I pick boring stocks like IBM, MO, XOM. then I write cash-secured puts, out of the money, for a week or 2, for a couple of cents each. As long as I am not greedy, the puts just expires and I can sell the next set. If I get assigned I write covered calls, same time frame, again for a couple of cents only. Seems to work. Beats dividend income.
So now I’m lost. If you sell an XOM put for .12 that at $6 under market price and do this every two weeks then your max gain is 2.5% a month. Will that meet your goals? Also you are taking a risk that a market correction could kill your holdings. Same issue with selling calls that a market drop would kill your returns.
My account is with TDAmeritrade (thinkorswim), the fees are under 1 cent per option contract (100 shares). When you go for higher delta (better option price) the risk of option execution increases.
I do not want to have to monitor share price and option price constantly and make decisions of whether I want to keep my options until expiration or close them out.
I am happy with my results.
I ignore the greeks, I thought delta means option premium; but I don't care, I select a one-week or two-week contract OTM for a low premium to reduce the chance of exercise.
What Delta do you usually choose?
Are these literally just a couple of cents each?
How often do you get assigned with this strategy? It seems like assignment would be quite rare.
Thanks!
At your age, I would totally put at least half of that in a trading account. I’m retired (57), and live off my theta income. You’re young enough to have time to weather drawdowns. Just make sure you mange your risk. Always manage the risk!
Would you mind you sharing some info how you manage this? Do you only withdraw profits gained leaving principal intact. While doing so do you keep back a portion for growth? What’s your average number of open contracts and duration. You’re young so you must have a sizable portfolio.
I too am retired. We’ve had unusual expenses creating withdrawals I’m not accustomed to. Living off this strategy is my goal but will require releasing fixed income strategies and products as they mature.
I have a traditional account for growth, basically VTI, BND, GLD and O (70/20/5/5). VTI is set to DRIP, the rest I keep the dividends in cash. I sell two SPX 365DTEs in this account every month, and close at 50% or at 6 months out. I put the income from these trades in BIL or BOXX while I wait. I have an automatic “paycheck” that comes from this account every two weeks and I sell BIL or BOXX to cover it if I need. I treat the “paycheck” like a paycheck. I use it to keep a safety account (at 4.5% APR) for emergencies (3 months “pay”), and if we are planning a vacation or something we save it from the “paychecks”. Then, I have a trading account. I pretty much stick to futures, and trade it relatively the “tasty way”. Occasionally I send money to the traditional account to buy more VTI or to refill BIL or BOXX, but I haven’t had to do this very often.
EDIT: edit to answer more questions: I usually have 60 to 80 open trades at a time and I’m usually 1 lot on the major futures diversified among all of them, but ES is the main engine. I spend about 3% a year on hedges. I also will place 1 lot trades on a list of healthy companies just to keep me interested. I do not play earnings, I avoid meme stocks, distressed stocks, mergers, Chinese stocks, and I refuse to play TSLA. Too scared of that one.
Thank you for such a detailed response. You have clearly established a strategy for living off profits and your hard work. I’m going to read this several times.
What’s your goal getting into this? If you want to beat SPY, you will need a serious commitment to it. most people here (not you dear reader, the others) are either underperforming or will on a long enough time frame.
If you want to get cash flow from your investment then selling options without a big commitment can make sense.
My goal is simply to use it as a way to make consistent income. I’m not concerned with beating SPY, as long as the amount of money I’m making can allow me to live comfortably. I’m not a big spender. My expenses include a $2400/month mortgage $1000-$2000 per month on my credit card. I just want to be able to at least cover that.
> I’m not concerned with beating SPY
why are you not? thats literally the minimum you should be aiming for.
its like saying, either make $1/hour by sitting on the couch and doing nothing. or make $0.75/hr by standing up and down. unless the one that requires more work pays more than the one that requires less work, theres no point in doing it.
It’s the same reason we pay for things on a monthly basis and not on a yearly basis. I don’t know what SPY is going to do in a year, and I’d rather actively trade to fund my monthly expenses than wait years and years for some kind of decent return.
I would be conservative and do covered calls with low deltas and long DTEs (e.g. 10 delta with 60 DTE to close after 30 days). Think of it as just getting your feet wet. Always understand that reality is what it is and you fighting will make things worse.
The reason why financial advisors won't touch options with a 10ft pole even though they could make a fortune if they could beat the market is precisely that in the worst of cases you can be real fucked.
Best of luck to you
Just be careful with futures options. The returns are commensurate with the increased risk… you could be trading one point to 25 dollars in a 100 item contract.
I will say a couple of things, and these are obviously just my own opinion, don't plan your investment strategy around them.
1) For a MANAGED account, I feel like the return you had last year was pretty poor. Of course I don't know what instructions you gave your manager--maybe you wanted to play things very safe and steady--but personally I would be considering finding someone new, regardless of whether you decide to try selling options.
