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Generating 2% – 4% in Bull Markets: How to Take Advantage of Out-Of-The-Money Strikes

The 3 required skills for covered call writing and selling cash-secured puts are stock selection, option selection and position management. This article will use real-life examples highlighting the first 2 of these skill sets in a bull market environment.

 

Article assumptions and guidelines

  • Portfolio is set up in a bull market environment
  • Target goals for initial time value returns are 2% – 4%
  • $50k cash available
  • Select 5 different stocks in 5 different industries
  • Adequate cash allocation
  • 2% – 4% of total cash available reserved for exit strategy execution, if needed
  • Premium Report dated 12/15/2017 for 1/19/2018 expirations is used for stock selection

 

Stocks selected

covered call writing stock selection

Bull Market Portfolio for January 2018 Expirations

 

Selection guidelines achieved

  • 5 different stocks
  • 5 different industries
  • Cash allocation near $10,000.00 per position (no single position dominates from a cash investment perspective)
  • Adequate cash reserve ($2323.00) for potential exit strategy opportunities

 

Calculating Initial time value portfolio returns

                                                                                                            

Portfolio ROO and Upside Potential

 

Calculation guidelines achieved

Returns fall into our target 2% – 4% range (2.4%)

Establishing a significant upside potential bull market opportunity (3.6%)

 

Discussion

When targeting initial time value return goals (ROO) for our covered call writing portfolios of 2% – 4%, we are using these stats to set up the portfolios. Final results can be lower or higher. In bull markets we favor out-of-the-money strikes which offer the opportunities for share appreciation up to the strike price in addition to the option premiums…two income streams per position. In the real-life portfolio highlighted in this article, the average initial return (ROO) was 2.4% and the potential share appreciation averaged 3.6%. This created a portfolio with a possible 6%, 1-month return. Stock and option selection were discussed in this article but I would be remiss if I didn’t mention the importance of position management in our final returns. Also, two final points:

  • The odd $94.95 strike for MKSI was a result of a contract adjustment after a corporate event
  • Bid prices were used for the calculations. Leveraging the Show or Fill Rule may have elevated the returns displayed

 

Upcoming event

Chicago Stock Trader’s Expo: All Stars of Options

Sunday July 22nd 12:30 PM – 1:15 PM

“How to Select the Best Options in Bull and Bear Markets”

Hyatt Regency Hotel @ McCormick Place

2233 South Dr. martin Luther King Jr. Drive

Chicago, IL 60616

Click here for details

See all events

 

Market tone

This week’s economic news of importance:

  • NAHB home builder’ index June 68 (70 last)
  • Housing starts May 1.301 Million (1.300 million expected)
  • Building permits May 1.301 million (1.364 million last)
  • Existing home sales May 5.43 million (5.52 million expected)
  • Weekly jobless claims 6/16 218,000 (220,000 expected)
  • Philly Fed June 19.9 (29.0 expected)
  • Leading indicators May 0.2% (0.4% last)
  • Markit manufacturing PMI June 54.6 (56.4 last)
  • Markit services PMI June 56.5 (56.8 last)

 

THE WEEK AHEAD

Mon June 25th

  • Chicago Fed national activity index May
  • New home sales May

Tue June 26th

  • Case-Shiller home price index April
  • Consumer confidence index June

Wed June 27th

  • Durable goods orders May
  • Pending home sales May

Thu June 28th

  • Weekly jobless claims through 6/23
  • GDP revision Q1

Fri June 29th

  • Personal income May
  • Consumer spending May
  • Chicago PMI June
  • Consumer sentiment (final) June

For the week, the S&P 500 moved down by 0.89% for a year-to-date return of 3.04%

Summary

IBD: Confirmed uptrend

GMI: 5/6- Buy signal since market close of April 18, 2018

BCI: Favoring 3 out-of-the-money calls for every 2 in-the-money calls. 

WHAT THE BROAD MARKET INDICATORS (S&P 500 AND VIX) ARE TELLING US

The 6-month charts point to a neutral tone. In the past six months, the S&P 500 was up 3% while the VIX (13.77) moved up by 40%.

Wishing you much success,

Alan and the BCI team

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About Alan Ellman

Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing. Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.

