Let's get back to discussing the details of option trading in a minute....
It's just like you said, I am juggling a scary amount of money. It makes my home's value look like chump change. This port is supposed to constitute about 50% of my income in only 3 1/2 years when I retire for real. I was already fully retired for three years but I am working at HD in Millwork Sales Specialist now. I enjoy the work and when I no longer do, I won't be there anymore. I'm in an enviable spot at my age. Just trying to stay out of the retirement fund for a few more years.
Back to business... this is just what Mike said, an income strategy, and some months a VERY good one. Not so much different than a DGI port. When you "lose" your put bet, your punishment is owning a good stock at a small discount if you are doing this right. While I am truly trying to build my long port over time, valuation prevents it and I bide my time with put sales like KO. I'm smart enough to know KO is neither cheap, nor likely to deliver above market returns. We've had that discussion lately. Mike and I both traded KO puts because we know their is strong KO support whether justified or not. (it's not). PEP is my real soda water company target and I own an entry position in it already. I have no illusions KO will be a core position unless they change up their game plan. But it is an without any doubt an All-American beloved company. I'm not so sure it is rationally worth much over $30 but it will never go there. I've already profited on expired KO put sales. I have two open right now. When the dust settles I may keep 50 or 100 KO shares because these fools will run it up again someday, and the above average DIV is already good, and safe for the foreseeable future. There are others like it such as MMM. 75% of my put sales are an attempt at going long, but some trades are admittedly intended for generating income. I'm happy to own the shares long when the market makes it happen. But it's optional until valuations get reasonable. That day will come.
Utility stocks have been my biggest surprise. I was just sure I would be in them in a big way by now. Didn't happen and I keep cashing income checks every month. I desire them to be about 1/3 of my stock holdings in the end because I can sleep well in any market. Up market or down market the puts keep expiring worthless. I think I counted like 28 consecutive puts expired worthless the past 5 months. I sell puts on every Ute dip. Some dips not even that substantial. This month will likely be my last attempt for awhile as they are about to leave my buy price range. It's tempting to just go long now but that would be foolish until they pull back. In fairness if we did the math a couple of them would have yielded the same money in increased share price had I just went long, but I can't see the future and my way is a bit more conservative. A couple other Utes are trapped in a trading range and grabbing the put income is so easy it's like stealing. I only have a couple more safe non-ute stocks that are so predictable for generating put income. Right up until they aren't but I am going to keep milking this cow lol.
I know this has only been five months. I have bought and sold options for decades on a small scale and I definitely know how to do it wrong. Now I am doing it on a big scale. I know the odds are in my favor by design as I am "the house" in this casino. For now I think the volume of trades is what is strongly in my favor. Place 20-40 bets a month with odds 70% in my favor, you can get by with some small mistakes. Can I screw this up if I allow emotion to cause me to not follow basic rules? Absolutely! I've had about five trades I regret since SEP 18. About all of them can be attributed to my failure to follow my own simple rules. I can't blame it on the market because it was all me. I've written the rules down. Maybe I need to tape them to the wall behind my monitor. My wife will think I am nuts lol.
It's just like you said, I am juggling a scary amount of money. It makes my home's value look like chump change. This port is supposed to constitute about 50% of my income in only 3 1/2 years when I retire for real. I was already fully retired for three years but I am working at HD in Millwork Sales Specialist now. I enjoy the work and when I no longer do, I won't be there anymore. I'm in an enviable spot at my age. Just trying to stay out of the retirement fund for a few more years.
Back to business... this is just what Mike said, an income strategy, and some months a VERY good one. Not so much different than a DGI port. When you "lose" your put bet, your punishment is owning a good stock at a small discount if you are doing this right. While I am truly trying to build my long port over time, valuation prevents it and I bide my time with put sales like KO. I'm smart enough to know KO is neither cheap, nor likely to deliver above market returns. We've had that discussion lately. Mike and I both traded KO puts because we know their is strong KO support whether justified or not. (it's not). PEP is my real soda water company target and I own an entry position in it already. I have no illusions KO will be a core position unless they change up their game plan. But it is an without any doubt an All-American beloved company. I'm not so sure it is rationally worth much over $30 but it will never go there. I've already profited on expired KO put sales. I have two open right now. When the dust settles I may keep 50 or 100 KO shares because these fools will run it up again someday, and the above average DIV is already good, and safe for the foreseeable future. There are others like it such as MMM. 75% of my put sales are an attempt at going long, but some trades are admittedly intended for generating income. I'm happy to own the shares long when the market makes it happen. But it's optional until valuations get reasonable. That day will come.
Utility stocks have been my biggest surprise. I was just sure I would be in them in a big way by now. Didn't happen and I keep cashing income checks every month. I desire them to be about 1/3 of my stock holdings in the end because I can sleep well in any market. Up market or down market the puts keep expiring worthless. I think I counted like 28 consecutive puts expired worthless the past 5 months. I sell puts on every Ute dip. Some dips not even that substantial. This month will likely be my last attempt for awhile as they are about to leave my buy price range. It's tempting to just go long now but that would be foolish until they pull back. In fairness if we did the math a couple of them would have yielded the same money in increased share price had I just went long, but I can't see the future and my way is a bit more conservative. A couple other Utes are trapped in a trading range and grabbing the put income is so easy it's like stealing. I only have a couple more safe non-ute stocks that are so predictable for generating put income. Right up until they aren't but I am going to keep milking this cow lol.
I know this has only been five months. I have bought and sold options for decades on a small scale and I definitely know how to do it wrong. Now I am doing it on a big scale. I know the odds are in my favor by design as I am "the house" in this casino. For now I think the volume of trades is what is strongly in my favor. Place 20-40 bets a month with odds 70% in my favor, you can get by with some small mistakes. Can I screw this up if I allow emotion to cause me to not follow basic rules? Absolutely! I've had about five trades I regret since SEP 18. About all of them can be attributed to my failure to follow my own simple rules. I can't blame it on the market because it was all me. I've written the rules down. Maybe I need to tape them to the wall behind my monitor. My wife will think I am nuts lol.