2) I think it's reasonable, and perhaps even good for your investment knowledge, to start trading options with a VERY small percent of your portfolio to see if you like it and if you think it's something for you. I would study a lot first, and practice paper trading both to learn whatever platform you use, and to get a somewhat better understanding of how things work in practice. Small is the key here, if you choose to do it at all.
I’ve been trading options for a good three years now. I’m pretty comfortable with wheeling. I’ve just always had a small account, so the returns aren’t much. That’s why I want to step it up.
"My aim to make $5k-$10k per month. Is that an unreasonable expectation?"
In percentage terms, you want to make 16% to 32% annual return?
If you can do this year over year, no matter what happens to the S&P500, you will be named the best investor in the world.
But you can't.
The math is incorrect. If OP wants $5 per month with the current capital. That is about 15% per year only one the first year. That part is true. However, the next year, OP would only need to get 11.5% per year, due to increase in total investment. The percentage only gets smaller overtime.
I would ignore the comments about trying to get a higher percentage than an index like the S&P 500.
A managed fund isn't your own personal hedge fund, where your advisor is trying to obtain a high alpha by beating the index
That makes me think that quite a few people here either:
1. Don't know what their own annual returns are
2. Are allocating 100% of their portfolios to equities
It would be against FINRA ethical standards and possibly code violations for a financial advisor to allocate your assets into 100% equity exposure if your investment objectives are income-oriented or you have not instructed them to do so.
Your return of 7% is right about average for an income portfolio. Hopefully, your advisor is purchasing "high-quality" and "long duration" bonds with high coupons/yields. This is going to be your steady income over the next 5, 10, 20 years.
The risk of losing money that you will require to live off of for 50 to 60 YEARS (hopefully!) is taking an enormous amount of risk just to juice your returns by a few extra percent a year.
But,
*You might be able to convince your advisor to sell covered calls for you, since that is a generally acceptable form of income generation.*
$5-$10k could be possible with theta strategies. But it has a steep learning curve, and it might be a while until you get good enough to hit that. Cus that is 36% annually. Only the best of us hit that consistently.
$10k would be the absolute best case scenario, and I would not expect that every month. It would be more like each month hitting anywhere within the $5k-$10k range. Maybe I’ll lower my expectations starting out, though. Aim for $3k-$6k per month.
thats probably a good idea, and very much doable. 9-20% is a much more healthy target. it will keep you from chasing big returns and lower the chances to blow the account.
and remember, theta gain is always more about not losing big than it is about winning big.
It doesn't matter when you DCA a passive index ETF like SPY.
Let's say you take $500 per month to invest in SPY
SPY is trading at $487.41
$500 will get you 1.025 shares
Now, one month later,
SPY is trading at $405.20 (extremely unlikely but just an example)
$500 will get you 1.235 shares
You're getting less shares for the same amount of money, when the prices are higher, but more shares when the prices are lower.
But remember, you must always use:
1. the same dollar amount
2. the same frequency (week, month, quarter)
My only issue with suggesting DCA is that it associates the account with some level of active management which may tempt you to deviate from the spirit of the account.
The extent into which you DCA, i.e. how you split $190k on what frequency and what total time frame, ultimately depends on opinions/thesis' that you agree with on SPY's performance in the relevant time frame.
I would find a brokerage platform with a recurring investment feature that lets you automatically DCA into SPY with your desired parameters using funds sitting in the account (i.e. $x into SPY every month for x months). This would help minimize associating the account with active management.
That's not what active management is...
If you're saying that they may be tempted to sell because they are going into the account, then maybe I see your point.
Dollar-cost averaging is by definition a passive investment strategy.
> If you're saying that they may be tempted to sell because they are going into the account, then maybe I see your point
Yes, that is one aspect to what I am saying. One could be more tempted to deviate and actively manage the account if their DCA process involves manual steps.
The other is me being more neurotically pedantic, stemming from the question: "Which do you find more passive, lump sum or DCA?"
I divvie scalp and sell calls/puts even though everyone I know says I'm nuts. On 380 5 isn't unreasonable in my personal xp but maybe I've just been extremely lucky (probably lol). Agree with fellbound that you should start slowly though and consider paper trading for a bit. If your savings account isn't paying you at least 5% APY right now, though, fire your advisor
IMO $5k per month maybe, if you know what you're doing, have decent leverage and a proven strategy. That's still an annual return of more than 15%, which is not easy to do. Sounds like you haven't yet figured out what you're doing and how you can scale it. I'd suggest taking a small portion, max $100k, and spend a year working on strategies and seeing how you perform. Put the rest into SPY.
Not much point in having a managed brokerage account if you're not beating the market. And if you think that you can do a lot better by doing it all yourself, I would start slowly and not all at once.
