buy and sell commissions, and the central bank can't just change the bills as in classic-cash-currency.  The only risk is volatility in the coin market, which is not necessarely a small risk.  Should coins have been going down, then for as long as you don't need that money and keep some for everyday&emergency use on a bank account, you can just wait until said coins re-climb - volatility goes both ways after all.

negative: "I am interested in seeing what happens to your report after you test this, but I don't think it's possible in practice, would not affect your credit score, and also wouldn't be worth it for you to carry a negative balance like that. Having a -1% credit utilization essentially means that you are lending the credit card company money, which isn't really something that the credit card companies ""do"". They would likely not accept an agreement where you are providing the credit to them. Having credit is a more formal agreement than just 'I paid you too much this month'. Even if your payment does post before the transaction and it says you have a negative balance and gets reported to the credit bureau like that, this would probably get flagged for human review, and a negative credit utilization doesn't really reflect what is happening. Credit utilization is 'how much do you owe / amount of credit available to you', and it's not really correct to say that you owe negative dollars. Carrying a negative balance like that is money that could be invested elsewhere. My guess is that the credit card company is not paying you the APR of your card on the amount they owe you (if they are please provide the name of your card!). They probably don't pay you anything for that negative balance and it's money that's better used elsewhere. Even if it does benefit your credit score you're losing out on any interest (each month!) you could have earned with that money to get maybe 1-2% better rate on your next home or car loan (when will that be?).  TLDR: I think credit utilization approaches a limit at 0% because it's based on the amount you owe and you don't really owe negative dollars. I am very interested in seeing the results of this experiment, please update us when you find out!"

negative: "The interest rate offered by a bond is called the nominal interest rate.  The so-called real interest rate is the nominal interest rate minus the rate of inflation. If inflation is equal to or greater than the nominal rate at any given time, the REAL interest rate is zero or negative. We're talking about a ten year bond. It's possible for the real interest rate to be negative for one or two years of the bond's life, and positive for eight or nine.  On the other hand, if we have a period of rising inflation, as in the 1970s, the inflation rate will exceed the (original) interest rate in most years, meaning that the real interest rate on the ten year bond will be negative over its whole life. People lost ""serious"" money on bonds (and loans) in the 1970s. In such situations, the BORROWERS make out. That is, they borrow money at low rates, earn inflation (plus a little more) pay back inflated dollars, and pocket the difference. For them, the money is ""free."""

negative: Mhmm, so it's not cheaper... you might want to shoot an email off to the execs at BK, I think they might be interested in your theory that they aren't going to save money in this merger.   They were dying out there (in the states) and they chose a Canadian rescue boat called Tims. Would it have appeased everyone if the US company just went belly up in the long-run?

negative: What you want to do is figure out how much you're paying in interest, solely (ie, the interest part of each payment), add that up over 48 months, then figure out the net value of the cash inflow/outflow for the points over 48 months (ie, 3.5% annual return on the positive or negative value).  Sum those two.  Then you can see your P&L, and your total cash outflow (up to you if you add a % to your negative initial outflow, and how exactly you consider your $2k closing costs; I agree with JoeTaxpayer about adding at least closing costs to the loan amount.  If you have money to pay the points that would otherwise be earning money, you could alternately consider it a negative cash (ie, instead of accruing 3.5% it's a negative balance accruing that). In excel I'd do something like: Then track changes in H and I when you change columns B and C and G.

negative: "I'm assuming the central bank of Italy will initiate quantitative easing (print money) to pay for this. This should devalue the euro.  This may be ""rescuing"" these banks but it's fucking over everyone who is saving/trading with the euro."

negative: "Which, if someone has been out of work for a while, may well be the unemployed one. After all rescuing someone from despair is a step towards nurturing loyalty.  For those who struggle with answering questions about why you have been unemployed for 2 years, people do like underdogs they can believe in. Nothing wrong with saying this is my dream job and you should pick me over others because I need it more and will fight harder to meet my goals for an employer that ""took a chance"" on me."

