Ideas for moderate/low risk investments?

[jlhooter]

It's a lot of work but if you did a buy-write of 100 shares of WEAT at/near today's close you could make 16%-45% annualized. Buy shares at $10.80, sell a May $9 call for $1.95... that lowers your basis to $8.85.... when it most likely gets called away for $9 in 38 days you've made $0.15 on a $8.85 investment or 1.7% in 38 days which works out to about 16% annualized return.

Eric I bought WEAT about 1.5 mo ago at 11.50 at the wrong time but by selling and rolling calls I have been able to drive my cost basis down to 9.16. Hopefully I just sold my last 11.00 call and if called I will be very happy to walk away with a 20% gain in about 45 days. I dont advise doing this and my goal was to dip my feet into selling options. So far so good and it is actually fun. I am playing with a small amount in options since I understand the risks and I wouldnt do the same play again the same way. I am also nearly done with my new tracking spreadsheet for leveraging the wheel strategy for getting in and out of stocks I really like.

I'd love to see a video or explanation of the wheel strategy to go with that spreadsheet. I've heard you mention it but haven't heard it before

TT send me a link for best way to take a video for Excel to present the sheet. Great idea

[nicolas]

It's a lot of work but if you did a buy-write of 100 shares of WEAT at/near today's close you could make 16%-45% annualized. Buy shares at $10.80, sell a May $9 call for $1.95... that lowers your basis to $8.85.... when it most likely gets called away for $9 in 38 days you've made $0.15 on a $8.85 investment or 1.7% in 38 days which works out to about 16% annualized return.

Eric, thanks for the idea. I looked for stocks I wouldn't mind owning with a share price below $10 to try this out. I chose uranium explorer NXE and did a buy-write for the May $5 covered call. Got the shares at $6.34, and sold the call for $1.58, driving my cost basis down to $4.76. In 38 days, I either pocket $24 on a $476 investment (5.0%, 60% annualized) or keep NXE on which I'm bullish at 4.76, and keep selling calls. Heads I win, tails I win.

[SOL]

It's a lot of work but if you did a buy-write of 100 shares of WEAT at/near today's close you could make 16%-45% annualized. Buy shares at $10.80, sell a May $9 call for $1.95... that lowers your basis to $8.85.... when it most likely gets called away for $9 in 38 days you've made $0.15 on a $8.85 investment or 1.7% in 38 days which works out to about 16% annualized return.

Eric, thanks for the idea. I looked for stocks I wouldn't mind owning with a share price below $10 to try this out. I chose uranium explorer NXE and did a buy-write for the May $5 covered call. Got the shares at $6.34, and sold the call for $1.58, driving my cost basis down to $4.76. In 38 days, I either pocket $24 on a $476 investment (5.0%, 60% annualized) or keep NXE on which I'm bullish at 4.76, and keep selling calls. Heads I win, tails I win.

That's a pretty good strategy. Remind me to open a post or someone open a post titled option strategies and post this there. Lets keep that post clean no deviations if possible, that's asking a lot as so far every post has deviated lol

Other Safe option strategies

If you already own the position, sell a covered call. If it is called away, then purchase the shares again and keep doing the something

Sell puts: if you don't own the stock and you don't mind owning the shares. But what happens if the shares are not put into your account. In this case, use some of the proceeds from selling the puts to get into out of the money calls. Now you have upside protection just in case you don't get in and you still will earn some money on the position or get in at a lower price if the shares are put into your account.

Sell covered calls (say you sold a 2-month call at 11, the stock is trading at 10.20) if the stock has moved up and the call is in the money, sell a put. Now you have two options. If the stock gets called away, you get a premium from the covered call say it's 1.50 and you have a premium from selling the put (say you sold puts with 2 months' time premium strike 10 when the stock was trading at 11.20, lets that's you got 1.10, the total premium you have is 2.60. Say the stock is does nothing but trade in the 10.40 to 11.20 ranges. You can use some or all of the premium to effectively lower your cost price by 2.60 and repeat the whole thing again.

Lastly, don't forget to enrol into DRIP. Every decent brokerage firm offers that. So on stocks like HIMX, KMB etc, you can get extra shares by using this plan. It adds up over time.

[jlhooter]

Sol we have one post here
viewtopic.php?t=434
Does this location work?

