Happy Tuesday Everybody! Make sure to leave your $0.02 in the comments. I am always open to feedback and future video suggestions so make sure to leave a comment below! =)
Sounds great in a perfect world, but remember we have weeks/months your stock price will dip 3%, 4%, 5%, which in turn forces you to write farther out of the money to your avg. cost, limiting your premium you can collect, it is not reasonable to believe you can keep this up every week at these premiums.
You are right! I recently sold a 20 delta put in QQQ with 2 days to expiry and got assigned😮 The price dipped several dollars below my strike price but i stuck to my guns and sold calls at or above my cost basis. Yes, less premium but i went out an extra day or so and got more premium than my original puts. It all comes down to not being afraid to own the equity/etf ur selling calls and puts on.
Joe! Some video ideas 💡: 1) Backtest this 20 years +/- so we can see the ups and downs, with 2 or 3 option deltas (high, mid, low) and also account for the differing interest rates over that period. 2) Make this same video on DIA (Dow Jones Index). 3) Make this same video on QQQM, a lower cost version of QQQ. It’s newer (can’t back test), lower management fee. Same institution as QQQ. Thank you 🙏
Curious, I’d be retiring/working much less in 5 years and need to know best how people split their pay, how much of it goes into savings, spendings or investments. I earn around $250k per year, but nothing to show for it yet.
quite inspiring! in what it seems to be like a possible recession, one of my goals this year is to have a financial expert assist me build wealth over time.. could you recommend yours please?
Another idea during down markets is to use that extra cash for selling cash secured puts while also selling covers calls in parallel. Requires a bit of tactical approach but can be done as well.
Hi Joe, great video! Heres an addition you could consider adding. Buy 1 cheap put and or 1 cheap call option along with you existing prcoess that way when there is a significant market move those one of those cheap long option will offset some of the opportunity costs. Love the channel.
Another method is to buy a monthly dividend income fund. There's stable ones that pay $0.06 per unit, and the price doesn't move much at all for years. $500k into that yields enough per year in dividends. Without the work of selling options weekly and price doesn't drop like SPY
@@philelmo All of these funds will go down as the SPY and QQQ goes down, and the recovery will be slower then SPY if it will ever happen and SVOL can nerly go to ZERO in case of black swan events and never recover, these funds are good only for income, don't expect capital appreciation from any of the above.
I enjoyed this video, thank you. I've had a war going on in my own trading between whether to solely do cash-secured puts or covered calls. You could play either side with cash-secured strangles. With that said, could you possibly do a similar video with IWM? I'd be interested to see the results. Thanks again! 🙏
He explained it… How often does that happen? If the market is going down, (volatility up) you’re not getting assigned, more likely you’re holding onto your shares…
@@delliott777 It doesn't have to go down 20%. Today it went down 1.58% and that meant his hypothetical portfolio lost $4,400 while we're waiting a week to make $1,000.
In uncertain times, how can one outperform with the S&P 500? my money goal of $3m seems far-fetched and just saving is not an option, do I seek a license advisor to help grow my funds, or wait for a favorable economy? I have barely 5 years to retirement.
@@ScottLarrry Very correct, investing is plain-sailing using a well experienced advisor, and at first-hand experience, I've witnessed my investments compound over 280%, since Jan.2020 amid rona-outbreak, summing up nearly $1m as of today.
@@HRMColoniallifeinsurance this is huge! been a fan of asking questions like Socrates, seeking information and handling certain duties to professionals, my $ 100k index has been shortened by 10% due to inflation over the years and I could really use a help at this point
I take guidance from ''DESIREE RUTH HOFFMAN a renowned figure in her industry with over two decades of experience. I'd suggest you research her further on the web.
@@HRMColoniallifeinsurance very much appreciated, just inputted DESIREE RUTH HOFFMAN on the internet, spotted her consulting page ranked top and was able to schedule a call session. Ive seen commentaries about advisors but not one looks this phenomenal
When running this strategy don't live on all your cash flow. Set 5 or so % of your cash flow towards dollar cost average down. So as the market continues to go down you can buy more shares to get more contracts
What about buying leaps instead of owning the stock and selling synthetic covered calls. I know you dont get dividends but you can sell more contracts, almost double the amount
Yes you could do that. Probably be better to do the same # of contracts . Buy leap calls at strike 1/2 current stock price to replace bought stock and leave the cash in a MM account earning 5%. Then if the S+P 500 crashes 30% plus buy more call leaps. So invest $250,000 in call leaps ( 9 or 10 $250 contracts ) and $250,000 + - in cash earning $12,500 annually, at least to start.
