"In Retirement" Portfolio's

Again, your results, blah, blah.....
I use optionsxpress, which has a bit higher commission, but seemingly quicker response. And I can sell puts and calls within an IRA - something most other brokers won't let you do. At least my previous broker Scottrade wouldn't.  Anyway, my example is: bought 300 shares of Microstrategy at 79, mid-Aug, sold 3 Sept 80 calls at 1185, and 2 Sept 75 puts and 2 Sept 70 puts for total of 750, bought back the Sept call and the Sept 70 put for cost of 785, and resold Oct 80 call for 1485, and Oct 70 & 75 puts for total of 1530. Still have an outstanding put that I could buy back for 320 but I'll wait it out awhile. None of the above numbers take in commissions but total of 134.72 in commissions, and the above mentioned buy backs, and net right now is 4165 for the 23,700 invested in the stock, and it will likely be around to sell more calls against in when the Oct calls expire.  Net.Net is for 2 months of a couple of my hours I have an annualized return of 103.72% so far.  Could go down, could go up ... time will tell.
As to the predicted 13% from Kim's method (and by the way, the above is not her's but borrows heavily on her knowledge) says that it has similar risk to AAA bonds, with a higher yield.  As you can see, results can be higher, but that is the floor she is offering, irregardless of the stock market performance. 
I am the first to admit, I've been lucky, and could get bit.  But it's been a *$#&*%( of a ride so far.  I should mention that these results are in a brokerage account, not and IRA, but the IRA has had similar, albeit smaller % results - it's a more conservative play, with no margin allowed in it.
It's not for everyone, but I'm enjoying it so far.
 
whitestick has some fuzzy math.  Let me see if I make it fuzzier or not.
300 * $79 = $23,700 at risk
Sold sep calls and puts: net  $1935 (before commissions).  However there is an outstanding put which will cost whitestick unless MSTR goes above $75 before Saturday.  Plus the stock is now worth about $1500 less than when he bought it.  He might be up $100 on Saturday, but he might be down $100, too.  It depends on the stock price between now and Saturday.  $1935 - $785 buybacks - $320 future put buyback - $150 commissions - $1500 stock loss = $670 loss.

Now bring in the Oct options.  He sold those for $1530.  The stock could lose another $1500 by then.

Anyways, I'm not sure where whitestick got his $4165 return for a $23,700 investment, but maybe I mis-read his details.

[edited to subtract the $785 cost of buying back the Sep call and put and to reflect the new stock price of MSTR.]
 
Nothing like a bit of fuzz. You are close - but the outstanding put won't cost me unless I buy it back (at the time it was 320, this morning it appears to be 400 - but that can change as well), if however I don't buy it back then I just take delivery of the stock at that 75 price, and then resell calls against it at one strike above my cost basis.
Your math is good, but you missed the 1485 optoin income for the Oct call, the 1530 was just for the Oct puts. Total of 3015. I didn't subtract out the potential stock loss, as I didn't sell it, just the options, so I can hold, lower my overall cost basis, and resell more calls in Nov. Won't make money every month, some times it will slide, and when the stock price rises, above my cost basis, I will continue to sell calls against that.
So far, my experience has been, that when you eventually get called away, you have made a total of well in excess of 22%. I was using this scenario as an example, not to suggest that 100+% was a norm overall.
Your results may vary, blah, blah....
I'm happy with 22+% on average, and don't need to make the maximum every month. As an income stream (you do have to use the money from the previous year, to let the averages work out, not try and take the money this year/month), that's a pretty good revenue, and used as one more diversification for money.
Fuzzy as a peach now?
 
whitestick, thanks for the clarification.  For others reading this, then whitestick has not made any money yet until all the positions are closed out.  IMHO, he has a good chance of losing money (just my opinion, whitestick  :p).

As for the TGT I wrote about, the stock price has dropped today to $54.64, so I have not lost money ... yet, but there is still plenty of time to do so. Furthermore, there is virtually no buying/selling of TGT SEP options today. The volume and liquidity have simply dried up.

Anyways, the point of all my posts is that covered call options are not a sure bet nor as carefree as what some folks would have you believe.
 
I don't understand the claim that these types of options investments are safer than AAA bonds. Is that just puffing? I mean, your downside for investment grade (short term) bonds is limited to about 0%/yr returns. You can lose your shirt in options.
 
Not my claim, but rather Kim Snider's. Please read her website literature, rather then have me defend it. As you can see from the previous discussions, I have chosen a more risky, aggresive tack, but that's her claim.
LOL!, you are correct on this transaction, but I have on the other closed positions that I have done already. I was just using this one as an example. I certainly wouldn't recommend this for someone that has never done this before. As in all things concerning your money - caution is better then greed.
 
