Options investing for retirement?

[thepalmersinking]

Probability a bad strategy, but every February I sell way out of the money covered calls on key long term holdings such as v, pypl, sq. I am going to hold them for the long term. They are in my IRA’s and I am not retired yet. I take the premium and use it to buy boi med post IPO company’s such as AmRN and NKTR when they were cheap. It has worked thus far.

 

[JPatrick]

Probability a bad strategy, but every February I sell way out of the money covered calls on key long term holdings such as v, pypl, sq. I am going to hold them for the long term. They are in my IRA’s and I am not retired yet. I take the premium and use it to buy boi med post IPO company’s such as AmRN and NKTR when they were cheap. It has worked thus far.

That's not a bad strategy to sweeten the pot a little, just two things to watch for.
1. Of course you may lose your stock should there be a huge increase. That could be good or bad, but could be taken care of by rolling out or simply buying back the call.
2. On the other hand, if your stock goes sour and drops like a rock you will need to buy the call back in order to sell.
All that said, if the stock is solid and the call you sell is waaay out of the money, you likely will be OK. I do that with my load of QQQ's except that I try to repeat the process every month. It has been a fine two years.

 

[Ready-4-ER-at-14]

Options can be a weird beast due to volatility being such a major consideration of the pricing of the option.

I have had stock take a nose dive big and have had the calls rise in price for at least part of the day. Unless a person really understands several of the major "greeks" and how they affect pricing your learning curve is much harder. You need to be able to graph or obtain the win lose prices for a trade at expiration and have an idea how that graph forms over time with no price changes.

I'd also recommend a person understand other trading ideas like expectancy and probability as well as loss limiting strategies. Even then you always have stale data compared to the market makers even if it is just a millisecond behind. You may not know how many offers to buy or sell are stacked around the current price. Some trading ideas can work consistently, but they may require 100 little losses over months before you get that huge triple sigma win. The probability can be very low if the expectancy is high enough. Most people will not keep to such a system.

You should know how much you can split the bid and ask price and get filled. Cost per trade gets real important as well. You probably won't have the tax advantages that a professional trader has either. You need to understand trends (charts) and numbers both.
A bad trade can end up being a good investment or a lousy one.

Paper trade for a bit using different time frames and back test your system with other things while paper trading like rice or steel or wheat. Do up markets, down, and flat.

I have great systems if I know a trend. Problem is market zigs and zags and it really messes with charts. Once the trend is established clearly it may be about over..

I've enjoyed options, a great mental challenge, but like any other tool best for specific things and not a cure all. At least for me.