When the Dividend Snowball Really Takes Off (ACTUALLY)
ฝัง
- เผยแพร่เมื่อ 3 ต.ค. 2024
- In this video we are talking about When the Dividend Snowball Really Takes off in your portfolio and how you can REALLY have it take off much faster with a key ingredient I will share in the video which is selling covered calls on dividend stocks in your dividend portfolio.
JOIN THE PATREON COMMUNITY OR Work with Joe 1 ON 1!
➡ / averagejoeinvestor
WANT ACCESS TO ALL OF MY SPREADSHEETS I USE ON THE CHANNEL ALONG WITH THE MONTHLY DIVIDEND STOCK SPREADSHEET AND INSTANT AWARENESS OF CHANGES TO MY PORTFOLIO? JOIN THE PATREON COMMUNITY!
➡ / averagejoeinvestor
Need a GREAT Dividend Tracker for your portfolio? Here is what I use and it is EXCELLENT:
The Dividend Tracker: thedividendtra...
This communication/content is for informational purposes only and is not intended as personalized investment advice, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This communication should not be relied upon for purposes of transacting in securities or other investment vehicles.
#dividendstocks
Happy Friday Everybody!! THANK YOU for watching and I look forward to seeing your $0.02 in the comments! #DividendStocks4TheWin
Could you do a video about the best dividend stocks to sell covered calls? Examples that have good liquidity, maybe like BAC
Great suggestion! THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
thanks for being my Scout leader in stock stuff all these years.. your a true blessing Sir.
Glad to help! THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍
Top quality content. Love the covered call approach diverging from the standard buy/hold strategy.
AWESOME! THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍
how do you perform the options contracts you describe after getting over 100 shares?
Another great video. Really enjoying my time in the Patreon Discord.
Glad to hear it! THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
I would like to see a comparison to the new ETFs that have covered call strategies. It should depend on the expense ratio.
Depending on which ETFs you’re talking about they’re not quite apples to apples.
As example the yieldmax funds run a synthetic position and don’t own the underlying shares. Treasury bills are used as collateral.
Synthetic positions have a higher propensity to devalue because they sell calls against the calls they own (instead of the stock) and since options lose extrinsic value over time (theta decay) your holdings are losing value (as opposed to stocks that usually hold their value)
Both strategies are valid with different goals. An actual covered call that Joe talks about will give you more upside in balance value at the expense of cashflow because it’s more expensive to buy 100 shares than it is to buy a call.
A synthetic position will give you more cashflow with less capital at stake but you’re most likely going to slowly dwindle away your initial balance.
There’s always more than 1 way to skin a cat as they say.
Thanks for reaching out! There are quite a few of them now actually and as the other use noted, it's not always an Apples-to-Apples comparison. The expense ratio is definitely one consideration but the underlying strategy and potential capital erosion is also important. THANK YOU for watching and for leaving your $0.02 in the comments! =)
Did they have weekly options 20 years ago? Maybe your "backrest" is misleading.... My Google search says the pilot for weekly options started in 2005, and they became standard in 2010....
I sold naked options 2002, so yes
I can appreciate where you are coming from, and it's a fair concern to have, but really it doesn't matter. It's the time period that matters and showing what incremental additional shares from option premium can do over time. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
No. They didn't...20 uears ago, dividends were a relarively "insider", secret. It wasn't since the last 10-15 years that they blew up in popularity, due to shareholders realizing with the constanf market swings, it's the only thing we actually profited with...Markets take months or years to run up, and values destroyed in less than a day. At least with dividends, you have tangible assets to show for it; Being the main advantage of dividend growth models..."The market tanked, but at least I got %6-%10 before it did..."
With dividend yield and option premium both taken into consideration, what are the two (theoretical) best growth dividend stocks to hold, accumulate, and sell covered calls on?
That's a great question! Apple and Microsoft are certainly good contenders given the higher option premium. I'd have to take time to look through my dividend stock spreadsheet. Maybe I will make a video on that. =) THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
@@AverageJoeInvestor Video on this would be appreciated.