32 Responses to “Generating 2% – 4% in Bull Markets: How to Take Advantage of Out-Of-The-Money Strikes”

  1. Natasha June 23, 2018 4:54 am #

    Alan,

    I wanted to ask a question about investment amounts in order to start covered calls(or cash secured puts)

    I understand that we really want atleast $50k working for us in order to have a decent portfolio of stocks

    but lets say we want to start at the EXTREME bottom in terms of investment capital… what is that number? I presume you would recommend for this bare minimum amount to start in ETF’s , as you say there is less capital required to do that, but what does that mean in terms of numbers? what is that minimum amount I need to get started with this (even if it means building up to a decent ETF portfolio?)

    So to get started in covered calls with the view of building up (and understanding it will take time to compound up because I am starting with the least amount possible) what can that starting investment capital amount be and would that starting point be doing covered calls only in ETFs?

    Does it make sense to start with only doing one covered call in one ETF and then building from there? or should i have a portfolio of ETFs in order to do this properly? I understand ETFs are themselves baskets/portfolios of stocks, but am not sure if doing just one ETF covered call to get started is ok….as that will presumably be the least amount needed in terms of capital to get started with this

    thanks

    Natasha

  2. Alan Ellman June 23, 2018 7:22 am #

    Natasha,

    You are 100% correct that using ETFs will allow us to enter our properly-diversified covered call portfolios at the lowest capital requirements.

    Using Broad market ETFs that diversify the entire S&P 500 (SPY, IVV, and VOO) will allow for just one underlying but these currently trade in the $200.00 to $300.00 range, requiring an investment of $20k to $30k.

    An alternative is using the SelectSector SPDRs which break up the S&P 500 into 10 sectors and we can select the best-performers from these securities. In our premium member ETF reports, the BCI team dedicates 2 pages to these securities.

    Here is a link to an article I published several years ago pertaining to this topic:

    https://www.thebluecollarinvestor.com/constructing-a-covered-call-portfolio-using-select-sector-spdrs/

    Using these will require half the capital than the amount the entire S&P 500 ETFs require.

    Alan

  3. MarioG June 23, 2018 5:19 pm #

    Alan,

    I received a prospectus from Etrade on GSG (IShares S&P GSCI Commodity-Indexed Trust). I read a lot of it (85 pages). I also found I could read the same prospectus on line at Fidelity when I pulled up a GSG Quote Research page.

    The prospectus looks scary at first reading. Many warnings about risks involved and other issues.

    * GSG is a commodity ETF that invests in index futures contracts

    * 58% of it investments are in Energy (Different types of oils)./ The rest in other commodities

    * Investors will annually receive an IRS Schedule K-1, not an IRS Form 1099 from your broker. I read on online some investors stay away from Schedule K-1 investments to eliminate processing this form at tax time.
    * You are taxes as a partner in a partnership
    * You may be subject to “phantom Income” – taxable income without corresponding cash received from your investment

    I noticed that Turbotax Home and Business does support Schedule K-1

    Questions:
    * Should we be concerned in owning this ETF compared to stock based ETFs.
    * What special problems have you had with owning and trading this investment and impacting your end of your tax process?
    * Can the “Phantom Income” from the Schedule K-1 dramatically affect your net return on the investment?

    Thanks for any info or any information from other readers.

    Mario

    • Alan Ellman June 24, 2018 7:41 am #

      Mario,

      I’m glad you brought this up. When it comes to risk, it would be unreasonable to expect our BCI community to research each security in the detail that you spent with GSG (yikes…85 pages). That said, understanding the risk inherent in each security we consider is critical.

      To manage this issue in a practical way, we provide implied volatility stats in the last 2 pages of our ETF Reports. This reflects the market’s anticipation of price movement of the underlying security based on call and put option premiums.

      In the last re[port, GSG had an IV of 15.88 compared to 8.98 for the S&P 500. The range of eligible securities on the most current list is from 7.46 (UUP) to 31.87 (XES). This will give a risk perspective to our members who can then make a determination based on personal risk-tolerance and portfolio return goals (the higher the IV, the greater the option premium returns).

      It is also instructive to remember that IV stats are based on an annual price movement so if we sell monthly options the price movement for GSG would be much less than 15% during the contract (either direction from current market value).

      Thanks for bringing up this important topic.

      Alan

    • Jay June 24, 2018 1:51 pm #

      Mario,

      Another potential concern with commodities futures based products is they can be negatively impacted by “contango” in futures pricing similar to how the VIX futures products are.

      At it’s simplest, contango is the assumption the futures markets about 80% of the time make that the price of the commodity/underlying whether corn, pork, wheat, oil or the VIX, for that matter, will be higher in the “future” than it is now. That results in a built in drag on some futures funds in normal conditions since they are more often than not buying more expensive contracts to replace the ones expiring in the fund – even if the underlying has stayed flat or even gone up slightly. If the underlying goes down contango is an extra negative multiplier. Happens to VXX all the time.

