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Old 06-12-2020, 01:37 PM   #1  
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Default Any of you sell covered calls?

If the proponents of selling covered calls can be believed, one can make two to four percent per month with this strategy with low risk. So far it looks to me to be fairly straight forward and doable. I'd venture to say most retiring pilots on this forum have over one million in their IRAs. Two to four percent per month looks like a good retirement income. Have any of you done this?
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Old 06-13-2020, 05:30 PM   #2  
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I did it until I converted to index investing.

It can work well tactically, but the returns that you are expecting are not realistic. There is no such thing as 24% - 48% annual returns in much of anything, let alone low risk investments.

Anyone who could actually make that work would not be wasting time on books, newsletters or blogs.
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Old 06-13-2020, 06:09 PM   #3  
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I have dabbled in covered calls and it isnít a fast, easy way to get rich. No way you could get 2-4% per month on a consistent basis. Just go back and look at what option contracts stood at on days where the market really skyrocketed.

Now the only time I place covered calls is if I have a stock I am planning on selling but Iím not in a hurry to sell and and want to see if I can make a couple extra dollars.
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Old 08-01-2020, 07:55 PM   #4  
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Quote:
Originally Posted by mike734 View Post
If the proponents of selling covered calls can be believed, one can make two to four percent per month with this strategy with low risk. So far it looks to me to be fairly straight forward and doable. I'd venture to say most retiring pilots on this forum have over one million in their IRAs. Two to four percent per month looks like a good retirement income. Have any of you done this?

Covered calls in this environment is a bad game. At best, the stock takes off on a COVID rally tear, gets called away, and you lose profit. At worst, it crashes and you're stuck holding the bag. If you sell quickly you'll just lose the premium, but if you don't, then do you sell another call and hope it doesn't take off again cutting your 'break even' to a loss or hold on and hope it doesn't tank further? Covered calls are great with a stable market where you can make a few bucks on a sideways stock, but right now... it's too volatile. The market is chock full of manipulation and options just expose you to the worst of it. The days with the biggest gains were always within a few days of the biggest losses during past recessions and corrections; covered calls effectively expose you to the losses and cancel your gains.


Regardless though, after all this quanitative easing from CARES and now HEALS, we'll be lucky if the USD is still the world's reserve currency. Trump effectively quantitative eased an entire year's budget. Normally, the way money works is you provide a good or service, earn a dollar, the govt takes that dollar, gives it to someone who needs it more than you, and they buy a good or service with that dollar. Regardless, a good or service was provided at both ends of that transaction. With quantitative easing (running the presses), the govt just gives a corporation or someone out of work, a dollar. There was no good or service provided on the front end, so it just dillutes the value of dollars already in circulation. Right now we enjoy the 'reserve currency privilege' of mortgage level interest rates on our debt while the rest of world pays credit card interest on debt. We rely on debt; it's like 25% of our budget. As the dollar gets devalued, the interest we'll owe will be higher. The good news is if you have a ton of student loan debt, massive inflation will make your debt "cheaper." The bad news is our country may get stuck in a revolving debt cycle, much like those people who take out payday loans


Supposedly the best bet is diversification because cash, gold, stocks, bonds, real estate, international, etc could all fall apart or thrive. Nobody knows.
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Old 08-01-2020, 10:11 PM   #5  
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Originally Posted by 742Dash View Post
I did it until I converted to index investing.

It can work well tactically, but the returns that you are expecting are not realistic. There is no such thing as 24% - 48% annual returns in much of anything, let alone low risk investments.

Anyone who could actually make that work would not be wasting time on books, newsletters or blogs.
Are you still doing index investing? Are you using any particular ETFs? Other than my 401k, I'm sitting on cash right now. I was thinking of holding that position until this fall, as I'm having a hard time making any sense of the markets right now.
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Old 08-03-2020, 07:48 AM   #6  
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Are you still doing index investing? Are you using any particular ETFs? Other than my 401k, I'm sitting on cash right now. I was thinking of holding that position until this fall, as I'm having a hard time making any sense of the markets right now.
My suggestion, and I am no expert, is to start with an asset allocation. That is the most important decision, and fairly straightforward. Here is Vanguard's introduction. No particular reason I used Vanguard, all the major brokerages have guidance.