Why does he say that selling calls closer to the actual price is more aggressive, its actually more conservative. You get more premium and your breakeven is lower. Selling ITM calls is actually more conservative, your breakeven is even lower and if you can make 1-1.5% per week you are doing really well.
Hi Joe, I recently found your channel and it is very inspiring and helpful; thank you! Quick question about covered calls during price decreasing - If I write a covered call and the underlying assets go down - does it mean I avoid the assignment (because the call option is not "in the money")? (I am referring to what you said at 14:02 about avoiding the assignment).
This part in the video confused me as well. If the price depreciates, you'll never take assignment from your covered calls. In that scenario, it's the cash-secured puts that would be an issue. Did I misunderstand, @AverageJoeInvestor?
Joe you explain things well...but you are making too many simplistic assumptions. I am running CC on IWM right now...5 contracts. The variations are crazy. Many calls mature to 90% early to allow closing before expiry. How about back testing SPY and see how much income could be generated in 2022 or 2023?
If the market is going down, wouldn’t it be “safer” to sell CCO’s nearer to the money? When the market is going up, it’s necessary to be further out of the money because risk of assignment is higher.
If your cost basis is $250 and the stock drops to $200 you don't want to be selling $205 calls. Ideally you still want to be selling calls at $250 or above but there will not be any premium. But at least if you sell let's say a $225 call it is less likely to jump to $225 than $205.
AJ - loved the video but 10% a year? That's not a challenging goal - there are EFT's that will do that like SMH or VFLO. You can sell an AMZN at the money LEAP for next March and make 17%. 20%ish is very normal for tech on year LEAPS - you can choose which one you like - some are riskier than others - 30% for the volatile SMCI or even more for GCT. If you are going to actively trade options - which I do - I would say 30-40% a year is a more realistic target. Pretty sure 10% on your money would be an awful year for you AJ. :)
Started with 8 contracts. If gets called away at a higher SPY price, then it costs more to buy again. Probably can only buy less than 8 contracts. You did explain it, but you did calculate it assuming 8 contracts x12 months
Yes this is correct that eventually some point it’s POSSIBLE to fall below 8 contracts but not likely at all in my opinion, especially if you avoid assignment by rolling instead, even for a debit. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍
Can you get that on margin, something like 4:1 I think I heard someone say? That would be 125k for 500k worth? But you pay the margin back, so you might need to buy more so you have enough after paying the loan. Too much math for me at this late hour, but I'd bet someone has figured it out.
The SPY closed today at 501 dropping 5 points on the day of your video. So if you have 880 shares your portfolio just dropped $4,400, in ONE day while you're waiting a week to make $1,000. I think this strategy does not do very well when the market is not in an uptrend.
Happy Tuesday Everybody! Make sure to leave your $0.02 in the comments. I am always open to feedback and future video suggestions so make sure to leave a comment below! =)
Sounds great in a perfect world, but remember we have weeks/months your stock price will dip 3%, 4%, 5%, which in turn forces you to write farther out of the money to your avg. cost, limiting your premium you can collect, it is not reasonable to believe you can keep this up every week at these premiums.
I guess it might be a good idea to also have a stable of dividend stocks to buoy up your income in downturns.
You are right! I recently sold a 20 delta put in QQQ with 2 days to expiry and got assigned😮 The price dipped several dollars below my strike price but i stuck to my guns and sold calls at or above my cost basis. Yes, less premium but i went out an extra day or so and got more premium than my original puts. It all comes down to not being afraid to own the equity/etf ur selling calls and puts on.
Joe! Some video ideas 💡:
1) Backtest this 20 years +/- so we can see the ups and downs, with 2 or 3 option deltas (high, mid, low) and also account for the differing interest rates over that period.
2) Make this same video on DIA (Dow Jones Index).
3) Make this same video on QQQM, a lower cost version of QQQ. It’s newer (can’t back test), lower management fee. Same institution as QQQ.
Thank you 🙏
Since it is a weekly make it with TQQQ. Remember to separate income tax.
Curious, I’d be retiring/working much less in 5 years and need to know best how people split their pay, how much of it goes into savings, spendings or investments. I earn around $250k per year, but nothing to show for it yet.
quite inspiring! in what it seems to be like a possible recession, one of my goals this year is to have a financial expert assist me build wealth over time.. could you recommend yours please?
If you make $250,000 and have 5 years till you want to retire, and have no savings, you have other problems.
As mentioned, the main risk is on large market drops. Now you either stop writing calls (no income) or risk losing when the price goes back up.