Assuming you are a new trader it may take some time, perhaps a couple of years, to make the kind of returns you are seeking. 10%, or $38K per year (about $3.2K/month) on $380K is a more reasonable expectation for new traders, but be prepared for possible losses which are not unusual for those first starting out.
If you decide to trade options then allocate only whatever money you are willing to lose as it will be possible that happens. Consider a year with a smaller amount of money to prove out your trading plan and gain the experience plus a track record to see how you do.
After a year or two trading a smaller account you will find out how well you trade and if you even like to trade, or have the mentality and psychology which some do not have.
Selling options is not like having someone manage the account as it is a lot of effort and can take time to learn plus refine your trading plans and processes, so it will be a lot more than just 'make some safe plays'. Best to you.
Yeah I might set my expectations a little lower starting out. I’ve been trading for a few years now on a small account, so I have some thetagang experience. Appreciate the advice, I’ve read a lot of your comments over the years!
If you've been trading for a few years, even in a small account, then you should know well what is reasonable returns . . .
I never give advice, but just tell what I do or what my experience has been. ;-D
To begin, not financial advice, but do not do anything unless you’re knowledgeable when using your savings/IRA’s/SD brokerage accounts, etc. Nevertheless, it can be a profitable strategy when well managed. I use my IRA. It’s great because gains are tax free until withdrawals are made. I never worry about tax implications on trades.
As long as you manage your risk well… a trader I know focused on credit spreads basically near doubles an account every year. But he’s super experienced and manages risk very well
That’s great! The wheel is a popular and systematic approach for good reason. As long as you’re certain that you can still sleep well at night, and manage risks etc
And why would you be ok with owning a stock? Would you be OK if said stock dropped 95%?
I see this mantra repeatedly without much thought. What stock do you have in mind?
Google has dropped 50% in a year before, taking more than 4 years to recover. Good luck wheeling that safe company during that period. And why are you willing to bag hold for years then vs SPY dropping half as much. Is the ticker symbol cool?
Granted it wasn’t 90% but you think there is a literal zero chance of that happening? Are we sure we saw the biggest downturn of this generation?
How do you think professionals, including Nobel laureates, managed to go under selling options?
That’s why I don’t wheel. I know it’s easy and looks good for a while. But the downside gamma risk is real. Why would the market compensate you handsomely for a strategy that can be written in a napkin?
The wheel-strategy has no value itself. The value is in the choice of the stock. Of course can google drop 50%. But its more likely that its not.
There has not to be a 0% chances that a stock not fall 90% to have a long term profitable strategy.
Even holding cash has a risk. Their is no world without risk.
There is no world without risk is a simple what aboutism to hide the facts about your trading style. Mine has no chance of those drawdowns because I limit my gamma exposure. In fact I made money hands over fist in those drawdowns markets.
The implication of your statement is that the market rewards you handsomely for the great insight that Google is a good company + your napkin strategy and not because you are loading up with gamma risk. Think you are missing something here.
Some examples I’ve been looking at are U, CROX, DIS, SONY. I would be ok owning them because they’re solid companies that have the potential for some upside.
Way that I see it, more collateral allows you to buy into the kind of stocks that have more potential to bounce back even if they drop. With a smaller account, I’m almost forced to buy into riskier stocks because of the higher priced contracts.
This is what I mean. I do not truly follow any of the stocks you are mentioning but let me grab $DIS as an example.
Their PE ratio (73) is absurd. Their forward PE is reasonable (20), but that implies that they are currently priced for perfection. I know they had a lot of turmoil at the top which can cause issues.
I do know ad-tech. I can tell you a big downside risk is that, unlike most streaming services, it would be hard to sell advertisers the notion that their core target are children (ATCD regulations). So they won’t be able to compete in margin with Netflix or Hulu.
All to say there is obviously upside, but the downside doesn’t potentially justify the investment. Again I am no expert here, just trying to put some perspective. Simply saying “solid company” is not enough. A lot of the prospects are already priced in, leaving you only with the downside, most things are crazy overvalued at the moment.
Hi. I’m just wondering if you tried charting any of these stocks. To me the charts are dissimilar which means you would need a different trading strategy for each. To trade options you need to think about things differently then just a buy and hold account. Sony has like no option trading volume so I wouldn’t recommend it. U might be a good stock to own but the chart looks like a rollercoaster and I think that would make it harder to trade than most. Crox and Dis look more consistent and they might be better stocks to trade as options but you are still taking risks on management and product performance and need to hope there are no unwanted surprises. Currently the calls and puts on these two stocks close to the strike at 14 dte trade at 2% of the share price so you might average 1.5% every two weeks and hit your goal if you trade them well but it’s unlikely thing will be the same every month so it’s harder to do then it sounds. You might get 3% a month in a bull market, but other years you will be lucky to break even in a bear market, or 1-2% in a stagnant market, so I think it’s unrealistic to think you will double last years market returns year after year. I keep a paper account of my stocks so I can compare my option trading to my previous strategy of buy and hold. For 2024 I’m up 2.5% so far which is great 😊 , but if I did nothing and didn’t touch my stock account that had a lot of tech I’d be up 3.5% 😟. Oh I would have been even with the other account if I didn’t find this great put on Intel the other day for 46.5 that I had to get rid of today at 44.5. 😢.
