Posts: 1,389
Threads: 33
Joined: Jan 2015
Reputation:
21
What happened to you with those two stocks is the reason why I do not sell calls on the div growth part of my portfolio. I got those shares as a long-term investment and obviously the plan is to collect dividends from them for the next several decades, I'm not going to risk getting them called away. No way.
I keep my positions separate. A different account definitely helps, especially if taxes are an issue. I still often trade in the same stock since I tend to have a much better feel of the price movements. So for example if I want to trade company X and I already own 150 shares, then I'll either start with selling puts or I'll just buy another 100 shares and sell a single call. Whatever happens, those original 150 shares will stay in my portfolio.
Posts: 6,404
Threads: 47
Joined: Aug 2018
Reputation:
68
11-05-2021, 05:48 AM
(This post was last modified: 11-05-2021, 06:45 AM by fenders53.)
(11-05-2021, 02:54 AM)crimsonghost747 Wrote: What happened to you with those two stocks is the reason why I do not sell calls on the div growth part of my portfolio. I got those shares as a long-term investment and obviously the plan is to collect dividends from them for the next several decades, I'm not going to risk getting them called away. No way.
I keep my positions separate. A different account definitely helps, especially if taxes are an issue. I still often trade in the same stock since I tend to have a much better feel of the price movements. So for example if I want to trade company X and I already own 150 shares, then I'll either start with selling puts or I'll just buy another 100 shares and sell a single call. Whatever happens, those original 150 shares will stay in my portfolio.
The tax issue is an important point that should be mentioned on this thread from time to time. I do this exclusively in my tax advantaged accounts.
You really have to be comfortable with the outcome if you are exercised. That requires careful choice of strikes.
You will never eliminate the chance of having your shares called away. After doing this thousands of times through up and down markets I can honestly say I go months with very little risk of losing any shares, but in a strong bull market there will be at least a few months per year where a lot of your trades will be troubled for some of the open period or just hopeless from day one. I have a long list of stocks I have sold options on well over ten times with no issue. I have sold options 30 times on VSTO with no exercise. I waited a long time until the stock had doubled and seemingly in a trading range. I own enough shares to stagger the calls. I'll accept the good with the bad when I lose some shares eventually.
I am careful with covered calls on my DGI core positions, and stocks with a strong upside we can't predict. QCOM was just a bad trade. It's not all sunshine and rainbows. I'm not that emotionally attached to my positions. I've lost shares for sure and it will happen again. I won't go broke receiving less profit than I wish I had.
I do recommend range bound dividend stocks for a beginner though. They still make up half my option trades. This strat can take the sting out of yield traps as well. I've made money on T while it drops.
No matter the strategy, somebody can say "well what about if this happens?" I guess my response is "well what if your long port dips 30% and just lays there for years with negative total return?" The stock market will humble most any strategy at some point. That is definitely why I run multiple strategies and they all require discipline. The bottom line on my portfolio is what matters. Is it an acceptable return for the overall risk you are taking?
Was that preachy enough, because I can type some more later. It sucks you lost your QCOM, now rub some dirt on it and get back in the game. 
Posts: 778
Threads: 15
Joined: Nov 2013
Reputation:
5
One could also hone their option trading craft by using credit spread on the large indices.
It eliminates single name risk (see Z,TSLA, CHGG etc)
MUCH less capital tied up
Great place to start/practice and make a core option selling system, just place your strikes "behind" whatever the chart shows as clear (former) support or resistance. It's the best one can do.
Example, SPY, it looks like the former resistance of 454 was tested and "should" hold-LOL
Sell (2 units) 451/446 Put spread for DEC17 nets $150 using $850 buying power. 17.6% for 42 days or take off at 50% anytime sooner and move on.
Don't get giddy on the winners and don't fret over the losers, there will be plenty of each-LOL
As, I tell the Mrs., it's only money!!
Posts: 6,404
Threads: 47
Joined: Aug 2018
Reputation:
68
11-05-2021, 06:48 AM
(This post was last modified: 11-05-2021, 06:50 AM by fenders53.)
(11-05-2021, 06:32 AM)NilesMike Wrote: One could also hone their option trading craft by using credit spread on the large indices.
It eliminates single name risk (see Z,TSLA, CHGG etc)
MUCH less capital tied up
Great place to start/practice and make a core option selling system, just place your strikes "behind" whatever the chart shows as clear (former) support or resistance. It's the best one can do.
