A structured product is typically a pre-packaged investment fund designed to provide exposure to a specific asset class or sector with certain tax or yield characteristics. The return may be derived from a basket of securities, a single security, derivatives, options, indices, commodities, debt issuance and/or foreign currencies, and to a lesser extent, swaps or forward contracts. In Canada, the primary categories of structured products include closed-end funds which include investment trusts and split share corporations, exchange traded funds (“ETFs”) and notes. Structured products were created to meet specific needs that cannot be met from the standardized financial instruments available in the markets. Structured products can be used as an alternative to a direct investment, as part of the asset allocation process to reduce risk exposure of a portfolio, or to utilize the current market trend. Structured products can be an attractive addition to your portfolio as they give you the flexibility to tailor an investment structure to meet your specific financial objectives—taking into consideration such factors as your goals, risk tolerance and time horizon.
A closed-end fund (“CEF”) is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). Securities of the fund are listed on a stock exchange and trade like a stock. The stock prices of a closed-end fund fluctuate according to market forces (supply and demand) as well as the changing values of the securities in the fund's holdings Closed-end funds include investment funds, typically structured as a trust and split share corporations which are structured as mutual fund corporations. Despite the name similarities, a closed-end fund has little in common with a conventional mutual fund, which is technically known as an open-end fund.
The “split share” structure is unique type of financial structured product. The split share structure allows the risk-reward component of common shares to be broken down into two components and then allocated differently for investors who are more or less risk averse.
A split share corporation will hold common shares of one or more issuers, typically a portfolio of common shares (based on a sector or industry). The corporation then issues two classes of shares - capital shares and preferred shares. For preferred shareholders, the objective is to generate fixed cumulative preferential dividends and to return the original investment. For capital shareholders, the objective is to increase investors' participation in any capital appreciation (or depreciation) in the underlying portfolio shares and to benefit from any increase in the dividends paid on the portfolio shares. With the use of leverage, the capital shareholders can realize a greater proportionate change in the value of the capital shares vs. the underlying common share (e.g. $1 increase in the common share price translates into a $1.50 increase in the capital shares).
How are closed end funds different from Open –Ended Funds (Mutual Funds)?
Closed-end funds differ from conventional mutual funds in a number of respects, most notably as follows: (a) while the securities of a fund may be surrendered at any time for redemption, the redemption price is payable monthly whereas the securities of most conventional mutual funds are redeemable daily; (b) the securities of a closed-end fund have a stock exchange listing whereas the securities of most conventional mutual funds do not; and (c) unlike most conventional mutual funds, the securities of a closed-end fund are not offered on a continuous basis. In addition, closed-end funds offer greater flexibility in the use of leverage, derivatives or sector concentration.
What is the Management Expense Ratio (MER)?
Each fund will have a slightly different management expense ratio depending on the management fee and the size of the fund. Generally, the MER is comprised of up to three amounts being the management fee, the operating expenses of the fund and possibly a trailer or service fee payable to the dealers whose clients own securities of the fund. The management fee is expressed as an annual percentage of the net asset value of the fund and is calculated and paid monthly. The operating expenses of the fund are spread equally across all outstanding capital securities of a fund and include such items as audit fee, custody fees, annual report mailing costs, website maintenance, IRC fees and others. Since these fees are primarily fixed costs regardless of the size of the fund, larger funds will be able to spread these costs over a greater asset base and in percentage terms will be lower than for smaller funds. Some funds include a trailer or service fee which is payable to the dealers and is typically 0.30% or 0.40% annually of net asset value. All in, the MER may vary from 1.30% per annum to just under 2.0% per annum. Other expenses that may cause the MER to increase in a year include security holder meetings or follow-on offerings.
Why do they tend to trade at a discount to NAV?
Lack of advertising and research, implied discount until the next annual redemption at NAV, yield loss through dividend reductions, and general investor interest, along with investor sentiment issues, are probably the biggest reasons behind why some closed-end funds trade at discounts to their underlying portfolio values. Since closed-end funds do not receive the same sort of publicity as regular mutual funds, they tend to trade at prices below their NAV. Investor sentiment for a particular sector or investment style of a closed-end fund can also push a fund to a discount or premium. If investors believe that a fund’s investment objective is likely to underperform others or decline significantly, they may be willing to sell the fund at a deep discount to avoid larger future losses. Conversely, buyers of a closed-end fund may be willing to actually pay more than NAV (a premium) if they are upbeat about the prospects of that given sector.
Discounts benefit the investor on a yield basis and possibly on the capital gains side. A discount is simply another way of saying that you can buy a dollar’s worth of assets for something less. For example, a fund trading at a 20% discount from NAV is giving an investor $1.00’s worth of underlying assets for only $0.80. Closed-end bond funds at discounts let an investor purchase $1.00 of income-producing assets for something less. The cash flow coming off of the closed-end portfolio is based on its NAV, not what the market price is. Therefore, the effect on an investor’s yield of purchasing a closed-end fund at a discount is similar to buying bonds at discounts; the yield is enhanced. For example, let’s say a closed-end fund that invests in U.S. government mortgage securities is paying $0.75 per year. If this fund has a $10 net asset value, then the fund is yielding 7.5% on NAV ($0.75 divided by the $10 NAV). Now let’s assume this fund can be purchased in the aftermarket for a discount of 15%. This discount would translate into a price of $8.50. The $0.75 annual cash flow remains the same, but instead of paying the $10 NAV, an investor is purchasing the fund at the market price of $8.50. The yield therefore is 8.82% ($0.75 divided by $8.50). An extra 1.32% (132 basis points) is being contributed by the discount alone.
This is important because it means that discounts may enhance the yield over what the portfolio is actually earning, which allows a closed-end investor to realize a higher yield than an identical product priced at NAV. Investors attempting to get the same yield from products at NAV will have to increase their implicit investment risk by using longer maturities or lower credit quality, or by using other methods such as leverage or derivatives. The discount contributes “free yield” with less stress on the underlying portfolio than a similarly yielding product priced at net asset value or above. However, there is no assurance that discounted funds will appreciate to their NAV.
What are the advantages of closed end funds?
Closed-end funds offer many advantages over traditional open-ended or mutual funds.
Portfolio concentration – Closed-end funds often have more concentrated portfolios with very specific sector allocations than might be found in mutual funds. A CEF portfolio may incorporate ten or fewer securities and sometimes only one security in the portfolio while overlaying some structure to provide attributes not available in a mutual fund such as tax re-characterization, option writing or leverage.
Lower Expense Ratios - Closed-end funds do not incur ongoing costs associated with distributing their shares as do many mutual funds; thus, the expense ratios of closed-end funds are often less than those of mutual funds. Over time, a lower expense ratio provides a boost to investment performance.
No Minimums - Closed-end funds do not impose amounts on purchases or sales, as most mutual funds do.
Low or no cash position – Closed-end funds do not accept new money from investors on a regular basis, and typically only have annual redemptions to fund. This allows funds to stay fully invested within their investment parameters. Without the need to carry a cash position in order to facilitate daily redemptions or reinvest new money, net yield should be higher (a cash position may lower the overall net yield of the portfolio as these liquid investments, such as money-market accounts, will typically earn yields lower than the rest of the portfolio).
Fixed asset bases that allow leveraging programs - The fixed capital structure of closed-end funds allows them to efficiently borrow money or issue senior securities (preferred stock) to enhance yield and/or performance, otherwise known as leveraging. What most leveraging strategies have in common is borrowing based on short-term interest rates, thus paying a floating interest rate, and then investing the proceeds in their given investment objective, usually longer-term bonds or high yielding equities that yield a higher rate than their borrowing costs. A positive yield spread between the investment rate and the borrowing rate increases a fund’s earnings, allowing the fund to increase its dividend payout to shareholders.
Potential opportunity to purchase assets at a discount to their underlying net asset value - Finally, one of the most important components of closed-end fixed income investing is the potential ability to purchase funds at a discount to their NAV. The NAV of a closed-end fund is the same calculation as that of a regular, open-end mutual fund (the current market value of all of the securities a fund owns, minus any outstanding liabilities of the fund company, all divided by the number of outstanding shares). In essence, it is the liquidation value of a fund, i.e. what each share of the fund would be worth to an investor (after paying off any liabilities such as salaries, rent, etc.) if all the securities within the portfolio were liquidated today. Investors in an open-end mutual fund who want to sell their shares can do so by selling them back to the investment company at NAV. Because closed-end funds trade on a stock exchange, the price they are bought and sold for is not NAV; it is the going market price of their stock. This price is determined by an interaction of buyers and sellers.
What are the tax implications of distributions?