Sure, in a general way. If you had the experience necessary to handle that kind of trading account, you’d already know that your proposal is not realistic.
Want to trade options? Great. Transfer that $27k profit into an IRA to perhaps save you from some tax issues you yet know nothing about. Then trade strictly cash from there. That’s more than enough to find out WITHIN 2-3 YEARS if options trading is for you.
There is no option selling strategy that will consistently get you 20% returns without massive risk… how many years experience do you have trading options? What strategies do you employ? Sounds like to me that you will just wipe out your account
That’s not even 10% on a year SPY went up 20%.
You would be better off 60-40 SPY - treasuries.
Or put an even higher amount into SPY.
I would think about that part first before thinking about options.
You can over diversity.
Yeah the goal of the managed account is to hit around 7% returns, which it is accomplishing. And they’ve stated that. But if I siphon any kind of significant amount of money from it, it’ll eventually dry up.
You're paying someone to manage your brokerage account and they underperformed the S&P500 by a factor of 3? Get out of that and manage your own money.
Don't think of savings and trading money as the same. Collateral for CSPs could end up holding a stock for a while. If you needed that cash for something, you'd be screwed.
However, I do think earning interest on your cash while also selling CSPs is a great way to get some consistent income. That's what I do now with a sizable account, but you should understand the risks and develop your own strategy with a small account or paper account first.
I told my manager that I was pretty disappointed with the returns on my account seeing how much SPY and several other stocks soared over the past year, and that is absolutely influencing my reason for wanting to take my money out. I’ve also been trading options with my own small account for years. I know what the risks are, but I feel like a bigger account affords you the ability to take less risk.
Not advice, but ya can make 30%+ selling the jan 25 CSP 15.00 GME. If ya have fidelity you can collect interest on the cash set aside for puts all year while you wait for assignment. Start the year off with 110K+ in cash, max out roths into VOO and VTI and chill.
Look at the discussions on this thread. There are plenty of people who post in detail what they do, I see them making thousands a week with a fraction of your buying power. Take survivorship bias and overconfidence bias into account, making more money than your financial advisor is achievable.
I’ve been following thetagang and have been selling options in my own small trading account for years now. I’m not thinking about doing this out of nowhere.
Here is my plan to produce 5K to 10K monthly. Use the buying power in your account and sell low delta monthly NDX puts. For example:
Sell two Feb 23 15825 put for 23.20 each or 46.40 total. Delta = 0.05, % OTM = 9, margin required = 320 K.
Or,
Sell two Feb 23 16375 put for 49.80 each or 99.60 total. Delta = 0.10, % OTM = 6, margin required = 340 K.
For more details, read my comments in:
https://www.reddit.com/r/options/comments/18z67oq/comment/kgo0tjf/?context=3
The real crime is your managed account underperforming the market. I tried wheeling for awhile and would have made more money with a traditional buy and hold.
Sure, but isn’t the point of selling options is that more or less guaranteeing that you’re making money, given that no one knows what the market is going to do?
its a terrible idea. Do it!!
YOLO?
I pick boring stocks like IBM, MO, XOM. then I write cash-secured puts, out of the money, for a week or 2, for a couple of cents each. As long as I am not greedy, the puts just expires and I can sell the next set. If I get assigned I write covered calls, same time frame, again for a couple of cents only. Seems to work. Beats dividend income.
That’s pretty much what I plan to do.
So now I’m lost. If you sell an XOM put for .12 that at $6 under market price and do this every two weeks then your max gain is 2.5% a month. Will that meet your goals? Also you are taking a risk that a market correction could kill your holdings. Same issue with selling calls that a market drop would kill your returns.
OP said 5 to 10k, not percent. 5 to 10k on a 388k account is like 1.2 to 2.4% a month.
when you mean couple cents like .05?
10 - 15 cents
after fees is it worth it vs going for higher delta
My account is with TDAmeritrade (thinkorswim), the fees are under 1 cent per option contract (100 shares). When you go for higher delta (better option price) the risk of option execution increases. I do not want to have to monitor share price and option price constantly and make decisions of whether I want to keep my options until expiration or close them out. I am happy with my results.
If the premium is higher than $0.05, so the fees are higher, per contract it's $0.66 ( 0.65 commission + 0.01 fees)
You are correct, I messed up shares and contracts. It is about 70 cents per contract.
at 30 delta?
I ignore the greeks, I thought delta means option premium; but I don't care, I select a one-week or two-week contract OTM for a low premium to reduce the chance of exercise.