When you say "selling weekly covered calls" are you referring to: A) selling weekly options every day (0DTE) or B) one weekly option contract per week? Also, which delta were you using to sell covered calls in this backtest? Thank you!
Great Question! I am referring to weekly options that expire every Friday and then rolling the contract to the next Friday every time. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Approximately a 20 Delta.
I thought if your CC went into the $ that the shares were automatically called away? Do you have to monitor price by the minute all week and if your cc gets close to the strike price then roll? Do you sell Covered Calls on Monday morning with a Friday expiration with the Pepsi example?
@@103eaglecrest The buyer of the contracts can call your shares away at any time. *MOST* of the time, it happens Friday (if in the money). But have been assigned early twice.
@@103eaglecrest Ideally you would sell on Friday for next Friday, now if it goes ITM then you are at risk of shares getting called away, so 1 approach is never let them get ITM and roll as soon as right before it gets there, else 2 approach would be take the risk and roll them on Friday of expiry assuming early assignment does not happen.
Can you share the spreadsheet in your videos? I’d love to run some projections of my own. Thanks!
Hey Joe, currently I have 1040 shares of Spyi… I’m 35years old. And between drip / adding my own cash I hope to double the share count by the time I’m 40 (5 years at 200 additional shares a year). After this 2000 share point is when I perceive the snowball as rolling. I look at how long to double my share count. Thanks for the video Joe
Good for you Mike. I personally am not a fan of SPYI at the age of 35 when you COULD be using an investment like SPY and selling covered calls against it. SPYI might be a better fit for somebody closer to retirement. Just my $0.02 though. THANK YOU for watching and for leaving your $0.02 in the comments! =)
What is the risk in the covered calls? Anything?
There is risk of assignment or having shares get called away below your cost basis, but you can avoid this by just rolling your contract every week to the following week. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍
Hi Joe, I've a question about the call option strategy. How do you ensure that the shares aren't exercised when stock price goes over than strike price?
I think I read this question somewhere else. And thd answer was, you just buy them at the new price. And start selling contracts again. I hope I'm right and I hope that helps.
Great Question! To ensure you do not lose your shares at times when the market price exceeds your strike price, you would roll the contract out to the following week for either a debit or credit. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Have you done a video, or would you do a video on what your strategy would be starting from the beginning? IE: “What I would do with 1K, 5K, 10K, 15K starting Capital”
Great video Joe. Thank you
Thanks 👍 THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
I'm a believer. I got my butt handed to me with GLYC this week. Fortunately, it was a pure option play. I've been selling options on it for a couple of months. I actually ended up $6 in the green because of the options. I'm doing this with some dividend stocks, as well, so I'm looking forward to the snowball starting to roll. Take care and happy investing.
Awesome! THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Thank you for the video TAJ! This is the most impactful video I have watched on your channel. A quick clarification though, I invest in ETFs, can the covered call strategy be implemented on this too, for example a VOO, SCHD or QQQM?
Crazy case study, mind blown
THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍
Great strategy, however one needs to understand underlying risk. As we keep piling on # of stocks and as long as company is doing well, everything works. However, if the company experiences business troubles, dividend cuts, etc then its time to exit from that stock else it will be disaster for the portfolio.
What delta did you sold on this strategy?
Approximately a 20 Delta. =) THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Was that at a 20 delta? Nice job joe
Correct, approximately a 20 Delta. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Wouldn't it be less risky covered calls on spy on a portfolio that large versus an individual stock
For sure and I really like doing that with my retirement portfolio. I think you can do both and for separate purposes. =) THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Do this in a Roth
Yes because this does not reflect taxes or any trading costs to cover options or the cost to convert option proceeds to shares
For sure you can do this in a Roth IRA, but you then lock the money up until 59.5 (except for contributions). I DO think there is benefit to having a retirement option strategy AND a strategy in a brokerage account to be used BEFORE retirement. =) THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Great example. However, you did not mention the risks of selling covered calls like the losses that could occur if the stock price declines below the breakeven point.
