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Old 04-08-2010, 08:29 AM   #21
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Covered calls - All of the downside risk, none of the upside potential, and very limited compensation for it. Stay away from such nonsense.
To me, the commissions that I would receive would be the upside potential, say $50 or $80 per month per 100 shares of stock, plus I still own the stock and collect the dividends. So, if I have 100 shares of stock that pays a 3% dividend yield per year, plus I receive $50 x 12 months, that's a lot of income for only 100 shares of stock.
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Old 04-08-2010, 08:40 AM   #22
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To me, the commissions that I would receive would be the upside potential, say $50 or $80 per month per 100 shares of stock, plus I still own the stock and collect the dividends. So, if I have 100 shares of stock that pays a 3% dividend yield per year, plus I receive $50 x 12 months, that's a lot of income for only 100 shares of stock.
Ask yourself, Why am I owning this stock ? If I expect historical stock market returns of maybe 10% per year (nominal) then that should be the reward. Do you think you can come anywhere close to that with dividends and writing covered calls. Do a little modeling on your portfolio where you take all of the losses on stocks and someone else gets the gains. Model in some of the stocks that drop by half.

Stocks tend to drift around and then move in relatively large spurts up or down. Your covered calls have a tendency to be called right before the price moves up or right before a dividend is paid.

In my opinion Nords has done you a dis-service by showing that a sophisticated investor may be able to use covered calls to achieve tax-efficient re-balancing of a portfolio.

This covered call game isn't for you.
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Old 04-08-2010, 09:09 AM   #23
Confused about dryer sheets
 
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[QUOTE=Koolau;923352]It seems to me there's an 800 pound gorilla in the room. Maybe we should talk about it. As you know, this is a forum for folks who want to retire early. I suppose "retiring early" could be considered its own goal, but I think it's important for YOU to know why you want to retire (so) early. I'm not against anyone retiring at 45 (or heck, 35 if they can - and want to). I just think it's important for YOU to have a clear understanding of your goal. Please don't try to retire at 45 because it seems 'hip' - hey, there's a forum for just about every taste out there.

And, by all means, if you already hate your j*b, get out and try something you could love. Life is too short to live it in the future. I did some of that and I regret it. I ended up with golden handcuffs and it took a long time to take the key out of my desk drawer and use it.QUOTE]

Instead of working 40 or 50 hours a week in an office, I want to be home with my family. (I do love my job, though) Also, I want to travel and not be bound to a 9-5 job, even if I like it. I feel like life's too short to be away working. If my job is 8 hours, plus an hour lunch, plus an hour of commuting, that's 10 hours per day, or 42% OF MY LIFE that I'm away. I see my coworkers more than my family. I just want to do things now in order to change my future so that it's on my terms.
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Old 04-08-2010, 09:14 AM   #24
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If you want to retire in 15 years you will probably need an aggressive stock heavy portfolio.

I'd like to offer some general advice on investing. I have an aggressive portfolio 80/20 stocks/bonds. One thing I learned from the crash that has almost eliminated the stress level for me is to not focus solely on the portfolio size. I now tend to focus on the dividends which are not as volatile as share price.

One of my goals for my portfolio is to maintain at least a 2% yield on the entire thing. This is relatively easy to achieve if you tilt towards value stocks and if you have some bonds. My plans are to withdraw 3% a year from the portfolio at some point. So, if I have a 2% yield that covers 2/3rds of the withdrawal.

I also like to include some dividend growth funds in my portfolio so that the dividend yield is more stable. Right now it isn't necessary, but I would be willing to buy a few individual dividend growth stocks. If you are willing to move to individual stocks you can pretty easily increase your yield by 1% over what you will get from a fund that is focused on dividend growth.

The last thing that I now do that has helped me is to invest globally. The historical data shows that it doesn't hurt your return much in comparison to people that invested only in the US. The benefit is that you protect yourself from the "Japan scenario" i.e. where a specific country's stock market lags the global market by a lot for a long time. It gives me added peace of mind to know that my eggs are all spread out.
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Old 04-08-2010, 09:24 AM   #25
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To me, the commissions that I would receive would be the upside potential, say $50 or $80 per month per 100 shares of stock, plus I still own the stock and collect the dividends. So, if I have 100 shares of stock that pays a 3% dividend yield per year, plus I receive $50 x 12 months, that's a lot of income for only 100 shares of stock.
Let's see, for a nine-month option that'd be $50x9=$450 per 100 shares or a $4.50 contract price before commissions. That's a lot of time value but it still needs a hefty dose of volatility.

Or I guess you could have 900 shares of a stock and sell a nine-month contract every month on 100 shares. To earn $50/month, each of the nine contracts would have a share price of five cents before commissions.

The commission becomes a huge drag on this scheme, although I don't know where to find cheap commissions. And then there's short-term taxes.

On a stock carrying a 3% dividend.

You want a great guaranteed return with zero commissions or taxes? Pay off your student loans...
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