QDRO
 

Has anyone done a QDRO from their Delta retirement plan in the last couple years? I've heard it mentioned as an option for moving money out of a retirement account without the 10% penalty (income taxes still apply).

Yes, then she spent it all. Oh well, best money I’ve ever spent to get rid of a bad Investment…

How deep ITM do you usually like to go with your LEAPS? I’ve just recently started to play around with LEAPS and curious to know your strategy.

At least 20% lower than current price. https://www.creditdonkey.com/leaps-options.html

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​​​​​​I'm sure it's a good article, but I find the URL too funny to be taken seriously. Credit donkey 🐴 leaps options?

Buying those is a bullish strategy. So you believe that the stock is going up, would you agree? Why do you prefer buying LEAPS rather than selling puts outright? If you look at Aug 20 CSX, ($95) the $80 calls will cost you ~$17. The $80 puts go for $.40. The stock can lose well over 15% before I have to 'worry' about going long, annnnnnd, even if I did I will be getting it at a 15% discount from present value whereas you will have $1700 tied up and the stock MUST go up for you to see the first penny of profit. If you are buying, what difference does it make how far below the current NAV you go. You are still depending on a stock move to the upside before you can make any profit. Why not go down to 50%? Lastly,, form your article, LEAPS is just a fancy marketing moniker. It says right there that they are little more than options with long term horizons.


Edit: If you look at the same CSX options except in November, the Calls will cost you just a little more... around $18 while the puts triple in value.

I'm not being argumentative or anything like that, I just don't get the whole buying puts/calls strategy. I find a price that I would be willing to own the stock at, and sell the puts. If it finishes OTM, then YAY. If not, and it's assigned then I start selling calls on the discounted stock. And.. I have money in my account I can put to use elsewhere. In an up market, it prints money. I got hammered a little this week as some options were put to me, but come Monday I will be selling calls.

I'm a long term investor. With a Long Equity Anticipation Securities (LEAPS) strategy, I can take a stock that I have conviction is strongly undervalued ie BABA, and from the additional leverage receive greater gains. Moreover, with LEAPS generally being 12+ months expiration, it's tax efficient at 15% capital gains.

Thru buying a deep ITM LEAPS, the stock does not have to advance far before you are ITM. Combine that with a stock that's is already deeply undervalued, the odds are now stongly in your favor for principle protection. It is a tenent of my investing style, when it comes to stock selection, that maximizing the upside means first and foremost, minimizing the downside. Why not go down to 50%? Because the stock should already be deeply undervalued providing downside protection. Furthermore, at least 20% ITM provides premium protection as the price of the stock is at or nearly at break even.

As you can tell, my best LEAPS idea is BABA. Currently trading at $212. After analyzing the company's fundamentals and cashflows my conservative valuation is $320. Using a LEAPS strategy, the JAN 20 23 $170 call will cost around $6100 per contract. Stock only needs to advance to $231 to breakeven. If the stock reaches my conservative fair value:

Per Contract-

Premium Cost: $6100
Equity Cost: $17,000 ($170x100)
Total Cost: $23,100

Equity Value: $32,000($320x100)

$32,000-$23,100= $8900 profit on $6100 investment for a 146% ROI vs 51% ROI from just purchasing the equity instead of LEAPS. Moreover in the case of BABA, $320 would such a conservative valuation that I would keep the stock and let it compound further making my total acquisition cost $231($23,100/100) a share.

LEAPS allow me to achieve large returns typically gained from Nano, Micro and Small Cap stocks with larger, established companies that are undervalued.









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disregard...gotcha

Hopefully, it stays this way for the rich.....you know ....like airline pilots! Since I'll be retired I won't have to worry about it, but it is a concern for some....like my kids....or possibly you.!

if you don’t mind owning BABA, why not sell a put contract to lower costs and increase returns?

Because if the contract goes against you will get Margin Called.

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Same question I guess. Why not sell puts assuming you have the assets to cover vs the LEAP?

But you believe the stock is undervalued. And, if it goes down, you can roll down. I do that all the time. By buying, you would be out the amount you spent. Selling puts allows you to set a lower price that you would be willing to go long at. There is no right or wrong to any of this, but buying something with an expiration date is too stressful for my taste. You HAVE to see movement up in order to make money. I have breathing room even if there is a down trend for a bit and I already have the money in the bank doing something else for me. If I pick a strike that is 15-20 percent off the current value as you do with calls, I would be getting a huge discount.