Distributions from a fund may have significant tax benefits which result in higher after-tax cash flow than if the income had been earned outside of the fund. Each fund will generally earn dividends on portfolio securities, interest income on cash balances and option premium income which is generally taxed as capital gains. Capital gains and losses will also be recognized as portfolio securities are traded during a year. Many closed-end funds pay out a greater amount in distributions than is being earned in dividend or interest income, relying on capital gains or option premiums to bridge the gap. Any portion of a distribution that is considered a return of capital for tax purposes is not included in an investor’s taxable income for a year, but will reduce the adjusted cost base of the units, by the amount received. The reduction in the adjusted cost base of the units is ultimately taxed as a capital gain when the units are sold for investors who hold their units as capital property. If a return of capital would reduce the adjusted cost base below zero, that amount is taxed as a capital gain. Some funds may have existing tax pools which may allow a significant portion of the distributions to be a return of capital for tax purposes.
What are some of the risks of a closed-end fund?
No assurance on achieve fund objectives - There is no assurance that a fund will be able to achieve any distribution or capital preservation objectives. There is no assurance that a fund will be able to pay distributions. The funds available for distribution to investors will vary according to, among other things, the dividends and distributions paid on the securities in each fund’s portfolio, the level of option premiums received and the value of the securities comprising each fund’s portfolio.
Fluctuations in Net Asset Value - NAV per security will vary as the value of the securities in the fund’s portfolio varies. At any time, the issuers in the portfolio may decide to decrease or discontinue the payment of distributions on their securities. The fund has no control over the factors that affect the issuers in its portfolio, such as fluctuations in interest rates, changes in management or strategic direction, achievement of strategic goals, mergers, acquisitions and divestitures and changes in dividend and distribution policies. An investment in the securities does not constitute an investment in the securities of the issuers in the fund’s portfolio. Investors will not own the securities held by the fund and will not have any voting or other rights with respect to such securities.
Trading at a discount – Securities may trade at, above or at a discount to the net asset value per security. Securities that trade at a discount to the net asset value per security may offer an opportunity to enhance the yield in an investor’s portfolio however; trading liquidity may be hindered for funds trading at a significant discount. Funds offer an annual redemption at net asset value per security to minimize trading at a discount.
Use of derivatives - Derivative transactions involve the risk of the possible default by the other party to the transaction (whether a clearing corporation in the case of exchange-traded instruments or other third party in the case of over-the-counter instruments) in that it may be unable to meet its obligations. This risk is minimized by using well multiple regarded counter-parties for over-the-counter options.
Significant redemptions - While the annual redemption right provides securityholders the option of annual liquidity, there can be no assurance that it will reduce trading discounts. If a significant number of securities are redeemed, the trading liquidity of the securities could be significantly reduced. In addition, the expenses of a fund would be spread among fewer securities potentially resulting in lower NAV per security.
Concentration risk – A fund may invest in a limited number of securities or in a specific sector that will have a different risk profile than the overall market and may not be diversified. While this is generally viewed as beneficial for those investors seeking a specific asset allocation, it is important to ensure the fund is part of a diversified portfolio to reduce risk.
Exposure to foreign currencies – Some funds may purchase securities in foreign currencies thereby exposing the fund to foreign exchange risk if not hedged back to the Canadian dollar. Most funds are hedged back to the Canadian dollar to preserve the return in Canadian dollars.
Use of leverage to enhance returns - A leveraging strategy increases the volatility of a fund’s net asset value (NAV) by essentially magnifying the gains or losses of the fund’s portfolio holdings. There is a high likelihood that this increased volatility will impact the market price of the fund in the same fashion. In addition, there are two primary situations in which a leverage-enhanced yield is negatively affected – a flattening yield curve and an inverted yield curve. In both situations, the spread between the investment rate of the fund and the borrowing costs of leverage decreases, increasing the probability for dividend reductions. On the other hand, if this spread widens, there is a greater chance for dividend increases. Leverage is neither good nor bad; it is just an additional component of fund analysis and must be properly understood in order to evaluate a fund’s prospects.
In addition to daily trading on the stock exchange a redemption feature offers another liquidity alternative whereby investors can put their units back to the fund on an annual basis typically for proceeds equal to the net asset value per unit or share of the fund, less any costs incurred to fund the redemption. Many funds also offer a monthly redemption feature though these are typically at a discount to the net asset value or market price. Redemption are sometimes referred to as retraction features and the two terms are generally used interchangeably though technically a retraction is at the option of the holder (investor) while a redemption is at the option of the fund, such as the redemption of units on the termination of a fund.
Leverage is a means of amplifying the returns on a portfolio in an effort to generate better returns than the portfolio would generate without leverage. The most common form of leverage, also known as gearing, is bank debt whereby the fund borrows money from the bank and invests the proceeds in additional securities for the portfolio. For example, if a fund can borrow 15% of its net assets of say $100 million, the total invested portfolio would have a value of approximately $115 million, offset by a liability to the bank of $15 million. Income and capital gains would be earned on the total portfolio of $115 million less the interest cost of the loan to the bank. It is important to note that while this can be beneficial to the fund (and investors) when markets are doing well, leverage will also amplify negative returns on the portfolio since the loan outstanding to the bank remains the same even when the value of the securities in the portfolio go down. Other forms of leverage include short selling and split share corporations. In a short sale, the fund borrows securities from an outside source, sells them in the market and reinvests the proceeds in additional securities in the portfolio, referred to as the long position. The leverage component in a split share corporation comes from the preferred shares which have a specified par value and pay out a pre-determined coupon to holders in the form of dividends or interest payments. The Class A shares are then considered to be leveraged investments. In each scenario, the fund incurs a cost of leverage being interest payments to the bank, borrowing costs to lenders of securities in a short sale or distribution payments to preferred shareholders in a split share corporation. It is also important to note that as the value of the total portfolio increases the amount of leverage declines (since the value of the loan or other liability outstanding as a percentage of the total portfolio declines) and conversely as the total portfolio declines in value, the amount of leverage increases.
Why do I receive the annual report even though I have asked my broker not to send me anything?
Securities legislation requires a manager of a fund to send the annual report to all securityholders as of a specific date (the record date). Investors do have the ability to op-out of receiving the semi-annual report. All of the annual reports are available on our website typically posted by the end of March in each year while the semi-annual reports are posted in early August.
This is an offering whereby current holders of the fund are given the "right" to purchase additional securities in proportion to their current holdings, at a stated price. The offering price is generally established at the net asset value per security at the time of the offering, plus some premium to cover the costs of the issue, so the offering is not dilutive to the existing holders at the time the rights offering is made. A rights offering generally has a time to expiry of less than six months, whereas a warrant offering has a time to expiry of greater than six months. Rights and warrants typically trade on the exchange from the date of the issuance to the expiry date. The trading price will be a function of the time remaining to expiry and the intrinsic value of the right or warrant. Dilution to the net asset value of the existing securities will occur if the net asset value per security rises above the exercise price. In this instance you should see two net asset value per security disclosed, the basic NAV which does not reflect the impact of any dilution and a diluted NAV, which will be lower and reflects the impact on the NAV per security as if the rights have been exercised. A right issue gives investors the ability to purchase additional units of a fund on a low cost basis and provides the fund with additional capital that can be used to take advantage of attractive investment opportunities. A larger fund also has greater liquidity in the market with greater trading volume and the management expense ratio (MER) of the fund will be lower as operating expenses are spread over a greater number of securities. Since rights and warrants expire worthless after the expiry date holders are reminded to exercise or sell their right or warrant before they expire.
A warrant is similar to a right, however the term of the warrant, being the time from the issue of the security to the expiry date, is generally greater than six months for a warrant but less than six months for a right. Otherwise both issues are similar in form and function.
How often are the NAVs per security calculated, when do they get updated?
Net asset value per security is calculated on a weekly basis as of the close of business on Thursday and is generally posted on the website at the close of business on Friday. If the last day of a month falls during the week on a day other than Thursday, the NAVs per share are calculated as of the last day of the month for that week and the regular weekly calculation on Thursdays is resumed the following week. The NAV per security for more recent funds is calculated daily and posted on the website prior to the market opening on the following day.
What is a diluted NAV?
The diluted net asset value per security assumes the exercise of all outstanding warrants or rights if the net asset value per security on the valuation date is in excess of the warrant exercise price. Total net assets would be increased by the amount of cash received (all warrants outstanding multiplied by the warrant exercise price, less costs) from exercise of the warrants and total units outstanding would be increased by the number of units issued pursuant to the exercise of the warrants. If the net asset value per security on the valuation date is less than the warrant exercise price, the basic and diluted net asset value per security will be the same.
When does the distribution get taken off the reported NAV?
Distributions are taken out of the net asset value of the fund on the ex-distribution date which is two business days prior to the record date. The record date for our funds is generally the 15th of the month the distribution is paid.
How do I update for address changes?
Unlike mutual funds, closed-end funds and their managers cannot track who owns the individual securities of the fund. Securities of a closed-end fund are typically book-entry only which means investor records are maintained electronically by the individual broker/dealers whose clients own and trade the securities. Each broker/dealer has an account with CDS Clearing and Depository Services Inc. (“CDS”) which tracks the total amount of securities held by each respective broker/dealer. The fund only has one registered holder being CDS. Any change in address must be addressed to your respective broker/dealer who maintains your account.