But then you sell put and buy again.
Another idea during down markets is to use that extra cash for selling cash secured puts while also selling covers calls in parallel. Requires a bit of tactical approach but can be done as well.
Really enjoy this video along with the cash buffer! Would love to see this same video on a daily basis instead of weekly :)
Hi Joe, great video! Heres an addition you could consider adding. Buy 1 cheap put and or 1 cheap call option along with you existing prcoess that way when there is a significant market move those one of those cheap long option will offset some of the opportunity costs. Love the channel.
Great video alls you have to do is sell some puts or buy some pits for protection
Another method is to buy a monthly dividend income fund. There's stable ones that pay $0.06 per unit, and the price doesn't move much at all for years. $500k into that yields enough per year in dividends. Without the work of selling options weekly and price doesn't drop like SPY
Like which?
@@John-wl3hu svol
Spyi pays 11.99% monthly dividends.
SPYI QQQI SVOL SPYT
@@philelmo All of these funds will go down as the SPY and QQQ goes down, and the recovery will be slower then SPY if it will ever happen and SVOL can nerly go to ZERO in case of black swan events and never recover, these funds are good only for income, don't expect capital appreciation from any of the above.
Awesome video. Thank you for sharing.... your income thoughts have grown over the last couple years. ( Schd & pure dividends ) 🥰
I enjoyed this video, thank you. I've had a war going on in my own trading between whether to solely do cash-secured puts or covered calls. You could play either side with cash-secured strangles. With that said, could you possibly do a similar video with IWM? I'd be interested to see the results. Thanks again! 🙏
Excellent video! Thanks for sharing
Very well explained and complete video !!
The main risk is: what if the market drops 20-30%? Your capital will go down accordingly.
He explained it… How often does that happen? If the market is going down, (volatility up) you’re not getting assigned, more likely you’re holding onto your shares…
@@delliott777 well you cannot sell covered call above your cost anymore as there will be no more premium!
@@delliott777 It doesn't have to go down 20%. Today it went down 1.58% and that meant his hypothetical portfolio lost $4,400 while we're waiting a week to make $1,000.
You don't lose if you dont sell.
Yet he still has the same number of shares 🤔
Can you please discuss the tax implications of doing this weekly? Cap gains and income tax implications. Please and thank you.
Do you not like selling puts after the stock is called away ?
Thank you Joe. Excellent presentation!
Nice info. Why not sell puts against SPY with the 50k on the side?
Keep in mind you can make $25k just by putting the $500k into a bond mutual fund with no risk. Not sure where you can retire at $50k.
In uncertain times, how can one outperform with the S&P 500? my money goal of $3m seems far-fetched and just saving is not an option, do I seek a license advisor to help grow my funds, or wait for a favorable economy? I have barely 5 years to retirement.
patience is your best friend here, although you can benefit from the help of advisors, especially when it comes to smart financing.
@@ScottLarrry Very correct, investing is plain-sailing using a well experienced advisor, and at first-hand experience, I've witnessed my investments compound over 280%, since Jan.2020 amid rona-outbreak, summing up nearly $1m as of today.
@@HRMColoniallifeinsurance this is huge! been a fan of asking questions like Socrates, seeking information and handling certain duties to professionals, my $ 100k index has been shortened by 10% due to inflation over the years and I could really use a help at this point
I take guidance from ''DESIREE RUTH HOFFMAN a renowned figure in her industry with over two decades of experience. I'd suggest you research her further on the web.
@@HRMColoniallifeinsurance very much appreciated, just inputted DESIREE RUTH HOFFMAN on the internet, spotted her consulting page ranked top and was able to schedule a call session. Ive seen commentaries about advisors but not one looks this phenomenal
I have an impression that you are making the same video over and over again lol
Some of us older folks like me, need to hear things repeatedly until we understand and get the confidence to engage in the strategy.
I have an impression that you are making the same video over and over again
@@omarghosn8655 Some of us older folks like me, need to hear things repeatedly until we understand and get the confidence to engage in the strategy.
Great video as always, Joe!!
When running this strategy don't live on all your cash flow. Set 5 or so % of your cash flow towards dollar cost average down. So as the market continues to go down you can buy more shares to get more contracts
Thank you for the video. What do you think about the cover call strategy on stock symbol SOXL thank you.
Hey Joe, Thanks for all your content, you've helped me a lot. I just joined patreon and would like to talk to you, how do i set that up?
Eric
Luv all ur videos. Which is the etf you like the best for this strategy? Qqq, iwm, spy? Or any other etf?
