05-03-2020, 11:15 AM
My apologies if anyone falls asleep while reading this because it is truly conservative and boring, but I hope you'll read the entire post. 
For the most part I use a "basket" strategy. My two year basket is mostly in a very short-term bond fund with a decent enough yield over 2% and not volatile. The five year basket often has a lot of cash in it as I tend to trade it and use it to back up cash covered puts. The cash yields are going to hurt my overall income yields and I don't see this changing soon. I'd like to solve this without making it overly-complicated. My other activities keep things complicated enough around options expiration dates.
So I think I am going to go WAY conservative with some of the cash I would otherwise be saving for a real crash. It was very close but I didn't invest a dime of it in equities in March. I think I am going to assemble a small basket of aristocrats and sell some way out of the money puts. Maybe 20% OTM, and stagger the expirations from 2-4 months. Might add a bit of TLT because it tends to run counter to equities. (that isn't a fail-proof thought, but it usually does well enough when equities dive). This differs from my normal strategy of selling 15-30 puts a month much closer to the money and much shorter DTE.
I suspect you guys have read enough to know I am cautious overall. My love for utilities runs deep and a little too much cash makes me sleep better. This has to pass my risk-reward filter because within a few months it will be a substantial amount of money. So here is my justification.
-This is cash I was saving for market Armageddon. If the market crashes again this year I intend to deploy it anyway. It won't affect my life for five years if I get trapped in equities.
-If for example I am forced to buy KO at $35, or JNJ at $120, the market is highly likely in trouble anyway. If this happens IV is high and I can likely roll forward and sell some more time if that makes sense at that time. I haven't decided on the stocks but these are representative. Solid balance sheets and near zero chance of a Div cut is absolutely required. A lot of sectors are completely off the table without a significant pullback. Maybe next quarter. No chance I am not going to try this trick with WMT, CAT or XOM at current prices and recession risk.
I am leaning pharma-consumer non-durable-maybe the right financial, and TLT.
-A 5% annual option premium yield with lowish beta stocks looks pretty easy unless the market stabilizes longer term and IV dies. If this works at all it completely solves the problem of cash accounts killing my current yields. I use these yields to feed bucket #1 which is cash I do want the option of spending in about two years. This bucket could be full in under a year if I don't eat 1/2% yields on a lot of money for years.
Opinions welcomed.
For the most part I use a "basket" strategy. My two year basket is mostly in a very short-term bond fund with a decent enough yield over 2% and not volatile. The five year basket often has a lot of cash in it as I tend to trade it and use it to back up cash covered puts. The cash yields are going to hurt my overall income yields and I don't see this changing soon. I'd like to solve this without making it overly-complicated. My other activities keep things complicated enough around options expiration dates. So I think I am going to go WAY conservative with some of the cash I would otherwise be saving for a real crash. It was very close but I didn't invest a dime of it in equities in March. I think I am going to assemble a small basket of aristocrats and sell some way out of the money puts. Maybe 20% OTM, and stagger the expirations from 2-4 months. Might add a bit of TLT because it tends to run counter to equities. (that isn't a fail-proof thought, but it usually does well enough when equities dive). This differs from my normal strategy of selling 15-30 puts a month much closer to the money and much shorter DTE.
I suspect you guys have read enough to know I am cautious overall. My love for utilities runs deep and a little too much cash makes me sleep better. This has to pass my risk-reward filter because within a few months it will be a substantial amount of money. So here is my justification.
-This is cash I was saving for market Armageddon. If the market crashes again this year I intend to deploy it anyway. It won't affect my life for five years if I get trapped in equities.
-If for example I am forced to buy KO at $35, or JNJ at $120, the market is highly likely in trouble anyway. If this happens IV is high and I can likely roll forward and sell some more time if that makes sense at that time. I haven't decided on the stocks but these are representative. Solid balance sheets and near zero chance of a Div cut is absolutely required. A lot of sectors are completely off the table without a significant pullback. Maybe next quarter. No chance I am not going to try this trick with WMT, CAT or XOM at current prices and recession risk.
I am leaning pharma-consumer non-durable-maybe the right financial, and TLT.
-A 5% annual option premium yield with lowish beta stocks looks pretty easy unless the market stabilizes longer term and IV dies. If this works at all it completely solves the problem of cash accounts killing my current yields. I use these yields to feed bucket #1 which is cash I do want the option of spending in about two years. This bucket could be full in under a year if I don't eat 1/2% yields on a lot of money for years.
Opinions welcomed.