What is the Adjusted Cost Base of my investments?
Since the fund does not have any knowledge of when you bought your securities or what you paid for them it is impossible for the manager to determine your individual adjusted cost base. Generally, the adjusted cost base or ACB of your securities will be the weighted average cost you paid for the securities less any return of capital distributions you received. The tax allocation of distributions paid during a year is available on the website towards the end of March every year on a per security basis.
What happens when the fund approaches its termination date?
If the investment thesis of the fund still makes sense it is likely that the manager will put forward a proposal to the security holders to extend the term of the fund. This involves the issuance of an Information Circular and a security holder meeting at which all security holders may vote on the extension. Often, the manager includes other changes to the fund to bring it in line with current practice in the industry, such as amending redemption features, adjusting for changes in the tax laws or amendments permitting different investments in the fund. Investors are generally given the right to exit the investment on the same terms as if the fund were being terminated if they so desire. This means that no investor is disadvantaged by virtue of the extension.
Are these funds suitable for me?
Each investor must consider suitability from their own perspective giving consideration to such things as their level of risk tolerance, desired level of income, asset allocation and overall exposure within their entire portfolio, investment knowledge and comfort with investment products. We recommend that investors speak regularly with their investment advisors as market conditions can change the risk profile of funds over time and each investor’s needs and circumstances change.
An option is simply an agreement between two investors to enter into a transaction in the future under certain circumstances. The future transaction is either buying or selling an underlying asset, usually a security. Some options trade on an exchange, such as the Montreal Exchange, or the Chicago Board Options Exchange, while others trade ‘over the counter.’ For options that trade on an exchange, the ‘circumstances’ of this future trade are defined and standardized so that many investors can easily trade the same option. For example, two investors (A & B) may agree to trade 100 shares of Company XYZ at $25 anytime in the next month. One of the investors (Investor A) agrees to sell the shares at $25 if the other investor (Investor B) wants to buy them at $25. Investor B now has the right to buy shares of XYZ from investor A and must pay investor A for that right; this is ‘price’ of the option and also referred to as ‘the option premium.’ Investor A has the potential obligation to sell 100 shares of XYZ at $25 and receives this premium for accepting this obligation.
What does ‘writing options’ mean?
With regards to options, ‘writing’ is another name for ‘selling.’ An investor does not have to own an option to be an option writer. When someone writes an option it is important to note that they are obligated to perform in the event the option is exercised.
How are Options different from Futures?
Options and Futures may appear to have similarities, but they are quite different. In Futures, the buyer and the seller have the obligation to either ‘make’ or ‘take’ delivery of some underlying asset in the future. With Options, the buyer of the option has the ‘right’ to make (using Puts) or take (using Calls) delivery of some underlying asset, but not the obligation. The seller (or ‘writer’) of that option, therefore, has a potential obligation to make (using Calls) or take (using Puts) delivery of the asset.
A call option contract gives the holder the right to buy and obliges the writer to sell a specified number of shares at a specified strike price, any time before its expiry date.
One option strategy is the covered call, in which a trader buys a stock (or holds a previously-purchased long stock position), and sells a call, also known as a buy-write strategy. If the stock price rises above the exercise price, the call will be exercised and the trader will get a fixed profit. If the stock price falls, the call will not be exercised, and any loss incurred by the trader will be partially offset by the premium received from selling the call. Overall, the payoffs match the payoffs from selling a put. This relationship is known as put-call parity.
Are there any covered call indices?
A benchmark index for the performance of a buy-write strategy is the CBOE S&P 500 Buy-Write Index (NYSE: BXM).
A put option contract gives the holder the right to sell and obliges the writer to buy a specified number of shares at a specified strike price, any time before its expiry date.
What factors determine the price of an option?
The price of the underlying asset - If the price of the underlying asset goes up, the value of a call with also go up, while the value of a put will decline, assuming nothing else changes.
The strike price - If the strike price is higher, a call option will be worth less and a put option will be worth more. Any dividend on the underlying asset during the life of the call - Dividends impact the price of an option because they impact the price of the underlying asset. Generally, a stock price will decline by the amount of the dividend on the day it trades ‘ex-dividend.’ If this date occurs during the life an option it will be taken into account when determining the option price. Higher dividends will reduce the price of a call and increase the price of a put, other things being equal.
The time to expiration - Other things being equal, any option (call or put) will be worth more if the time to expiration is longer because that extra time increases the opportunity for the option to become more profitable.
Interest Rates - Interest rates affect the prices of Calls and Puts because investors have choices about how to invest their money. In the simplest case, an investor can either buy 100 shares of stock for $X, or buy a call on 100 shares of stock at much less than $X and invest the difference in a risk-free asset like treasury bills. If the rate on treasury bills is high, the call buyer will be willing to pay more for that call because of the extra return received on the t-bills. So, higher interest rates cause call prices to rise. If interest rates go up it makes the value of investing in t-bills relatively better than the value of 100 shares at a fixed price, so, higher rates will cause put prices to fall. Similarly, lower rates will cause call price to fall and put prices to rise.
Volatility - Volatility is the way we quantify the variations in the price of a security. If we expect volatility to be high during the life of an option, this increases the probability that our option position will be profitable. This impact is the same whether the option is a call or a put.
The Black–Scholes model is a widely used option pricing model developed by Fischer Black and Myron Scholes in 1973. The model can be used to calculate the theoretical value of an option based on the current price of the underlying security, the strike price and term of the option, prevailing interest rates and the volatility of the price of the underlying security. Many empirical tests have shown the Black-Scholes price is “fairly close” to the observed prices, although there are well-known discrepancies such as the “option smirk”.
Why is volatility so significant?
While volatility is not always the largest component in a given option’s price, it is perhaps the most critical determinant. All the other factors used to determine the option price are known, or at least fairly certain. We know the price of underlying stock now, we know the strike price, we know the time to expiry, we can be quite certain about any dividend especially if it has already been declared, and, we can be relatively confident about the level of interest rates over short periods of time. The one thing we do not have any certainty about is how volatile the stock will be over the next week, month or year. We can look at how volatile it has been recently as a proxy, however, this will have limited value in times of great uncertainty.
As indicated previously, volatility is one of the inputs used to determine the price of an option in pricing models. If we observe the price of an option traded in the market, we can use this same model to ‘solve’ for the volatility input because all the other inputs are relatively certain. This number is referred to as the ‘implied volatility’ because it indicates how volatile the option buyer expects the underlying asset to be, implied by the price he is willing to pay for that option.
Apart from changes in the stock itself, changes in expectations are likely to have the biggest impact on option prices from one day to the next.
The implied volatility of an option contract is the volatility of the price of the underlying security based on the market price of the option. Another way to think of it is solving for the volatility part of the pricing equation using all other known factors in the equation, including the price of the option. Since options are traded in the market, the implied volatility is the market’s expectation of future volatility and not historical volatility. Often financial literature will highlight the 30-day historical volatility of a security which should not be confused with the implied volatility which is future expectations of volatility in the security.
Options are referred to as ‘a wasting asset,’ why would I want to trade them?
It is true that if nothing else changes, an option will be worth less tomorrow than it is worth today. However, the passage of time is only one factor in determining the price of an option. Other factors, such as the expected change in price of the underlying asset, can have a much bigger impact on the value of an option. Some strategies, such as ‘covered writing,’ take advantage of this characteristic.
Not necessarily. Some strategies can involve a lot of risk, while other strategies can actually reduce an investor’s risk. Options are often used to ‘hedge’ the risk associated with a portfolio of assets. It is very important to understand the rights and obligations associated with an option to correctly determine the risk.
This is a type of risk-reducing strategy using options. For example, an investor who owns shares of XYZ Corp can sell (‘write’) call options on the same company. As long the quantity of Calls written does not exceed the quantity of shares held by that investor, the written option position is referred to as ‘covered.’ It is covered because if the call options are exercised, the seller can simply deliver the shares already held. If Calls are sold when shares are not held, the position is referred to as ‘naked’ and carries significant risk because the call seller may have to purchase shares at a much higher price to meet his obligations if the option is exercised.
Buying a protective put involves buying one put contract for every 100 shares of underlying stock already owned or simultaneously purchased. This put guarantees the owner the right, but not the obligation, to sell the shares at the strike price at any time until the option expires, no matter how low the stock declines in value. And just as with other forms of insurance the investor pays a premium for this protection - the premium paid for the put.
The buyer of a protective put retains the profit potential on the stock as long as the price of the underlying stock continues to rise. However, purchasing a protective put in effect increases the purchase price of the stock by the premium paid for the option contract. When the underlying shares are ultimately sold, whether by exercising the put after a stock price decline or by simply selling the shares after a stock increase, the net price received will be the sale price less the put premium paid. The break-even point for this strategy at expiration can be calculated in advance as the stock's purchase price plus the put premium paid.
