This month's stock market has been tough. My stocks have slipped rather substantially at this point, so I guess it's good timing to make some income off of them.
With the market slip, I bought some more stock and sold more covered calls, pocketing another $380. I think the total of contract premiums I've made is up to... almost $800? They're all set to expire on September 18th, so I can sell another round of contracts then.
I've also been fine-tuning the strategy, to focus more on earning the premiums over trying to win the market somehow. Less speculation and more guaranteed income.
While covered calls still have the same downside risk as regular stocks, at least you're also propped up a bit with the contract income. The real downside, I think, is giving up on the upside potential. However, I don't see how this is a problem because, again, I'm trying to reduce speculation, and exchanging it for guaranteed income. Despite that, even covered calls have the ability to return 10% to 30% in annual gains, depending on your trading abilities and market conditions. Good enough for me.
I'm also reading up on cash-covered shorted puts. It's the cousin of covered calls where you sell put contracts (to buy their stocks at a set price), again, for a fee premium. But in theory, I could do absolutely nothing more than covered calls, and still do just fine. But adding more and more of these strategies ultimately gives me more trading flexibility, regardless of the market direction.
Archive for August, 2010
This month's stock market has been tough. My stocks have slipped rather substantially at this point, so I guess it's good timing to make some income off of them.
This doesn't have anything to do with finance, but I thought some of you might get a kick out of thisflower breeding game. There are no winning or losing with this game, just whatever you feel like doing. Enjoy.
It's that time of the month again! My net worth posted a very modest increase this month. Only 1.33%. For a while, it was actually behind too.
What happened? The stock market hasn't been all that kind this month, and you know, I'm kind of amazed at just how much influence the stock market has on my net worth these days.
It got me wondering what my basic asset allocation is, and... it's 65% stocks/options, 35% cash/bonds. Hmm. I thought my asset allocation might be off somehow, but it's actually fairly on target. That percentage is also when I am bought into stocks. Otherwise, my cash/bonds percentage would be much higher.
So, despite my relatively risky hobby of stock trading, I don't feel like I am taking too much risks. When I do trade stocks, I typically stick with quality company names, and on top of that, now I am adding covered calls to sort of buffer against market volatility, and at the same time, converting the stocks to be more of a passive income generator. As far as stock trading goes, I'm actually very conservative.
Still though, the month has essentially been a disappointment... as the blog subtitle says, it could be worse. A lot worse! Gotta celebrate the little things in life.
Today's market started out rather low, and I decided to buy more SNDK, and then make some more covered calls with it.
You know, I really like this covered calls option. This way, you're not entirely at the mercy of the stock market. You make decent (immediate) income selling contracts that although locks you into a price you are obligated to sell, you are nevertheless selling at a profit. And you can also adjust how much passive income versus market volatility you want to depend on for your money.
For example, I just made an additional $200 (for a total of $300) just for selling contracts that, even if it's exercised, would allow me to sell my stocks at a pretty substantial profit (15%+).
Now you're probably saying, "Wait, where's the downside?" The downside is that you're still at the mercy of the stock market, and there is still a risk of losing money. There is also the "risk" of capping your gains, but I'm not greedy, and it's 15%+ profit. The real risk is that your stocks can still lose a lot of value, to a point that it erases both the market value as well as contract premiums that you make.
But hey, nobody said this was a free lunch. I mean if I want a lot more guarantee, then I might as well buy bonds instead.
Believe it or not, but covered calls actually cushions me from a straight up stock trade. Geez, I don't know why I haven't done this sooner.
I just checked my account and saw my dividend payout for Best Buy stocks I bought earlier. I lost a little bit of money on that trade, but the dividend helped even things out.
Also, I just saw Sandisk drop substantially today. This company is pretty solid and has great growth prospects. I don't know why it's falling by that much, but I bought some up.
My stock trading is evolving more and more, and right now, it's at a point where I am more passive than I am speculative.
I mean, yes, who am I kidding? Stock trading is still a speculative activity, but it's quite tame compared to my fast trading BP days not too long ago. Here's all I do right now: I keep an eye out for great companies that are selling at a great discount. When I see one, I analyze the company financials and stock technicals. If it still looks good, I buy it, set it (with a reasonable limit sell) and forget it. That's it. Easy peasy.
I've also experimented with some covered calls for the first time. Ironically enough, I haven't gotten around to them until now. I don't know why. It's a great way to add an extra layer of income generation, especially in a flat market (which is what we appear to be in).
I guess the thing is, I still don't have a firm grasp of the options market just yet. And frankly, this is something I just don't want to rush into, even with covered calls. That's also why I'm sticking only with covered calls right now.
But I did it with the Sandisk stocks that I just bought. The options symbol took a little bit for me to get it just right, but when I did, the transaction went right through. I earned a tiny profit from selling the contracts (the commission fee for the sell is still the same), and we'll see if anyone exercises the contract.
Edit: Just wanted to add some details to this trade (for anyone curious and for my own reference). The contracts are $45 calls that expires on Sept 10th. Right now, my SNDK stocks is showing a $100 paper profit, and I locked in an extra $100 from selling the contracts.