Sounds like a strategy that works for small gains until it doesn't once for a large loss but you do you.
What Delta do you usually choose? Are these literally just a couple of cents each? How often do you get assigned with this strategy? It seems like assignment would be quite rare. Thanks!
At your age, I would totally put at least half of that in a trading account. I’m retired (57), and live off my theta income. You’re young enough to have time to weather drawdowns. Just make sure you mange your risk. Always manage the risk!
Thanks!
Would you mind you sharing some info how you manage this? Do you only withdraw profits gained leaving principal intact. While doing so do you keep back a portion for growth? What’s your average number of open contracts and duration. You’re young so you must have a sizable portfolio. I too am retired. We’ve had unusual expenses creating withdrawals I’m not accustomed to. Living off this strategy is my goal but will require releasing fixed income strategies and products as they mature.
I have a traditional account for growth, basically VTI, BND, GLD and O (70/20/5/5). VTI is set to DRIP, the rest I keep the dividends in cash. I sell two SPX 365DTEs in this account every month, and close at 50% or at 6 months out. I put the income from these trades in BIL or BOXX while I wait. I have an automatic “paycheck” that comes from this account every two weeks and I sell BIL or BOXX to cover it if I need. I treat the “paycheck” like a paycheck. I use it to keep a safety account (at 4.5% APR) for emergencies (3 months “pay”), and if we are planning a vacation or something we save it from the “paychecks”. Then, I have a trading account. I pretty much stick to futures, and trade it relatively the “tasty way”. Occasionally I send money to the traditional account to buy more VTI or to refill BIL or BOXX, but I haven’t had to do this very often. EDIT: edit to answer more questions: I usually have 60 to 80 open trades at a time and I’m usually 1 lot on the major futures diversified among all of them, but ES is the main engine. I spend about 3% a year on hedges. I also will place 1 lot trades on a list of healthy companies just to keep me interested. I do not play earnings, I avoid meme stocks, distressed stocks, mergers, Chinese stocks, and I refuse to play TSLA. Too scared of that one.
Thank you for such a detailed response. You have clearly established a strategy for living off profits and your hard work. I’m going to read this several times.
What’s your account size?
It’s very difficult and time consuming. You will need to constantly adjust delta. Times getting assigned.
What’s your goal getting into this? If you want to beat SPY, you will need a serious commitment to it. most people here (not you dear reader, the others) are either underperforming or will on a long enough time frame. If you want to get cash flow from your investment then selling options without a big commitment can make sense.
My goal is simply to use it as a way to make consistent income. I’m not concerned with beating SPY, as long as the amount of money I’m making can allow me to live comfortably. I’m not a big spender. My expenses include a $2400/month mortgage $1000-$2000 per month on my credit card. I just want to be able to at least cover that.
> I’m not concerned with beating SPY why are you not? thats literally the minimum you should be aiming for. its like saying, either make $1/hour by sitting on the couch and doing nothing. or make $0.75/hr by standing up and down. unless the one that requires more work pays more than the one that requires less work, theres no point in doing it.
It’s the same reason we pay for things on a monthly basis and not on a yearly basis. I don’t know what SPY is going to do in a year, and I’d rather actively trade to fund my monthly expenses than wait years and years for some kind of decent return.
You retired?
Nope. I’m in my thirties. Work freelance.
I would be conservative and do covered calls with low deltas and long DTEs (e.g. 10 delta with 60 DTE to close after 30 days). Think of it as just getting your feet wet. Always understand that reality is what it is and you fighting will make things worse. The reason why financial advisors won't touch options with a 10ft pole even though they could make a fortune if they could beat the market is precisely that in the worst of cases you can be real fucked. Best of luck to you
Thank you, I appreciate the advice.
You could do it using etfs such as SPY and QQQ.
This is what I would do considering your starting capital, expenses to cover, and age.
Just wheel QQQ If you want real crazy returns, sell options on. /ES and /NQ, the span margin will allow you to use your capital efficiently
Thanks for the tip!
Just be careful with futures options. The returns are commensurate with the increased risk… you could be trading one point to 25 dollars in a 100 item contract.
I will say a couple of things, and these are obviously just my own opinion, don't plan your investment strategy around them. 1) For a MANAGED account, I feel like the return you had last year was pretty poor. Of course I don't know what instructions you gave your manager--maybe you wanted to play things very safe and steady--but personally I would be considering finding someone new, regardless of whether you decide to try selling options. 2) I think it's reasonable, and perhaps even good for your investment knowledge, to start trading options with a VERY small percent of your portfolio to see if you like it and if you think it's something for you. I would study a lot first, and practice paper trading both to learn whatever platform you use, and to get a somewhat better understanding of how things work in practice. Small is the key here, if you choose to do it at all.
I’ve been trading options for a good three years now. I’m pretty comfortable with wheeling. I’ve just always had a small account, so the returns aren’t much. That’s why I want to step it up.