Also, since I started the above post in the beginning of Mar I have been working on a spreadsheet to maintain and select the options plays. It is a fitting name (Wheel Strategy), but I leverage it for buying stocks (cash secured puts (CSP)) I want to enter and have been using it for some MU plays to exit (covered calls (CC)).
One example is the MU CHPT play. My average entry was 15.45 and the instruction is to sell 1/2 at 22.00 which would be a 42% gain.

Since Mar 19, I have been using my spreadsheet to assist at selecting and rolling CCs, and as of today my cost basis for CHPT is at 13.54. I have rolled it 3 times already where my latest CC is the Jun 17 strike of 21.00 (started at 22.00 earlier in the process but was able to drop to 21.00 cause of the premiums). If I was Called today, it would have been a 55% gain. Trust me I am not greedy and would be ecstatic to make 42%, but since I was able to get the strike to $21, I should (hope) be able to sell it much sooner.

I monitor the difference between the Ask price of the last option sold versus the price when I sold it. Ideally, I like to see a >65% difference, but it is not necessary. Presently, my Jun 17, $21 option is seeing a +0.25 difference between my sale and what it would cost to close the position (+27% difference).

Today I am rolling the position again by Buying to Close (BTC) my Jun 17 option and selling to open (STO) a new Aug 19, $21 option. Once this happens, I estimate the CHPT cost basis to be down to 13.02 or if called 61% gain.
What helps is if the stock continues to fall when playing CCs (the opposite is true for CSPs when the stock rises), it causes the Ask premium of the option to drop and I can easily roll the position again. Part of the problem is you can only roll out so many times before you run through the options chain (I did this with WEAT; I sold my last roll (for now) for an Oct play; my 11.50 price dropped down to a 9.36 cost basis. If I get called (maybe today), I am happy with a 17.7% gain for 47 days of effort versus what would have been a -4% holding value (11/11.5-1 = -4% v. 11/9.36-1 = +17.5%).

I am getting very close to sharing my spreadsheet with everyone since my latest changes have been more house-cleaning then algorithmic, but I would like to see a full round to occur (do a CSP followed by a CC for the same stock); I don't think I need to wait, but my concern is if someone does a full round, my sheet MAY confuse some I I might have to fix it again??

When I release the sheet (as TT suggests) I will have (hopefully) a video to describe it. Trust me that it is hard to understand the strategy at first and it is why I use something like the spreadsheet to help me understand it, but once you learn it, it is relatively easy to explain.
One place I learned this from was a dapper, young man. I like his attitude and he is fun to watch (https://www.youtube.com/watch?v=siFsIleNTzk), but my spreadsheet is 100x more involved than his and has a much better dashboard to track each play (very proud of it).

Two main things with my sheet
1. I will do my best to explain its use and the math behind each cell/column to give you an understanding of the strategy
2. If you do NOT have TD Ameritrade's ThinkorSwim loaded and running in the background (I believe you can get a free account and load ToS SW) and some knowledge of using Excel (I can share basics of Excel), this sheet will NOT work. I monitor option ASK, option BID and stock LAST once you enter the option into the appropriate spreadsheet cell. If you don't have or don't want to get ToS and Excel, you will need to revert to 1., meaning you must understand the math OR minimally the approach to doing this strategy. Your learning curve will increase by taking this path, but you will figure it out. My sheet works because it helps take the complexity of managing a single option play and assists what/when to roll your position (rolling is a key part of the strategy). Once you start doing multiple strikes for a specific stock AND/OR doing multiple stocks, you either need to use my sheet or build your own. Tracking the cost basis needs to be done accurately or you will fail.

Sorry, but them's the rules.

Stay tuned

[Triplethought]

Eric I bought WEAT about 1.5 mo ago at 11.50 at the wrong time but by selling and rolling calls I have been able to drive my cost basis down to 9.16. Hopefully I just sold my last 11.00 call and if called I will be very happy to walk away with a 20% gain in about 45 days. I dont advise doing this and my goal was to dip my feet into selling options. So far so good and it is actually fun. I am playing with a small amount in options since I understand the risks and I wouldnt do the same play again the same way. I am also nearly done with my new tracking spreadsheet for leveraging the wheel strategy for getting in and out of stocks I really like.

I'd love to see a video or explanation of the wheel strategy to go with that spreadsheet. I've heard you mention it but haven't heard it before

TT send me a link for best way to take a video for Excel to present the sheet. Great idea

JL I use techsmith's camtasia to record videos of my screen and I love it. However it's an expensive piece of software. We could also do a zoom conference call (I have an account) and share screen and we could simply record the session for everyone else. It makes it easier if someone dumb like me is asking questions and the other guy is answering them. Not much of a script is needed that way and it flows more naturally. I've heard loom.com is good and may have a free trial. I've heard https://screencast-o-matic.com/screen-recorder is good and has a free version. Your choice on which tool to use.

