Great post Bill. Whilst the strategy (somewhat) protects against downside risk, it actually creates an upside risk that doesn't exist for holding the underlying share. My experience with those small time players that tout such a strategy is that the value of the upside risk is very poorly understood and significantly underestimated.
Retire on equity, how ?
- Thread starter quitratrace
- Start date
Great post Bill. Whilst the strategy (somewhat) protects against downside risk, it actually creates an upside risk that doesn't exist for holding the underlying share. My experience with those small time players that tout such a strategy is that the value of the upside risk is very poorly understood and significantly underestimated.
Why doesn't this mutl-quote button work ?!
Thanks everyone for the replies, you gave me few ideas to look into. I have been doing the round & met few FPs, it was a waste of time, one post to my SS friends cleared the picture for me. When I turned half a century couple of years ago, got a first notice from the big fellow upstairs, nothing really serious, but make me think better make use/enjoy each day and don't want to do what I've been doing for the past 25 years.
Dave, your links to the thread by Keithj on LOE is excellent, I need time to digest it.
Propertunity, I may look into this covered calls, but am a bit share averse as tipped my toes in the stock market just before the GFC and got burnt up to my knees I think.
Once again thank you everyone.
Thanks everyone for the replies, you gave me few ideas to look into. I have been doing the round & met few FPs, it was a waste of time, one post to my SS friends cleared the picture for me. When I turned half a century couple of years ago, got a first notice from the big fellow upstairs, nothing really serious, but make me think better make use/enjoy each day and don't want to do what I've been doing for the past 25 years.
Dave, your links to the thread by Keithj on LOE is excellent, I need time to digest it.
Propertunity, I may look into this covered calls, but am a bit share averse as tipped my toes in the stock market just before the GFC and got burnt up to my knees I think.
Once again thank you everyone.
Last edited:
Has anyone looked at writing put options over shares instead of writing calls? You would hold cash on deposit as cover. This also provides an income and until exercised (and if you write put options well out of the money you may never be exercised) you earn interest on your funds.
I managed to earn good monthly income on this strategy with only $200,000 capital...though I was pushing the envelope a bit (writing at strike price one below current share price and with one month to expiry on each occasion).
If you are fortunuate you may never have to actually buy the shares using this strategy. Some larger brokers (such as Commsec) may be reluctant to give you a high enough level to enable you to do this this online.
I managed to earn good monthly income on this strategy with only $200,000 capital...though I was pushing the envelope a bit (writing at strike price one below current share price and with one month to expiry on each occasion).
If you are fortunuate you may never have to actually buy the shares using this strategy. Some larger brokers (such as Commsec) may be reluctant to give you a high enough level to enable you to do this this online.
Ajax,
Does one actually "write puts" on shares one owns? I thought you'd write puts with cash as cover. Aren't you forced to buy the shares when you've written puts?
Or do you mean you can have shares as security that will be sold, and the proceeds will go to covering the put?
Does one actually "write puts" on shares one owns? I thought you'd write puts with cash as cover. Aren't you forced to buy the shares when you've written puts?
Or do you mean you can have shares as security that will be sold, and the proceeds will go to covering the put?
Back to writing covered calls again are we? It's a crock on the ASX. Premiums too small, brokerage too high and far too few stocks liquid enough to write them on.
These are mostly over $30/sh and one contract is 1,000 shares. So you need to have $30 - 50,000 tied up to write one contract. You pick up a few dollars and sign away any up side but carry the can for all downside.
I did Daniel Kercher's seminar and while I do not recommend it, it would be better to do that than nothing. Go into it clear in your own mind that he is a spruker (and a good one) and will only tell you the plusses as they all do.
BTW Writing Cash Covered Puts is the same risk.
Read a little on that here:
https://admin.na4.acrobat.com/_a831474155/p66281181/?launcher=false&fcsContent=true&pbMode=normal
These are mostly over $30/sh and one contract is 1,000 shares. So you need to have $30 - 50,000 tied up to write one contract. You pick up a few dollars and sign away any up side but carry the can for all downside.
