Option to ride II

I wouldn't call it a problem, but I had a potential issue. I had to fork out a premium of RM$0.10 for the option to ride. To some "investors" (or LRT riders... haha..) it may seem like an okay deal because there is potential savings to be made for a 10cents initial payout. For more demanding 'investors' like me(Aka poor working man with no money!), well, I was always looking for a way to address this "issue". HAHA...

Okay... so the solution may have been obvious to many who have had experience living in Kuala Lumpur, but for me, it was the perfect solution in everyways! =D I discovered the wonders of.... Touch 'N Go! Huh what?

Well, in a nutshell, Touch 'N Go is a prepaid card system that can be used to take the train, pay highway toll, more recently, buy doughnuts from some donut place, very much like the EZ link card system in Singapore or cashcard system in many other countries.

Well, okay, no AHA moment there... but still, I was pretty happy to have found out about the Touch 'N Go system, saving me time and hassle, as I do not need to join the queues to buy a ticket nor suffer machine malfunction where your 10 dollar bill will get eaten up and you can't get a refund because the station staff 'do not' have access, and well of course because I don't have to fork out an extra 10cents should I not need to head down to Taman Paramount.

Of course, if you would want to discuss the time value of money of pre-paying money versus forking out the 10 cents at a later date. Well, I could and probably would put everything down on a timeline and give a detailed analysis on a later date, however, I can safely say that, the benefits would outweigh the initial outlay, and besides, the initial outlay is up to you as you can choose to top up your card with any amount above 5RM, so time value of money is not a big factor.

In every "investment", and when I say investment i refer to anything in life really, you not only have to weigh the pros n cons financially, but also the amount of work and time and effort you are willing to put in or save in order to achieve your goals.

So, my life example is all nice and good, but how could such a no cost option actually exist in the investment world?! Well... Actually... there is! hehheh... It's called a zero cost collar. Well it basically is a exotic derivative based upon a "the purchase of a put option and the sale of a call option with a lower strike price." (investopedia.com) Whats all this mumbo jumbo?! I think I'll have to go into them in another post... If not I have to write a realllly HUGE post. But basically, its a combination of two options to come up with a derivative that protects you from losses but also caps your earnings potential, basically a hedging tool.

So there you have it... Finance is every where in our daily lives! I hope you gleaned another piece of sense n cents from this... As follow up, I will do up an analysis of the payouts, talk more in depth about the different types of options, and update this post soon with collar options diagrams when I get back to my own laptop! And of course... I WILL do the hot air balloon soon! =D