And something else I think I have said before, and that is that I really don't look at ROI in terms of percentage. I really don't see the point in annualizing out a short term investment. It seems silly to me because you can't guarantee you will do that for the entire year, and if you only do it once it is nothing but something to puff out your chest over that means nothing. I just look at bottom line dollars made. fwiw, ymmv.


Edit: Oh, and I will give you the tax efficiency thing. Biden is gonna rape short term investors.

Edit 2: AMZN Jan 23 $3400 Puts are $440. I think that is an undervalued stock for that far out. But I won't tie up that much margin for that long. :)

Isn't a QRDO is a separation of assets likely caused by a divorce proceeding?

That's what mine was used for.

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exactly as JB said. You think it’s undervalued and don’t mind owning. Or, you roll down.

I’m sure on your way to becoming an investing guru, you read the quote, “rich people sell insurance, poor people buy it.” I think it was the rich dad, poor dad guy.

Does anyone feel like a loser when they go about their day?

No.

Seek help. Either for your mental health issues, or for your trolling tendencies.

I’m honestly curious what gives someone who doesn’t do finance all day every day confidence in their own ability to determine what is overvalued and what is undervalued? With millions of people and hundreds of funds buying/selling/holding equities, where does the confidence come from to believe one is on the smart side of any given trade? Whatever I’m buying, someone is happily selling. Whatever I’m selling, someone is happy to be buying. With the (illegal) exception of insider actionable knowledge, I feel like millions of people have already heard any good gouge I might stumble on and that info is likely already baked in. Am I selling myself short, so to speak?

index fund gang gang. Get rich slowly

A variation of that is THE quote that has always stuck in my head about all this was in one of the early books I read on options investing. "You never make any money buying, you only make money when you sell".

For a LEAP Call on BABA I only need $6000ish. I'm simply making an equity substitution and applying leverage. If I'm selling a Put to generate the same type of return it will require significant Margin in case the price goes against and the buyer decides to exercise the option early. Combine those risk factors with short term capital gains on premiums, selling Puts is more of a hedging strategy and not optimal use of capital for the long term investor

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Trip, as usual, you prove you know just enough to get yourself (but, hopefully not others) into trouble. You obviously do not have a full grasp as to how margin works, nor do you truly understand how risk works.

If I had a dime for every time you used the quote from the book you read that made you think you understood what you were talking about, I’d be able to have a nice dinner. You have a visceral aversion to “permanent loss of capital” and if you want your best shot at that, look no further than buying long calls or puts. Not only do you have to be directionally correct, you also have to nail the time frame. If you want long calls as a stock replacement you must go MUCH deeper in the money than 20% with LEAPS. You are looking for a 1 delta, which is sub $100 strike in 2023 and very expensive. Like $15k, expensive. What’s more likely? A long call expiring worthless or one of the stocks you dub “a story stock” going to zero? Again, you don’t fully understand risk or probabilities.

If you buy a call for $60 ($6000) and you aren’t lucky enough to have time and direction right, you will most definitely have a :::gasp:::: permanent loss of capital. If you sell a put, you MAY be assigned, and you MAY have a margin call (depending on if you’re in a portfolio margin account or a regulationT account), but you can also turn around and sell the shares back at a loss much less than a 100% loss should your calls expire worthless.

You tell me what is a greater risk; a 100% loss of capital from a long call expiring worthless or getting assigned a stock at $200/share when it fell to $150 and you sell it back when assigned. Do the math and get back to me.

If you view a permanent loss of capital as your greatest risk, then you are completely contradicting yourself. There are many more opportunities to take stock in companies you like with a short put at a reduced basis or, roll contracts indefinitely and generate significant income while lowering cost basis.

Back to my original point, you think you know more than you do, and that might be far more valueable advice than what you read in a “value investing” book. You not only think you know the actual value of a multi billion dollar corporation but you think you can peg a share price and a date. Why don’t we call it what it is; a gamble and I take them all the time. The difference is that I accept it as a gamble and risk only a fraction of a % of my NLV.

Options need not be a gamble, you can certainly play probabilities and use the leverage to your advantage like JamesBond mentioned.

I suggest anyone reading trips post approach with extreme caution. While he SOUNDS like he knows what he’s talking about, seasoned investors know otherwise. If you want to learn how to trade options in a way that can be very lucrative, leave here and dig into tastytrade.com materials.

That was the genesis of the QDRO, but it can be used in other ways. I'm contemplating pulling money out for real estate investments in 2022 or 2023. Because of the original use in divorce proceedings, I think it takes a husband & wife combo to do it. Still researching...

