Fidelity tools caveat

[Happyras]

I learned something to share about Fidelity. Without warning, I found out the hard way that ANY info you enter into their planning tool to do modeling can and will impact the features on your accounts.

In my case, I was playing with their quite lame retirement planner which forces you to review their allocation and choice of ETFs based on your profile info.

I trade options, or more correctly, I use option trades to capture time risk premium on SPY selling or rolling covered calls. It is a conservative strategy which delivers a pretty consistent 6 to 14% annual return.

When I played with that planner, changing my risk to conservative, their system over night removed option trading on our accounts. Naively I called and asked them to correct it, but they could not. I was told I had to re-submit forms for each account to re-establish my aggressive risk profile needed to trade options.

Here I thought with mid 7 figures invested at Fido that our local rep would jump to fill out forms and get this corrected. Instead he left a message that there was nothing he could do. He even went so far as to suggest I contact my Schwab accounts manager who could take care of transfers back to them, where I still have option trading on our accounts.

I am considering his advice. However Fido does afford the ability to maintain cash in MM to cover trades that Schwab does not (not simply anyway). So I am forced to fill out paper to restore something that should not have occurred had their system provided some kind of warning.

Just in case others are playing with their retirement planner, beware....

 

[G-Man]

I learned something to share about Fidelity. Without warning, I found out the hard way that ANY info you enter into their planning tool to do modeling can and will impact the features on your accounts.

In my case, I was playing with their quite lame retirement planner which forces you to review their allocation and choice of ETFs based on your profile info.

I trade options, or more correctly, I use option trades to capture time risk premium on SPY selling or rolling covered calls. It is a conservative strategy which delivers a pretty consistent 6 to 14% annual return.

When I played with that planner, changing my risk to conservative, their system over night removed option trading on our accounts. Naively I called and asked them to correct it, but they could not. I was told I had to re-submit forms for each account to re-establish my aggressive risk profile needed to trade options.

Here I thought with mid 7 figures invested at Fido that our local rep would jump to fill out forms and get this corrected. Instead he left a message that there was nothing he could do. He even went so far as to suggest I contact my Schwab accounts manager who could take care of transfers back to them, where I still have option trading on our accounts.

I am considering his advice. However Fido does afford the ability to maintain cash in MM to cover trades that Schwab does not (not simply anyway). So I am forced to fill out paper to restore something that should not have occurred had their system provided some kind of warning.

Just in case others are playing with their retirement planner, beware....

consistent 6 to 14% return. Would love to learn more about that strategy.

 

[sengsational]

I'm surprised that a planning tool would change your profile. That seems like a bug.

The idea that a customer service rep doesn't have the tools/authority to do what you want? That's par for the course, and I expect it. If what you want fits a script, you can and should do it without assistance on the web site. There might be a few scripts a rep can do that you can't, but not many. Then there's the rest. Get ready to be frustrated, passed around, reps ducking and bobbing so not to be struck with the survey whip. Meanwhile you're wasting hours on hold with the occasional retelling of your story, ending with nothing getting done. It's a great time to be a customer!

Hollywood says the future will be terminator type robots to fear. I think it will be evil programmers that make everything so infuriating that we all just give up.

 

[Happyras]

consistent 6 to 14% return. Would love to learn more about that strategy.

I am glad to point this out. It is really quite simple, but can be as complicated as you want. Consider this, but excuse my math if I make a major error in this example;

You do a buy write order on SPY.

Buy 100 SPY 409.19, sell covered call option SPY 400 June 30 2023 for 21.80

Net cost for the order/share is (409.19 minus 21.80 ) x 100= 387.39 (plus about $6 for the trade)

You now have sold your shares of SPY for 400, but it cost you 387.39. If SPY is less than 400 on June 30, you keep the shares and the premium. If SPY is 400 or more, you loose your shares, but collect only 400/shr. You have sold your upside potential above 400 in favor of the time risk premium collected. In a lost decade market, this should be just fine over time.

In this case the time value of the share option call is 12.61 for the time from today to June 30 about 12 weeks. 12.61/409 x52/12 is an annual 13.36%

If SPY is <400 you keep your shares and can sell another covered call OR prior to the expiration you can do a roll of the option to a later date. Typically you collect 2.5 to $4 per month additional time premium. That is 7 to 12%. Now if market volatility VIX is high >30 then you get even better premium return.