[Triplethought]

Sol we have one post here
viewtopic.php?t=434
Does this location work?

Also, since I started the above post in the beginning of Mar I have been working on a spreadsheet to maintain and select the options plays. It is a fitting name (Wheel Strategy), but I leverage it for buying stocks (cash secured puts (CSP)) I want to enter and have been using it for some MU plays to exit (covered calls (CC)).
One example is the MU CHPT play. My average entry was 15.45 and the instruction is to sell 1/2 at 22.00 which would be a 42% gain.

Since Mar 19, I have been using my spreadsheet to assist at selecting and rolling CCs, and as of today my cost basis for CHPT is at 13.54. I have rolled it 3 times already where my latest CC is the Jun 17 strike of 21.00 (started at 22.00 earlier in the process but was able to drop to 21.00 cause of the premiums). If I was Called today, it would have been a 55% gain. Trust me I am not greedy and would be ecstatic to make 42%, but since I was able to get the strike to $21, I should (hope) be able to sell it much sooner.

I monitor the difference between the Ask price of the last option sold versus the price when I sold it. Ideally, I like to see a >65% difference, but it is not necessary. Presently, my Jun 17, $21 option is seeing a +0.25 difference between my sale and what it would cost to close the position (+27% difference).

Today I am rolling the position again by Buying to Close (BTC) my Jun 17 option and selling to open (STO) a new Aug 19, $21 option. Once this happens, I estimate the CHPT cost basis to be down to 13.02 or if called 61% gain.
What helps is if the stock continues to fall when playing CCs (the opposite is true for CSPs when the stock rises), it causes the Ask premium of the option to drop and I can easily roll the position again. Part of the problem is you can only roll out so many times before you run through the options chain (I did this with WEAT; I sold my last roll (for now) for an Oct play; my 11.50 price dropped down to a 9.36 cost basis. If I get called (maybe today), I am happy with a 17.7% gain for 47 days of effort versus what would have been a -4% holding value (11/11.5-1 = -4% v. 11/9.36-1 = +17.5%).

I am getting very close to sharing my spreadsheet with everyone since my latest changes have been more house-cleaning then algorithmic, but I would like to see a full round to occur (do a CSP followed by a CC for the same stock); I don't think I need to wait, but my concern is if someone does a full round, my sheet MAY confuse some I I might have to fix it again??

When I release the sheet (as TT suggests) I will have (hopefully) a video to describe it. Trust me that it is hard to understand the strategy at first and it is why I use something like the spreadsheet to help me understand it, but once you learn it, it is relatively easy to explain.
One place I learned this from was a dapper, young man. I like his attitude and he is fun to watch (https://www.youtube.com/watch?v=siFsIleNTzk), but my spreadsheet is 100x more involved than his and has a much better dashboard to track each play (very proud of it).

Two main things with my sheet
1. I will do my best to explain its use and the math behind each cell/column to give you an understanding of the strategy
2. If you do NOT have TD Ameritrade's ThinkorSwim loaded and running in the background (I believe you can get a free account and load ToS SW) and some knowledge of using Excel (I can share basics of Excel), this sheet will NOT work. I monitor option ASK, option BID and stock LAST once you enter the option into the appropriate spreadsheet cell. If you don't have or don't want to get ToS and Excel, you will need to revert to 1., meaning you must understand the math OR minimally the approach to doing this strategy. Your learning curve will increase by taking this path, but you will figure it out. My sheet works because it helps take the complexity of managing a single option play and assists what/when to roll your position (rolling is a key part of the strategy). Once you start doing multiple strikes for a specific stock AND/OR doing multiple stocks, you either need to use my sheet or build your own. Tracking the cost basis needs to be done accurately or you will fail.

Sorry, but them's the rules.

Stay tuned

JL under what market conditions would this strategy fall apart?? I hope to understand it better once I see your video (Or if I interview you on zoom as a way of creating the video)

[jlhooter]

TT I will check the video sites you mention and like the idea of a Zoom call too.

Related to best market conditions it is a question I am not sure I have an answer.

I can tell you in the research I have done that options trading is good to do when the VIX is in the 20 to 26 range. Not sure why. Maybe someone can help answer.