Whitestick,

Yeah, I know it was Kim's claim that these types of investments are uber-safe. Not trying to put her words in your mouth. I'm sure you can make a quick buck here, I just don't think the characterization of the risk attributes of these transactions is correct at "just like AAA bonds".
 
Which is why I defer to her site for an explanation. I took the course, and use her info as a basis for the way that i do it. By no means does she "preach" doing what I am doing. She is chacterizing her philosophy as similar to AAA grade bonds, because of the parameters that she evaluates the underlying stocks to buy, and the use of keeping most of your money in a swept money market till needed through the optionsexpress brokerage. It has seemingly worked for her, and for the friends that got me into it, and for my wife, who plays by the rules, so it's hard to argue with their results.
I suppose that I should add, that the real benefit of her course is that it teaches the sifnificant other, the methodology so that should something happen to the primary financial provider, that they can still carry on, and not feel helpless or strapped for making ends meet. A real comfort for those less involved in financial decisions. That seems to be the main attraction that causes so many couples to take the course. Testimonials abound on this piece of the results.
 
Whitestick,

FYI, you're sample of successes using this product is a very small sample size, and a non-random sample at that. The successful have self-selected themselves into your sample.

But congrats on making it work. I guess there are benefits besides making money from the trades such as getting your spouse involved with the money decision.
 
whitestick said:
Not my claim, but rather Kim Snider's. Please read her website literature, rather then have me defend it.
Click to expand...

Whitestick, I did look at her site. Interesting, but I keep seeing references to 'yield' and 'cash flow' but nothing on 'total return'. On covered calls, you can take a hit on a stock drop and have a negative month from time to time. You could still claim to be getting the cash flow or yield from the calls, but that is a bit misleading, IMO.

As far as I know, any hedge is going to cut into your returns, and you can't hedge away ALL your risk (there would be no chance of making a profit, or someone would be giving away 'free money'), so there must still be the chance for losses, which seems to get downplayed by the continuing cash flow.

Maybe I missed it - is there a reference to "Total Returns" on that site?

Thanks, ERD50
 
I honestly don't know. Her message as you point out is all about cash flow and yield. Her philosophy is all about the cash, which is different then the traditional asset driven methodology. You can calculate yield eventually when you close a position, but she really advocates not selling the underlying stock until you absolutely get it called away from you. The majority of time the stock will go down on a month to month basis - just the facts of the market. Tradtional equity investment is looking for the market to go up and then sell, or for the contrarian, to sell it short, and buy when it hits the level needed. Her thing is to sell calls (and occasionally puts accoring to her rules), every month that you can (not all months will qualify), so that you are looking for the cash flow as income to siphon off and live off of. When you continually siphon off the excess money, you really don't get to a total return calculation, and it is meaningless anyway. Like the folks here that talk about LBYM, and a minimum safe withdrawel rate, this is a methodolgy that matches the income to what you want month to month
She does state that you are drawing off the money a year later, to allow for positions to close, etc, as they will - however, one of her examples is of a position that she held for (I think) 2 1/2 years before she was able to be called out and closed the position, however, her yield on that for income was still slightly better then the 13% she talks about.
There are some non-disclosure things that she teaches that you agree not to talk about, when you sign up and take her course, so I think I better stop qualifying before I get myself in trouble. Suffice it to say, that I payed for the course (about 3k) within the first couple of months, and after that it was all uphill. I went into it wanting a consistent 13% return or better, and watching the and investing in the stock market and funds over the last 25 or so years, I know that some years it's up, some year's it down, and worse, so they analysts tell us, when the market is up, there are only about 15-30 days of the year that it jumps enough to exceed itself and pull up to make the average. Which means you have to stay fully invested to hit those few days.
Your results may differ, but my experiences (and as Justin points out, I'm a statistically small sample, self-selected to bias the results - whatever that all means), has been overall positive. My biggest problem is to continually remind myself that "Pigs get fat, Hogs get slaughtered". Which I interpret to mean that I can't be too greedy and chase the even bigger dollars, or i will get burned.
Her presentation seminars are free, so if your are in the Dallas area (and I have met people there that came from two states away to attend her classes), go and spend an evening and listen and judge for your self. She does provide finger food snacks, so you won't leave hungry. She often has alum there as well, so you can talk one on one, with people that are doing it themselves, and see what they say about it.
Oh, I think she is opening another class/office in the Atlanta area as well, so East coast folks can check it out.
I'm tired now, I feel like I should be a salesperson for her, but it is exciting to see the results and talk to other folks and share their experiences. That's the main reason that alum go to her seminars, I think.
 
whitestick said:
The majority of time the stock will go down on a month to month basis - just the facts of the market.
Click to expand...