I did Daniel Kercher's seminar and while I do not recommend it, it would be better to do that than nothing. Go into it clear in your own mind that he is a spruker (and a good one) and will only tell you the plusses as they all do.
BTW Writing Cash Covered Puts is the same risk.
Read a little on that here:
https://admin.na4.acrobat.com/_a831474155/p66281181/?launcher=false&fcsContent=true&pbMode=normal
Holy smokes - you sound like a beaten man. What did you let them do to you ??
Cheer up young sausage....you're a multi-millionaire !!!
If your expenses are low at 50K (which is way higher than most retired folks), then you are home free with some knowledge and some balls to act. Get to it man.
I reckon the question is....can you afford not to ??
It's not the right advice for this thread; doesn't mean it's never the right advice.
I wouldn't write CCs on the ASX under ANY circumstances. IMHO.
And some people would never buy houses in Australia. Or drive a car. Or have sex before marriage.
That is what I call 'due diligence'...........
I wrote in the Magic Moo Cow game on the Coffee section my views on options. They have a time and a place, as does everything in life. I may have just interpreted you wrongly, but I'm not a fan of the word never.
I certainly wasn't suggesting them in this thread to this thread's originator, he's in a much different position. I suggested he look at Keith's threads, since that sounds like a similar position. This was (tongue in cheek here) 1 on-topic reply more than you had
I certainly wasn't suggesting them in this thread to this thread's originator, he's in a much different position. I suggested he look at Keith's threads, since that sounds like a similar position. This was (tongue in cheek here) 1 on-topic reply more than you had
because you are wrong
MQG today trades at $42.26
Sell dec 38 call = $7.44 =
Actual outlay $34.82
actual profit $3.18 for 6months = 9.13% twice a year is 18.26% (less brokeage) not bad money
Down side risk if price drops to $34.82 but consider holding on dividend your return per year still 5.75%. and still have $7.44 in the bank at term or but more shares if goes lower.
You must want to own the company and not be greedy as that is the real problem there are no fast bucks just hard work, if you know what you are doing
if you are not using options you are at risk.
because you suggested an alternative.
driven and focussed people get rattled when you show them a new path.
Hi all,
Sunfish,
Beautifully succinct and 100% accurate. Those that don't believe it have never seriously tried it, nor looked at the potential gains from just the bull market without selling calls.
reefer, what have you been smoking,
Any danger of you looking at downside risk for that strategy?? MQG has had a price range of $15, $28, and $23 over the last 3 six month periods, yet you want it to be in a range of only $10.62 for the punter to stay in the money over the next 6 months.
Put it another way, as soon as the price of the shares trade lower than $35 or above $45 then the strategy is bad, with a very high likelyhood of it happening.
bye
Sunfish,
Beautifully succinct and 100% accurate. Those that don't believe it have never seriously tried it, nor looked at the potential gains from just the bull market without selling calls.
reefer, what have you been smoking,
Any danger of you looking at downside risk for that strategy?? MQG has had a price range of $15, $28, and $23 over the last 3 six month periods, yet you want it to be in a range of only $10.62 for the punter to stay in the money over the next 6 months.
Put it another way, as soon as the price of the shares trade lower than $35 or above $45 then the strategy is bad, with a very high likelyhood of it happening.
bye
Sorry Bill you must be right, Ill stop or may be pick another company.
As you said "Those that don't believe it have never seriously tried it"
Your answer would suggest just that.
so once again thanks for your input great answer.
I'm off for that smoke you talk about.
thank you thank you.
I feel so refreshed.
Thanks BillL, I felt a bit lonely there.
As for Macquarie, it has done a couple of BIG dives in recent years and if you are wring CCs you have sold the upside (so ignore them in the chart) but still carry the can for those dives in value.
I believe it is a useful strategy during long steady bull markets and even then you should use an on-line broker such as optionsXpress (just an example, not a recommendation) trading the US market.
As for Macquarie, it has done a couple of BIG dives in recent years and if you are wring CCs you have sold the upside (so ignore them in the chart) but still carry the can for those dives in value.
I believe it is a useful strategy during long steady bull markets and even then you should use an on-line broker such as optionsXpress (just an example, not a recommendation) trading the US market.
Similar threads