He is buying and holding, not trading. Look at a 20 year chart of PEP. It goes up. 😮😊
@Johnsmith
Can you expand on that question some?
What are the risks you are concerned about exactly?
If the price drops below breakeven on a covered call you're still good. You keep all of your shares, so you get the dividend on all of your shares - and you can use the dividend and covered call premium to pick up more shares at a discounted price.
@@mjs28s as a seller of a covered call option, you are hoping to collect the premium expecting the option to expire worthless and, therefore, keep the premium. However, if the stock jumps in value, you are forced to sell the stock thereby giving up all that upside in return for the premium you collected. My point is that as a long term investor seeking outsized total returns, this strategy appears to get in its own way of achieving that goal.
@@jamesm.3967 not sure I follow. He is selling covered call options hoping that the price of the underlying asset - PEP does not appreciate enough for the buyer of the option to exercise the right to force the sale of the asset. I find it hard if not impossible to do so consistently for 20 years. What am I missing? Besides, he only gets the dividend if he holding the asset on the ex-dividend date. Enlighten me.
I thought if your cover call hit the strike price that the shares would be automatically called away? Do you have to monitor? Do you have to monitor your covered calls all week and if it gets close to the strike price then roll the options? Do you sell covered calls on Monday with expiration on Friday in your Pepsi example?
Is there any ETFs this would work well with or do you pretty much need to stick with an individual stock to get the options frequency required.
I prefer to use index ETF’s like SPY, QQQ and IWM for creating income and then using this to turbocharge dividend stock portfolios. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍
Thanks Joe
You bet! THANK YOU for watching and for leaving your $0.02 in the comments! =)
But this assumes that your options never ever get called, that is completely unrealistic....
its all relative. it takes off the moment you start investing, and just, hopefully, gets faster over time. its totally abritrary to pick a point on that graph and say "this is the moment"
Also relative to when you start, and the initial investment amount. And, portfolio size definitely matters to yield. So, say your # is $50,000 anually to quit. Your account would need 1 million invested to sustain (key word, here), your goals. This leaves a healthy %3-%5 gap for incidentals (market pull backs, taxes, and re-investment to adiust for inflation)...While, realistically the account should need be much higher (Since, 50K is not enough to live comfortabally on, unless you own your house/car outrigjt...
Hey Joe you were right I received my premium instantly I didn't see it because I thought I would get a notification or something
THANK YOU for watching Mark and for leaving your $0.02 in the comments! 😎👍🏻
Fantastic information.
The analysis doesn’t take into account the time when your shares are called away.
Instead of letting your shares get called away, you just always roll your contract to the following week. There will be some weeks you do so for a DEBIT, but most of the time you do it for a CREDIT. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍
Good video,🤔not 100% with the options
I can appreciate that. I have other videos on the channel you can learn from. You can also join the Patreon Community and a tier with 1:1 access to me. =) THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
That "fastgraph' looks cool, however it is way toooo expensive for us.
THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
You have to account for assignments. This makes your story a lot more complicated....
You forgot that covered call income is taxed as regular income, so you need to back out taxes paid
I can appreciate that, and at SOME POINT, you would need to actually have a plan for taxes, but in the beginning I don't think you need to worry too much about taxes as you can just pay those separately. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Sorry this option sucks…swing and miss…most people don’t want to do options…covered call etfs high yield stocks and dividend growth stocks and etfs are my options…
Swing and a miss? 😂 Sucks? 🤣 It’s one thing to not want to do a suggested trade tactic, it’s another to say it’s a bad idea.
This approach is clearly beneficial, but requires hands on knowledge and work.
I don’t know how to do options and am mission out because of that, but that doesn’t mean this advice “sucks” or is a “swing and a miss”. That’s just lying.