Income Investing Results

[dobig]

I also like boring dividend investing. However, I think the so-called risk of options trading (covered calls) is not really risk if you understand the nature of covered call options. It isn't for everyone, but it isn't hard and the only risk is that my shares will be called at a price I already like that is higher then the price when I entered the contract.
There are types of options trades that are super crazy risky, but there are some that are really not "risk" in the true sense of the word.

Wayne, there's another factor at play. I like to gamble. And to a person like me I'd push the envelope, make larger bets because I'm sure I found an angle and eventually get myself in a bad position. Some have the discipline, like you. Then there are those of us who don't, like me.

There's a reason I haven't set foot in a casino 20 years or had a single drag on a cigarette for the past 12 years(a vice I still miss). I know my weaknesses and so when I feel a nervous excitement at the thought of trading options I know I have to stay away.

By the way, looked up your website. Very nice portfolio. Congratulations on a fine job getting where you are.

 

[Koolau]

I also like boring dividend investing. However, I think the so-called risk of options trading (covered calls) is not really risk if you understand the nature of covered call options. It isn't for everyone, but it isn't hard and the only risk is that my shares will be called at a price I already like that is higher then the price when I entered the contract.
There are types of options trades that are super crazy risky, but there are some that are really not "risk" in the true sense of the word.

I think I mentioned elsewhere that I had two direct reports who retired early on the strength of their broker (they had the same one) who promised them they could retire and spend 8% of their "stash" IF they allowed him to write covered calls for them at his discretion. Within a couple of years, they had to go back to w*rk at lousy j*bs (like repositioning cars).

So maybe there is no "risk" in covered calls, but there can be risk in counting on them to deliver outsized investment results.

By the way, I'm enjoying reading through your website - especially the non-financial stuff. Love your tombstone.

 

[C-man23]

Hi. After you woke me up, I've had a good experience since 4/15 selling AGNC weekly calls. Of course, I started at the bottom of a nice price run up and a very high volatility period. I am currently short the 5/2 8.5 expiry, so I'll likely get the regular dividend that goes ex- 4/30 as well as the 5/2 premium. Since we are interested in the experiment exclusively in call writing premium, since 4/15 I have picked up $3462 on an on average of just 13k AGNC shares. Assuming I get the $1800 distribution then lose the shares, it will have been a very lucky first foray into your strategy.
Regards, Dick

What kind of premium are you getting for each contract? I am showing low ask prices for ones outside of the money. For example, $0.02 for the 9.5 5/2. Even with 13k shares, that premium ($2.60) would barely cover the fees.

 

[DuluthGA]

Wayne, there's another factor at play. I like to gamble. And to a person like me I'd push the envelope, make larger bets because I'm sure I found an angle and eventually get myself in a bad position. Some have the discipline, like you. Then there are those of us who don't, like me.

There's a reason I haven't set foot in a casino 20 years or had a single drag on a cigarette for the past 12 years(a vice I still miss). I know my weaknesses and so when I feel a nervous excitement at the thought of trading options I know I have to stay away.

By the way, looked up your website. Very nice portfolio. Congratulations on a fine job getting where you are.

Same reason I don’t keep alcohol in the house.

 

[Waynew]

I think I mentioned elsewhere that I had two direct reports who retired early on the strength of their broker (they had the same one) who promised them they could retire and spend 8% of their "stash" IF they allowed him to write covered calls for them at his discretion. Within a couple of years, they had to go back to w*rk at lousy j*bs (like repositioning cars).

So maybe there is no "risk" in covered calls, but there can be risk in counting on them to deliver outsized investment results.

By the way, I'm enjoying reading through your website - especially the non-financial stuff. Love your tombstone.

Sadly, there are some "brokers" and "financial advisors" who are clueless drones and a few are (sadly) crooks. I've met some of both categories from various well-known firms. One of them (a crook working for a well-known brokerage) was the distant relative of a couple of our friends. His "expert" advice and their permission to allow him to trade on margin for them was nothing short of a disaster. They signed anything he put in front of them (like the margin agreement), not understanding what they were saying when they signed. I reached out to their brokerage and started asking questions. Apparently other wealthy clients did as well.
He is now in Federal prison. Had my friends done a broker check on him they would have never entrusted their retirement accounts to his care. The brokerage firm made them partially whole to avoid further legal action for having a rogue employee.
Covered call options are not a guarantee of income. But that doesn't mean you can't make some supplemental income if you are a disciplined person and understand percentages.

 

[Waynew]

Wayne, there's another factor at play. I like to gamble. And to a person like me I'd push the envelope, make larger bets because I'm sure I found an angle and eventually get myself in a bad position. Some have the discipline, like you. Then there are those of us who don't, like me.