It is unlikely, but always possible, that the contracts could be exercised, but the upside is that at least I will be selling at a price I want. If not, I can keep writing contracts on them and make more income.
Also, writing covered calls means that my gains will always be capped at $45 in this case, but that's not a huge deal to me considering that that would be a very profitable sell, and I still made income on the contracts. In any case though, that's the risk, although it's worth explicitly noting that writing these calls actually LOWERED my overall loss potential than just sitting on the stocks.
So, yeah, I think I can really get used to this. Still, one baby step at a time. In the future though, I think I will write contracts with longer expiration dates, so I can earn more on them, but also so I can sort of go back to my "set it and forget it" attitude. So, yeah, this appears to be a great replacement for limit sells or trailing stops that I've been using.
Now, here are two words that can provide an endless well of interesting conversations.
I was reading this
What I find particularly interesting is that money used to play a much more prominent role in marriage prospects in the yesteryear. According to the article, an old ad from the 1860s reads, "A young lady, rather good looking, and of good address, desires the acquaintance of a gentleman of wealth (none other need apply), with a view to matrimony." The article ruminates, "Several generations back, personal ads could not have been more explicit about finances, since everyone knew that women generally had no income and a marriage involving a man of means was the only way to live comfortably."
As a result, financial fitness was once seen as a very important trait in men, and the ads from men back then blatantly reflected that. "'There was this idea that men were very frugal,' said Ms. Epstein, 33, who posts copies of some of the ads she’s dug up at advertisingforlove.com. 'You were going to work hard and save your money, and then by doing so, you would be able to support a wife in comfort.'"
Whatever happened to the good ole days. Actually, I shouldn't say that because I probably would not be able to compete in the sense that I don't make a lot of money right now. But I digress....
Either way, the article continues on with what I thought was a refreshingly direct shot at the truth about love and money. "'Frugality may or may not have anything to do with how much he loves you,' said BJ Gallagher, 61, an experienced online dater and author of several self-help books for women. 'But for a lot of women, love looks like 'Take care of me and give me things.''" Now, I'm not saying that generalizations like this will conveniently apply to every woman today, but I think there is quite a bit of truth to that statement. In the end, we all still want a sense of stability and comfort. Even as a guy, I do too (though, I am expected to make the money to provide, not be provided for).
Or, maybe she's wrong, or that there's more to this? What do you think, you ladies, rather good looking, and of good address?
I have mixed feelings about this. To me, money is just a representation of value. He has a laptop, for example, and it doesn't matter to me if he worked for the laptop in a barter, or if he worked for money, and then bought the laptop. The result is the same. So, why avoid money?
On the other hand, I do admire the fact that he not only tries, but actually enjoys a very simple form of living. Even if we don't strive to live without money, there are some useful tips that I think we can learn from his experiences. He also has a forum that I am reading through right now. Looks interesting.
I just read some heady but funny Chuck Norris internet jokes from elsewhere and I thought I'd share it here as well:
* Chuck Norris doesn’t hedge. He waits.
* Chuck Norris trades on fear and greed simultaneously.
* Chuck Norris charges the Bank of England a penalty rate for borrowing – And guarantees its deposits.
* Chuck Norris gets ALL of his funding from the asset-backed commercial paper market.
* Chuck Norris thinks Credit Crunch is a breakfast cereal.
* Chuck Norris subprime collateralized debt obligations still trade at 100 percent of face value.
* When Chuck Norris makes you a price, it isn't an offer; it's an obligation to buy.
When it comes to cooking, I think I'm a bit of a quack. But that isn't to say this awkward little duckling does not dream of being a culinary swan some day. Ah, but every great adventure starts with a single waddle, and it may look something likethis LifeHacker article here.
Most of you may have yawned at the article for its remedial, Hooked-on-Phonics-like content, but to me, it's still something of a revelation. For example, did you know you can also cook things other than rice in a rice cooker? Actually, I knew that too because I've seen my mom do it with hers, but it never occurred to me that perhaps I could do that too! It was as though it's some kind of Asian dark arts that I am not suppose to speak of or fathom.
Well, I'm pumped! And seriously, doesn't that picture look delicious?
By the way, does anyone use a rice cooker for their cooking? Does anyone know what's the difference between the rice cooker and the crock pot? Also, since I already have a crock pot, is it worth buying a rice cooker or is that redundant?
Based on that, I found out that I have a fairly high risk capacity (33) but a moderate risk tolerance (24).
For someone like me, the risk tolerance sounds about right. I've noticed that I'm starting to be a bit more conservative as time goes by. Again, it's most likely because I'm anticipating to lose my current job soon, but I think it's also because I'm starting to get older.
Now, risk capacity is what I'm slightly concerned about. However, the suggested asset allocation is 80% equities, 20% fixed income, and this is what I would have if I had went all-in on my stock trades anyways. Otherwise, I would be in more % cash.
Here's a quick explanation of the difference between risk tolerance and risk capacity.
Anyways, how did you do on the quiz?
Bonus: Amusing currency picture.
