Comments on: Compounding Our Option-Selling Profits To The Highest Levels https://www.thebluecollarinvestor.com/compounding-our-option-selling-profits-to-the-highest-levels/ Learn how to invest by selling stock options. Wed, 12 Sep 2018 10:35:27 +0000 hourly 1 By: Alan Ellman https://www.thebluecollarinvestor.com/compounding-our-option-selling-profits-to-the-highest-levels/#comment-179050 Wed, 12 Sep 2018 10:35:27 +0000 https://www.thebluecollarinvestor.com/?p=17008#comment-179050 In reply to Seth.

Seth,

In my books and DVDs, exit strategies are a major focus of the strategies. For a declining stock when using covered call writing, we use our 20%/10% guidelines to close our short call positions. The next step depends on time within the contract, overall market assessment, evaluating stock news etc. There are specific guidelines with examples taken directly from my own portfolios to exemplify how to manage these scenarios…too many to enumerate in this venue.

As far as a guideline as when to close the long stock position after implementing other mitigating strategies, an 8 – 10% price decline is a fair range to consider.

Alan

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By: Seth https://www.thebluecollarinvestor.com/compounding-our-option-selling-profits-to-the-highest-levels/#comment-179049 Wed, 12 Sep 2018 09:44:13 +0000 https://www.thebluecollarinvestor.com/?p=17008#comment-179049 In reply to Alan Ellman.

Thank you Alan. Very helpful to know.

Another question: how do you determine your exit strategy from the underlying? I know we can aim doing double but what if the underlying price keeps dropping? At what point do you decide to exit? Are there certain “cut losses” thresholds or do you exit when the stock is no more in the weekly selected stock list?

Thanks again.

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By: Jay https://www.thebluecollarinvestor.com/compounding-our-option-selling-profits-to-the-highest-levels/#comment-179014 Tue, 11 Sep 2018 21:57:53 +0000 https://www.thebluecollarinvestor.com/?p=17008#comment-179014 Hey friends,

Great story Hoyt, thanks for the share!

As a follow up to the discussion at the top of the thread this video out today will be helpful for fellow market junkies out there!

https://www.tastytrade.com/tt/daily_recaps/2018-09-11/episodes/term-structure-of-volatility-09-11-2018

It supports my opinion that you should not sit around holding VXX waiting for a spike in VIX but when you see one short it for it’s subsidence/mean reversal/normalization using VIX options or SVXY. – Jay

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By: Roni https://www.thebluecollarinvestor.com/compounding-our-option-selling-profits-to-the-highest-levels/#comment-179006 Tue, 11 Sep 2018 17:41:05 +0000 https://www.thebluecollarinvestor.com/?p=17008#comment-179006 In reply to Hoyt T.

Hoyt,

wow !!! Fantastic, and inspiring.

Congratulations – Roni

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By: Alan Ellman https://www.thebluecollarinvestor.com/compounding-our-option-selling-profits-to-the-highest-levels/#comment-178996 Tue, 11 Sep 2018 14:51:10 +0000 https://www.thebluecollarinvestor.com/?p=17008#comment-178996 In reply to Hoyt T.

Hoyt,

What a great story…thanks so much for sharing.

You have quite an impressive family and I’m sure they realize how fortunate they are to have a Poppa like you.

Alan (aka Papa)

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By: Hoyt T https://www.thebluecollarinvestor.com/compounding-our-option-selling-profits-to-the-highest-levels/#comment-178993 Tue, 11 Sep 2018 13:26:36 +0000 https://www.thebluecollarinvestor.com/?p=17008#comment-178993 Alan,
Good article on compounding.
Eleven years ago I took all five of my grandchildren (ages 11-17 at that time) to my credit union and set up a savings account for each of them. I set up a program where I would match their savings up to $100.00 each month. But if they ever withdrew any funds I would stop the match. Two of them went online and set up a monthly withdrawal of $100.00 each month which was then automatically deposited in their credit union savings accounts. Smart kids!
Four years later I set up them each up an account with Vanguard. I put $3,000.00 in for each, which was Vanguard’s minimum at that time. My new deal was that I would match their Vanguard investments up to $3,000.00 per year as well as maintaining the credit union program. As a part of this program I set each one of them a personalized savings compounding calculator. It showed them what their present balance was, had a cell for investment additions, a cell for investment returns (set by me at 8%) and a cell to show the total at any point in the future.
Needless to say their minds were blown!
All five have done very well. The two I described above have become obsessive savers and have account balances that are unbelievable for young people in their mid twenties. They still enjoy life by spending money on experiences not things. One is a Dentist, how ironic, and one teaches English Lit at her Alma Mater. Of the other three one is an OBYGN, one is a registered nurse responsible for the most critical NICU babies and the youngest is still in med school. I am a very proud Poppa and like to think that I played a small part in their success.
I think it may have been Napoleon Hill who first introduced to the concept of compounding interest. I believe he may have described it as the eighth wonder of the world.
I agree.
Hoyt T

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By: Alan Ellman https://www.thebluecollarinvestor.com/compounding-our-option-selling-profits-to-the-highest-levels/#comment-178990 Tue, 11 Sep 2018 11:26:52 +0000 https://www.thebluecollarinvestor.com/?p=17008#comment-178990 In reply to Seth.

Seth,

There is no one correct response to this question but I’m happy to share with you how I approach expiration dates. Since I average 50 -100 contracts per month, it makes it more practical for me to have all contracts expiring on the same date…the 3rd Friday of the month since I trade Monthly contracts. Some of our members prefer Weeklys and others may go our further than 1 month (without conflicting with earnings reports). Money can be made with all these approaches.

If I close a position mid-contract, I look to replace it with a new position expiring in the same contract month by setting lower initial time value goals. For example, if my original monthly goal was 2% – 4% for initial time value returns, I may drop to 1% – 2% mid-contract.

If we are in the last week of a contract and close a position, I’ll wait for the start of the new contracts to use that cash in a new position. The logarithmic nature of Theta (very little time value erosion initially) will do little damage to our overall time value returns and we are eliminating an additional week of risk.

Alan

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