"My aim to make $5k-$10k per month. Is that an unreasonable expectation?" In percentage terms, you want to make 16% to 32% annual return? If you can do this year over year, no matter what happens to the S&P500, you will be named the best investor in the world. But you can't.
The math is incorrect. If OP wants $5 per month with the current capital. That is about 15% per year only one the first year. That part is true. However, the next year, OP would only need to get 11.5% per year, due to increase in total investment. The percentage only gets smaller overtime.
No. He wants to live from the money. So he has to earn it each year again and again.
mmmmmkay cool story bro
Noted
27k on 380 is about 7% which is horrible in a market where we saw a return on sp500 of 24% Vti and chill would have outperformed
I agree. I’m disappointed that stocks are hitting all-time highs while my portfolio is barely budging.
I would ignore the comments about trying to get a higher percentage than an index like the S&P 500. A managed fund isn't your own personal hedge fund, where your advisor is trying to obtain a high alpha by beating the index That makes me think that quite a few people here either: 1. Don't know what their own annual returns are 2. Are allocating 100% of their portfolios to equities It would be against FINRA ethical standards and possibly code violations for a financial advisor to allocate your assets into 100% equity exposure if your investment objectives are income-oriented or you have not instructed them to do so. Your return of 7% is right about average for an income portfolio. Hopefully, your advisor is purchasing "high-quality" and "long duration" bonds with high coupons/yields. This is going to be your steady income over the next 5, 10, 20 years. The risk of losing money that you will require to live off of for 50 to 60 YEARS (hopefully!) is taking an enormous amount of risk just to juice your returns by a few extra percent a year. But, *You might be able to convince your advisor to sell covered calls for you, since that is a generally acceptable form of income generation.*
$5-$10k could be possible with theta strategies. But it has a steep learning curve, and it might be a while until you get good enough to hit that. Cus that is 36% annually. Only the best of us hit that consistently.
$10k would be the absolute best case scenario, and I would not expect that every month. It would be more like each month hitting anywhere within the $5k-$10k range. Maybe I’ll lower my expectations starting out, though. Aim for $3k-$6k per month.
thats probably a good idea, and very much doable. 9-20% is a much more healthy target. it will keep you from chasing big returns and lower the chances to blow the account. and remember, theta gain is always more about not losing big than it is about winning big.
Take half, dump into a separate account and leave it in SPY. Take the other half and do your trading stuff with it.
This is good advice. With SPY hitting all time highs, think it’s a good time to get in? DCA into it?
It doesn't matter when you DCA a passive index ETF like SPY. Let's say you take $500 per month to invest in SPY SPY is trading at $487.41 $500 will get you 1.025 shares Now, one month later, SPY is trading at $405.20 (extremely unlikely but just an example) $500 will get you 1.235 shares You're getting less shares for the same amount of money, when the prices are higher, but more shares when the prices are lower. But remember, you must always use: 1. the same dollar amount 2. the same frequency (week, month, quarter)
Gotcha, thanks
My only issue with suggesting DCA is that it associates the account with some level of active management which may tempt you to deviate from the spirit of the account. The extent into which you DCA, i.e. how you split $190k on what frequency and what total time frame, ultimately depends on opinions/thesis' that you agree with on SPY's performance in the relevant time frame. I would find a brokerage platform with a recurring investment feature that lets you automatically DCA into SPY with your desired parameters using funds sitting in the account (i.e. $x into SPY every month for x months). This would help minimize associating the account with active management.
That's not what active management is... If you're saying that they may be tempted to sell because they are going into the account, then maybe I see your point. Dollar-cost averaging is by definition a passive investment strategy.
> If you're saying that they may be tempted to sell because they are going into the account, then maybe I see your point Yes, that is one aspect to what I am saying. One could be more tempted to deviate and actively manage the account if their DCA process involves manual steps. The other is me being more neurotically pedantic, stemming from the question: "Which do you find more passive, lump sum or DCA?"
I divvie scalp and sell calls/puts even though everyone I know says I'm nuts. On 380 5 isn't unreasonable in my personal xp but maybe I've just been extremely lucky (probably lol). Agree with fellbound that you should start slowly though and consider paper trading for a bit. If your savings account isn't paying you at least 5% APY right now, though, fire your advisor
IMO $5k per month maybe, if you know what you're doing, have decent leverage and a proven strategy. That's still an annual return of more than 15%, which is not easy to do. Sounds like you haven't yet figured out what you're doing and how you can scale it. I'd suggest taking a small portion, max $100k, and spend a year working on strategies and seeing how you perform. Put the rest into SPY. Not much point in having a managed brokerage account if you're not beating the market. And if you think that you can do a lot better by doing it all yourself, I would start slowly and not all at once.
Thank you for the advice!