Another benefit of the protective put is that the investor is in total control of the sale of the protected shares. Since the protection provided is a long option position, whether or not the put is exercised, and the underlying shares sold, is entirely up to the investor. If the underlying stock has declined below the put's strike price before it expires, and the put is in-the-money with intrinsic value, the put may be sold instead of exercised and the shares retained. Regardless of the investor's decision at option expiration, during the lifetime of the put contract the investor continues to receive any dividends paid to stockholders as long as the underlying shares are owned.
How do Puts protect value in the portfolio?
A protective put is a portfolio strategy where an investor buys shares of a stock and, at the same time enough put options to cover those shares. This is a form of hedge or insurance on the invested stock in case it declines in value. The buyer of a put protects himself from a drop in the stock price below the strike price of the put since the put allows him to sell the stock at the strike price which would be above the stock price if the put was in the money. In the event the put is not exercised the investor has only lost the cost of the put. A put by itself has limited upside or potential gain, which occurs when the stock becomes worthless. By combining a put with shares of the stock, the resulting portfolio has potentially unlimited upside(due to the theoretical upside in a stock), while limiting downside due to the protective nature of the puts. Of course this is offset by the cost of the puts.
The strike price is the price at which the option holder can buy (call option) or sell (put option) the underlying stock.
What is the option premium?
What is the difference between at-the-money, in-the-money and out-of-the-money options?
An option is "at-the-money" when the underlying stock price is identical or relatively close to the option strike price. A call option is "in-the-money" when the underlying stock price is higher than the strike price. A call option is "out-of-the-money" when the underlying stock price is lower than the strike price. A put option is "in-the-money" when the underlying stock price is lower than the strike price. A put option is "out-of-the-money" when the price of the underlying is higher than the strike price.
What is the contract size of a stock option?
Open interest represents the total number of options contracts on a particular share that have not yet been closed or exercised. This is an important concept, but it has no direct impact on the price of an option. An opening transaction increases the open interest whereas a liquidating transaction reduces it. The greater the open interest, the more liquidity in the market, therefore the easier it is to take or dispose of a position.
What does “being assigned” mean?
An assignment takes place when a holder exercises an option. Option writers each receive an exercise notice that obliges them to sell (in the case of a call option) or buy (in the case of a put option) the shares at the stipulated strike price.
What is the difference between American and European options?
The expiry date is the date on which the option and the right to exercise it cease to exist. Options expire at noon on the Saturday following the third Friday of the expiry month (last trading day).
A warrant is a security that gives the holder the right to purchase securities from the issuer at a specified price within a certain time frame. Warrants are typically offered directly by the issuer, and when exercised, require the issuer to issue new securities. Warrants trade on the market separate from the underlying security. Of note, warrant holders have the opportunity to acquire the respective securities at a price potentially lower than the market price.
The value of a warrant can be broken into two components, intrinsic value and time value. Intrinsic value is the amount by which the market price of the underlying security exceeds the subscription price of the warrant. Even when warrants are out of the money (i.e. no intrinsic value), they still may have what is known as time value, which is related to the market’s view of the potential for the warrants to become “in the money”, prior to expiry. The longer the time period until expiry, and the more volatile the underlying security, the higher the time value will be.
Why did I receive warrants in my account?
If you did not buy any warrants on the exchange it is likely you received the warrants by virtue of your ownership of some other security upon which warrants were issued. Funds that issue warrants must file a preliminary prospectus that outlines some of the details of the offering and then follow-up with a final prospectus that fills in all the details once it has been approved (“receipted”) by the respective securities commission. The securities commission is not assessing the merits of the offering but simply that the issuer has fulfilled all the filing requirements in order to issue the warrants.
What is the tax implication of receiving a warrant?
Generally, there is no tax implication upon receipt of a warrant. Therefore, if you sell your warrant in the market you will have a capital gain equal to the proceeds of the sale. Investors who purchase warrants in the market and subsequently sell them will have capital gain (or loss) equal to the proceeds from the sale less the cost to purchase the warrant. If warrants are exercised, the cost base of the warrants will be the exercise price plus the cost to purchase the warrant, if bought in the market.
How do I exercise warrants and what I am entitled to with such exercise?
To exercise a warrant (or a right) a holder of the warrant must instruct their investment advisor to exercise all or a portion of their warrants prior to the expiry date. Most investment dealers will have an earlier cut-off date (typically two days prior to the expiry date) in order to allow for sufficient time to process the request, so please check with your investment advisor. Securities purchased pursuant to the exercise of a warrant should be deposited in your account within a few days.
Why can’t American residents exercise warrants or rights?
As a Canadian issuer the fund is prohibited by the SEC from issuing securities to residents of the United States of America. This includes the warrants or rights themselves and any securities issued pursuant to the exercise of a right or warrant. Generally, warrants or rights issued to a resident of the United States of America will be held in their dealer’s account and not delivered to the individual investor’s account. The warrants or rights should then be sold in the market and the proceeds from the sale delivered to the US holder’s account. Accordingly, no subscriptions will be accepted from any person, his agent, who appears to be, or whom, the fund has reason to believe is a resident of the United States. Security holders whose recorded addresses are outside of Canada (but not in the United States) are generally permitted to subscribe for securities pursuant to a warrant or rights offering.
Can I trade my warrant?
Yes, warrants (or rights) trade on the exchange on which the securities of the fund are listed (typically the Toronto Stock Exchange). Note however, that warrants cease trading after the expiry date.
What happens to my warrants on the expiry date?
Warrants will cease trading on the expiry date (typically around noon) and if not exercised will be worthless.
Adjusted Cost Base or ACB The average cost per unit of an investor’s securities.
ADRs American Depository Receipts issued by a depository that evidence a beneficial interest in securities of an issuer that are held on deposit by the depository.
Alpha The excess return of the fund, adjusted for risk, relative to the return of a benchmark.
at-the-money in relation to a call option, means a call option with a strike price equal to the current market price of the underlying security and, in relation to a put option, means a put option with a strike price equal to the current market price of the underlying security.
Beta The measure of an equity or portfolio’s historical volatility compared to the market as a whole over a given period. It is a tool investors can use to assess the risk profile of potential investments, relative to the overall market.
Black-Scholes Model a widely used option pricing model developed by Fischer Black and Myron Scholes in 1973. The model can be used to calculate the theoretical value of an option based on the current price of the underlying security, the strike price and term of the option, prevailing interest rates and the volatility of the price of the underlying security.
business day any day on which the Toronto Stock Exchange and The New York Stock Exchange are open for business.
Buy-Write Another term for covered call writing. The investment manager buys a portfolio of common shares and writes calls on them.
call option the right, but not the obligation, of the option holder to buy a security from the seller of the option at a specified price at any time during a specified time period or at expiry.
other cash cover as defined in NI 81-102.
cash-covered put option a put option entered into in circumstances where the seller of the put option holds cash equivalents or other acceptable cash cover (as defined in NI 81-102) sufficient to acquire the securities underlying the option at the strike price throughout the term of the option.
covered call option a call option entered into in circumstances where the seller of the call option holds the underlying security throughout the term of the option.
Current Yield The most recently reported monthly or quarterly per unit or common share distribution or dividend for that issuer multiplied by 12 in the case of issuers that make monthly distributions or dividends and by four in the case of issuers that make quarterly distributions or dividends and divided by the closing price per unit or common share of such issuer on such date.
Distribution Date The date on which cash distributions are paid by the fund, which for all Strathbridge funds is the last business day of the month.
Ex-Distribution Date The day on or after which new units purchased on the stock exchange will not receive that month’s distribution.
in-the-money in relation to a call option, means a call option with a strike price less than the current market price of the underlying security and, in relation to a put option, means a put option with a strike price greater than the current market price of the underlying security.
Intrinsic Value The amount by which the market price of an underlying security exceeds the subscription price of the warrant related to that security.
NAV per Unit in general, the NAV of the Fund divided by the number of Units then outstanding. See “Calculation of Net Asset Value – Calculation of Net Asset Value and NAV per Unit”.
Net Asset Value or NAV The net asset value of the Trust, as determined by subtracting the aggregate amount of the liabilities of the Trust from the Total Assets and as more particularly set forth in the Declaration of Trust.
Net Asset Value or NAV the net asset value of a fund which, on any date, will be equal to the difference between the aggregate value of the assets of the fund and the aggregate value of the liabilities of the fund on that date.
NI 81-102 National Instrument 81-102 – Mutual Funds (or any successor policy, rule or national instrument), as it may be amended from time to time.
Nymex New York Mercantile Exchange, the largest physical commodity futures exchange.
option premium the purchase price of an option.
Options Options are agreements between two parties for a specified time period (up to the expiry date) that give holders the right, not the obligation, to buy or sell a specified number of shares, usually a lot of 100, at a pre-determined price (exercise or strike price). You can buy or sell options just like shares.
out-of-the-money in relation to a call option, means a call option with a strike price greater than the current market price of the underlying security and, in relation to a put option, means a put option with a strike price less than the current market price of the underlying security.