The bonus is that holding SPY you still collect the DIV of 1.6% on top of the time risk premium. So even in a down market you are collecting both. Your entry point for SPY is $387 (considering the premium) so your downside risk is at a lower point than simply buying at $409. So your annual is 1.6%+7%.

This only works if you are committed to holding some % equities long term, and see that SPY is a highly traded option with a lot of liquidity. Your downside risk on SPY remains, but you limit your upside in favor of the premium. If you are going to hold equities anyway, so be it.

I hope my simple example is correct, please check my math.

 

[rkser]

Half scared about losing my shirt/peace of mind/not sharp enough to learn something new, but getting attracted/greedy to earn some income in retirement by learning/trading options.

 

[Happyras]

Half scared about losing my shirt/peace of mind/not sharp enough to learn something new, but getting attracted/greedy to earn some income in retirement by learning/trading options.

I was too, but my life long friend who has been doing this for years, showed me the light. I really struggled with spread sheet models trying to understand why this works, but its simply selling insurance and collecting the premium. I am very happy if I can even simply get 7%, but it appears to be better more often due to this market.

The trick is not to get too greedy.....

 

[Happyras]

I'm surprised that a planning tool would change your profile. That seems like a bug.

The idea that a customer service rep doesn't have the tools/authority to do what you want? That's par for the course, and I expect it. If what you want fits a script, you can and should do it without assistance on the web site. There might be a few scripts a rep can do that you can't, but not many. Then there's the rest. Get ready to be frustrated, passed around, reps ducking and bobbing so not to be struck with the survey whip. Meanwhile you're wasting hours on hold with the occasional retelling of your story, ending with nothing getting done. It's a great time to be a customer!

Hollywood says the future will be terminator type robots to fear. I think it will be evil programmers that make everything so infuriating that we all just give up.

Yup, I thought they might care that others get sc#$$D by this bug. But NOPE

 

[COcheesehead]

I am pretty sure there is a warning about how changes will affect your profile before you proceed. I remember seeing it on mine and I backed out of it.

 

[Jerry1]

I am pretty sure there is a warning about how changes will affect your profile before you proceed. I remember seeing it on mine and I backed out of it.

Still, that’s crazy that they would use information from a modeling tool and make changes to your status. I would be very upset as that is not something I would think would ever happen. Whoever did that needs reeducation. That’s not how modeling programs should work where there is an obvious expectation that different scenarios will be reviewed. If you go in and choose the highest risk tolerance do they restore your options status. Of course not.

 

[COcheesehead]

Still, that’s crazy that they would use information from a modeling tool and make changes to your status. I would be very upset as that is not something I would think would ever happen. Whoever did that needs reeducation. That’s not how modeling programs should work where there is an obvious expectation that different scenarios will be reviewed. If you go in and choose the highest risk tolerance do they restore your options status. Of course not.

But you can review different scenarios without changing your profile. I’ve done it. It asks at the end if you want to save it with the caveat that it will change your profile. So there is a bit of user error here too.

The tool is pretty easy to use. I’ve used it for years without issue. Someone clicked through the warning without realizing the consequences.

 

[Jerry1]

But you can review different scenarios without changing your profile. I’ve done it. It asks at the end if you want to save it with the caveat that it will change your profile. So there is a bit of user error here too.

I get that, but now you’ve made me think it even more ridiculous. Why wouldn’t I want to save whatever scenario I was working on?

 

[COcheesehead]

I get that, but now you’ve made me think it even more ridiculous. Why wouldn’t I want to save whatever scenario I was working on?

Have you ever used the tool? You can save whatever you are working on and then have the option to make it a permanent plan. I play around with what ifs, then revert back to the current stored model.
The OP stated it happened without warning. There is a warning.

 

[COcheesehead]

This is the warning you get.

 

[Jerry1]

This is the warning you get.

Yes, I used it but that was before I retired 4 years ago. I never saw that warning. Must be something that changed since then.

 

[COcheesehead]

Yes, I used it but that was before I retired 4 years ago. I never saw that warning. Must be something that changed since then.

I can remember it as long as I have used it, 5+ years.

 

[Texas Proud]

Yes, covered option trading can be good... I might start to do a bit on my own...


It was a long long time ago when I first graduated from college I did taxes... there was this rich guy who had a few million shares of a company that bought out his company... his plan was to sell some of his holdings over time... but what he did was sell covered options... a few hundred thousand shares at a time... he made a boatload of money on options and if they sold he was happy as that is what he wanted tin the first place...


Thanks for posting about this...

