There is a simple concept.."The 72 rule" where you divide into 72 your average compounded annual return and that is the number of years it takes to double your money.
This time of the year, If you own stock you can simply sell a Jan 2014 covered call, the option to another to claim your stock at a specific strike price for a premium determined on how volitile the stock trading pattern is...99% of the time this premium is 10 - 15%. So your giveaway is that strike price + premium. Until this trade is closed this sale of a covered call is a tax deferred, cash loan.
Until the stock is claimed you the shareholder pocket the company's quarterly dividends.
Negatives? You can loose on potenial upside and the stock is locked up until you close out sale of call.
First play this on a piece of paper until you understand it....
I often ask, If you did not have a 15% return last year then why not?
Comments 8 Pending 0
etienne
ReportOn March 3, AAPl was $430 and the Jan 2014 $430 calls were $45.
Today, AAPl is at $450 and these calls are the same price.
Why is this? Time robs all stock options their premium. This is the beauty of this suggestion. For two months, since March 03, it gave the shareholder $45 tax free cash and/or $45 hedge which was needed now but no longer.
One can close these out now or allow the stock run then close these out for a paper tax loss but real cash gain.
Okay, no more discussion on this strategy
etienne
ReportFinal recap!
on March 3, when I wrote this last comment, AAPl was $430 and the Jan 2014 $430 calls were $45.
Today, AAPl is $450 and these same calls are $45,
So, this strategy allowed you $45 tax free cash and/or $45 hedge at no real loss to your profitability.
Now, you can close this out and sell a higher strike price or do nothing until the premium drops completely, giving you a paper tax loss but a real cash profit.
My purpose was to explain an investing strategy that works.
Good-bye
etienne
ReportObviously, AAPL is under attack. here is where the beauty of this strategy as outlined two months ago comes in.
In Dec, when AAPL was $520 you could have sold the Jan 2014 $520 calls for $75+...Today these can be closed out at $17 for a $58 profit....
But the stock is down $90? No problems! You can now sell a lower strike price Jan 2014 call...The Jan 2014 $430 call sells for $45.65. If this was done?
Let's do the math: $430 + $58 + $45 = $533. But your stock can be taken away at $430 + $45 = $475 Bottom line? The stock is down $90 and you put $105 in your pocket with only a paper loss.
Last year, I recommended selling the Jan 2013 $600 calls for $80 then close them out at $40 only to sell the Jan 2014 $600 calls for another $80 for a total of $120. Ultimately the Jan 2013 $600 calls expired worthless and the 2014 $600 calls are now..?
Once a call that is sold loses premium; why hold onto it? I like to chase that 15% premium. An example of this was last week, AAPL was down $10 and the $520 calls was only down $1. This also indicated how AAPL was oversold. due to HEDGE FUND "orchestrated" attack.
Once again, if you sell these "covered calls" you keep the AAPL declared dividend.
Also If you sell "covered calls" you are not locked into that trade. Some trade multi times a day..some never trade with the "Who Cares" attitude..Everyone has different needs and time luxury.
I realize this is not a financial web site but I just like to introduce people to strategies when it comes to their stocks. Anyone who owned AAPL and listened is in a better position now.
etienne
ReportThis original posting is quite interesting! AAPl was at $520 and the Jan 2014 $520 calls sold for $70+...IF an AAPL investor held the stock and sold a covered Jan 2014 $520 call then; they were saying.."I'm happy with 15%. This will give me a HEDGE down to $450 and a giveaway of $590.
Look where we are now! These calls are now $21...One could close these out and profit $50+ only to resell them once again at $80+. IF the trade is closed out then it is now taxable...if left opened, it remains a tax deferred cash loan.
I called this the option see-saw.
Now, if you sell covered calls you are still entitled to all AAPL dividends especially a post dated "special dividend" that is being rumored in many circles.
At this point in the market I think this strategy is prudent for other stocks
the whispering wind
ReportFunny how numbers make the world go round.
Last year, this was introduced when the stock was $600 as a way to hedge but lock in future upside at the present.
Then, the Jan 2013 $600 calls sold for $80 and the stock closed at approximately $520.
Now this year, the Jan 2014 $520 calls sold for $70 and this "fabricated" drop was to $450.
Some will say this is merely catch up but is it...IF you purchased the stock at $600,,,this has ensured that $600 principle has remained intact, waiting for the upside to happen when it does and it will
the whispering wind
ReportTime to revisit this comment....The Jan 2013 $600 calls expired worthless with the stock down almost the value of those contracts. So, the shareholder was even without factoring in the AAPL dividend.
If the Jan 2014 calls were sold for anther 15%, today's action is a mere footnote in the journals of HEDGE FUND MANIPULATION...
Now, the stock market has had a great Jan. Many pros are selling stock and buying near term calls in that stock for any further upside action.
By the way, Charities need HELP>
the whispering wind
ReportFor example , last year in the SPring when AAPL was climbing past $600 the Jan 2013 $600 calls could be sold for $80...they are now eighteen cents.
This put $80 a share tax deferred cash in your pocket and a hedge down to $520 where it is now.
Over 70,000 contracts were sold for $80 to $120 each...Hundreds of Billions gone like the ..."Whispering Wind".
Yet, the CHARITIES GO HUNGRY...Very sad, indeed
the whispering wind
ReportThis has been removed from the "latest commets"..?
It is helpful and relevant.