negative: "Is there any way out from letting the money disappear into a black hole? But that is the whole point of insurance; the ""black hole"" = the insurance company.  That's how they stay in business.  You are giving up your money to them, but you get something in return:  a guarantee of financial rescue if something happens to you medically.  Considering how much health care costs can cost in the U.S., this is not insubstantial. To the degree that you might be able to divert some of that money out of the ""black hole"" and back into your pocket, or a charity, would be equivalent to reducing your premium costs.  There are few ways to do that, but none too significantly.  E.g., sometimes plans have health programs that customers can participate in and get a small discount, etc.  But for the most part, you are stuck.  Welcome to the U.S. Health Care System. One tiny tip:  see if your school offers a free flu shot this fall; many do, it seems, so there is $15 saved.  The school's human resources office would probably know about this."

negative: From my experience using PayPal for selling products on eBay (and for the last two, experiences of a friend)...  Can paypal get money from my Bank Account without my authorization. This is assuming they have transferred the funds to me. They can't pull money from your bank account without your authorization. They will, however, take the money from your PayPal account if it's still there, or leave you with a negative balance if you've already withdrawn. They will do this as soon as there is a claim against you and will only release the funds if the investigation ends in your favor. Any money received would first be used to satisfy the negative balance. What actions can paypal takes against me if charge back amount is very high and I don't agree / pay them. They will send it to a collections agency. Is there any case it is going to effect my bank account, i.e. is there any chance paypal can block my bank account in India. They will block you from using PayPal. If you try to sign up again with a different bank account or credit card and they recognize you as the account holder, they will block that account as well.

negative: > MSNBC is not just as bad.   And this is how you can identify someone who has been brainwashed by the television and probably needs to be rescued.  It's two sides of the exact same coin, and their only real goal is to control every moment of your life. Wake up or live as a slave.

negative: "In economics, there is a notion called the Sunk Cost Fallacy.  In a nutshell, the sunk cost fallacy says that human beings tend to prefer to ""throw good money after bad"" because of a strong loss aversion.  That, coupled with how we frame an issue, makes it very tempting to say, ""if I just add these funds, I'll recoup my loss plus..."" In reality, the best best is to ignore sunk costs.  (I know, far easier said than done, but bear with me a second.)  How much you've invested is really irrelevant.  The only question worth asking is this: ""Would I invest this money in the asset today?"" Put it this way - any money you spend on ""rescuing"" this upside mortgage is an investment that trades ready funds for a little more equity.  Knowing that the mortgage is $100K in excess of the value, why buy that asset?  If you could do a HARP, different story - but as you say, you can't. As such, buying into that investment is not the best use of your funds. You are throwing good money after bad.  Invest your money where it will earn the best rate of return - not where your heart lead you."

negative: Ever wondered why no bankers got arrested? Henry Paulson needed them on board. He has gone on record saying as much. You don't make this sort of rescue by dangling people over a cauldron, you need the political will. Remember some of the banks didn't even need TARP, they had to be convinced to take them against their best interests.

negative: The point of what you heard is likely that gold is thought by some to hold its value well, when the money market would provide negative interest rates. These negative interest rates are a sign of deflation, where cash money is worth more in the future than it is today.  Normally, under inflation, cash money is worth less in the future than it is today. Under 'normal' circumstances where inflation exists, interest paid by the bank on money held there generally keeps up with inflation + a little bit extra. Now, we are seeing many banks offering interest rates in the negatives, which is an acknowledgement of the fact that money will be worth more in the future than it is today. So in that sense, holding physical gold 'fights' deflation [or, negative interest rates], in the same way that holding physical cash does [because if you hold onto a $10k bundle of bills, in 10 years you can walk into a bank and it will be worth $10k in future dollars - which in a deflationary market would be more than it is worth today]. Some view gold as being better at doing this than just holding cash, but that discussion gets into an analysis of the value of paper money as a currency, which is outside the scope of this answer.  Suffice to say, I do not personally like the idea of buying gold as an investment, but some do, and partly for this reason.

negative: Just to put in one more possibility: my credit card can have a positive balance, in which case I earn interest.  If more money is due, it will automatically take that from the connected checking account. If that goes into negative, of course I have to pay interest.  I chose (argued with the bank in order to get) only a small credit allowance. However, I'll be able to access credit allowance + positive balance. That allows me within a day or so to make larger amounts accessible, while the possible immediate damage by credit card fraud is limited at other times.  Actually, the credit card pays more interest than the checkign account. Nevertheless, I don't keep high balance there because the risk of fraud is much higher for the credit card.