We would all be broke now if the majority of the time stocks went down on a month to month basis.

I see now why you like this method.  First, you claim a $4165 gain when you actually have a loss.  Sure you have sold calls and puts for the next month, so it looks like you might come out ahead, but you conveniently ignore the loss in the underlying stock.  Second, when a stock selling for $73 a share is put to you at $75 a share (forcing you to pay $2 more for it than anybody else is willing to pay), you claim that is not a loss.

I can put money in a savings account and withdraw 22% a year, give 10% of it away to someone else and claim I have a 22% annual return, but I would not be right.
 
whitestick said:
Her message as you point out is all about cash flow and yield.
Click to expand...

whitestick, thanks for that reply. You have convinced me that I have no further interest in her seminars, and would suggest that all others approach with a 50 pound block of salt.

I'm with LOL! on this one. To focus on cash flow and yield and sweep TOTAL RETURN under the rug is a shell game. You are basically saying that a CD paying 4% and a stock paying a 4% dividend are 'the same', as the cash flow and yield are the same. If that stock drops 50%, your total return suffers. The CD does not drop. No comparison.

Yes, you can say that you didn't loose anything on the stock because you didn't sell it yet, but you cannot just dismiss it either. It may come back, and it may not. When you look at total return, you need to evaluate where you are TODAY. You can't estimate that you'll be OK in the future. If the SEC allowed the mutual funds to do that, you'd never see a down year reported by them.

I should add that I have been doing covered calls for the past year, and my TOTAL returns have been above the market with less volatility. But I have down months, and there is the risk one or more of my stocks will totally tank. I know you can hedge some of that, but it will lower your returns. No free lunch.

Be careful out there - ERD50
 
I think I'll stop now. Obviously, I wasn't successful in communicating the underlying message, and that's ok. We all have different opinions, and Thank God we do. For some reason, (apparently magic if I believed the critics) through the months of activity, my total dollars available keeps increasing in these accounts. Obviously, you take a final reading when you close your position, and my point was that on a month to month basis, I don't worry about the relative price of the underlying stock, as I continue to sell calls against it, take that income, and when the stock is finally called away, at a price above my cost basis, then I "book" that small profit as well. I don't care if that profit is .50 above my cost basis, 'cause I made the money on the options all along. But then to each his/her own.
I take comfort in that this is a contrarian view, and if the mainstream bought into it, then there would be no one to bet against. Enjoy your View, and I'll enjoy mine.
 
whitestick said:
I take comfort in that this is a contrarian view
Click to expand...

whitestick, I actually do agree with much of what you say. Being contrarian is important in many ways, and you may do very well with this system.

I am just concerned that you are counting your profits as such before the position is closed. I'm even more concerned that the website downplays total returns. That is not just being contrarian, it is a misrepresentation.

I used to do some short term trading, and I fell into the same trap. I would look at the many 3% profits I took over the month and ignored the stock that fell 30%, thinking that 'it will come back later, I have not taken a loss yet'. Over time, those failures kept piling up, almost completely offsetting my gains. But my 'realized gains' looked good, and Uncle Sam appreciated it!

You indicate that your dollars available keep increasing, so that means your gains exceed any losses - good. But I would suggest you use that as a measure of your performance rather than just the cash flow. If you do better than the market by that measure, and with less volatility, then you are clearly doing well.

I hope it works for you, in both the long and short term.

-ERD50
 
Thanks ERD50! I was afraid that we were losing the group with all of our discussions. I do understand the need to only count on a closed position, and to date, my longest run has been about 5 months before I was called out completely, and closed the position. Kim has taught me to keep precise and meticulous records (if nothing else to satisfy Uncle), and that is why the danger of quoting a particular result mid-stream can be mis-leading. I was providing the information as an example only, and didn't want to teach the same class that Kim does.
I have enough to do, with my regular job, and planning for my FIRE. 3 yrs, 60 mo, 16 days, and counting. And just so we are clear, that timing is based on what it will take to clear out my lifetime of collections, prep the house, and get my plans in place for life after work - not a function of FI - at least not yet.
Been a good discussion, think I'll go get out of the spotlight now, and return to lurking.
 