LEAPS investing is a solid value investing strategy if you know what you are doing. By going Deep ITM, an investor protects their premium since the stock price is close to or more than breakeven. LEAPS by default are long term investments so the odds of being directionally correct are in your favor, especially for an undervalued stock. I know you invest in crazy expensive growth stocks like Tesla with no Margin of Safety so I don’t blame you for being worried about direction over the long term. An equity replacement strategy does not mean find a Delta of 1 to track the underlying asset to the penny. .70-.80 Delta is typically a good risk reward profile for this strategy

For my BABA LEAPS I have strong conviction BABA will move 8% before Jan 2023 as BABA has been growing earning 30%+ a year. Moreover, I don’t know the future, so I don’t project a precise valuation to companies, always a range. A stock like BABA based on a varying range of future cash flows looks like it is worth $320-$500. With the stock trading at $212, it doesn’t take a genius to realize this stock is undervalued. As Warren Buffett eloquently stated, “You don’t need to know a man’s weight to know he’s fat”.

In your example, if I buy a 1 BABA JAN 20 2023 $170 call I pay the $6100 premium and do not have to do anything until expiration for year and a half. To control the same amount of shares selling a put I open up myself to a margin call all the way to expiration based on the short term movement of the stock. Furthermore, many brokerages require you to have the buying power to cover the shares prior to selling the put. That’s too much work and an inefficient use of capital for my long term investing strategy. If another Black Swan event happens and the option expires worthless I’m out $6100 in 2023 and I didn’t have to tie up $21,200 buying 100 shares from the beginning.

As far as listening to me, I’d be the first to tell folks to DDYOD and invest in a manner that’s you’re comfortable with. I’m a long term investor. You trying to discredit me and send folks to “lucrative” options trading strategies is very snake oil salesman like. Those are short term strategies that usually result lots screen time trading along with short term capital gains tax.

1-If BABA is a huge value like you’ve calculated based on a BS metric, taking assignment at a reduced cost basis is an even greater value. Risking $6k with the highest probability of “PERMANENT LOSS OF CAPITAL”. If you’d like to know the probability of profit, it’s 34%. Buying stock gives you at least 50%. Holding shares indefinitely, the probability increases. Again, if permanent loss of capital is what you’re trying to avoid, buying calls ain’t the way to do it. Half of the premium you’re paying is extrinsic value and is lost daily to time decay. It sounds like this is sound long term investing for you. Best of luck with that.

2-A true stock replacement is a delta of 1. If you want the leaps to act like stock, you buy a 1 delta call or at a minimum 2 standard deviations below the ATM call.

3-Again, you don’t understand how margin works. It’s dependent on if you’re in a regulation T account, a portfolio margin account or a retirement account (cash covered). Each one requires a different amount of buying power to cover a naked put. Your example above says this would tie up $21k of buying power which simply isn’t true unless you’re in a cash covered account like your retirement account at which point a “margin call” that you mentioned in your other post is not a player. Again, you seem to know just enough, but not nearly as much as you think. In your example the Jan 2023 $170 put in my regulation T margin account tied up $1751 in buying power and nets me around $700 in premium.

3-short term capital gains are treated as ordinary income. That is to say I pay on that, what I pay at my regular job. Do you not go to work because you have to pay taxes? This does not have to be a long screen time event and To say you don’t want to make an extra $100k in a year because you have to pay $30k in taxes is well….stupid. Are there more tax efficient ways of making money out there? Sure, I’ll give you that. But in my world I don’t let the tail wag the dog.

4-If me telling people to approach what you say with caution and posting a link for people to get a real education on options is snake oil, then what is the garbage you post? Let me provide some examples; you posted “Tesla is due for a STEEP decline” and then posting a tweet from Michael Burry. How about another? You posted “It’s not too late to get out of bubble stocks” and posting a link to a WSJ article. Snake oil salesmen sell fear. That is the crux of your “investing advice” on here; Fear. Bubbles. Margin calls. Overvalued. Oh my. If your due diligence is a tweet and WSJ article, I reiterate my caution.

I’d say your best strategy so far has been trolling me. Hook, line and sinker every time. 🍻

Are those general probabilities? Where are you getting 34% and 50% from? If they are general probabilities those are of no concern to me. I access risk on a per company basis. FYI BABA, GOOG and FB LEAPS are very popular right now amongst value investors. There's a reason why. Sheer outrageous value.