negative: "Negative Yields on Bonds is opposite of Getting profit on your investment. This is some kind of new practice from world wide financial institute.  the interest rate is -0.05% for ten years. So a $100,000 bond under   those terms would be ""discounted"" to $100,501, give or take. No, actually what you are going to get out from this investment is after 10 years when this investment is mature for liquidation, you will get return not even your principle $100,000 , but ( (Principle $100,000) minus (Negative Yields @ -0.05) Times ( 10 Years ) ) assume the rates are on simple annual rate.  Now anyone may wander why should someone going to buy this kind of investment where I am actually giving away not only possible profit also losing some of principle amount!  This might looks real odd, but there is other valid reason for issuing / investing on such kind of bond.  From investor prospective: Every asset has its own 'expense' for keeping ownership of it. This is also true for money/currency depending on its size. And other investment possibility and risk factor. The same way people maintain checking account with virtually no visible income vs. Savings account where bank issue some positive rate of interest with various time factor like annually/half-yearly/monthly. People with lower level of income but steady on flow choose savings where business personals go for checking one. Think of Millions of Ideal money with no secure investment opportunity have to option in real. Option one to keeping this large amount of money in hand, arranging all kind of security which involve extra expense, risk and headache where Option two is invest on bond issued by Government of country. Owner of that amount will go for second one even with negative yields on bonds where he is paying in return of security and risk free grantee of getting it back on time.  On Issuing Government prospective: Here government actually want people not to keep money idle investing bonds, but find any possible sector to invest which might profitable for both Investor + Grater Community ultimately country.  This is a basic understanding on issue/buy/selling of Negative interest bearing bond on market.   Hope I could explain it here. Not to mention, English is not my 1st language at all. So ignore my typo, grammatical error and welcome to fix it.  Cheers!"

negative: well, no, i just see some really huge numbers been thrown around, like Spain's banks will need several tens of Bn euros to be rescued... that's a huge amount of money, even if not a large share of the problem, a nation in trouble should not be saving the private sector's ass.

negative: Yes, a mortgage is debt.  It's unique in that you have a house which should be worth far more than the mortgage. After the mortgage crisis, many found their homes under water i.e. worth less than the mortgage.  The word debt is a simple noun for money owed, it carries no judgement or negative connotation except when it's used to buy short lived items with money one doesn't have.  Aside from my mortgage, I get a monthly credit card bill which I pay in full. That's debt too, only it carried no interest and rewards me with 2% cash back. Many people would avoid this as it's still debt.

negative: The assumption that bonds have been issued with a negative coupon is not correct, or at least is has not occurred thus far.  We'll look at this future possibility in the final paragraph. For now, lets look at the current bond market. The issuance of government bonds which carry a negative gross redemption yield is the result of governments issuing bonds at an issue price which exceed the nominal/redemption price and any coupon yield receivable over the life of the bond.  I can find no instances of bonds with a negative coupon, though many have tiny positive coupon yields. The short seller of a bond with a negative gross redemption yield will be liable to pay the buyer the interest amount determined by the coupon.  If the short seller has borrowed the bonds in order to sell them, then the short seller will receive the interest due from the lender to offset the interest paid to the buyer.  If the short seller has not borrowed the bonds, but has sold them using some sort of synthetic contract such as a Contract for Difference, then the short seller will pay the coupon without receiving any offsetting payment. I thought this was an interesting question and it will be interesting to see if, at some time in the future, governments do ever issue bonds with a negative coupon.  To date, this does not appear to have happened. So what would happen if we assume that a government issues a bond with a negative coupon.  The buyer of the bond would be required to pay the equivalent yield to the government according to the bond contract specification.  If an investor sells short such a bond, they would then become entitled to receive the interest from the buyer.  If they have borrowed the bonds in order to sell them short, then they would pay any interest received back to the lender - this chain should eventually end with the ultimate owner/lender paying the government their dues.  If they have sold short using a synthetic contract, then presumably they would keep the interest from themselves.

