02-15-2019, 11:16 PM
(02-15-2019, 04:57 PM)NilesMike Wrote:Undercapitalized is what we are referring to. Some of the guys here are only ten years along in this journey. They already have a diversified port of DGI stocks which is why they are on them of this website. Many of them have assets in their company 401K if they are smart. (which I believe they are) Lets say Crimsonghost wants to enter a position in AAPL and HD. Do that our way and you need $35K to back a couple trades. That might cause him to be under diversified if he liquidates assets to fund that. I was potentially committed to buy 2000 shares of stock this month and it's only the 15th. And I was still assured of a decent cash position and diversification. 90% of the contracts expired worthless today, or were closed for a near 100% profit within days of selling them because the market just goes up this year. But the point is that requires significant cash like assets. I couldn't have done this just a few years ago with my assets tied up in my 401K.(02-15-2019, 01:55 PM)fenders53 Wrote: Right, but you do need the free capital in your account, or a margin account and authorization to trade naked options. Something I would never recommend as it ends bad at some point when the market turns on you. For younger traders with lower capital, the cover call still provides some opportunity to trade with a conservation strategy. That's what I did for a lot of years. I know crimsonghost already does this from time to time.
Sentence 2 does not compute unless one is undercapitalized for the trades they are making.
I do wish a few of them would try it with a $40 stock when they can. About the third time your put expires while trying to buy the same 100 shares it becomes apparent how many years it would take to get that income from a quarterly dividend. I just counted 28 failed attempts to buy utilities since OCT. It starts again next week when I sell a half dozen new ute contracts. I have been assigned occasionally but never a ute.