      It would be interesting if your prospectus also listed that risk which can be more a structural issue for that type product than a reflection of spot price of the underlying commodities on any given day. – jay

      • MarioG June 24, 2018 11:30 pm #

        Jay,

        Regarding the GSG Commodity Indexed Trust:

        Yes, Good Point. I did come up with the Contango term in my research and in the Prospectus. It’s a lot to assimilate. It’s good to get this education thought.

        it’s good know that an ETF exists for the commodity investment area. I don’t like the fact GSG is heavy (58%) in Oil futures contracts. Oil and Gas that has been a downer for me this year. Too many strikes against me so why ask to be slapped again. The Schedule K-1 that I will now receive for tax season probably is not big problem since I remember dealing with Schedule K-1 with my Subchapter S Corp.

        I may unwind Monday at a profit. I am long with GSG in 5 accounts. Purchased 6/15 dip in price. Last Price Friday was 17.4 or 2.05% Return in gain (Purchase Price 17.05) in 10 days. Considering unwinding now.

        *****
        Here is a definition I found.

        A market is said to be in contango when the forward price of a futures contract is above the expected future spot price. Normal backwardation, which is essentially the opposite of contango, occurs when the forward price of a futures contract is below the expected future spot price.

        ****
        Prospectus:
        Did a search of these 2 keywords in the GSG prospectus and on page 14 of the Prospectus are the following 3 paragraphs. Note the first and last where the values of the shares might decrease because of Contango and Backwardation or ongoing fees and expenses.

        During a period when commodity prices are fairly stationary, an absence of “backwardation” in the prices of the commodities included in the S&P GSCI-ER may cause the price of your Shares to decrease.

        As the futures contracts that underlie the S&P GSCI-ER near expiration, they are replaced by contracts that have a later expiration. Thus, for example, a contract purchased in March may specify a June expiration. As that contract nears expiration, it may be replaced by selling the June contract and purchasing the contract expiring in September. This process is referred to as “rolling.” Historically, the prices of some futures contracts (generally those relating to commodities that are typically consumed immediately rather than stored) have frequently been higher for contracts with shorter-term expirations than for contracts with longer-term expirations, which is referred to as “backwardation.” In these circumstances, absent other factors, the sale of the earlier contract would take place at a price that is higher than the price at which the later contract is purchased, thereby allowing the contract holder to purchase a greater quantity of the later contract. While some of the contracts included in the S&P GSCI-ER have historically exhibited periods of backwardation, backwardation will likely not exist at all times. Moreover, some of the commodities reflected in the S&P GSCI-ER have historically exhibited characteristics typical of “contango” markets rather than backwardation. Contango markets are those in which the prices of contracts are higher in the distant delivery months than in the nearer delivery months due to the costs of long-term storage of a physical commodity prior to delivery or other factors. The forward price of a commodity futures contract may also fluctuate between backwardation and contango.

        The absence of backwardation or the existence of contango in the commodity markets could result in losses, which could adversely affect the value of the S&P GSCI-ER and, accordingly, decrease the value of your Shares. Moreover, because the Trust must pay certain ongoing fees and expenses, the value of the Shares may decrease even in periods where commodity prices are otherwise stationary.

        Mario

        • Jay June 25, 2018 10:41 am #

          Thanks Mario,

          I respect the fund for being fully disclosed articulating the potential contango drag on it. A good place to see this effect on a chart is:

          http://vixcentral.com/

          It charts the futures curve for the VIX. I suspect many commodity futures curves would look similar. On the one posted it shows the contango % or “headwind” a long VIX futures fund has to overcome each month to break even. It illustrates why the short VIX futures funds like SVXY did so well for years.

          Those funds imploded not long ago which put Exchange Traded Notes like XIV out of business. But that was more a margin effect where the short interest in VIX got so high that when VIX spiked and the bets were called the non-ETF short products issued as notes by Credit Suisse and others collapsed. An extremely remote scenario for the things GSCI-ER holds.

          Anyway, arcane crap like this is interesting to me as a hobbyist :). I speculate a little with VIX and SVXY options so VIX Central is something I monitor.

          But for the bulk of us: investing in quality stocks selling put options on the front end to acquire them and calls on the back end to enhance return and loss protection is all we need! – Jay

          • MarioG June 25, 2018 10:20 pm
            #

            Jay – Very sophisticated stuff. Like a whole new world…. Mario

          • Jay June 26, 2018 1:04 pm
            #

            Mario,

            My humble suggestion is stay in the world you know and are master of!