There's a reason I haven't set foot in a casino 20 years or had a single drag on a cigarette for the past 12 years(a vice I still miss). I know my weaknesses and so when I feel a nervous excitement at the thought of trading options I know I have to stay away.

By the way, looked up your website. Very nice portfolio. Congratulations on a fine job getting where you are.

I get it. Gambling can lead one to make poor decisions. If you do the math on gambling you don't gamble. Gamblers, for the most part, never consider the math. The same is true of those who buy lottery tickets.

However, doing the math on covered call options leads to a different result. I'm not saying options trading is for everyone, especially for people who don't do the math, but I've learned that doing the math reduces my desire to gamble.

Everyone I have taught my covered call option process has had success. At least that is what they tell me. One of them is even our pastor, and his strongest skill set isn't investing. However, he has one very strong skill set: he knows how to ask good questions to get understanding. Good questions are fundamental for success in options trading.

 

[Waynew]

What kind of premium are you getting for each contract? I am showing low ask prices for ones outside of the money. For example, $0.02 for the 9.5 5/2. Even with 13k shares, that premium ($2.60) would barely cover the fees.

View attachment 55382

My average income per trade in 2025 is $275.89. It takes me five minutes to do a trade. Last year my average income for the full year was $189.21 per trade. I can take my wife out for a very nice dinner several times on one trade.

 

[C-man23]

My average income per trade in 2025 is $275.89. It takes me five minutes to do a trade. Last year my average income for the full year was $189.21 per trade. I can take my wife out for a very nice dinner several times on one trade.

My target to start is going to be $100ish per trade. Still waiting for my account to be approved to do level 1 and 2 option trading.

Did you see Dick's post about AGNC options? Where am I missing something?
I assume he has done two sets of weekly options for it and made $3,462 with an average of 130 contracts (13k shares).
However, the premiums I am seeing are so low, I am not sure how he picked up such high premiums.

 

[dickoncapecod]

I also like boring dividend investing. However, I think the so-called risk of options trading (covered calls) is not really risk if you understand the nature of covered call options. It isn't for everyone, but it isn't hard and the only risk is that my shares will be called at a price I already like that is higher then the price when I entered the contract.
There are types of options trades that are super crazy risky, but there are some that are really not "risk" in the true sense of the word.

Well said. It's difficult to imagine a simple covered call strategy exploding dangerously.
Regards, Dick

 

[dickoncapecod]

What kind of premium are you getting for each contract? I am showing low ask prices for ones outside of the money. For example, $0.02 for the 9.5 5/2. Even with 13k shares, that premium ($2.60) would barely cover the fees.

View attachment 55382

Hi. Two items: first my position is short 8.5 calls, and second, I sold them on a scale up from 11c to 22c WHEN THEY WERE OUT OF THE MONEY. AGNC kept going up, and I'm fine with losing the on 5/2 as is likely to occur.
Regards, Dick

 

[Waynew]

My target to start is going to be $100ish per trade. Still waiting for my account to be approved to do level 1 and 2 option trading.

Did you see Dick's post about AGNC options? Where am I missing something?
I assume he has done two sets of weekly options for it and made $3,462 with an average of 130 contracts (13k shares).
However, the premiums I am seeing are so low, I am not sure how he picked up such high premiums.

Yes I saw Dick's post. I also looked at AGNC and found it did not fit my "investment rules." One of the things I look at is 10-year total returns. Anything less than 90% is (usually, not always) removed from consideration. By way of example, two of my large holdings are MAIN and IBM. Here is how they compare with AGNC using Seeking Alpha for 10-year returns. I trade options on IBM and MAIN. I suspect Dick has different criteria for the investments he chooses, but we agree on some things. No two investors are exactly alike.

 

[Flieger]

As long as my Investment Income Portfolio Div's will (more) than cover my needs, I won't make the extra effort and headache of CC options. Not what I want to spend my time on at this point.

Flieger

 

[dickoncapecod]

Yes I saw Dick's post. I also looked at AGNC and found it did not fit my "investment rules." One of the things I look at is 10-year total returns. Anything less than 90% is (usually, not always) removed from consideration. By way of example, two of my large holdings are MAIN and IBM. Here is how they compare with AGNC using Seeking Alpha for 10-year returns. I trade options on IBM and MAIN. I suspect Dick has different criteria for the investments he chooses, but we agree on some things. No two investors are exactly alike.
View attachment 55383

