Agree @mikebrisy. Emma has expressed the opportunity eloquently! We’re down 20% on IDP Education to date, and it makes up about 9.4% of our IRL portfolio. I’m happy to take this one to 10% if the share price falls back to $13.70. Then we will hold and not let the short sellers get a single share! I’m not one to hold a grudge! ;)

The short selling has steadied up over the last month after dropping from 17.5% to 13%. Reminds me of PolyNovo not so long ago. David Williams was right! Shorters are your best friends!

I wish to buy a silly stock, but only once, you see;

So should I wait to see some strength before it belongs to me?

The market's ebb and flow each day is a dance that's hard to trust;

But I will not average down for me, lest the whole thing is a bust.

Good point you make @TechBunny,

Catching a falling knife ain’t that funny,

The price is low, the value’s there,

Let’s add some more if you dare,

Each time we do we feel the pain,

As we repeat once more…never again!

@Rick and @mikebrisy I'm in the same camp as you guys ... under water from buying too early but still very committed to the long term upside in this stock. Here's the trade I'm looking to set up for early next week. (its a bit tricky so not really sure how to represent in my SM portfolio)

Background

• I have a bunch of shares acquired at $16.50 in April 2024.
• This is all in my SMSF

Here's the plan (shoot holes in it please):

• Sell August 15 13.75 PUT (current market price of 30c). The 30c premium equates to about 42% annualised return. Because its in SMSF its counted as a short term capital gain so 15% tax need to be paid on proceeds (i.e. 25.5c premium = 35% annualised return after tax).
• Scenario 1 - Share price doesn't drop below 13.75 ... I keep the premium and set up something similar for next month.
• Scenario 2 - Share price drops just below 13.75 ... I get the shares (and keep the majority of the premium)
• Scenario 3 - Share price drops below 13.50 ... I end up having paid too much in the short term as I spend all my option premium and then some.

Assuming I get the shares in August:

• I can then turn around and write a June 2025 covered call at the money on the previously acquired $16.50 shares (that also equates to about 20% increase from the $13.75 above). Currently that's paying about 65c (which is a 5.2% annualised return before tax). (so all in all the 30c from the PUT + 65c from the CALL premium the total is 95c or 80.75c after tax is taken out ... ie about 6.5% annualised on the 13.75 share price after tax)
• Scenario A - Share price doesn't get back to 16.50 by June 2025 ... I keep the 6.5% return and can sell some more covered calls next FY. I've got double the number of shares but I've reduced my average purchase price to $15.12 so I have an unrealised capital gain on the 13.5 shares helping offset the unrealised capital loss on the $16.5 shares.
• Scenario B - Share price gets to just over 16.50 by June 2025 ... I keep the 6.5% return, sell the more expensive shares and reduce my average purchase price to $13.50 giving meaning I have an unrealised capital gain of 20% for the year.
• Scenario C - Share price recovers to well over $16.50 ... i keep the 6.5% return but miss out on some gains on the 16.50 shares albeit I will have an even larger unrealised gain on the $13.50's.

In addition to the 6.5% annualised return from the options, there is also the typical dividend of around 3% (although not sure whether IEL might put that on hold for a while given the macro circumstances). Seems like a pretty asymmetric bet to me ... I hope we are all correct and the market is wrong on this one.

@RhinoInvestor I'm not the Member to comment on an options trade. While I understand them (and have used them professionally in energy markets when I worked in the industry) I only ever take long positions on companies. I like to think I own part of the company, and I want the full exposure of that decision.

I intend to hold my position in $IEL for the long term (>3 years). I'm not counting on a material recovery on the next 1-2 years, because I believe the major markets are now locked into a hard position on immigration, and this might not move until there has been significant movement on economic recovery. However, for the reasons we have discussed here before, because of the long-term demographic and skill shortage trends, the longer the policies restrict international student movement, the stronger and longer the recovery in student flows will be.