How about 50 k no covered calls selling all dividend income ?
What about buying leaps instead of owning the stock and selling synthetic covered calls. I know you dont get dividends but you can sell more contracts, almost double the amount
Yes you could do that.
Probably be better to do the same # of contracts .
Buy leap calls at strike 1/2 current stock price to replace bought stock and leave the cash in a MM account earning 5%.
Then if the S+P 500 crashes 30% plus buy more call leaps.
So invest $250,000 in call leaps ( 9 or 10 $250 contracts ) and $250,000 + - in cash earning $12,500 annually, at least to start.
Buying leaps is losing strategy
Why does he say that selling calls closer to the actual price is more aggressive, its actually more conservative. You get more premium and your breakeven is lower. Selling ITM calls is actually more conservative, your breakeven is even lower and if you can make 1-1.5% per week you are doing really well.
It is more aggressive because it is more likely to be called away.
Hi Joe, I recently found your channel and it is very inspiring and helpful; thank you!
Quick question about covered calls during price decreasing - If I write a covered call and the underlying assets go down - does it mean I avoid the assignment (because the call option is not "in the money")? (I am referring to what you said at 14:02 about avoiding the assignment).
This part in the video confused me as well. If the price depreciates, you'll never take assignment from your covered calls. In that scenario, it's the cash-secured puts that would be an issue. Did I misunderstand, @AverageJoeInvestor?
Joe you explain things well...but you are making too many simplistic assumptions. I am running CC on IWM right now...5 contracts. The variations are crazy. Many calls mature to 90% early to allow closing before expiry. How about back testing SPY and see how much income could be generated in 2022 or 2023?
If the market is going down, wouldn’t it be “safer” to sell CCO’s nearer to the money? When the market is going up, it’s necessary to be further out of the money because risk of assignment is higher.
If your cost basis is $250 and the stock drops to $200 you don't want to be selling $205 calls.
Ideally you still want to be selling calls at $250 or above but there will not be any premium. But at least if you sell let's say a $225 call it is less likely to jump to $225 than $205.
@@janshuster1426okay I see
SPY or IWM? I thought you were rooting for IWM. And what happens when the market drops.
Buy all the things!
Your channel is filled with spam comments that are old, yet you don't remove/block keywords
Personally, if I were going to do this I would sell only 2-3 points OTM and would be selling options that expire the next day and rolling daily.
Looks like a Job , the title of the video is "How Retire with $500K Today! NEVER. WORK. AGAIN."
@@coocoocachooglin It is, at most, a 30 minute a day job.
AJ - loved the video but 10% a year? That's not a challenging goal - there are EFT's that will do that like SMH or VFLO. You can sell an AMZN at the money LEAP for next March and make 17%. 20%ish is very normal for tech on year LEAPS - you can choose which one you like - some are riskier than others - 30% for the volatile SMCI or even more for GCT. If you are going to actively trade options - which I do - I would say 30-40% a year is a more realistic target. Pretty sure 10% on your money would be an awful year for you AJ. :)
Started with 8 contracts. If gets called away at a higher SPY price, then it costs more to buy again. Probably can only buy less than 8 contracts.
You did explain it, but you did calculate it assuming 8 contracts x12 months
He also explained using the cash buffer to get you back to the 8 contracts. At least that was my assumption could be wrong.
Yes this is correct that eventually some point it’s POSSIBLE to fall below 8 contracts but not likely at all in my opinion, especially if you avoid assignment by rolling instead, even for a debit. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍
Sure does beat going to a job, you just need startup capital.❤
500k in cornerstone 100k yearly
Can you get that on margin, something like 4:1 I think I heard someone say? That would be 125k for 500k worth? But you pay the margin back, so you might need to buy more so you have enough after paying the loan. Too much math for me at this late hour, but I'd bet someone has figured it out.
The SPY closed today at 501 dropping 5 points on the day of your video. So if you have 880 shares your portfolio just dropped $4,400, in ONE day while you're waiting a week to make $1,000. I think this strategy does not do very well when the market is not in an uptrend.
You don't sell so you don't lose.
"I think this strategy does not do very well when the market is not in an uptrend." Or, if it's in too much of an uptrend.
In what scenarios can selling covered calls result in a loss
When the underlying stock goes down a lot.
Selling below your cost basis.
How to retire on $500k
Step 1. Have 500k
Step 2. Retire
SPY can easily drop to 450 within this month of May!
Can you make a video on the minimum you need to retire and live comfortably? Thank you.
lol yea let me pull 500 thousand out of my ass to invest all at one time.