We are already in month 5! Months 1, 2, 3 and 4 are available for review.
This is an opportunity to learn our portfolio-building strategies step by step that, hopefully anyone will be able to follow. Our goal in this portfolio is to show our Members how to use slow, steady, simple options strategies to amass over $1M over 30 years by investing just $700/month ($252,000). If you can apply this discipline in your early working years – your retirement will be a breeze.
Our goal is to make 10% a year on our investments and, though it has only been 4 months – the portfolio is up 5.5%, which is right on track, despite the disappointing market. When we started the portfolio (Aug 25th), the S&P 500 was at 4,000, so being up at all is a nice accomplishment as we’re back at 3,840. As with all our PSW portfolios, the returns tend to accelerate as our positions mature.
Last month, we added the SOFI position, which used $205 in cash and $500 in margin and it’s right about where it was at the time – so you haven’t missed much. SOFI is $750 in the money and the spread is net $198 so $802 (405%) upside potential if we get to $5 on just that spread.
Last week left us with $80 in unused buying power and we’re going to add $700 more cash to the mix and we’ll see what we can do with it.
We collected 0.88/share ($27.28) on NLY last week and that’s why we love our dividend-payers. That NLY dividend is about 20% of our total profits to date. We need to close the loop on T and NLY so we can get around to selling options on those positions – that’s when things get fun!
69 more shares of NLY would be $1,479.36 and then we’re at 100 shares so we could sell 1 2025 $20 call for $3.20 ($320) for net $1,159.36. The problem with NLY is they reverse-split since we bought them and the shares are more expensive than we’d planned. Still, the dividend is nice so we’ll just get there later than sooner.
58 more shares of T, on the other hand, would be $1,086.92 and we can then sell 1 2025 $17 call for $3.15 ($315) for net $771.92 and that makes sense since T will also be paying us a 0.277 ($27.70 on 100 shares) dividend on January 9th – so that’s the trade we’ll go with this month:
- Buy 58 additional shares of T (100 total) for $18.74 ($1,086.92)
- Sell 1 T 2025 $17 call for $3.15 ($315)
That leaves us with just a few extra Dollars for next month and we look forward to collecting $27.70 on the 9th, which is 0.79% of our entire (now) $3,500 portfolio!
Selling the 2025 $17 call may seem a bit strange with T at $18.74 but we’re selling the calls for $3.15 so the net sale is $20.15. If we are called away over $17, that’s a nice 15% profit as we spent $706 on the first 42 shares and now $1,086.92 for 58 more LESS the $315 is net $14.78/share. We will also be likely to roll the call out to a higher strike for 2027 if possible in Jan 2025. PLUS we get those dividends, 8 sets of 0.27 is another $2.16 or 15% of our $1,478 net outlay.
We prefer to lean a bit conservative in our targets when we’re first building our positions as the damage done from losing money far outweigh the benefits of making a little extra by taking bigger risks.
So this simple little play, which began as our first purchase on Aug 25th, will make 30% if T is just over $17 in Jan, 2025 for a total return of $1,916 against our $1,478 outlay. And we can make that every two years after that as well – reinvesting and growing our returns over time. Numbers like that can blow us miles past our goal of making “just” 300% in 30 years (and, don’t forget, we’ve only invested $3,500 (1.4%) of a planned $252,000 so far).
Next month, we’ll have had a chance to see some of the Q4 earnings reports but it’s most likely we’ll spend the next two cycles filling our NLY position before we move on to something new.
Phil your 1Mil port. Selling a 17 jan 25 call on T feels just like given the stock away. Do not think this way the stock will see many div. days. 🙄
As long as the premium you sell ($1.46 in this case) is more than a dividend payment – how can they possibly harm you buy calling you away? The minute the short call is cancelled you have collected more than the dividend would have been and then you just turn around and sell another one for more premium.
In a larger portfolio, I don’t mind taking chances but, when we’re only going to have $8,400 deposited in our first year – I don’t want to lose a penny!
Good morning everyone!! Here is the link to today’s webinar..
Latest on Hamlin:
The game will not be made up, I guess they will consider it a tie.
Oil failing $74 after that BS move up yesterday morning. $74 should be bouncy to $75.20 (weak) /NG back over $4.
Europe is a lot more enthusiastic than we are so very possible we start dropping at 11, when they start to close.
Phil// any suggestions on the APPL positions we have have on the various portfolio? Thanks
One of the things I try to teach you guys is not to feel pressured to make changes. If AAPL were down on a completely false rumor and we saw a one-time opportunity to adjust, we might jump in it, but the whole market is faltering and we don’t know where it will stop and we don’t know what’s true and what isn’t so it doesn’t make sense to trade in the dark.
Those are our only AAPL positions. If AAPL goes down to $100, I imagine we’ll want to roll the June 2024 $110 calls ($33) to the 2025 $90 calls that are now $49. That would cost us net $16 ($128,000) but less as we’d be waiting for $20 and the 2025 $130s are $26.50 so net $6.50 to the $90s – THAT is a roll I’d love to make any time!