What I think is confusing some readers: Waynew is discussing his long term asset selection process. Specifically with respect to THAT, we have different styles because I am utterly indifferent to the past.....although I certainly agree AGNC is NOT a good long term buy-and-hold (but then I don't think ANY bond or equity product is a long term b&h). I bought AGNC simply because I thought it was going up when I looked at it in mid-April, And I thought I'd experiment with it as it approached ex-date. So I sold several launches of calls, I captured some excess income, and I'M DONE. I expect to have AGNC called away, and I doubt I'll buy it again soon unless I remain bullish AND there's a good setup as it approaches mid-month again.
Regards, Dick

 

[Flieger]

Final DIV count for April. Met what was projected, so very little if any erosion in Divs accompanied the erosion in the Income Portfolio (on paper, nothing sold). Futures this morning look negative , so I will wait to post what the Portfolio Performance looks like until after the bell today.

With the goal being Income, so far so good. I have 55% more Divs than needed income (~$6k), so if the market does go south today, I may be posting on the "What did you buy today" thread.

Flieger

 

[Alex The Great]

Final DIV count for April. Met what was projected, so very little if any erosion in Divs accompanied the erosion in the Income Portfolio (on paper, nothing sold). Futures this morning look negative , so I will wait to post what the Portfolio Performance looks like until after the bell today.

With the goal being Income, so far so good. I have 55% more Divs than needed income (~$6k), so if the market does go south today, I may be posting on the "What did you buy today" thread.

View attachment 55426

Flieger

Thanks for publishing. Looks impressive. May I ask where the growth come from? Is that reinvesting or some companies/funds increase their distributions?

 

[Flieger]

Thanks for publishing. Looks impressive. May I ask where the growth come from? Is that reinvesting or some companies/funds increase their distributions?

Some of the Div increase comes from the small, incremental buys each month from excess Divs (beyond income needs) that I am doing to in the long run offset inflation as part of my plan, but this month in particular there were a couple of additional quarterly Divs that dropped.

Flieger

 

[corn18]

I keep following this thread because I am envious. If I could generate that much income, I could spend a lot more now in my gogo retirement years.

 

[Flieger]

Ok, so end of month for Total Portfolio basis isn't stellar, but not nearly as bad as it looked like it was going to end up a couple of weeks ago! Down 1.9% for the month, making YTD total down 6.8%. Reminder that this is not just the Income Portfolio (currently 60% of Total), but the Total Portfolio.

If I go back to Post #64 (2nd snippet), it looks like my actual so far this year is pretty close to what was estimated back then (maybe $600-$700 lower for March), so I am pretty happy with that.

Only 1 of my Limit orders hit today, so not much addition to my Income Portfolio thus far. I may cost average down on my Growth Portfolio a little this week instead, especially since the Income Portfolio is pretty much hitting the mark.

Hope everyone made out ok for April. On to May!!

Flieger

 

[imjustawarrior]

I'm still learning about income investing, so let me know if this is a bad question or understanding.

It appears that one tries to generate enough income (dividends, interest, distributions) to cover expenses. Any excess is plowed back into the portfolio. Any shortage one would need to sell something. Do you model this in a retirement calculator (or software) to predict the likelihood of success (not going broke before you die)? If you only spend your income, aren't you spending less than you could if you spent part of your portfolio too?

Thanks in advance for any insight into how this works.

 

[Flieger]

I'm still learning about income investing, so let me know if this is a bad question or understanding.

It appears that one tries to generate enough income (dividends, interest, distributions) to cover expenses. Any excess is plowed back into the portfolio. Any shortage one would need to sell something. Do you model this in a retirement calculator (or software) to predict the likelihood of success (not going broke before you die)? If you only spend your income, aren't you spending less than you could if you spent part of your portfolio too?

Thanks in advance for any insight into how this works.

I think you pretty much have it. My goal is to generate enough "income" that the bolded doesn't come in to play (Div's would have to drop 50% plus). In this hopefully unlikely scenario, I would probably start SS a bit earlier than FRA to avoid sale of investments as the investments would probably be in pretty dire straits in that scenario as well!

I also plan to eventually shift some of the current Income Portfolio to Short Term and Growth once I start my SS at FRA which will add an additional $4200 in todays $'s.

I've put something to this effect in some Retirement SW, showing no growth of investments and Div's as "additional income", but have no idea if that is a really good model. Honestly, I'm not getting all tied up in my shorts over models of retirement SW. I feel rather confident that the 5 years until FRA, where between DW and my SS we will cover 80%+ of needs, we will be ok. If the SHTF, I have beans and bullets...

Forgot to respond to your question on spending only income vs some of portfolio. Yes, theoretically spending less, but I am not "wanting" based on my spending budget. In fact, that's another point. Some of the spending could be adjusted if the income were to drop significantly.

