What Did You Buy Today?

[fenders53]

(12-30-2020, 06:41 PM)pdaignau Wrote:

(12-28-2020, 06:26 PM)fenders53 Wrote:

(12-28-2020, 10:57 AM)pdaignau Wrote: What are people planning on buying with their 2021 IRA contributions?  I'm still undecided.

• In my Roth I've been experimenting with higher yield (PCI, T, etc.).  I'm thinking about something like QYLD.
  
• In my wife's Roth, I usually buy the best value/quality DGI stock I can.  Nothing is jumping out at me, might buy into a DGI ETF (for now).
  

Unrelated... Bought a few more shares of BABA.  I've been working on a small position on the recent drops.  I know it's not DGI, but I've seen people here talking about it.

Paul

I own some T and used to own a lot more at times.  FWIW it's an income stock period.   It's a fake Aristocrat/DGI after so many years of miniscule raises and high debt and in my opinion you have to do some combination of the following to make it worth the risk.

-never buy many, if any, shares when it is up above 30.  You don't have to buy them all rock bottom but you better be adding when it is probing sub 27.  

-enter by selling a put when it get's near the bottom of what you believe is the trading range.  They will mostly expire worthless, so rinse and repeated until you get some shares assigned.  Sell some calls, at least quarterly.  The option income added to dividend income piles up.

-don't be afraid to trim some shares if you get lucky and the SP runs a few months after you bought low. 

-it's pretty easy to collect 15% a year in a stock I consider a complete dog for the foreseeable future.  If they get their act together and it runs past $40, oh well.            

I'd go easy on high yield anything until we get a pullback.  Most of the ones I follow always get smoked in a market downturn.  When the credit markets get scared they suffer.

Thanks for the feedback.  My "Dividend" / "Fun" portfolio is just starting to get to the point where basic option play is feasible.  I took this and your followup post on the strike prices as indicators its time to start playing around with options more.  I followed suit.  I sold a couple of Cash Secured Puts (Cash Secure Puts) on AT&T.

How do you track money generated from selling CSPs?  Dividends / DRIPs lower the cost basis of stock I keep, but CSPs aren't necessarily tied to a holding.  I guess you treat it like new cash?

Thank you,
Paul

I do track it precisely because I have a specific place for all the income.  Not that the specifics matters to you, but I had a goal of $50K income I placed in an extremely short-term bond fund that isn't volatile.  I might use that money in a few years, or not.  It's there now and safe if I choose to use it.  That goal met in OCT I started putting the new proceeds in a a growthy port I started a thread on.  Intend to do that for 24 months so $60K invested but only if I make the income happen.  I need $2500/mo income to hit that goal.  I can exceed that 10 months a year.  Those are personal goals but set a realist one for yourself. You'll know soon what reasonable is for now.  It might $100 and that works.  

To answer your question.  The income counts no matter what you do with it.  Buy a couple shares in whatever you choose. It's money in hand before you invest it however you choose.  The income you receive is entirely dependent on the amount of risk you subject yourself to.  Lets use a $50 stock for an example.  Let's assume we desire a minimum of a 1% return per month, so 12% annual return.  That exceeds the long-term average S&P return and it's a bit safer because you are choosing your entry at below today's price.  So you need a $50 premium after commissions if any for a 30 day expiration.  That is a 1% return.  You could sell a 15 day option for $25 and same result.  Still 1% annualized.  

In reality I don't settle for that very often.  You need more than 1%/mo for anything risky at all.  The VIX (volatility index) significantly effects the premiums collected on any given day. A somewhat risky stock close to the money might pay 5% for a month.  I sell some of those as well on stocks I am truly comfortable owning a year or more.  

When the market goes to hell you will be buying some shares so ALWAYS be comfortable when you sell a contract.  I frequently roll options forward to dodge assignment with success but that's another subject.  I'm no expert but I've sold 30-50 separate contracts a month for years so I understand the good and the bad outcomes well enough. I am no better than average at picking tops or bottoms but this has been very forgiving.

The best advice I can give is stick to low volatility stocks until you truly understand the risk.  But in the end the risk is less than just buying shares.  Your risk is selling a put and the stock rockets high fast.  You made money but missed the potential gain.  That is your trade off.  Do it right and you'll mostly just collect premiums.  

Nilesmike is an options guru IMO.  I just practice a simpler strategy.  We have discussed this subject ad nauseum on the conservative options thread but we are just talking to ourselves.  Nobody ever asks a question.