 

[MRG]

I learned something to share about Fidelity. Without warning, I found out the hard way that ANY info you enter into their planning tool to do modeling can and will impact the features on your accounts.



In my case, I was playing with their quite lame retirement planner which forces you to review their allocation and choice of ETFs based on your profile info.



I trade options, or more correctly, I use option trades to capture time risk premium on SPY selling or rolling covered calls. It is a conservative strategy which delivers a pretty consistent 6 to 14% annual return.



When I played with that planner, changing my risk to conservative, their system over night removed option trading on our accounts. Naively I called and asked them to correct it, but they could not. I was told I had to re-submit forms for each account to re-establish my aggressive risk profile needed to trade options.



Here I thought with mid 7 figures invested at Fido that our local rep would jump to fill out forms and get this corrected. Instead he left a message that there was nothing he could do. He even went so far as to suggest I contact my Schwab accounts manager who could take care of transfers back to them, where I still have option trading on our accounts.



I am considering his advice. However Fido does afford the ability to maintain cash in MM to cover trades that Schwab does not (not simply anyway). So I am forced to fill out paper to restore something that should not have occurred had their system provided some kind of warning.



Just in case others are playing with their retirement planner, beware....

Your representative can't do this because there's forms that are required. They're required because there's an audit point requiring forms.

You want there to be audit points, they're what keeps bad people from doing things they're not supposed to.

 

[Happyras]

Your representative can't do this because there's forms that are required. They're required because there's an audit point requiring forms.

You want there to be audit points, they're what keeps bad people from doing things they're not supposed to.

My point is that changing your investments/ability should require your consent. Yes a form stating you are aware you are removing your account feature. The tool took this away under the guise of changing strategy for purposes of modeling. Even the so called warning, did not clearly state you were making changes to your account features. There was no form to make this happen, but requiring one to reverse an error is ridiculous.

Notice the warning cited states it won't affect your investments in your accounts. Not being able to close your option positions seems to be affecting my accounts.
This is not the first time I have had unexpected outcomes with Fido software.

 

[frayne]

I'm surprised that a planning tool would change your profile. That seems like a bug.

One man's bug is another man's feature !

 

[COcheesehead]

I know when I tried to invest in something Fidelity considered “aggressive”, I just had to go to my profile and update my investing style. It was a few clicks. I did not have to resubmit any forms. I did it all online. Maybe the OP can investigate that option.

 

[Happyras]

I am glad to point this out. It is really quite simple, but can be as complicated as you want. Consider this, but excuse my math if I make a major error in this example;

You do a buy write order on SPY.

Buy 100 SPY 409.19, sell covered call option SPY 400 June 30 2023 for 21.80

Net cost for the order/share is (409.19 minus 21.80 ) x 100= 387.39 (plus about $6 for the trade)

You now have sold your shares of SPY for 400, but it cost you 387.39. If SPY is less than 400 on June 30, you keep the shares and the premium. If SPY is 400 or more, you loose your shares, but collect only 400/shr. You have sold your upside potential above 400 in favor of the time risk premium collected. In a lost decade market, this should be just fine over time.

In this case the time value of the share option call is 12.61 for the time from today to June 30 about 12 weeks. 12.61/409 x52/12 is an annual 13.36%

If SPY is <400 you keep your shares and can sell another covered call OR prior to the expiration you can do a roll of the option to a later date. Typically you collect 2.5 to $4 per month additional time premium. That is 7 to 12%. Now if market volatility VIX is high >30 then you get even better premium return.

The bonus is that holding SPY you still collect the DIV of 1.6% on top of the time risk premium. So even in a down market you are collecting both. Your entry point for SPY is $387 (considering the premium) so your downside risk is at a lower point than simply buying at $409. So your annual is 1.6%+7%.

This only works if you are committed to holding some % equities long term, and see that SPY is a highly traded option with a lot of liquidity. Your downside risk on SPY remains, but you limit your upside in favor of the premium. If you are going to hold equities anyway, so be it.

I hope my simple example is correct, please check my math.

I had to go back and check my performance to validate this strategy. Simple math of change /beginning balance x period fraction to annualized rate (not true ROI...)

About 50% of our invested retirement assets are in covered calls, 15% other equities/funds, and the balance in bonds/cds/t-bill etc. Since Sept last year my overall annualized ROI is >11%, but this YTD its only running 8%. My fixed income avg is 5.2% annualized, so it would appear the math is in line, and fairly stable with all the ups and downs in SPY. The covered calls are still yielding more than fixed income. I know there are desks full of young folks doing just this for hedge funds, Citadel controls most for Fido. I know many make the big bucks on the option call spreads.