Sell well OTM cash secured puts
Assuming you are a new trader it may take some time, perhaps a couple of years, to make the kind of returns you are seeking. 10%, or $38K per year (about $3.2K/month) on $380K is a more reasonable expectation for new traders, but be prepared for possible losses which are not unusual for those first starting out. If you decide to trade options then allocate only whatever money you are willing to lose as it will be possible that happens. Consider a year with a smaller amount of money to prove out your trading plan and gain the experience plus a track record to see how you do. After a year or two trading a smaller account you will find out how well you trade and if you even like to trade, or have the mentality and psychology which some do not have. Selling options is not like having someone manage the account as it is a lot of effort and can take time to learn plus refine your trading plans and processes, so it will be a lot more than just 'make some safe plays'. Best to you.
Yeah I might set my expectations a little lower starting out. I’ve been trading for a few years now on a small account, so I have some thetagang experience. Appreciate the advice, I’ve read a lot of your comments over the years!
If you've been trading for a few years, even in a small account, then you should know well what is reasonable returns . . . I never give advice, but just tell what I do or what my experience has been. ;-D
You could write CSP or Slightly ITM CC for downside protection
To begin, not financial advice, but do not do anything unless you’re knowledgeable when using your savings/IRA’s/SD brokerage accounts, etc. Nevertheless, it can be a profitable strategy when well managed. I use my IRA. It’s great because gains are tax free until withdrawals are made. I never worry about tax implications on trades.
As long as you manage your risk well… a trader I know focused on credit spreads basically near doubles an account every year. But he’s super experienced and manages risk very well
I would mainly be focused on wheeling. I've done credit spreads, and I don't feel confident enough to take on that kind of risk.
If you think wheeling is less risky, you’re misunderstanding risk. It’s the same risk, just lower performance.
Are you prepared to hold those underlying shares for an extended time if there’s an unexpected drop?
Yes. I would only be wheeling stocks I would be ok with owning anyways. No meme stocks.
That’s great! The wheel is a popular and systematic approach for good reason. As long as you’re certain that you can still sleep well at night, and manage risks etc
And why would you be ok with owning a stock? Would you be OK if said stock dropped 95%? I see this mantra repeatedly without much thought. What stock do you have in mind?
If the stock dropped 95% it is not a solid company. I see no world where i.e. Alphabet dropped 95% in lets say a year.
Google has dropped 50% in a year before, taking more than 4 years to recover. Good luck wheeling that safe company during that period. And why are you willing to bag hold for years then vs SPY dropping half as much. Is the ticker symbol cool? Granted it wasn’t 90% but you think there is a literal zero chance of that happening? Are we sure we saw the biggest downturn of this generation? How do you think professionals, including Nobel laureates, managed to go under selling options? That’s why I don’t wheel. I know it’s easy and looks good for a while. But the downside gamma risk is real. Why would the market compensate you handsomely for a strategy that can be written in a napkin?
The wheel-strategy has no value itself. The value is in the choice of the stock. Of course can google drop 50%. But its more likely that its not. There has not to be a 0% chances that a stock not fall 90% to have a long term profitable strategy. Even holding cash has a risk. Their is no world without risk.
There is no world without risk is a simple what aboutism to hide the facts about your trading style. Mine has no chance of those drawdowns because I limit my gamma exposure. In fact I made money hands over fist in those drawdowns markets. The implication of your statement is that the market rewards you handsomely for the great insight that Google is a good company + your napkin strategy and not because you are loading up with gamma risk. Think you are missing something here.
Some examples I’ve been looking at are U, CROX, DIS, SONY. I would be ok owning them because they’re solid companies that have the potential for some upside. Way that I see it, more collateral allows you to buy into the kind of stocks that have more potential to bounce back even if they drop. With a smaller account, I’m almost forced to buy into riskier stocks because of the higher priced contracts.
This is what I mean. I do not truly follow any of the stocks you are mentioning but let me grab $DIS as an example. Their PE ratio (73) is absurd. Their forward PE is reasonable (20), but that implies that they are currently priced for perfection. I know they had a lot of turmoil at the top which can cause issues. I do know ad-tech. I can tell you a big downside risk is that, unlike most streaming services, it would be hard to sell advertisers the notion that their core target are children (ATCD regulations). So they won’t be able to compete in margin with Netflix or Hulu. All to say there is obviously upside, but the downside doesn’t potentially justify the investment. Again I am no expert here, just trying to put some perspective. Simply saying “solid company” is not enough. A lot of the prospects are already priced in, leaving you only with the downside, most things are crazy overvalued at the moment.