Then fill the allocations with whatever broad index funds that you want. One S&P 500 index fund is pretty much like any other. However be aware that different brokerages often use different indexes in defining "large cap" "mid cap" and so forth. Schwab for example uses the largest 750 companies to define large cap, rather than the S&P 500. This is a minor matter, but one to be aware of if your retirement savings are spread over several IRAs/401ks in different places.

So pick an asset allocation. Fill it with index funds. Re-balance once a year. Ignore it the other 364 days. If making a major change (such as moving a bunch of cash into the market) I would do that in stages over 3 years or so. You won't get it right, but you also won't totally blow it.

About 12 years out from retirement it gets more complicated. You need to consider how to restructure and manage the portfolio for income, and this is a much more complex puzzle. I suggest this book. You can download the first 3 chapters for no charge, and the entire book is on Amazon. Also look up work by Wade Pfau.

I am on day 2 of retirement. Not broke yet!
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Old 08-03-2020, 08:14 AM   #7  
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Thank you for the reply, Iíll check that book out today. Congrats on retirement!
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Old 08-30-2020, 05:18 PM   #8  
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I have done a lot of reading on the forum and it seems there are a good number of pilots out there who do much of their own investing. While I admire this, I have to add my two cents here. All the while I really thought that I knew what I was doing until I lost my ass. Enough is enough. I obviously didn't know enough to do it right. They say there's nothing more dangerous than a doctor in a Bonanza - but what about the airline pilot in the stock market? Let's face it, we are far better pilots than we are investors. After losing my butt, I started working with Wings Wealth Management out of Charlotte. They ONLY work with AIRLINE PILOTS who are getting close to retirement. Like over 55. Got my goals and finances in order and under control and got a lot of planning done. Like many other pilots, I have a business - and I got some pretty good strategies that have helped me save some serious bucks in taxes. I'm not pushing Wings Wealth (although they have helped me far more than I could have ever imagined), I am simply suggesting professional advice as opposed to forum advice (Don't shoot me, just a thought). A lot of guys don't want to pay for advice, but when that advice yields a lot more than you can do on your own - or prevent the loss of principal, then I'm in. I'm almost 60, now at $2.8M and really happy I decided to let someone else do the worrying for me.

Just a thought, fellow aviators. I think that when I was doing it myself, I had the equivalent of a private license in the financial services industry. I knew a lot more than a lot of others, but I don't know near as much at the "ATP" that handles it now.

Just my 2 cents............fly safe.
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Old 08-30-2020, 06:17 PM   #9  
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Generally, by the time you know enough to make an intelligent choice of financial advisors, you will know enough to do it yourself.

The best advice you can find is on bogleheads.org.

Joe
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Old 08-30-2020, 06:38 PM   #10  
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Thanks for posting about Wings Wealth Management. They're just a 20 minute drive from my house and I had never heard of them. They have a quiz you can take on how ready you are for retirement. I've been out on medical for over 3 years now and won't be going back so my case is different but I may call them and see what they say. I'll have to see how much they charge, that's been the sticking point with Schwab, they charge a couple of percent per year which is thousands of dollars.

Quote:
Originally Posted by StillFlyingaBus View Post
I have done a lot of reading on the forum and it seems there are a good number of pilots out there who do much of their own investing. While I admire this, I have to add my two cents here. All the while I really thought that I knew what I was doing until I lost my ass. Enough is enough. I obviously didn't know enough to do it right. They say there's nothing more dangerous than a doctor in a Bonanza - but what about the airline pilot in the stock market? Let's face it, we are far better pilots than we are investors. After losing my butt, I started working with Wings Wealth Management out of Charlotte. They ONLY work with AIRLINE PILOTS who are getting close to retirement. Like over 55. Got my goals and finances in order and under control and got a lot of planning done. Like many other pilots, I have a business - and I got some pretty good strategies that have helped me save some serious bucks in taxes. I'm not pushing Wings Wealth (although they have helped me far more than I could have ever imagined), I am simply suggesting professional advice as opposed to forum advice (Don't shoot me, just a thought). A lot of guys don't want to pay for advice, but when that advice yields a lot more than you can do on your own - or prevent the loss of principal, then I'm in. I'm almost 60, now at $2.8M and really happy I decided to let someone else do the worrying for me.

Just a thought, fellow aviators. I think that when I was doing it myself, I had the equivalent of a private license in the financial services industry. I knew a lot more than a lot of others, but I don't know near as much at the "ATP" that handles it now.

Just my 2 cents............fly safe.
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