I know there are those that trade options at a very high risk, but this seems pretty efficient to achieve a steady moderate/limited return with the risk being the downside of the market you would have anyway holding equities. If there are holes in this strategy, I would like to have them pointed out.

 

[DuluthGA]

I am glad to point this out. It is really quite simple, but can be as complicated as you want. Consider this, but excuse my math if I make a major error in this example;



You do a buy write order on SPY.



Buy 100 SPY 409.19, sell covered call option SPY 400 June 30 2023 for 21.80



Net cost for the order/share is (409.19 minus 21.80 ) x 100= 387.39 (plus about $6 for the trade)



You now have sold your shares of SPY for 400, but it cost you 387.39. If SPY is less than 400 on June 30, you keep the shares and the premium. If SPY is 400 or more, you loose your shares, but collect only 400/shr. You have sold your upside potential above 400 in favor of the time risk premium collected. In a lost decade market, this should be just fine over time.



In this case the time value of the share option call is 12.61 for the time from today to June 30 about 12 weeks. 12.61/409 x52/12 is an annual 13.36%



If SPY is <400 you keep your shares and can sell another covered call OR prior to the expiration you can do a roll of the option to a later date. Typically you collect 2.5 to $4 per month additional time premium. That is 7 to 12%. Now if market volatility VIX is high >30 then you get even better premium return.



The bonus is that holding SPY you still collect the DIV of 1.6% on top of the time risk premium. So even in a down market you are collecting both. Your entry point for SPY is $387 (considering the premium) so your downside risk is at a lower point than simply buying at $409. So your annual is 1.6%+7%.



This only works if you are committed to holding some % equities long term, and see that SPY is a highly traded option with a lot of liquidity. Your downside risk on SPY remains, but you limit your upside in favor of the premium. If you are going to hold equities anyway, so be it.



I hope my simple example is correct, please check my math.

This

 

[Happyras]

This

 

[latexman]

When I played with that planner, changing my risk to conservative, their system over night removed option trading on our accounts. Naively I called and asked them to correct it, but they could not. I was told I had to re-submit forms for each account to re-establish my aggressive risk profile needed to trade options.

I've been with Fido about 40 years. I've played with the planner many, many times, including adjusting my risk tolerance. I've never noticed any changes, but, TBH, I have never traded options. So . . .

 

[tutan]

I am glad to point this out. It is really quite simple, but can be as complicated as you want. Consider this, but excuse my math if I make a major error in this example;

You do a buy write order on SPY.

Buy 100 SPY 409.19, sell covered call option SPY 400 June 30 2023 for 21.80

Net cost for the order/share is (409.19 minus 21.80 ) x 100= 387.39 (plus about $6 for the trade)

You now have sold your shares of SPY for 400, but it cost you 387.39. If SPY is less than 400 on June 30, you keep the shares and the premium. If SPY is 400 or more, you loose your shares, but collect only 400/shr. You have sold your upside potential above 400 in favor of the time risk premium collected. In a lost decade market, this should be just fine over time.

In this case the time value of the share option call is 12.61 for the time from today to June 30 about 12 weeks. 12.61/409 x52/12 is an annual 13.36%

If SPY is <400 you keep your shares and can sell another covered call OR prior to the expiration you can do a roll of the option to a later date. Typically you collect 2.5 to $4 per month additional time premium. That is 7 to 12%. Now if market volatility VIX is high >30 then you get even better premium return.

The bonus is that holding SPY you still collect the DIV of 1.6% on top of the time risk premium. So even in a down market you are collecting both. Your entry point for SPY is $387 (considering the premium) so your downside risk is at a lower point than simply buying at $409. So your annual is 1.6%+7%.

This only works if you are committed to holding some % equities long term, and see that SPY is a highly traded option with a lot of liquidity. Your downside risk on SPY remains, but you limit your upside in favor of the premium. If you are going to hold equities anyway, so be it.

I hope my simple example is correct, please check my math.

Thank you for this example. It is a novel way to trade options at least for me. I only sell put and call options in equal numbers per month to try to capture the ups and downs of the market. But probably more suitable in the "Active Investing" forum.
Good warning on the Fidelity tools too. It took some work to print, scan, and submit the forms to apply for options trading.