Premium/Discount The amount in percentage terms by which the market price differs from the net asset value per unit. A market price in excess of the NAV per unit is trading at a premium whereas a market price less than the NAV per unit is trading at a discount.
put option the right, but not the obligation, of the option holder to sell a security to the seller of the option at a specified price at any time during a specified time period or at expiry.
Record Date The date on which a holder of a security will be entitled to receive a benefit. Typically refers to a distribution, though may also refer to voting rights pertaining to a scheduled security holder meeting.
REITs Real Estate Investment Trusts.
Selling volatility Selling volatility is a term used to describe the process of writing options and receiving the option premium.
SIFT Rules provisions of the Tax Act applicable to “SIFT trusts” and “SIFT partnerships” (within the meaning thereof).
strike price in relation to a call option, means the price specified in the option that must be paid by the option holder to acquire the underlying security or, in relation to a put option, the price at which the option holder may sell the underlying security.
Tax Act means the Income Tax Act (Canada) and the regulations thereunder.
Taxable Capital Gain A realized capital gain upon the disposition of an Canoe Unit, upon which a Unitholder will be required to include in computing the Unitholder's income one-half of any such capital gain.
Time Value The market’s view of the potential for a warrant to become “in the money” prior to expiry. The longer the time period until expiry, and the more volatile the underlying security, the higher the time value will be.
Total Assets The aggregate value of the assets of the fund as determined in accordance with the terms of the constating documents.
VIX or Volatility Index The Chicago Board Options Exchange Market Volatility Index (symbol: VIX) is a popular measure of the implied volatility of S&P 500 index options. It represents one measure of the market's expectation of stock market volatility over the next 30 day period.
volatility in respect of the price of a security, is a numerical measure of the tendency of the price to vary over time.
Warrant A security that gives the holder the right to purchase securities from the issuer at a specified price within a certain time frame.
WTI West Texas Intermediate, a crude oil benchmark.


I make 100,000 pens earning a profit of $200,000. A customer wants to buy 10,000 additional pens. If I accept that order I will earn $220,000. The incremental revenue is $20,000, the difference between $220,000 and $200,000. It is the extra money I will earn by making 10,000 more pens.


The baby name of the pregnant mother is considered by her family members as a & # 39; dog name & # 39; knocked down - but is it so bad?
The baby name of the pregnant mother is considered by her family members as a & # 39; dog name & # 39; knocked down – but is it so bad?
Choosing a baby name can be difficult, but a mother has remained deeply sad after her family has taken the name she chose for her unborn child.
The mother in question posted on the Netmums online forum seeking advice from other parents after being told that her suggestion was a & # 39; dog name & # 39; used to be.
& # 39; Nobody likes the baby name we have chosen. When I tell someone they make a face and say it's the name of a dog, & she wrote.
& # 39; I'm trying to stick to what my partner and I like, but it's so daunting. Can you ignore negative opinions or should I listen to them? & # 39 ;.
The name she chose for her little one is Huxley.
The mother explained that while she and her husband had fallen in love with the name no one else knew.
Some commentators on the wire also expressed their aversion to the name.
& # 39; It's the perfect name for a dog. No baby. I could even steal it for my puppy, & a person said.
& # 39; Huxley is the name of the villain of Elmo in Grouchland, when I hear the name, I can only think of crazy eyebrows lol. Hopefully your child will like it, & another person said.
Nevertheless, most people on the wire expressed their support for the moniker.
Would you give your baby Huxley a name?
& # 39; As long as you and the other half are happy, that's all that matters. I like different, unusual names, and he won't be one of five in the year with the same name! & # 39 ;, Reads a supportive comment.
Many others said the name & # 39; cute & # 39; and & # 39; lovely & # 39; used to be.
& # 39; I really like the name! And it's so easy to say who's worried about what others think, but ultimately the negative opinions really lead you down, & a person said.
A variety of people posted on the wire recommended not to tell anyone the name before birth.
& # 39; I had the same reaction when we said we were going to call our son Dexter. He is now eight years old and I am so happy that we stayed with our weapons, & a person said.
& # 39; Ignore all others, if you like the name stick with it. Huxley is a great name!, & Another one said.
After everyone had accepted the opinions, the original poster revealed that she and her partner would continue to choose the name they had chosen.
& # 39; We talked about it again last night and my partner is adamant, no matter what other people think. We will keep Huxley as our name, it will probably be a girl right now, & she said.


Can he step out of Eminem's shadow ahead of his new album?
When Stephen Manderson aka Professor Green burst on to the scene last year, he was touted as the UK's answer to Eminem; an expert in wordsmithery with connections to the coolest kids in music who managed to work in a humorous spin on the rap scene despite a troubled history. It was, in many ways, a fairly accurate description - but has he managed to step out of Marshall's shadow on the trailer for his second album?
If we were to liken it to the US rapper, we'd suggest 'Read All About It' was his 'Cleanin' Out My Closet' moment; but in truth its lyrical content is too personal to be compared to his peers. "I wasn't even 5/ Life's a journey and mine wasn't an easy ride," he says of the tense relationship with his family after his father committed suicide, before a stadium-sized chorus courtesy of R&B-soul singer Emeli SandÃ© ensues. It may doff its cap to the rapping greats, but few can deny this is all Pro Green.


". . . to all parts of the UK media to be vigilant against attempts to present a distorted view of the scientific evidence about climate change and its potential effects on people and their environments around the world.
I hope that we can count on your support."
" "There are some individuals on the fringes, sometimes with financial support from the oil industry, who have been attempting to cast doubt on the scientific consensus on climate change."
What do you think of this effort to stop an open discussion of Naomi Oreskes claim in Nature (Dec. 2004) of a consensus among scientists that Earth's climate is now controlled more by human activity, rather than by solar activity?
I am not surprised by either the attempt or the response.
I did have the impression you were on the other side, thinking that the Sun's changes were the bulk of the observed warming, but that doesn't change either your concern or mine in the lame attempt to squash the debate. Thanks for bringing it to light.
What do you think of this effort to stop an open discussion of Naomi Oreskes claim in Nature (Dec. 2004) of a consensus among scientists that Earth's climate is now controlled more by human activity, rather than by solar activity? I'm sure I have a dog in this race, but I'm not sure which one it is. Hard evidence from NASA indicates that CO2 has increased in the last few decades and that IR radiation specific to CO2 as seen from outside Earth's atmosphere is less which seems to prove that humans are having an effect. I've not seen "the whole picture" presented by what appear to be unbiased interests. That said, I'm not sure that those who believe that the effect of humans is minimal (loading the camel with the last straw), by expressing their opinion, are attempting to stop the debate. Perhaps they are attempting to enrich it. Both sides of this debate suffer from way to many unfounded claims or, at least, over-exhuberant extrapolations in the direction of their most feared disaster.
We seem to be heading at great speed toward a substantial wall which is the failure of the fossil fuel powered world economy. It seems prudent to begin braking our speed and adjusting our direction so that we can survive the collision.
I agree with your concerns, Gourdhead, and delighted that the scientific community is looking at the possibility of man's influence on Earth's climate.
However, I suspect that changes in our climate are controlled mostly by variability in the Sun as it wobbles through space, gravitationally pulled toward the center of mass of the solar system.
The scientific community will lose credibility if it shuts out opposing views, aligns itself on the side of global warming, and then global cooling occurs instead.
Yesterday the National Post published this note on evidence that changes in cosmic ray intensity and variations in solar activity have been driving much of the Earth's climate.
The article cites a comprehensive review by Jan Veizer, one of Canada's top Earth scientists, who concluded that the "empirical observations on all time scales point to celestial phenomena as the principal driver of climate, with greenhouse gases acting only as potential amplifiers."
I agree. The Sun has been highly variable and subject to violent change since its birth, and it remains that way today.
If climatologists find a way to correct for the Sun's variability, their conclusions about influence of greenhouse gases on climate will be taken seriously.
Astronomers and astrophysicists can assist this effort by working to improve our understanding of the solar cycle, solar magnetic fields, and solar eruptions.
Another thing that doesn't get discussed much in the climate change debate is that CO2 is not the badest of the bad gases that cause a greenhouse effect. Worse than CO2 is good old H2O, and we have people pushing for a hydrogen powered economy that would only produce water vapor as its waste product. That, IMO, would be worse than continuing to use carbon fuels.
That, IMO, would be worse than continuing to use carbon fuels.
I'm not an expert in this, so there might be a counter-intuitive thing I'm not seeing, but it seems to me that our atmosphere is already in an equilibrium state with water, and that it rains out of the air whenever too much gets there. If we put billions of tons a day of water into the atmosphere, it isn't going to stay there, the way billions of tons of CO2 would.
Is atmospheric CO2 in equilibrium with the carbonates in sea water?
Yes. But it is a dynamic equilibrium whose cycles have a fairly long period, and we as a species might find some of the extrema personally inconvenient.