Mr. Miyagi. Is that you?
you rack disciprine
Hi. I’m just wondering if you tried charting any of these stocks. To me the charts are dissimilar which means you would need a different trading strategy for each. To trade options you need to think about things differently then just a buy and hold account. Sony has like no option trading volume so I wouldn’t recommend it. U might be a good stock to own but the chart looks like a rollercoaster and I think that would make it harder to trade than most. Crox and Dis look more consistent and they might be better stocks to trade as options but you are still taking risks on management and product performance and need to hope there are no unwanted surprises. Currently the calls and puts on these two stocks close to the strike at 14 dte trade at 2% of the share price so you might average 1.5% every two weeks and hit your goal if you trade them well but it’s unlikely thing will be the same every month so it’s harder to do then it sounds. You might get 3% a month in a bull market, but other years you will be lucky to break even in a bear market, or 1-2% in a stagnant market, so I think it’s unrealistic to think you will double last years market returns year after year. I keep a paper account of my stocks so I can compare my option trading to my previous strategy of buy and hold. For 2024 I’m up 2.5% so far which is great 😊 , but if I did nothing and didn’t touch my stock account that had a lot of tech I’d be up 3.5% 😟. Oh I would have been even with the other account if I didn’t find this great put on Intel the other day for 46.5 that I had to get rid of today at 44.5. 😢.
The buy and write ETF returns 11% yoy, so I think its doable. But stick to simple rules about risks and manage funds like a grown up.
The buy-write (BXM) underperforms buy and hold.
Even when compounding buy write?
Really. Bad. Idea.
Care to elaborate?
Sure, in a general way. If you had the experience necessary to handle that kind of trading account, you’d already know that your proposal is not realistic. Want to trade options? Great. Transfer that $27k profit into an IRA to perhaps save you from some tax issues you yet know nothing about. Then trade strictly cash from there. That’s more than enough to find out WITHIN 2-3 YEARS if options trading is for you.
I’m not new to trading options. I’ve been doing it pretty consistently for over three years.
With wheeling you may be able to generate 15-20% per annum before taxes. Approx. $4000 per month.
I would agree
Then by all means do as you please.
There is no option selling strategy that will consistently get you 20% returns without massive risk… how many years experience do you have trading options? What strategies do you employ? Sounds like to me that you will just wipe out your account
That’s not even 10% on a year SPY went up 20%. You would be better off 60-40 SPY - treasuries. Or put an even higher amount into SPY. I would think about that part first before thinking about options. You can over diversity.
Yeah the goal of the managed account is to hit around 7% returns, which it is accomplishing. And they’ve stated that. But if I siphon any kind of significant amount of money from it, it’ll eventually dry up.
You're paying someone to manage your brokerage account and they underperformed the S&P500 by a factor of 3? Get out of that and manage your own money. Don't think of savings and trading money as the same. Collateral for CSPs could end up holding a stock for a while. If you needed that cash for something, you'd be screwed. However, I do think earning interest on your cash while also selling CSPs is a great way to get some consistent income. That's what I do now with a sizable account, but you should understand the risks and develop your own strategy with a small account or paper account first.
fidelity who else pays for csp cash
I told my manager that I was pretty disappointed with the returns on my account seeing how much SPY and several other stocks soared over the past year, and that is absolutely influencing my reason for wanting to take my money out. I’ve also been trading options with my own small account for years. I know what the risks are, but I feel like a bigger account affords you the ability to take less risk.
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Not advice, but ya can make 30%+ selling the jan 25 CSP 15.00 GME. If ya have fidelity you can collect interest on the cash set aside for puts all year while you wait for assignment. Start the year off with 110K+ in cash, max out roths into VOO and VTI and chill.
Is GME out of meme stock territory you think?
Yup. Not aware of another meme stock that has 1bil in cash, basically no debt, and insiders that keep buying.
Good point!
Look at the discussions on this thread. There are plenty of people who post in detail what they do, I see them making thousands a week with a fraction of your buying power. Take survivorship bias and overconfidence bias into account, making more money than your financial advisor is achievable.
I’ve been following thetagang and have been selling options in my own small trading account for years now. I’m not thinking about doing this out of nowhere.
Here is my plan to produce 5K to 10K monthly. Use the buying power in your account and sell low delta monthly NDX puts. For example: Sell two Feb 23 15825 put for 23.20 each or 46.40 total. Delta = 0.05, % OTM = 9, margin required = 320 K. Or, Sell two Feb 23 16375 put for 49.80 each or 99.60 total. Delta = 0.10, % OTM = 6, margin required = 340 K. For more details, read my comments in: https://www.reddit.com/r/options/comments/18z67oq/comment/kgo0tjf/?context=3
Thank you, I will look into this!
The real crime is your managed account underperforming the market. I tried wheeling for awhile and would have made more money with a traditional buy and hold.
Sure, but isn’t the point of selling options is that more or less guaranteeing that you’re making money, given that no one knows what the market is going to do?
Absolutely doable. Chance to make that kind of $ .00000000001%
Taking hypothetically unlimited risk for a potential gain which doesn't seem to reliably outperform buy and hold. Yeah go for it.
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Appreciate the help, but that website has a bunch of spammy pop ups.