No I don't want a LEAPS to act exactly like a stock. That's why I bought a LEAPS not a stock. Again, buying LEAPS of large, undervalued companies at a Delta of. 7-.8 has a very attractive risk reward profile



Again I stated Margin requirements vary among brokerages. Now in your example, you net $700($400 after tax) in premium, then the market goes against you and BABA drops to $170, now a $17,000 margin call is possible if you don't have enough buying power to cover, forcing you to sell other assets if you can't come up with the cash. Meanwhile with my LEAPS only $6100 is at risk with a long time horizon



I don't mind short term gains if it's the most efficient way at extracting value. I've had plenty of short term gains from Net Net investing. Selling Puts is flat out inefficient to LEAPS if you have conviction in the direction of the stock over the long term. $700 premium plus risk of $17,000 cash outlay vs $6100 premium and strong possibility of 100%+ ROI taxed at long term capital gains. Moreover if BABA dropped to $170 I can just buy more LEAPS driving down my cost basis and still use less than $17000 in capital



When it comes to securities like TSLA and ARKK, I'm not selling fear. I'm advocating for reality. This has happened before in the 2000s. Know your history or be doomed to repeat it. The intrinsic value of a stock is its future cashflows discounted to the present value. If you want to pay eyewatering amounts for cashflows that don't exist and you believe the company will grow those cashflows due to a "Story" that's on you. I'm just here to give folks fair warning to DYODD when listening to such silliness. You probably would have been preaching about Yahoo and Pets.com in the 2000s.

Tesla Enterprise Value: $600 Bil
Tesla Earnings before Tax and Depreciation: $4.7B

Without the stock moving a single penny Tesla would have to grow earnings to $30 Bil just for a valuation of 20x earnings. And again, that's without the stock pricebadvancing a single penny. Unless you're using a momentum strategy with these story stocks, good luck

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I kept it simple, I bought 412 shares of BABA at $212 :D

You realize if you’re assigned a stock from a naked put you get actual shares of stock, right? In this case you’d get 100 shares at a basis of $163. It’s your stock and you can sell them back.

You don’t have a $17k cash outlay upfront, it simply earmarks $1750 of your buying power. Your method you have a $6k cash outlay up front. You only make money if the stock goes up in price within a finite time period. If you’re assigned shares, And you don’t have 50% of the cash required you will get a margin call to bring you back to 50% of the position value. The rest is covered with margin which you will pay interest on, this varies from broker to broker. In this case, if you get below $8500 in margin you will receive a call and will have to bring your buying power back in line with regulation T account requirements. Easiest way to do that? Sell the shares assigned back. A margin call is not a big deal assuming you didn’t take some stupidly large risk. This whole discussion ignores the possibility of rolling the put out in time and adjusting the strike to collect even more premium. This is a beginners level intro as to how margin works. Your interpretation of it is not complete or accurate. I suggest before you go further with options, you study how margin works more in depth.

Finally, let’s define something; Risk. The book you read beats into your head, permanent loss of capital is the ultimate risk and you seem to have adopted that mentality. Agree? There is no higher probability of 100% loss of capital than buying calls. Deep in the money is “least worst” depending on how deep you go and since the deeper you go, the more intrinsic value. The probabilities get worse the closer to the money and further out of the money you go. It’s a mathematical fact, there’s no greater probability of losing 100% of your money than buying calls. Much higher than owning the stock outright. The chances of losing SOME money are very high.

I say this all as someone who has plenty in the way of DITM and far OTM calls. But, I understand the risk and buy accordingly.

BTW I was looking at the wrong strikes; selling a Jan 2023 $170 put gets me $17 in premium and reduces buying power by $1700. So if assigned shares my break even is $153. If I buy the $170 call for $60 my BE is now $230.

OK... I am still working on coffee #1, but here's the thing. You talk about tying up $21,200 buying 100 shares. Unless you are trading options there is nothing that requires you to buy/sell 100 shares. Buy 10 at a time and dollar cost average. Or just buy $6100 worth. Your profit will actually be close to the same anyway when it all washes out and you don't have a time bomb ticking. (expiration) And, if they are underwater in Jan 2023, you can still hold on to them until they come back.I guess the good news is if we get a president that wants to go to economic war with China, and BABA tanks, you are only out $6100. Regardless of how you try to sell this, you are putting yourself behind at the start by that same $6100. The option has to increase by that amount for you to break even. That's a long way for the dy/dx. It very well might, but then again it might not.

I'm not trying to sell anyone on anything either. But what I will say is that it sounds like to me is that you are in love with this company and that is a dangerous thing. I would urge you to take a breath. Seriously.

