Off Balance Sheet Financing Example

There are a lot of concerns about the banks’ off balance sheet asset lately. New accounting rule will take effect starting next year and require banks to move certain off balance sheet asset back to their balance sheet. This change was triggered by the shady practice of using off balance sheet financing in the Enron case. Many analyst expect when that happens banks with large off balance sheet asset will be forced to raise capital again.

I tried to find an example of bank’s off balance sheeting financing but didn’t really find one. However I found the following was very close to an example and it is the best explanation about off balance sheet financing. “Uncovering Hidden Debt“

Wells Fargo and Bank of America were said to have huge off balance sheet asset.

• 2009-07-24 Wells Fargo’s Balancing Act
• 2009-07-21 Analyst sees $12 bln reserve charge for B. of A.

That was why I didn’t trade any financial stock lately. I don’t want to short. I don’t want to trade in and out as frequent as I did. I don’t believe in the banks’ balance sheet. All of these make me trading nothing lately. I am still waiting for the DOW to come down below 9000. I believe it will happen.

Searching for Balance and Trying to Get Back to Discipline Following Trading Guidelines

account balance 20090604
I don’t feel like to trade till the put option I sold expires and I am still holding OZRK. I don’t feel I like to trade options again. Many of the options are not liquid enough and I hate waiting. Of course I don’t have to wait and close my option position before it expires but I feel that makes me lost some profit that I have a very high chance to get. It seems to me once you are in a position to write options you don’t want to let go until it expires.

Anyway I don’t feel like to trade because I can not get back to discipline. I can not let go the thought to earn back quickly the $10,000 I lost before I started this blog. I am searching for a balance in my mind and I feel if I start again from a clean cash position say $30,000 then I may be able to forget about the past. I want to close out all the position and move out any balance in excess of $30,000 so that I can achieve the balance I am searching for.

Have you had the same feeling and did the same before or I am silly? My account balance is at about $31,500 at this moment

I did this right after I wrote this post. I can not wait. I sold ORZK at a lost of about $400. Close out the option position. The option position net about $200. I transfer out $1,427.25 and my account balance is at a whole number at $30,000.00. I have to give myself a fresh starting point
Clean Cash Starting Balance 20090604

With all the transactions above

Account Balance Change: -$1,427.25