INTERVIEW
Gold: How did you come up with your so-called ‘Sharelord’ strategy for utilising stocks to generate cash flow yourself? N.H.: While my band-mates where doing drugs and spending indiscriminately, I was saving 80% of the US$1,500-2,000 a week I was getting paid and investing it in property back in Australia. However, once I had acquired 7-8 properties, the banks refused to lend to me as they thought I was overleveraged so I had to look for other cashflow generating strategies. After investing in many different things from agriculture and livestock (a lot of which was speculative and, at best, broke even) I gravitated towards the stock market and to futures, Forex and commodities trading. But yet again, it was based on speculation – gambling on a specific market direction and hoping to generate returns. Eventually I discovered that other investors, who were far more sophisticated and astute than the speculators, were in effect creating the marketplace. When I was first introduced to the concept of issuing options on shares owned I didn’t really understand it until I started comparing it to how the property market works, i.e. just as a landlord rents to a tenant, a ‘Sharelord’ rents his shares to a ‘tenant’ who is an options trader, (a speculator or gambler) who
GREECE NEEDS TO START LIVING WITHIN ITS MEANS AND GREEKS NEED TO ACCEPT THAT THEIR PROBLEMS ARE SELFINFLICTED buys time-lapsing options to buy the actual shares. The share owner or ‘Sharelord’ buys the shares and issues options (like rental contracts) to put these shares on hold and commits to the possibility of selling them at a predetermined price in the future. For this the ‘Sharelord’ receives an upfront payment for these shares so even if the speculators lose their money, as a ‘Sharelord’ you are stacking the odds in your favour.
AUTHOR OF THE THRILLIONAIRE, NIK HALIK
(Nikos Halikopoulos) was the youngest of four children born to Greek immigrants to Australia. He suffered a variety of medical problems as a young boy and spent a large part of his childhood confined to his bedroom. During this time he read the Encyclopaedia Britannica repeatedly, while obsessing over his favourite comic book hero Tintin. Eventually overcoming what turned out to be a psychosomatic condition, he began planning ways to fulfil the ten life-time goals that he had set out as an 8-year-old, which included becoming a rock star and an astronaut. Halik relocated to California at the age of 17 to study music at the Guitar Institute of Technology in Hollywood before performing and recording with various bands throughout the ‘80s and ‘90s. He quit the music industry to pursue his business interests and became a multi-millionaire in his twenties thanks to shrewd investments in the property and the stock markets. He later completed his space training at Russia’s famed Star City complex in Russia and was selected as the backup to Richard Garriott on the 2008 autumn flight to the International Space Station. Among his other achievements: • Performing a 33,000-foot HALO sky dive • Climbing 6 of the 7 highest mountain peaks in the world • Running with the bulls in Pamplona • Going on expeditions to Antarctica • Descending to the wreck of the Titanic • Sleeping in a sarcophagus in the Kings Chamber in the Great Pyramid at Giza
Gold: There’s a major difference though: as the tenant in a property you don’t have the option to buy it a predetermined price, while with share options, if the price of the shares increase to a point where it makes sense to exercise the option, those shares are called away from the owner. N.H: True, but as the share owner you set the selling price and collect your rental income from day one. Say you buy 100 shares for $18 each and you rent them out immediately at $20 – you’ve instantly created a $200 dollar income by investing $1,800. If the market price moves to $25, the ‘tenant’ who paid $2 per share for the option to buy your shares will probably exercise that right to buy from you at $20 because he will make a profit of $3 per share (the current market price of $25 per share minus the $2 per share call option). So the ‘tenant’ makes 150% return on his investment while you make 22% (11% in the initial sale of the options and then another 11% on the actual sale). On the other hand, if the price stays the same, falls or increases to just $22 per share you still make your initial 11% cash return, regardless. Gold: But if the share price goes down a lot, say to $14.4 (i.e. a 20% fall), you may keep the 11% ($200 dollar) initial gain in cash terms but you will still be left holding shares that have lost value and take a 9% overall loss in cash terms. N.H.: Yes, this is true, which is why I always recommend utilising some of the call premium received for the shares to insure against downside losses exceeding 88-95% by using protective put options (i.e. the right to sell at a predetermined price). As a landlord, you would ensure your property against damage so why not do the same with your shares? It reduces the income somewhat but it also protects you. Remember, too, that we train people to understand the analytical aspects of shares and their trends and how they may be expected to perform in the future. We also recommend utilising only established US stocks and avoiding certain sectors due to their inherent volatility.
64 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS
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