So, if AAPL drops $20, the $110/90 roll should be about the same as the $130/110 roll and we will have saved $76,000 – so I kind of hope that happens as I’d love to do that roll.
As to paying for it, if we sell 60 of the 2025 $130s, which are now $26.50 for the price of the $150s, which are now $18, that would be $108,000 – so the roll is pretty much paid for and we still have lots of room to sell short-term calls with 20 open long calls.
We spent net $235,000 on the current spread and if we roll to the $90/130 spread for about net $0 then we’re in that $400,000 spread for $235,000 and we can sell 20 April $135 calls for $6.25 ($12,500) so 7 sales like that would be $87,500 collected (but I’d sell 30 if AAPL were higher) so net down to about $150,000 on the $400,000 spread that pays out at $130 in 2025.
Since I would LOVE to be in that spread (and would probably DD at those prices), then I have no fear of AAPL going lower so there’s no sense in spending money now since it either goes higher and I don’t have to adjust our current $400,000 spread or it goes lower and we get discounts.
See how easy that logic is?
LOL on that a-hole. So glad he’s being humiliated but I can assure you it won’t teach him a thing.
Airplane mode people!!!
Yeah, anyone who thinks all of California is “liberal” – whatever that means – I give you Kevin McCarthy, Devin Nunez, and Darrell Issa, just for starters.
And that’s why I don’t understand why progressive California doesn’t take back its power in the house (Congress) from the two parties by legally requiring it’s congressional delegation to take one unanimous position for any votes
so glad this portfolio exists. Thank you, Phil.
I think it’s a nice exercise people can wrap their heads around.
ISM Manufacturing activity slides deeper into contraction terrain in December
Jan. 04, 2023 10:01 AM ET
With WBA coming out with earnings before tomorrow’s opening, is this another lesson in patience?
It’s not even patience. We’re long and, unless the earnings report sucks, we’ll still be long tomorrow, next Q and next year, etc.
Phil, I own 20,000 shares of Apple with long term capital gains, net cost under $10.00 per share. I have 200 Deep In the Money January 2023 $70.00 short calls, which I shorted at 67.00, current value ~58.00. Considering several alternative plays: 1) let the January options expire and have the stock called away at 70, pay long term capital gains (approx 20%), 2) roll 70.00 short call out from January to March 2023, then monitor stock (hold/roll until it appears to bottom before covering, or buy to cover if rolled short call becomes unprofitable). Please comment and provide other suggestion if you see fit. Thank you.
Well, congrats for one thing.
If you have the margin for it, I’d roll the Jan $70 short calls at $58 ($1,160,000) to 300 2024 $100 calls at $38 ($1,140,000) and sell 5,000 of the shares for $127.75 ($638,000) and buy 200 2025 $100 ($45)/150 ($19) bull call spreads at $26 ($520,000).
That leaves you with 15,000 long shares and 200 of the $100/150 spreads covering 300 of the 2024 $100 calls and the 2025 $130 calls are $27, so it will cost you $300,000 to roll them up another $30 if you have to but then your 15,000 shares would be $120 in the money ($1.8M) and your 200 spreads would be another $600,000 in the money so $2.4M to cover whatever 200 calls are over $130. If that becomes an issue, you can wash rinse and repeat to higher and higher strikes but you can’t do it if you don’t have tons of room for rolls.
Otherwise, best to just cash in and start fresh with a spread.
Phil ATT only pays a .277 cent dividend per quarter you have it as 1.11 in the morning write up
Yes, right. It’s $1.11 total, not quarterly.
Another blah day.
Hi Phil, Any thoughts about EWZ, the Brazil ETF. It has been hammered lately on fears that Lula will damage the Brazilian economy with huge social spending programs. There are also worries that he will put cronies in charge of components of the ETF like PBR, and perhaps dip into its coffers to fund social spending. Plus, there is the worry that commodity prices may weaken if we go into a strong global recession. So lots to worry about.
On the other hand, the dividend yield is over 15%, and it has dropped from about 34 to 26 since November. I am wondering if selling puts on down days is a good strategy for an entry. Yesterday, EWZ was at 25.72. Are we at the point where the reward is starting to counterbalance the risks?
Interested in Phil’s take as well. Mine is that it is a strong buy due to future near shoring.
I think the same knee-jerk right-wing idiocy is panicking people out of EWZ as it does when any liberal takes control of a Government and plans to (gasp!) balance the books by taxing people who make the most money and (gasp!) spend money on programs that actually help the people who need it.
As with our own economy, it’s a completely factless fear when CLEARLY the economy performs much better when we invest in the people rather than tilting the game further to the advantage of the already rich and powerful.
Like Obama, Lula is being handed a disaster to start with and there’s a Global Recession so why do you expect a magical turnaround? I just don’t see it as the most compelling place to make a bullish bet – not when our Watch List has 100 great stocks that are extreme values.
As with everything else – I’d wait for Q1 earnings and see if things are actually improving before putting money at risk.
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Phil – thank you – Dan Bender