I used to like to watch Options Action on CNBC every Friday (not religiously, but occasionally). I was trying to understand all those complex spreads and condors and flying Wallenda strategies that they were doing and after awhile I decided it was a lot of yoga for a little bit of money. And most of it was money paid out that was dependent on movement one way or the other. Jim Cramer won't talk about options other than in one of his books he says doing what you do is 'OK'. (I disagree, obviously) This stuff is not rocket surgery. Making it more complicated than it is is unnecessary.

I hope it works out for you and that you have found a hundred bagger. If you did, that $6100 worth of stock will have been worth more than the option, but hey ya gotta dance with who brung ya.

Enjoyable discussion rather than the monkey **** throwing contests usually found here.

👏🏻👏🏻👏🏻👏🏻👏🏻👏🏻👏🏻👏🏻

I'm gonna throw out another idea. Let's say you bought 30 shares at $210. ($6300). Now you are long that stock. Just decide what you want as a minimum profit and watch the stock until it gets there. Let's say you want to make $30/share. When the stock hits $250, put in a $10 trailing stop limit and let 'er run. It's on autopilot at that point and works like a champ. Now if you are right and it goes to $350/share, you have locked in your profit but it goes right along with the stock. IF there is a flash crash, you sell out and don't miss out on a great runup.

And one more question for you. How do you figure you are applying leverage with purchased ITM calls?

This right here ^^^^^^^^^^^^^^ is the basics of options trading. The only other component that one needs to know about is that your time is limited and it all dies on a certain date.

I haven't looked it up, but I wonder what the Jan 2023 $170 call would have to be worth in order for [MENTION=13699]Trip7[/MENTION] to realize a 5%... 10%... 20% ROI for tying up $6100... And then what would the underlying have to be to get to those numbers. I have stated before that for the most part I don't look at percentage gain unless it is in terms of a full year because I just don't think it is all that useful unless it is repeated throughout the year.

Good discussion indeed. How do you come up with $6100 of stock would be better? One just has to look at the beautiful job famed Reddit investor DFV did with GME turning $50k into $20+
Million with GME LEAPS calls

If you get the direction and velocity(strike price selection) right you are always better off with LEAPS. A little more optimistic valuation of BABA is $400. If BABA hits $400:

$6100 in shares turns into $11,600 of total value

1 LEAP:

$40,000 of value(100 shares)
-$6100 (Premium)
-$17000($170x100)

$16900 of total value

That's a difference of $5300 or 45%

The key of course is getting the trade right. That why it helps tremendously to find a company that you have conviction is undervalued. If Delta Pilot staffing was a stock price I would have have bought a LEAP Call last October with a strike price of 9,000 pilots. Sheer outrageous value like that is the tenent of my investment process.

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So, you call Tesla a story stock and yet you cite a Reddit thread as a case for buying calls because someone from that thread made tens of millions doing it. I think I’ve just about got you figured out. Best of luck on your $20million call buying conquest. It’ll make a great story, one way or another.

As usual you mostly about slinging stones and not providing any color about valuation. The gentleman I referenced bought the GME LEAPS when GME was trading in the low digits and would come up on nearly every value screen mainly due to its strong balance sheet. Heck GME was nearly a Net Net at the time. I look forward to unwinding any assumptions you have of me as we update each of our returns over the next 5 years

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If the discussion is about valuation that’s one thing. The example you gave was making $20 million buying calls in GME to support your buying of calls. You use a tweet to support a short thesis. You use a WSJ article to support a short thesis.

Yet I talk about a stock(BABA) that is Undervalued by about 30%. I didn't proclaim BABA was going to $2000. Put your pitch fork down.


I have provided specific examples of TSLA's eyewatering valuation based on its Enterprise Value. You haven't provided any ideas how TSLA will not only increase earning to justify its current price, but also drive shareholder returns going forward.


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I'm interested in what you find out...please advise!

Found this too, divorce not required by Federal law, look about 3/4rds the way down the page:
https://www.investopedia.com/persona...dro/#qdro-faqs

Time, technology, founder.

Seem over simplistic? That’s because it is. Investing for the long haul super simple.

Since you like complicated and metrics how about this;

On a trailing basis TSLA is 40x EV/EBITDA. Operating earnings are growing faster than sales. This is as of May of this year, last time I looked at any of that. Of course this metric is basically useless now, since the stock price has gone up. Regardless, If this continues, by that metric, Tesla is dirt cheap. They’re not even operating at scale yet. This also doesn’t take into account optionality such as subscription revenue.

That’s the problem with metrics, and why I largely ignore them. You can find one to fit your thesis any day. They sound smart but they’re mostly created to make people feel that way.