negative: "The answer is yes. And the reason is if today's interest rates are lower than the interest rate (coupon) at which the bond was issued. The bond's ""lifetime value"" is 100 cents on the dollar. That's the principal repayment that the investor will get on the maturity date. But suppose the bond's coupon rate is 4% while today's interest rate is 3%. Then, people who bought the bond at 100 would get 4% on their money, while everyone else was getting 3%. To compensate, a three year bond would have to rise to almost 103 so that the so-called yield to maturity"" would be 3%. Then there would be a ""capital loss"" (from almost 103 to 100) that would exactly offset the extra interest, that is 1% ""more"" for three years. If today's interest rates are negative (as they were from time to time in the 1930s, and in the present decade), the ""negative"" interest rates will prevent the buyer from getting the ""lifetime value"" (as defined by the OP) of principal plus interest over the original life of the bond. This happens in a ""flight to quality"" situation, where people are willing to take a (small) capital loss on Treasuries in order to prevent a large possible loss from bank failures like those that took place in 2008."

negative: "One alternative to bogleheadism is the permanent portfolio concept (do NOT buy the mutual fund behind this idea as you can easily obtain access to a low cost money market fund, stock index fund, and bond fund and significantly reduce the overall cost).  It doesn't have the huge booms that stock plans do, but it also doesn't have the crushing blows either.  One thing some advisers mention is success is more about what you can stick to than what ""traditionally"" makes sense, as you may not be able to stick to what traditionally makes sense (all people differ). This is an excellent pro and con critique of the permanent portfolio (read the whole thing) that does highlight some of the concerns with it, especially the big one: how well will it do in a world of high interest rates?  Assuming we ever see a world of high interest rates, it may not provide a great return. The authors make the assumption that interest rates will be rising in the future, thus the permanent portfolio is riskier than a traditional 60/40.  As we're seeing in Europe, I think we're headed for a world of negative interest rates - something in the past most advisers have thought was very unlikely.  I don't know if we'll see interest rates above 6% in my lifetime and if I live as long as my father, that's a good 60+ years ahead. (I realize people will think this is crazy to write, but consider that people are willing to pay governments money to hold their cash - that's how crazy our world is and I don't see this changing.)"

negative: Credit agency sovereign ratings take into account the amount of external support the government is likely to get during a time of stress.  The whole EU just came to Spain's rescue, but who would come to India's rescue so as to be sufficient to prevent default?  See, the fact that Spain was able to get a bailout is most of the reason Spain's credit rating is higher than India's.

negative: Because they believe that negative interest rates will force people to push capital around, and promote investment to avoid the negative interest rates associated with having your cash sitting in an account. Most likely they will be banning cash within the next 10 years anyway which will prevent you from being able to keep it yourself. You will either need to: or

negative: There is some sense that negative interest rates make no sense, because then two things appear to happen Neither of these are true in reality. But then we are edging towards a deflationary time, during which the common understanding of money and what to do with money reverses. During deflation, spending is better (to an extent) because the buying power of money is less as time passes, so also saving is less worthwhile. But for the bond market (and your question), the reason why people are still investing in negative interest bonds, is that they are going to be looking to capital gain to make their money. Over time the bond price fluctuates and as the bond approaches maturity, the bond price equates to the face value minus whatever interest will be received, or in this plus whatever interest will need to be payed.

negative: ''just how much of the troubled southern EU nations' debt is due to the rescuing of private banks?  thanks''  My answer rambled onto related topics.  In short, not much. While the actual sums involved in bank bailouts are considerable, relative to sovereign debts run up by having structural/trade deficits for ~10 years, they aren't the problem in Europe at the moment...but they ARE the tip of an Iceberg that could sink parts of the EU and leave the rest struggling to stay above water.   An interesting question to ponder, with deceptively simple answers, is:  If the % of sovereign debt resulting from bank bailouts is so small, why does the media and general public throw a fit every time a major EU bank gets into trouble?  People are worried about losing their savings that they have with that bank. Its a visceral fear that is easy to personally relate to.  But scratch below the surface and there is a whole buffet of terror for you to feast on.  Assuming leverage of ~26* on assets held by banks and that true liabilities aren't completely opaque to average Joe retail investor, the collapse of the right bank could fire the starting gun on a vicious recession, trigger bailouts of other institutions exposed to the original and all sorts of nasty events.  These bank assets include the mess created by rehypothecation, securitization of shitty credit/assets and CDS, commercial paper that relies on never having to be realized as a loss and interference in the money markets and currencys by states.  Its damn hard to work out what assets and liabilities a bank has these days, let alone what any debt they have taken on is worth.   Euro Crisis Best Crisis.   *Pulled from memory, I'm not sure if this is accurate for Europe.