According to the press release, “The mesosphere has been called the miner’s canary for climate change; meaning that it is very sensitive and the changes there may be larger than in any other part of the atmosphere.
“Evidence of these changes comes from sightings of noctilucent clouds, very unusual clouds seen only in polar regions and known to be in the mesosphere. These clouds don’t seem to have been observed before 1885 and may mark the onset of a long-term cooling of the upper atmosphere”.
These clouds don’t seem to have been observed before 1885 and may mark the onset of a long-term cooling of the upper atmosphere”.
My understanding is that cooling in the UPPER atmosphere is an artifact of more heat being captured and retained in the LOWER atmosphere, where global warming is measured. I'm not sure what your point is here.
Prior to 1885, we relied upon Poe, de Bergerac. and Aristotle for descriptions of what the upper atmosphere was really like. Nobody hung out at the poles to do any observing. Were you going somewhere with this?
The 23 May 2005 on-line issue of Advances in Space Research contains a related article by G.A. Zherebtsov, V.A. Kovalenko and S.I. Molodykh entitled, "The physical mechanism of the solar variability influence on electrical and climatic characteristics of the troposphere."
The paper contains this statement about global warming (GW) ". . .the most significant and substantiated argument, which makes us doubt that the observed global warming is caused only by the contribution of CO2 of anthropogeneous origin, is the absence of the answer to the question of the causes of the existence of warm and cold periods in the last millennium.
i.e., the increase of CO2 could be the consequence, but not the cause of global warming."
CO2 is not the only, or most efficient green house gas, but it is the one we are creating, or otherwise releasing into the atmosphere most. Do you have any figures showing the annual tonnage of CO2 added to the atmosphere annually by fossil fuel production & consumption vs the total annual amount being observed in our recent increases?
I don't doubt your idea that warming the ocean can cause further release of dissolved CO2, but without some numbers, I don't think the doubt you're trying to sew here is valid. In the interest of full disclosure, do you or your department get any funding, direct or otherwise, from any major oil producing company? (This is not an accusation, I'm just curious about your position).
In the interest of full disclosure, do you or your department get any funding, direct or otherwise, from any major oil producing company? (This is not an accusation, I'm just curious about your position).
Are you by any chance in the legal profession?
A dishonest scoundrel in the hire of oil companies to discredit global warming would of course answer dishonestly.
We all have a vested interest in the future of old planet Earth.
A crafty answer as it neither says yes or no. I assumed there was some middle ground including well meaning people whose sponsors might have self-serving agendas.
If you have any evidence that I receive now, or have ever received, "any funding, direct or otherwise, from any major oil producing company", please post it here.
Otherwise, Anton, please refrain from questioning my motives.
The threat of global warming, whether real or illusionary, is the topic at hand.
Please let me be VERY clear about this. I do not now, nor have I ever had any evidence that your expressed doubt about the human causes of global warming are a result of funding by any organization that would benefit from a reduction in social pressure to reduce carbon emissions. In my first post, I was careful to say that this was NOT an accusation.
My question was related to trying to understand WHY you were so vigorously against the idea that there is a substantial fraction of the observed global warming stemming from an increase in human activity related to the production od CO2.
I note here that even now, you have not denied it, but I will not ask about it further, as the debate is more my concern than your motive, and the discussion of your motive has lasted longer than I intended (a simple yes or no would have ended it immediately).
I do not now, nor have I ever had any evidence that your expressed doubt about the human causes of global warming are a result of funding by any organization that would benefit from a reduction in social pressure to reduce carbon emissions.
In fact, I am not vigorously against the idea that human activity causes global warming.
But I am vigorously opposed to pseudo-science, no matter which side it supports.
Now can we please return the discussion to possible causes of global warming?
Very interesting speech. I'm not sure how all this global warming idea got started. I'm not the brightest bulb in a light socket but I know when I am being fed **.
Who ever thought of global warming is a nutcase. The real terminolgy is Climate Changes.
I know this is a touchy subject and I'm not sure why. But for some reason there is a group of people out there with a big hard-on for global warming.
The real terminolgy is Climate Changes.
Our inability to understand the violent and dynamic Sun may be why we grasp at straws.
I regard both of these as positive developments and an indication that we are finally moving toward a better scientific understanding of the reasons for Climate Changes.
Global warming induced by human activity.
The story concludes that this action has damaged the reputations of National Science Academies for unbiased information.
From the concluding paragraph, "The scientists should retire from the battlefield now. They have picked the wrong fight at the wrong time."
Hmmm... you should perhaps consider that the source itself seems to be very right wing biased. I'd appreciate it if you could keep this kind of editorial opinion off of our forum please. (The same goes for any political bias).
Hmmm... you should perhaps consider that the source itself seems to be very right wing biased.
I'd appreciate it if you could keep this kind of editorial opinion off of our forum please. (The same goes for any political bias).
How do you know "that the source itself seems to be very right wing biased" ?
You and I don't always see eye to eye, but here we do. There is climate change. There has always been climate change. The one thing the climate has never, EVER been is static. The problem is that I have seen evidence that the temperature is rising, that CO2 emissions are up, but I have seen no proof that the two are corolated. I hear about glacier melt, but only from a very small sample of the huge number of glaciers around the world. I know there was a little ice age a few hundred years ago, and I've seen evidence that the warming trend has been happening ever since then - not a recent creation, and started before there was even an industiral revolution.
Until I see proof that human activities - and only human activities - are responsible for proven warming of the Earth, and all other major natural causes such as solar cycle variability are proven to not exist or be involved, then I have to continue to believe that any changes to the climate are natural and man has had no effect on the length, severity, or duration of the change.
Global Cooling is a theory that already exists. The same people raging over global warming/climate change are the same people that in the 1970's insisted that human activity was causing global cooling which would result in another ice age. This should not be mistaken for the more recent theory of shutting down the thermo-haline system in the Atlantic as popularized in that Day After Tomorrow movie. That came about much more recently.
There is climate change. There has always been climate change. The one thing the climate has never, EVER been is static.
You "hit the nail on its head".
I couldn't have said it better.
I posted a response but it was deleted.
a.) The Sun has the dominant influence over Earth's climate.
b.) The Sun is violent and dynamic, with magnetic fields that poke through its surface periodically in 11-year cycles, causing solar flares and eruptions.
c.) Those deep-seated solar magnetic fields extend out to the Earth and the other little balls of dirt with iron cores close to the Sun.
Your point c is very appropriate right now. I read just last week about a recent proton storm released earlier this year that was faster than any solar theory predicted possible. They believe that the solar magnetic field at the site of the coronal mass ejection was directly connected to the Earth's magnetic field and this accelerated the protons on a super fast highway to the Earth. Rather than having hours or days to warn satelite operators and astronauts in the ISS, they had only minutes.
You are right, John L.
You pointed out earlier that "There is climate change. There has always been climate change. The one thing the climate has never, EVER been is static."
We also suspect that There is change in solar activity. There has always been change in solar activity. The one thing the Sun has never, EVER been is static.
Now all we have to do is to convince climatologist that there may be a link between these.
2. The First Crisis in Cosmology Conference, CCC-1 in nothern Portugal.
Overheads are near the top of my web page, in an article entitled "The Sun Is A Magnetic Plasma Diffuser That Controls Earth's Climate"
Is getting a planet that is 4C cooler on average in a few hundred years really worth eschewing the internal combustion engine? Considering that the internal combustion engine, and other combustion powered processes make our food, transportation, power, water purification, automated manufacturing, materials processing, ect even possible, I think it's a stretch to imagine a downside big enough to justify restraining its use. Before the IC engine, we were scratching on the dirt with horses and plows! (Horses by the way, generate pollution that is much less easy to deal with) The only materials we could realistically use en-masse were wood and plant fibers! Now we can reshape the very landscape to suit our needs. We have everything from bulk steel and aluminum to composites and concrete available for our use. I say: keep the IC engine regardless. Even if the worst these environmentalists can conjure comes true (and the realistic worst case scenario is really a gradual centuries long process of warming and sea level rise), then the IC engine can help us adapt and thrive regardless.
Is getting a planet that is 4C cooler on average in a few hundred years really worth eschewing the internal combustion engine? .......Even if the worst these environmentalists can conjure comes true (and the realistic worst case scenario is really a gradual centuries long process of warming and sea level rise), then the IC engine can help us adapt and thrive regardless. The more pressing problem arises from the IC engine eschewing us because we run out of fossil fuels before we get replacement energy sources in place. Not correcting our focus is as safe as swimming with mosasaurs. Maybe they like fish better or won't notice us.
In gas phase CO2 is heavier than air, and when compressed by the 400 meters depth in the oceans to about 40 atmospheres, it is transformed to liquid phase that is heavier than water. During the compression the temperature is increasing that is warming the oceans down to 3000 meters. But that is a small heat source compared with the underwater vulcanos.
