"In Retirement" Portfolio's

[Spanky]

Quote:

..The method I use is the Kim Snider plan, and although she emphasizes low risk conservative covered calls and minimal naked puts, her expectation is pegged at 13%.

Claim from the method:
"Spend less than 2 hours a month!"
"Consistent 13% returns, with less risk than government bonds!"

Sounds like a free lunch if you could afford over $3K for the seminar/workshop

[justin]

I just glanced at the Vanguard stock funds 1 year returns as of 8/31/2005. You'd have to be unlucky to have picked a fund with less than 12-13% returns over the last year. 13% returns in a year where the market is up at least that much isn't anything to be proud of.

[unclemick]

Heh, heh, heh, heh

The Norwegian widow doesn't - in ER - as long as the div/interest stream holds up.

The rest is er ah - Mr Market.

[REWahoo]

Quote:

Originally Posted by justin I just glanced at the Vanguard stock funds 1 year returns as of 8/31/2005. You'd have to be unlucky to have picked a fund with less than 12-13% returns over the last year. 13% returns in a year where the market is up at least that much isn't anything to be proud of.

Since many of Vanguard's funds are index funds, wouldn't you expect their returns to mirror the market?

[uncledrz]

Just a question about the covered calls. I looked at this a while back and decided to not get involved for two reasons. First, on conservative, large holdings the premiums did not seem to be sufficient. Second, the transaction cost seemed high. Question is, where do you trade and what are the transaction costs?

Uncledrz

[justin]

Quote:

Originally Posted by REWahoo! Since many of Vanguard's funds are index funds, wouldn't you expect their returns to mirror the market?

REW, Yes. Vanguard's funds' returns should generally mirror the market because many of them are index funds.

My post was in response to whitestick's post that stated "..The method I use is the Kim Snider plan, and although she emphasizes low risk conservative covered calls and minimal naked puts, her expectation is pegged at 13%."

A monkey throwing darts at Vanguard's list of stock mutual funds could have gotten 13% over the last year. That is why I don't see the Kim Snider plan as anything novel, if it can't beat the market.

[REWahoo]

Quote:

Originally Posted by justin A monkey throwing darts at Vanguard's list of stock mutual funds could have gotten 13% over the last year. That is why I don't see the Kim Snider plan as anything novel, if it can't beat the market.

Gotcha.

REW, a "dart throwing monkey"

[justin]

Quote:

Originally Posted by REWahoo! Gotcha. REW, a "dart throwing monkey"

That is really all the passive index investors are. But it is an effective method.

[brewer12345]

Quote:

Originally Posted by uncledrz Just a question about the covered calls.* I looked at this a while back and decided to not get involved for two reasons.* First, on conservative, large holdings the premiums did not seem to be sufficient.* Second, the transaction cost seemed high.* Question is, where do you trade and what are the transaction costs? Uncledrz

You got it, drz. Commissions have come down, but bid-ask spreads are still pretty wide in the options market. Volatility is at historical lows, so unless you own some pretty volatile stuff, the premiums are small.

[LOL!]

Quote:

Question is, where do you trade and what are the transaction costs?

I'll give you a specific trade. Today I bought 1000 shares of Target @ $55.11 a share. Commission was $9.95. I sold 10 SEP 55 calls for $700 less $29.50 commission, so net $670.05. These calls expire this coming weekend.

As long as TGT stays above $55, I will let the stock get called away because I am not interested at this time in holding it more than 4 days. I should be able to net about 1% in those 4 days. I will lose money if the stock goes below $54.45 this week. That's a distinct possibility. 1% in 4 days beats out my ING Direct savings account. Or I can roll out the call to a OCT 55 and get another 3% premium (perhaps).

I had a similar trade with HD a couple months ago. The calls expired worthless (so I made that money), but the stock also dropped below my break-even point. So I still own shares of HD which is now above my break-even point. Thus, I have not lost money, unless you count the taxes I must pay on the gain in the options. I do not mind owning HD though. I think it will go up.

[whitestick]

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.

[LOL!]

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.]

[whitestick]

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?

[LOL!]

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.

[justin]

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.

[whitestick]

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.

[justin]

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".

[whitestick]

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.

[justin]

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.

[ERD50]

Quote:

Originally Posted by whitestick Not my claim, but rather Kim Snider's. Please read her website literature, rather then have me defend it.

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