Secondly without understanding the greeks if you watch the YT video I referenced I try to select options that have a Delta <= 0.3 which relates to the probability on the option getting exercised. My vision on delta may change since there are times I want to continue to roll my position since I wont want to own the stock yet while I manage my cost basis, and there are times when I feel my cost basis is right and want to get assigned; I will pick an option (maybe) with a slightly higher delta.

As for when to do options I hope someone else comments but I would think pretty much anytime. Sol mentioned a good time to sell puts for income is to do it when the stock is over sold on the monthly. Also when selling a put purely for income it is good to do it if you believe the stock will increase within the expiration. It lowers the chance if getting assigned and if it continues up and the premium paid to Ask ratio is >50% you consider getting out or roll your position to gain more as long as greed does not play into your decision. For selling calls the opposite is true. For income only investing you predict the share price will drop. It is possible that timing for calls is when the stock is over bought.

Sellings calls for me personally is something I only plan to do now with stock I own since I dont fully understand selling on margin which where in the the Wheel strategy I start with selling a put first, get assigned (shares put to me) and then sell covered calls on that stock.

[jlhooter]

As I think about it selling puts are a bit more tricky if you want to be assigned. You want to sell them as the stock is starting to hit (fall to) your entry price, but you have to be careful as you roll your position since the sell premium to ask ratio could be less than desired or even negative. This means as you try to find the right "bottom" you might pay more to close than you opened and you sell a new put to cover the loss and manage to drop your cost basis. A big reason to have a spreadsheet to manage this because it is a balancing pain in the ass, but fun if you have the time. As AMD continues to drop I have had to do this and still able to get it down. I think my basis for AMD is 92 right now. Not great but not too long ago it was >100.

[Triplethought]

Hello all,

I've been a subscriber for over a year, yet never have posted here before.

Question - my wife and I were fortunate enough to come into a tidy sum of money from capital gains from real estate investments. We want to park a good chunk of this money (six figures) into a fairly safe investment that doesn't have abysmal interest rates. Holding cash in a savings account or money market doesn't appear to be wise due to inflation. I was thinking high-yield corporate bonds could prove to be a decent option (VCLT or VWEHX) given the current yield and recent sell-off.

Any other ideas that I am missing? This is in a taxable account.

Something I'm considering is buying real estate thru this firm https://www.hughescapital.com/secured-portfolio/. I like how they say your name can be on the mortgage to protect you. What other REIT does that? pretty good assurance you won't get Bernie Madoff'ed. Of course only 7.5% return - but given tax advantages and they do all the work it's not so bad. My only hesitation is buying in after such a big run up in real estate and the fact I'm already heavily in real estate plus adding that north carolina warehouse to the portfolio

[Centeron631]

Hi Folks
does someone know the possible scenarios of what happens to calls when your stock is taken over by another company using various methods of takeovers (assuming the different methods might have different outcomes for your Call?) I understand that it may only be relevant if the takeover price is below ur strike price? but not sure. Ofcourse the longer the call the more chance of this happening. eg. i was thinking of buying a call on Match but there r rumors out there of a possible takeover and therefor so far am shying away. thks

[harryg]

In brief, the price is what matters.

If the company is taken over above your strike price, you are probably OK.

If not, not.


In more detail, when you purchase options you pay a certain amount for time.

In the event of a takeover or a merger, 'time premium' becomes worth 0.

Anything out of the money, which might previously have had time value, will expire worthless (unless there is another offer, or the takeover fails etc).

You need to be in the money.


To make a profit you need to be enough in the money to compensate for your time premium being eroded to nothing.

[jlhooter]

I'd love to see a video or explanation of the wheel strategy to go with that spreadsheet. I've heard you mention it but haven't heard it before

TT send me a link for best way to take a video for Excel to present the sheet. Great idea

JL I use techsmith's camtasia to record videos of my screen and I love it. However it's an expensive piece of software. We could also do a zoom conference call (I have an account) and share screen and we could simply record the session for everyone else. It makes it easier if someone dumb like me is asking questions and the other guy is answering them. Not much of a script is needed that way and it flows more naturally. I've heard loom.com is good and may have a free trial. I've heard https://screencast-o-matic.com/screen-recorder is good and has a free version. Your choice on which tool to use.

TT, I got Camtasia, so I will try this path first, but I still like the idea of Zooming with you at some point.
I will touch base later.