This causes a very acid milieu that dissolves shells and reacts into chemically compounds with water and calcium and other matter. That materials in molecular form follow the cold bottom streams that is flow up outside the east-coasts of Chile and Africa. There this material-rich water gives food for algea and plankton and fish.
There must be a surplus of CO2 that sinks into the sediment layer and by the times it reacts with hydrogen radicals that came from the underlying magma and produce the hydro-carbonates that we are prospecting and drilling after as rude-oil and natural gas.
Consequently the carbon dioxide level is self regulating.
The nature is clever as ever.
it is transformed to liquid phase that is heavier than water. During the compression the temperature is increasing that is warming the oceans down to 3000 meters. But that is a small heat source compared with the underwater vulcanos.
the amount of heat from underwater volcanos would be but a flea bite to an elephant.
if CO2 became heavier under compression and deposited on the lower sea floor then there would be ample evidence of this and easily verified and strange ive never heard about it.
once adsorbed in the water at great depths you say it will sink to the sea floor.
so why don’t we see the same in a soda water bottle where the same thing happens.
Carbon dioxide is dissolved in the oceans to a specific level that is depending on the depth. This also implies that carbon dioxide has a specific buoyancy.
Let us take the analogy with a floating iceberg that always has 10 percent of its volume over the water level.
Carbon dioxide is also “floating” with a certain part dissolved or absorbed and partly sink into the oceans but its buoyancy when it is lighter than water (over ca. 360 meters depth) lifts the certain atmospheric part of carbon dioxide over the ocean's level and consequently regulates the level in the atmosphere. Carbon dioxides buoyancy capacity depends on its specific weight that increases with higher pressure that increases with the depth in the oceans.
With more emissions of carbon dioxide in the atmosphere, as heavier is the partial pressure on the ocean’s surface and as more is dissolved (absorbed), and as more is sinking to the depth where the carbon dioxide is compressed to higher density than the water's specific weight where it is sinking to towards the ocean’s bottom. Of course there are chemical bounds and reactions with water and calcium and other matter.
According to the experts this critical pressure is 36 atm. which implies 360 meters depth. At greater depth the pressure is higher and carbon dioxide is heavier than water – and therefore it sinks. This is the strange and long searched sink that automatically and naturally reduces the carbon dioxide level in the atmosphere to an equilibrium level in that linked system of ocean and atmosphere. This is the sink where all surplus of human made carbon dioxide disappears.
At further depth in the ocean and by that higher pressure the water is more aggressively acid. This implies that at more than about 3000 meters where the pressure is 300 atm., it is well known by observation (but misinterpreted how and why) all organic matters that have sunk to the bottom are dissolved. The bottom can be white of shells down to that level, but at larger depth the color of the bottom is depending on the sand sediment.
This intellectual discovery and analysis is mine.
I have lectured about it and discussed it with interested audiences on seminars and conferences.
I have asked science journals to let me publish an article, which they refused because it is not known before (?).
I have discussed with experts that agree but they are afraid to violate the consensus of the fundamentalists in greenhouse community.
I have, during many years, sent hundreds of letters and e-mails to milieu politicians and newspaper, but no one has answered: nobody of them is interested to know the truth – because money makes them to liars.
why is the oxygen nitrogen and other dissolved elements also separating out into a sink/ float level.
If this is so then we have really missed a great way to mine magnesium.
how come fish survive at depths of over 360 meters where you claim acidity is high.
is there any evidence of this CO2 settling in the sediments of the ocean present and past.
The more pressing problem arises from the IC engine eschewing us because we run out of fossil fuels before we get replacement energy sources in place.
This is an entirely seperate issue from global warming though. We have processes now that can mine shale oil. NIMBY is the problem, as usual. If we were allowed to do so, America could probably support itself in terms of oil production. We haven't even begun to explore offshore mining possibilities. We probably have a few hundred years left of gasoline.
Economically, combustion is present in so many important processes that the only way to replace them while maintaining our present civilization is to find something more powerful and less complicated to replace it with. Only one such energy source comes to mind, and it was killed in the 60s with a bad sci-fi movie.
Earth has a common behavior of "change", the great changes are taking place so for earth is concern, pressure on earth is changing, sea water levels are increasing substantially, the ozone is getting more damage and its holes are expanding, the harmful rays are reaching on earth directly.
If we are not taking care of today, if we are not aware with this great problem of global warming today, if we are not going to implement the rapid actions over the heat rising, pollution and other related aspects, to stop wars (wars creates extra heat in the atmosphere) worldwide, then only we will be able to live on earth without worries, without tensions, with a fine health and wealth.
There are news reports that the Russian National Academy of Sciences has publicly corrected the mistaken impression of its endorsement of global warming induced by human activities.
When I get to my office I will try to find the news story and post a link to it here.
Reduce waste(generation and transmission losses)> increase efficiency> reduce energy consumption> save money> use money for space travel> pump Titan dry.
Here is some of the news on the Kyoto protocol to the UN convention on climate change prior to the G8 summit in Scotland this week.
Advances in Space Research 35, issue 3 (2005) pp. 451-457 (http://tinyurl.com/d3c2e) is a new paper showing that solar varibility has a greater impact on Earth's climate than previously thought.
c.) Concludes that solar variability has a significant influence on the chemical composition of the stratosphere and mesosphere and on the species that are responsible for destruction of ozone, methane, nitrous oxide and CFCs.
But the supposed ozone hole problem and global warming are two different issues. I have not seen any hard data that shows a basically uniformly thick ozone layer covering the entire globe followed by a never before seen ozone hole. From what I've read, and please correct me by linking to the revelent data if I'm wrong, is that when we began trying to measure the composition of the atmosphere over the antarctic and artic that we suddenly discovered that there were holes in the ozone layer. Some scientist then decided that it must be our fault even though we had never measured the polar ozone layer before and seen no hole.
So in a sense they are similar then, as they are both about scientists jumping to conclusions and blaming mankind on problems that are completely natural and beyond our ability to cause, control, or change.
Here's more news headlines on the eve of the G8 summit meeting in Scotland.
Dr. Manuel, these are editorials, not scientific papers. I have asked you previously to not post links to these things here. If you have some science backing up your position, go ahead and post it, but please keep the politics out of it.
We all know the rules, but on Doc O'c behalf I'd like to say that global warming is a political issue.
"the oceans are going to melt and we'll all die if we don't ride our bicycles to work starting tomorrow"
"You can't prove anything and looking into the issue any further will obliterate our economy"
Balance. That's what it's all about, IMO.
Are we seeing anything that is using SOHO and data from other probes to track whether a changing Sun maps to the rises and falls of global warming (as implied should be the case from Dr. Manuel's argument?) No, we haven't seen that (from either side). Are we seeing recent charts showing a continued connection between CO2 (or Methane, or N2O4) levels and global temperature. No, we haven't seen that either.
This thread has pretty much been exclusively about 'hot air' as Dr. Manuel called it when he started the thread. If we are going to discuss this topic here in this forum, I'd strongly prefer to keep it about the science, and not about which nations are backing away from Kyoto, or which columnists side with the Bush team, and which don't. Editorial columns from "National Business Review" should rarely find a place in the UT forum, and this one was not an exception.
I apologize, Anton, for posting information about the shifting political sands in the debate over global warming.
The research article cited above [Advances in Space Research 35, issue 3 (2005) pp. 451-457] is probably worthwhile for anyone who wonders if solar varibility has an impact on our climate.
Oh, give me a break. The forces driving the climate change prophecy of doom are intensely political, and see no problem fighting the debate on the political field rather than the scientific/experimentation plane, so I don't see why political rebuttals aren't also in order.
On the political plane, global climate change is just one of many theories that have been grasped at over the decades by the environmental socialists and environmental anti-industrialists. The trend had it's roots in the concept of the noble savage and Malthus, but gained significant power in the modern context with Ehrlich's ridiculous predictions of global starvation and deforestation. His proposals were backed up only with poorly devised computer simulations that couldn't even be shown to to successfully post-dict the past, yet were swallowed whole by the green movements in their drive to halt and curtail western capitalism. It became unquestionable religious fact that by the year 1990, 3/4s of the world would be starving due to food shortages, metals and other resources would become too scarce for the average joe to buy or use, and that "you would have to see a tree in a museum". Our only hope was supposed to be placing the world economy under the control of technocrats, who alone had the wisdom to avoid the coming resource crash brought on by irresponsible free markets, and lead us all to a magical age of prosperity by force and fiat.
In fact, all environmental doom prophecies have fallen flat on their face, many having been almost exactly wrong, and like so many other irrationally held paranoid beliefs of apocalyptic doom and disaster, have been pushed further and further into the not-so-distant future, and modified whenever the fundamental tenents are shown to be faulty, absurd, or otherwise untenable.
Food is ridiculously abundant, so are materials, capitalists have proven better stewards of forestation and the environment than socialists have. So now that capitalism has provided abundance and universal access to resources, it is the process of producing that abundance that must be attacked. Production itself, having proven itself feasable, must be villified by invoking the wrath of angry mother nature.