Hey gang, I need some opinions on this if you know anything about this subject.
As you can imagine, my wisdom teeth are impacted? I think that's the term. It looks like the erupted one in the pictures below, except that it's has also completely surfaced through the gums.
Anyways, the dentist is saying that I need to get them out sooner rather than later, but it doesn't have to be right away. It could be a 5 year project if I want.
Now, another thing about my teeth is that I've already had a molar removed a while back, so there is now a gap in my lower jaw. I know that if I were to leave them alone, they would slowly slide out and mis-align, but with a gap there, at least the teeth shouldn't crowd too much and cause pain? I don't know.
What I do know is that I don't think I really care THAT much about having perfect teeth. I just want my teeth to not hurt, and then I don't want to over-pay for any unnecessary dental work.
So, my question is, do any of you know if this is truly necessary, or is this something that the dentist is telling me to help pay for his boat?
The Wall Street Journal has an interesting article called "Are you a Secret Spender?" Among the signs of being a Secret Spender, my favorite one is "sneaking out and bought an item in the middle of the night". Exactly what can be bought by sneaking out in the middle of the night?
"Pssst. Over here. You like baby wipes? Yeah? You want some baby wipes? I got just the thing. Please come over to my car trunk and peruse the merchandise."
All joking aside, I confess that I too was a Secret Spender once, back when I was married. I bought a rifle without my ex's knowledge or consent. I did that because we were so bad with money that, I figured that was the only way I was going to able to "keep" anything for myself. Otherwise, I felt like I was grinding everyday simply to fulfill her shopping list of wishes and demands, with nothing to show for myself.
Now, normally, one would think that she would be upset, but it turned out that she was not. Well, not terribly. She too was a spender, and instead, basically couldn't understand why I spent our money on that when we could've spent it on something else we can both enjoy instead. Yeah, such as it is when you put two spenders together....
But those were my deep, dark days. So, now that I told you mine, anybody want to fess up to their secret spendings?
I was perusingvandwellers.org earlier. The website has a gaudy color scheme that makes it hard to read, but I have to tell you, the content there is fascinating nonetheless.
Reading it, it occurred to me that the only technical obstacle between temporary and permanent living appears to be... a toilet! Everything else, you can find a solution around it.
There are a couple of options available, but none of them are very good:
For one, you can install RV toilets, but you still have to dispose of your own "dark water".
The alternative is to have access to public restroom facilities somehow, like using the bathroom at work, at a park, or having a gym membership. I think this is the most realistic, though imagine having to drive to the gym every time you need to take a dump.
Lastly, you can just "rough it" in the woods somewhere... but that's most likely illegal.
Anyways, that's my crazy observation for the day. That in the end, the majority of our housing cost actually goes into buying a connection to the municipal sewer system. Otherwise, a huge world of interesting and inexpensive alternative dwelling (not just RVs) open up to you.
Many of you know that I use a PDA to track my spending and budget, but because PDAs are generally expensive and bulky devices, I've tried to operate without one. And that's what I've been doing for the past... six weeks I think.
Although I've learned that I can operate just fine without one, I also currently have no idea what my exact spending is nor where I stand on my budget. For example, I can't tell you how much I've spent so far on food this past 5 days, whereas I used to be able to tell you down to the last cent. I also can't tell you how much is budgeted so far to buy more cellphone minutes. And until I log on to my online account, I don't know exactly how much is on my credit card.
Luckily, I am still living below my means, and I still check my bank accounts daily, bills weekly, and net worth monthly. So, I know I can do just fine without the PDA. But without it, I've lost a sense of precision that I sorely miss.
I am still hopeful that I can find something equally powerful and effective for me some day, minus the bulk and the expense. (By the way, anybody have any good recommendations?) But for now, I've decided to go back to my PDA.
According to thisarticle, Goldman has suffered a 10 day trading loss. This, after last quarter's shockingly perfect trading, raking in as much as $25 per day.
Er, now that I think about it, I'm not sure why I'm blogging this. I doubt anyone here would even be interested in a news tidbit like this.
But a lot of people DO guy Goldman stocks simply because of how good they are, and yet, it still pays to diversify because news articles like this reminds all of us that even the best... can't be perfect.
On a completely separate note, Rick Ferri reveals his hand!
34% Vanguard Total Stock Market ETF (VTI)
10% S&P SmallCap 600 Value Index Fund (IJS)
5% Ultra-Small Company Market (BRSIX)
8% Vanguard REIT ETF (VNQ)
6.5% Vanguard Pacific ETF (VPL)
6.5% Vanguard European ETF (VGK)
5% DFA International Small Cap Value
5% DFA Emerging Markets Core
12% Vanguard Total Bond Market Index(VBMFX)
4% Vanguard Inflation-Protected Securities(VIPSX)
4% Vanguard High-Yield Corporate Fund(VWEHX)
Wow, check out thischeap Miami Florida condo. Amazing price, especially for 1.5 baths. More than workable for a single guy like me. I wonder what the catch is? The place itself is likely to be unremarkable, but the location sounds great.