negative: I concur with the answers above - the difference is about the risk. But in this particular case I find the interest level implausible. 11% interest on deposits in USD seems very speculative and unsustainable. You can't guarantee such return on investment unless you engage in drug trade or some other illegal activity. Or it is a Ponzi scheme. So I would suspect that the bank is having liquidity problems. Which bank is it, by the way? We had a similar case in Bulgaria with one bank offering abnormal interest on deposits in EUR and USD. It went bust - the small depositors were rescued by the local version of FDIC but the large ones were destroyed.

negative: "Historically, most economists considered a sustained negative interest rate impossible for just the reason you describe: an investor could outperform a bond with a negative interest rate by simply hoarding cash. For background, see Wikipedia. Experimentation by central banks in the wake of the 2007 financial crisis, however, demonstrates that slightly negative interest rates are possible. First of all, note that the ""zero lower bound"" on interest rates has everything to do with the existence of cash as an alternative. It's a lower bound on the nominal interest rate, rather than the real interest rate—that is, on the rate before adjusting for inflation. In most situations, the real interest rate is more economically meaningful, as it's the real interest rate that measures the market's preference for ""stuff now"" as opposed to ""stuff later."" There's nothing in principle or in practice to stop a negative real interest rate: there are always some people who want stuff now and some people who want stuff later; a negative real interest rate just means that people who want stuff later are more dominant in the market. As I stated earlier, what creates the ""zero lower bound"" is the existence of cash as an alternative to bonds. Even though that lower bound applies, it's not strict: hoarding cash in large quantities can be difficult and expensive, especially when central banks are doing their best to prevent you from doing it. Consequently, investors who strongly prefer ""stuff later"" to ""stuff now"" are willing to pay a slightly negative nominal interest rate on bonds in order to avoid those costs. If it were significantly negative, however, you're right that no sane investor would buy such a bond."

negative: Basically there are 2 ways you can make money from an investment, through income (eg: rent or dividends) and through the price of the investment going up (capital growth or gains). Most people associate negative gearing with investment properties but it can be done with shares and other investments where you borrow money to buy the investment and it produces an income of some sort. If the investment does not produce an income then you cannot negative gear it. Using a property as an example (in Australia), if all your expenses each month (loan interest payments, council and water rates, insurance and/or strata, advertising and management fees, depreciation, and maintenance expense) are greater than your income (rent), then you are negative gearing the investment property. This is a monthly loss on your investment which can be used to offset and reduce the amount of tax you pay during the year. So most people negative gearing an investment property will get a nice sum back when they do their tax returns. The problem with negative gearing is that you have to lose money in order to save some tax. So as an example, if you are on a marginal tax rate of 30%, for every $1 you lose from the investment property you will save 30c in tax. If your marginal tax rate is 45% then will save 45c in tax for every $1 lost on the investment property. Thus negative gearing becomes more tax effective the higher your income (and tax bracket). But you are still losing money overall. The problem is that most novice investors buy an investment property for the main purpose of reducing their taxes. This can be dangerous because the main reason to buy any investment should be that you consider it to be a good investment, not to save you tax. Because if the investment is not a good one, then you will not only lose money on the income side but also on the capital side. Negative gearing should be looked at as a bonus or additional benefit when chosing a good investment to buy, not as the reason to buy the investment.

negative: You are not missing something basic.  Putting money in the bank will cost you in terms of purchasing power.  The same thing has been true in the US and other places for a long time now.  The real interest rate is negative--there is too much aggregate wealth being saved compared to the number of profitable lending opportunities.  That means any truly risk-free investment will not make as much money as you will lose to inflation.   If the real interest rate appears to be positive in your home country it means one of the following is happening: Capital controls or other barriers are preventing foreigners from investing in your home country, keeping the interest rate there artificially high Expected inflation is not being measured very accurately in your home country Inflation is variable and unpredictable in your home country, so investors are demanding high interest rates to compensate for inflation risk.  In other words, bank accounts are not risk-free in your home country. If you find any securities that are beating inflation, you can bet they are taking on risk.  Investing in risky securities is fine, but just understand that it's not a substitute for a risk-free bank account.  Part of every interest rate is compensation for the time-value-of-money and the rest is compensation for risk.  At present, the global time-value-of-money is negative.