Example, SPY, it looks like the former resistance of 454 was tested and "should" hold-LOL
Sell (2 units) 451/446 Put spread for DEC17 nets $150 using $850 buying power. 17.6% for 42 days or take off at 50% anytime sooner and move on.
Don't get giddy on the winners and don't fret over the losers, there will be plenty of each-LOL
As, I tell the Mrs., it's only money!!
Definitely works both ways. I brag about my VSTO trades constantly. For all I know the CEO and CFO may be handcuffed in the back of a squad car before the sun sets.
I really should do more spreads. I could put more of my capital in boring stuff when the market dips. I am going to have to move my IRA though.
Posts: 156
Threads: 2
Joined: Dec 2018
Reputation:
2
Great discussion. I appreciate you all chime in for my hard earned lesson.
Dividend Paying Stocks, Dividends and Options.
At 73, I am a very conservative investor, but I learned options before learning about dividend paying stocks.
Using cash secured Puts on stocks I would like to own and far out of the money Calls on stocks I own and I wish to keep - here are my results thru the end of November. Just a snapshot of the power of options as an investing tool...
Options: 53K
Dividends: 38K
Safe and Happy Holidays to everyone!
Posts: 156
Threads: 2
Joined: Dec 2018
Reputation:
2
Closed my TSM put (strike at 124, expire on 1/28) today with a 90+% gain after 2 day of sale; one of those rare instances where I got really lucky. Most of the puts I sold are making $$ while most calls are not doing so well.
Posts: 6,404
Threads: 47
Joined: Aug 2018
Reputation:
68
01-13-2022, 02:30 PM
(This post was last modified: 01-13-2022, 02:41 PM by fenders53.)
(01-13-2022, 12:39 PM)Dividendwayfarer Wrote: Closed my TSM put (strike at 124, expire on 1/28) today with a 90+% gain after 2 day of sale; one of those rare instances where I got really lucky. Most of the puts I sold are making $$ while most calls are not doing so well.
It seems to come in flurries. I can honestly say 80% of my put sells end well. There are definitely times I roll them forward once to achieve 80%. I really try to not sell puts on stocks I am not comfortable owning and covered call sells happen if I change my mind.
My biggest issue is when to close a trade that goes my way immediately. I get serious about closing as about 75% but I can usually tell how urgent that may potentially be. That said, if you are 50% profitable in a day or too it's likely there is a better trade out there.
And lest I make this sound too easy, there are definitely bad months and I shut the strategy down when I smell it coming. After about five years it's fair to say I can avoid half the rough stretches early. It took time to learn it's a bad time. I certainly place troubled trades sometimes.
BTW I like that trade a lot. A quality stock in a great sector unlikely to see negative momentum. If it goes bad, well you now own a good stock you know will be more than OK with patience. That is a perfect as a put sell can be IMO! Congrats on your decision.
Posts: 156
Threads: 2
Joined: Dec 2018
Reputation:
2
01-13-2022, 04:57 PM
(This post was last modified: 01-13-2022, 04:59 PM by Dividendwayfarer.)
One thing I have learned so far is it is not common to find a dividend growth stock with good option premium. I was lucky to find some good ones with TSM, EOG, ATVI (over 1% premium with an expiration within 2-3 weeks for the price I am willing to buy/sell) but I have rarely seen this kind of opportunity with stocks like TROW, BMY, T, AMGN, MRK, etc. I admire people who can consistently make money from boring stocks.
Posts: 6,404
Threads: 47
Joined: Aug 2018
Reputation:
68
I have traded a lot of BMY options but most of time boring stocks only work if the market is very volatile.
Posts: 156
Threads: 2
Joined: Dec 2018
Reputation:
2
I sold a put for ATVI, strike at $59 with an expiration on 2/4. I am comfortable with holding the stocks at $59 but fingers crossed it will not go much lower than that by then!
Posts: 6,404
Threads: 47
Joined: Aug 2018
Reputation:
68
(01-14-2022, 11:53 AM)Dividendwayfarer Wrote: I sold a put for ATVI, strike at $59 with an expiration on 2/4. I am comfortable with holding the stocks at $59 but fingers crossed it will not go much lower than that by then!
Good company. I sold some puts around 50 almost a month ago and they worked out. I wouldn't be worried to own them even after a bit of a spike. You have to take some calculated chances and grab some good premiums with some of your plays. Just have to be OK with all of them ending bad in a particularly tough month because it happens a couple times a year.
|