I have played in the global oil and gas markets for over 3 decades. And so I will draw on an analogy from these markets. When demand-driven slow-downs tank the price, this puts a break on investment. Then, because of the underlying, unstoppable depleting resource base, the price kicker when demand returns is all the stronger.

In the last 30 years, there have been 5-6 occasions when you could play this and it has been the easiest money I've ever made, because of the predictability of the cyclical upturn, giving high returns over a 1-2 year horizon. (My first exposure to it was in 1998! My most recent in 2020/2021, and before that 2016, and before that 2005/2007)

I think international student flows are following an analogous cycle. The "depletion" analgoue to the oil market, is the aging population of retiring workers, which is not being replaced fast enough. The demand side effects that amplify the pressure are the shifts in the structure of demand for jobs: more services, technology, healthcare, aged care - some of these require graduates (IT, engineering, biotech, healthcare etc.).

This is creating a dynamic in all developed markets whereby governments will inevitably have no choice but to turn on the tap and bring in the skills, including the skills pipeline into universities. The universities will create the pull pressure, because international students are their financial lifeblood. Governments are unlikely to be able to prioritise tertiary funding reforms even if they want to anywhere because of other pressures on government budgets.

Now, add to this that there is a practically unlmiited supply of talented people who want to come from developing countries when governements lower the barriers.

The longer the barriers remain up, the great the pressure in this dynamic builds.

$IEL as the market leader in placement and testing is well-placed to benefit from this. Provided that it continues to be well-managed.

In fact, if it is well-managed, it will use this down-turn to drive innovation and (hopefully) accelerate positioning itself in the US, which is much more enlightened and proven in tapping the global talent pool to drive its economy. So, my hope, is that a couple of tough years will help $IEL emerge even stronger.

However, just as in the oil market, it is very risky (I would say foolhardy, but that is just because I am risk-averse) to place a bet on what the "price" will be in 6-months or even 12-months. You have to be prepared to play with a longer time horizon (a small number of years IMHO).

I don't care about being 10%, 20%, or even 30% down on this play in the short term. I've done it before on oil and won every time. As long as $IEL executes well, then I am confident that over 2-5 years, this one is going to pay out and the returns - even given my false start - will be excellent. (I'm still holding about 25% more to allocate once the bottom is in.)

So my only challenge to you is: what timescare are you assuming for the recovery? My thesis is good for 2-5 years. FY2025 might not be a great year.

When would I sell:

1. Evidence that major markets have implemented skill reforms so that skilled and student immigration will not be needed or will only be needed at materially reduce levels. (Likelihood <10%)
2. $IEL make some serious mis-steps in execution or does something dumb (like big M&A) (Likelihood unknown)
3. Material price recovery that makes it over-valued (>$35) (Likelihood unknown)
4. As always, I need the capital elsewhere,... however, the lower the short-term SP depression, the higher my expected return, and the less likely I would sell!

Despite my high conviction on this thesis, I'm not betting the farm on it - because I could be wrong. My investment in $IEL is about 3.2% (cost base), and I'm prepared to take it up to 4-5% once the FY24 result is in, and I've reappraised the situation.

Hope this helps.

@RhinoInvestor I’ve sold put options with the strike price below the current share price numerous times with a great deal of success. I would always time the expiry date just before ex-dividend date so you receive both the option premium plus the dividend if you are exercised. I would much prefer a European style put option over an American style put option where you can be exercised at any time up until expiry. I don’t like nasty surprises.

I think this is a clever strategy providing you have the cash to cover your puts if the options are exercised. Don’t rely on shares to cover your margins or it could all go pear shaped.

You need to be prepared for the black swan events where either the stock or the market tanks and you are left holding the stock for a very long time.

Most of our BHP, CBA and NAB shares we own now were acquired through exercised put options during 9/11 or the global financial crisis. Scary at the time, but am I sorry we got landed with them? Nope!

I don’t particularly like l selling call options. The premiums are small compared to the potential capital gains that could be made, but many people do it.

I don’t trade options anymore. I like to keep things simple, buy quality stocks and hold! Good luck though. You can do very well out of it with minimum risk if you are smart about it.