negative: Perhaps something else comes with the bond so it is a convertible security. Buffett's Negative-Interest Issues Sell Well from 2002 would be an example from more than a decade ago: Warren E. Buffett's new negative-interest bonds sold rapidly   yesterday, even after the size of the offering was increased to $400   million from $250 million, with a possible offering of another $100   million to cover overallotments. The new Berkshire Hathaway securities, which were underwritten by   Goldman, Sachs at the suggestion of Mr. Buffett, Berkshire's chairman   and chief executive, pay 3 percent annual interest. But they are   coupled with five-year warrants to buy Berkshire stock at $89,585, a   15 percent premium to Berkshire's stock price Tuesday of $77,900. To   maintain the warrant, an investor is required to pay 3.75 percent each   year. That provides a net negative rate of 0.75 percent.

negative: Yes.  In the US these are called certificates of deposit or savings accounts.  Every run-of-the-mill bank offers them.  You give the bank money and in return they pay you an interest rate that is some fraction of or (negative) offset from the returns they expect to make from your money. Since most investments that a bank makes (say, loaning money to a local business) are themselves based on some multiple of or (positive) offset from the prime rate, in return the interest rate that they offer you is also mathematically based on the prime rate. You can find lists of banks offering the best returns on CDs or savings accounts at sites like BankRate.

negative: "Can it be so that these low-interest rates cause investors to take greater risk to get a decent return?  With interest rates being as low as they are, there is little to no risk in banking; especially after Dodd-Frank. ""Risk"" is just a fancy word for ""Will I make money in the near/ long future."" No one knows what the actual risk is (unless you can see into the future.) But there are ways to mitigate it. So, arguably, the best way to make money is the stock market, not in banking.  There is a great misallocation of resources which at some point will show itself and cause tremendous losses, even maybe cause a new financial crisis? A financial crisis is backed on a believed-to-be strong investment that goes belly-up.  ""Tremendous Losses"" is a rather grand term with no merit. Banks are not purposely keeping interest rates low to cause a financial crisis.  As the central banks have kept interest rates extremely low for a decade, even negative, this affects how much we save and borrow. The biggest point here is to know one thing: bonds. Bonds affect all things from municipalities, construction, to pensions. If interest rates increased currently, the current rate of bonds would drop vastly and actually cause a financial crisis (in the U.S.) due to millions of older persons relying on bonds as sources of income."

negative: I'm having a difficult time understanding how Chevron is avoiding taxes through party related loans. From my understanding, Chevron is providing loans to its Australian subsidiary at interest rates higher than market benchmarks. Does this shift profits from Australia to the U.S. and how does it help Chevron avoid taxes even though the corporate tax rate is higher in the U.S. than in Australia? Wouln't they want to be taxed at the the lower tax rate in Australia than in the U.S.? The more description the better, thanks! Edit: I think I understand that Chevron is giving out large loans with high interest rates to its subsidiary in Australia and I think the Australian subsidiary is converting its revenues to pay back the loan thus looking like profit in the corporation's books in Delaware. How is the money to pay back interest being raised if not from revenue? And how is that revenue not being taxed?

negative: "I have some money invested on Merrill Edge. 2 days ago I purchased some mutual funds with most of the rest of my money in my account. I logged in today to see how it did, and noticed that there are 3 sections: Priced Investments, Cash & Money Accounts, and Pending Activity. In the Cash & Money section, there shows a negative balance of Cash (let's say -$1,000) and a positive ""Money Account Value"" (let's say +$1,100).  The ""Money Account"" appears to be made up of $1 shares of something called ""ML Direct Deposit Program"". However, even though the mutual fund purchase was made 2 days ago, and the shares of the mutual funds are officially in my account, I'm still showing all of my ""Money Account"" shares ($1000). The balance sheet effectively makes it look like I somehow needed to have ""sold"" back my money account shares, converted them to cash, and then bought the funds. I'm hoping that isn't the case, and for some reason, there is a multiday lag between me buying stock and money getting deducted from my ""Money Account"". Hope that all makes sense.  TLDR: what's the diff between a Cash account and Money Account that's filled with shares of "" ML Direct Deposit Program""?  Edit: Today the cash and money account offset by equal values equal to one of my mutual fund purchases."