Flieger

 

[COcheesehead]

I'm still learning about income investing, so let me know if this is a bad question or understanding.

It appears that one tries to generate enough income (dividends, interest, distributions) to cover expenses. Any excess is plowed back into the portfolio. Any shortage one would need to sell something. Do you model this in a retirement calculator (or software) to predict the likelihood of success (not going broke before you die)? If you only spend your income, aren't you spending less than you could if you spent part of your portfolio too?

Thanks in advance for any insight into how this works.

You are seeing things correctly, but I never used the 4% rule or a tool to determine my spending. I spend what I want and try to maximize my income within a risk tolerance. The end result is I earn about 2.5X my expenses in portfolio income, reinvest the excess and only after the fact calculate a withdrawal percentage which currently stands at 2.27%.
I run FICalc, FireCalc occasionally and Fidelity updates the retirement planner tool for me. All say I’ll die with way more than I retired with. Multiples of the original portfolio value.
I not concerned with that. I am not cheap or overly frugal. Charities will benefit, we have no kids. I feel no great desire to spend anymore. We do everything we want. Have everything we want.

 

[Flieger]

You are seeing things correctly, but I never used the 4% rule or a tool to determine my spending. I spend what I want and try to maximize my income within a risk tolerance. The end result is I earn about 2.5X my expenses in portfolio income, reinvest the excess and only after the fact calculate a withdrawal percentage which currently stands at 2.27%.
I run FICalc, FireCalc occasionally and Fidelity updates the retirement planner tool for me. All say I’ll die with way more than I retired with. Multiples of the original portfolio value.
I not concerned with that. I am not cheap or overly frugal. Charities will benefit, we have no kids. I feel no great desire to spend anymore. We do everything we want. Have everything we want.

Awesome to hear! That's a better result than me, as I am only 2X my expenses. But I still feel pretty good about it. I'm hoping things continue as they have during this turbulent time.

I have a friend that has been at this longer than me who made it (very well I might add) through Covid using this strategy that also gives me a little more confidence.

Flieger

 

[COcheesehead]

Awesome to hear! That's a better result than me, as I am only 2X my expenses. But I still feel pretty good about it. I'm hoping things continue as they have during this turbulent time.

I have a friend that has been at this longer than me who made it (very well I might add) through Covid using this strategy that also gives me a little more confidence.

Flieger

If your portfolio throws off more income than you want or need and you have SS in the wings, that’s easy street.
It’s not the Bogle way, it’s a different way that needs a little bit more tending, but I like to do that anyway.
Even when rates were super low, I made enough to cover our expenses. 1 to 1. What has happened to fixed income has really just been a bonus.

 

[pb4uski]

I'm still learning about income investing, so let me know if this is a bad question or understanding.

It appears that one tries to generate enough income (dividends, interest, distributions) to cover expenses. Any excess is plowed back into the portfolio. Any shortage one would need to sell something. Do you model this in a retirement calculator (or software) to predict the likelihood of success (not going broke before you die)? If you only spend your income, aren't you spending less than you could if you spent part of your portfolio too?

Thanks in advance for any insight into how this works.

You got it, but if one is going to constrain themselves to only spending income (interest and dividends) in retirement and not touch principal then you'll need to have more retirement savings and probably need to work longer to have more retirement savings, especially where withdrawals are inflation adjusted (unless you go 100% TIPS).

According to FIRECalc, to withdraw $40k annually inflation adjusted for 30 years you would need $1,051k with a 60/40 AA but you would need $1,556k with a 0/100 AA. Both were at 99% success rates.

The average terminal values after 30 would be $1,657k with a 60/40 AA or $1,198k with a 0/100 AA.

 

[Flieger]

You got it, but if one is going to constrain themselves to only spending income (interest and dividends) in retirement and not touch principal then you'll need to have more retirement savings and probably need to work longer to have more retirement savings, especially where withdrawals are inflation adjusted (unless you go 100% TIPS).

According to FIRECalc, to withdraw $40k annually inflation adjusted for 30 years you would need $1,051k with a 60/40 AA but you would need $1,556k with a 0/100 AA. Both were at 99% success rates.

The average terminal values after 30 would be $1,657k with a 60/40 AA or $1,198k with a 0/100 AA.

I don't have that (invested), and I don't agree that Income Investing is equivalent to 0/100 investment, and I am pulling more than $40k.

Currently, just the Income Portfolio portion of my model is "returning" 14.18% Passive Income ($106k) with much less than your numbers. That is 60% of total portfolio.

If I look at the Total Portfolio it is returning under 10%, but ~$127k for 2025 (not including anticipated increase from ongoing additional investment from "excess" Divs).

Flieger