Because That's when Plan A, Plan B, and Plan C are all funded, so I'm not dependent on any one failure. Now if all three go under, I guess I'll work a bit longer.  I suppose I could RE earlier, by only going with A or B, but as it happens, it just works out that way.  I also have the dates for when DW quits, when various parts of the household goods need to be sold/eleminated, cars disposed of, house on market -etc.  That last one is a bit of a crap shoot, I'll admit, but nothing says that I have to be physically be here just to sell a house. That's what realtors are for.  Having revealed all that, would you believe that my idea of RE is to wander wherever the mood takes me, stay however long as I feel, and just explore to see what I missed in all my business travels. I know there must be something in all these cities beyond an airport, hotel room, conference room, and a nearby restuarant.  That's what I want to see. Quite a dichotomy, don't you think.
Relative to the various Plans,   I have spent quite a bit of time planning on what the various combinations of fund withdrawels should be to minimze taxes, yet optimze to my income needs.  I have checked the referred links to the vangard site and other sites, and still am wanting. Problem is I have a combination of IRA, Roth IRA, LT Capital Gains stock(with minimal basis), ST Capital Gains - the options trading, Pension, SS, and Equity in Home & RV, as well as some equity in cars and other sellable assets.  Think my combined income needs are going to be in the 50k range not counting taxes.  I'll be 60 at my magic date of RE, so a few years to go for SS.  I estimate waiting till 66 to draw SS to avoid the tax and reduction of SS because of exceeding the 32k limit (combined after the 1/2 business) so I have a few years of matrixing withdrawals untill the SS kicks in.  If DW's company holds together, I should have Health Care factored in and covered, with a fudge factor as well.  I realize that this is not most people's problem, but it is mine.  Any ideas of a good calculator that can take in all the above mentioned income streams, timings, and variability, factoring in the tax issue (federal only - don't need state) to get optimum use of income streams.  As I write this, I'm concerned that the answer is a FP, but I like the hands on approach, as it has served me very well so far - I just would like a tool to use, maybe a linear regression tool would be the best.  Ideas?
 
http://www.i-orp.com/

This site is a pretty nice calculator and will give some guidance on which accounts to withdraw money from first, given the tax implications. It may not be as sophisticated as what you are needing (it doesn't have any probablistic/stochastic modelling that it sounds like you want). At some point you have to accept that there will be unknowns and move on.
 
Update on reply #49. Today TGT closed at 53.33 and the SEP 55 call will expire worthless. So I can tell y'all that I made a free $670.05 on writing the covered call over the 4 days or a 111% annuallized return.

The reality though is that the underlying stock position lost $1820, so I am down $1150 or a little over 2% when the premium of the covered call is included. Ouch!
 
Update on reply #49. Yesterday TGT close at 52.23. So I have lost about $2200 on the trade or about 4%.

OTOH, whitestick's MSTR closed at 68.35 if he still has it.
 
Still have it, and bought another 100 shares to average cost down, and sold call 1 strike above for that lot. Will be interesting when Oct comes, as I have 3 different call prices, with only one in the money at this time. OTOH I still have one outstanding put at 75 for a couple of hundred shares. Thus I have a paper loss (not selling unless called away) of about 2500, and a dollar gain of around 4000, so still to the good, and in theory, should have about 800 shares to sell calls against at 75 for November, when Oct expires. If there is any kind of premium at all for that call, and it gets exercised, i will still be 1500 plus whatever that premium x the 800 shares is, and still sell (get called) on the stock at my cost basis. For the 4 months, that's not too bad, haven't bothered to figure the % yield untill it actually closes the position. Keeps me happy :D
 
:LOL:Just an update, as that MSTR position finally closed in Nov. Total profit of 8457, for an annualized profit of only 46.51% on the invested capital. Not to belabor the point, but cash flow is good, and focsing on income, rather then capital growth, has only one down side that I can see and that is the short term capital gains tax rate. Still and all, Cash is ready to spend when I need it, and no further taxation at that point, so that can help the SS taxation issue, if I end up going that way, when eligible. Had one lucky trade as well, percentage wise, in a did a put on a stock that happened to rise quickly over the next 3 days. No forthought on my part, just pure dumb luck, anyway closed the position in 3 days, and booked a 1176839% annualized profit - dollars was only 1472, but still not bad for 3 days. Not an expected result, but one that gives me something to brag about for a long time to come. I'll go back to lurking now.
 
This is my plan for my first few years of retirement (eight years from now):

Div Paying Stocks.....................33%
Natural Resource Stocks............9%
International Stocks..................9%
REITs.........................................9%
Munis/Agencies/Corporates......8%
Treasuries.................................8%
Preferred Stocks.......................24%

Total              100%
 
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