Before we do anything these quasi-religious zealots tell us to, we should expect that they at least get their story consistently straight. Global climate change is precisely worded thus because these people have been reversing their infallible predictions at every bump in the weather! First it was Global cooling and particulate winter. Then it was global warming, and sea level rise. Then it was global warming that induces global cooling later. Then it was global warming due to us ceasing coal burning, and reductions in particulates. All have had their particular models, all have not been shown to even postdict the geological past, much less predict the future any better than a slot machine.
When you really don't have a clue what the weather next year is going to be, isn't "Global climate change" so much safer than committing to a specific model and seeing if it works? That way, the politicians can switch from doomsday scenario to doomsday scenario with the shifting of the jetstreams, and keep people consistently worked up, without having to really know what will happen. It doesn't matter what the climate is actually doing, it's capitalism and industry that is doing it by God, and it's going to kill us all eventually! One only has to look at some of the "well even if I'm wrong, I'm still right, and we still need power to effect the changes that we want" type arguments posted here to see that this isn't about specific causes and effects and proposed solutions. It is about something else entirely.
Perhaps there is good science behind one or the other of these models, (or perhaps even behind one of these non-anthropocentric climate models that are regularly pillioried in political cirlces). But science isn't what's driving the green movements. It's politics pure and simple. This is about socialism versus capitalism, round II.


The hydraulic clutch assembly in your Ford Focus should not require bleeding unless the system has been opened for repair. The clutch master cylinder and slave cylinder come as a complete assembly so overhauling the hydraulic system is not an option. It is recommended that the brake system be bled first if required, since the brake system and the clutch use a common fluid reservoir and the brake system has more volume in its cylinders.
Remove the rubber air duct that connects the throttle body to the air filter housing using a screwdriver to loosen the hose clamps before twisting and pulling the hose. Locate the bleeder screw, found on the line between the clutch master cylinder and the clutch slave cylinder, and unscrew the dust cap covering it..
Top off the brake fluid level in the master cylinder reservoir. Instruct a helper to place his foot under the clutch pedal to prevent bottoming the clutch master cylinder piston in its bore.
Slip an 8 mm wrench into the bleeder screw and momentarily open and then close the bleeder screw as a helper pushes the clutch pedal down a few inches. Repeat this step until clean brake fluid, free of air, escapes.
Tighten the bleeder screw and reinstall the dust cover. Reinstall the air duct and tighten the clamps securely. Test drive the Focus to verify that the clutch functions properly.
A special tool is available from Ford to simplify this procedure by forcing fluid into the system through the bleeder screw. This is how Ford technicians perform this task.
Wear safety glasses and work gloves to prevent skin irritation caused by spilled brake fluid.
Flush any brake fluid spilled on the paint immediately with plenty of clean water. If left unattended, spilled brake fluid will damage or remove the paint.


Exotic species are identified with red text. Insects are divided into five categories; 1) defoliators, 2) bark beetles & wood borers, 3) terminal feeders, 4) sucking insects, and 5) parasites & predators. If attempting to identify 'what's eating your tree' then you'll need to know where the insect is feeding and what tree species is affected. Of course, only a sampling of forest insects are mentioned here.
Defoliators eat the leaves of trees, their infestation sometimes reaching epidemic proportions. Presence of these insects can easily be detected by the loss, deformation, or discoloration of needles on conifers or the summer loss, deformation, or discoloration of leaves on hardwoods. Resulting loss of the tree’s food manufacturing ability causes a slowing of timber growth, and in the case of sugar maples, can seriously affect sap production. Conifers can be quickly killed, or lose their form if intended as Christmas trees. Hardwoods, however, can usually withstand several years of defoliation without death. Fortunately, epidemics are usually cyclic and the insect boom will collapse through starvation or other natural checks and balances before the forest is irreversibly damaged. Many of these species are moth, butterflies, and wasps.
Bark Beetles include over 100 insect species and are among the most destructive in North America. It is estimated that approximately 60 percent of all tree growth loss is due to these burrowing pests. Bark beetles excavate egg galleries in fresh phloem, the inner bark which carries food from leaves to the roots of a tree. When the eggs hatch, hundreds of larvae eat their way from the main gallery, mining the inner bark in all directions. The pattern of their work is like a fingerprint for the species, and their collective eating nearly always spells doom for the tree. The first easily noticed sign of this is a reddening or fading appearance in the top of the tree, followed by complete browning. Less noticeable are patches of pitch or sap seeping out where the insects first entered the trunk. These insects are usually only a problem in mature or maturing trees, or stressed trees, but some species plague young plantations.
Wood borers go deeper than bark beetles, doing their damage in the sapwood and even the heartwood of a tree. But while some wood borers attack living trees, others drill into recently cut logs, lowering their value for lumber or pulp. Some even attack finished lumber. Often the tunnels have a secondary effect of providing an entry point and channels of spread for fungus (rot). Although not true of all species of wood borers, telltale sign is often the sawdust and other wastes that accumulate outside holes in the trunk or limbs. The best defenses against many members of this group are to keep trees healthy, vigorous and undamaged, and to sell or use cut trees quickly rather than letting them lie around. This is especially important during the summer. Common families include the Cerambicids and Buprestids.
Terminal feeders eat buds or root tips. Some species in this group also do their damage by girdling twigs. Their attacks are fatal only if repeated year after year, so their real damage is in the deformities caused as a tree overgrows its injured buds. This often slows growth as well. Root insects, mostly white grubs, some borers and root weevils, are problems only in seedlings and ornamental shrubs. Entomologists suggest that many terminal insect problems could be avoided by more carefully matching planted species with the site conditions of their natural range. Most of these species are moths and beetles.
This group is named because its insects have sucking mouth parts and feed on plant fluids. A huge number of species are included, but few cause actual death to trees. Their main offense is robbing the tree of its food and water. This, of course, will eventually affect growth and health. They are also known to spread tree diseases and sometimes the slits they make in branches weaken the branch enough that it dies or snaps off. True bugs are most common order.
A large number of insect species prey upon other insects that are tree pests. These parastic and predatory insect populations "boom" when their prey populations experience outbreaks. This is part of the natural controls for cyclic outbreaks of species such as forest tent caterpillar, spruce budworm, and (now) gypsy moth. Some of the more interesting (gruesome!) life cycles are associated with this group of "good" insects.


What can I expect at a reading? | Deciding on the questions I should ask.
What can I expect at a reading?
Readings are for either half an hour or an hour. I allow plenty of time so if they go a little over time this is allowed for in your appointment.
If you can, please bring photos of people (family or those who have passed over) you would like to either know more about or contact in spirit. This is like sending out a phone call to the Universe to make the connection with the energy of the person. It also helps the psychic link if you can give the age of the person and there first name.
You could also bring a piece of jewellery or something else that belonged to the person if it is someone who has passed.
If there is someone in spirit who want to make contact with you they may come through even if you don't want this. Please let me know if you do not want to have this communication.
I usually ask you to choose a deck of cards to shuffle. The decks are all very different and your choice of decks and the energy you put into shuffling them, because you feel something for them (i.e. like them or 'feel drawn to them') will enhance the reading. While you are shuffling the cards I will ask you what questions or areas that you need guidance with and if there is anyone you particularly want to know about or connect with. While you are telling me this you are putting the energy of these questions into the cards as you shuffle and this again leads to greater accuracy and clarity for the reading.
I rarely lay the cards out, preferring to read the energy that you put into the cards when you are shuffling them.
I prefer for my clients to have an hour reading the first time they see me and then you can choose whether on follow up visits for readings you come for half or an hour. Usually follow up visits are only half and hour and clients come with very specific issues they need addressing.
You are very welcome to tape your reading or take notes. I do tape readings if you request it and there is an extra fee of $10 for this. I burn your tape to a CD and this is then posted to you.
I may ask you if you are comfortable with me giving you a 'mini healing' prior to the reading. This is just to cleanse your energy body so that the reading is clearer and less full of other people's clutter that you may be carrying around in your energy body.
Sometimes the information given in a reading will be very clear and it will be obvious what it means to you and for you, helping you to take the appropriate actions. Other times you may need to go away and reflect on what you have learned. You may have to think about the messages you have been given before you make decisions. This is part of the process of learning to listen to, and trust your own inner wisdom.
Focus on the whys, hows and whats of a situation rather than a where or when question. This will get you more than a one-word answer. Moreover, I can't guarantee a specific date or time for an event to happen, but I can give advice about how to deal with any given situation and where I see it going in the future.
Make sure questions are clear and make sense. Just because I am clairvoyant doesn't mean I can interpret vague or ambiguous questions.
While any kind of supplementary information isn't always necessary if you need to give extra information to make sense of your question, please don't hesitate to do so.
If there is another person involved give their first name and date of birth. This helps the psychic link.
Half hour readings are $70. Hour readings are $100.