            The best way to get ahead in the market, in my opinion, is to get good at one thing and do it consistently.

            Speaking only for me when I tried to be a “Jack of all trades. Master of none”. It did not work out so well :)! – Jay

          • Roni June 26, 2018 4:12 pm
            #

            I agree Jay,

            that’s why I keep with American companies only, sell monthly NTM calls only, 2% minimum ROO and BCI method only.

            And that’s it. 🙂

            Roni

          • Jay June 26, 2018 6:29 pm
            #

            Thanks Roni,

            There is a wise old saying: “no one ever went broke taking profits”.

            I suspect there would be equal wisdom if we coined our own saying: “no one ever went broke selling options” :)? – Jay

          • Roni June 28, 2018 2:55 pm
            #

            true Jay,

            but this options cycle I already bought back 5 of my 9 call positions as they hit 20% of the premium received, and the underlying stocks are way down.
            I am counting on a rebound, but at the same time I am considering rolling down to mitigate losses.

            It is never as easy as it sounds.

            Cheers – Roni

          • Jay June 28, 2018 4:34 pm
            #

            Thanks Roni,

            We are all in the same place. Anyone long a stock portfolio is giving back gains and scratching their heads.

            This is a damn difficult market. We have Trade Wars, interest rates, seasonality and US mid term election cycle all conspiring against us.

            Most years July is OK and there are a lot of oversold signals so I am hopeful. But please don’t feel bad your stocks are down and selling options can not keep pace with the decline. Raise some cash on the good days and buy some things on the bad days.

            Imagine how bleak it would be if you did not sell the options! – Jay

          • Roni June 28, 2018 6:41 pm
            #

            Jay,

            it is so good to have you to share my thoughts with.

            As a matter of fact, I am not deeply worried or discouraged with this week’s market downturn.
            By now, I am quite seasoned and prepared to face these fickel market moves.

            But your heart must be well attached to your rib cage, and you always need a good friend with sound advice to keep you stable.

            The BCI method for position management gives me the basic guidance for each situation, and members like you help me feel safe to make the best decisions.

            As you know, I do not have anybody here in Brazil to exchange trading ideas with, so I rely very heavily on you and Alan, and some of the other experienced members.

            Thank you so much – Roni

          • Jay June 28, 2018 11:27 pm
            #

            Thanks for your always kind words, Roni, I love this blog and am grateful to Alan and Barry for providing it.

            If you look at charts on SPY and QQQ they are still holding above their 50 day MA lines which is bullish. But stock rotation happens constantly so there is always a hazard in chasing yesterday’s winners.

            in the “put my money where my mouth is” department on the big down days this week I sold CSP’s ATM for August expiry on QQQ, XLY and XLV. I hope to buy them back after time decay at a profit. – Jay

  4. Barry B June 23, 2018 9:56 pm #

    Premium Members,

    This week’s Weekly Stock Screen And Watch List has been uploaded to The Blue Collar Investor Premium Member site and is available for download in the “Reports” section. Look for the report dated 06/22/18.

    Also, be sure to check out the latest BCI Training Videos and “Ask Alan” segments. You can view them at The Blue Collar YouTube Channel. For your

    convenience, the link to the BCI YouTube Channel is:

    http://www.youtube.com/user/BlueCollarInvestor

    Best,

    Barry and The BCI Team

    barry@thebluecollarinvestor.com

  5. Felix June 24, 2018 11:23 am #

    Alan,

    For the poor mans covered call strategy are the exit strategies the same as those in your books? Will you be covering this in your new book?

    Thanks
    Felix

    • Alan Ellman June 24, 2018 5:38 pm #

      Felix,

      The exit strategies for the PMCC are similar but not precisely the same as those we use for traditional covered call writing. As an example, we will consider rolling up in the same contract month for the PMCC but will rarely use that strategy for conventional covered call writing. Another example of a difference is when we roll the long LEAPS. All these strategies are covered in the new book and are part of the new PMCC Calculator we developed that will be available in conjunction with the release of the book.

      Alan

  6. Alan Ellman June 25, 2018 10:49 am #

    BCI highlighted in a recent German publication:

    https://www.baestard.de/the-blue-collar-investor/

  7. Mike June 26, 2018 12:07 pm #

    Alan,

    I am a new premium member of the Blue Collar Investor – really enjoying your material! – and have a basic question for you about exit strategy:

    If possible, I’d like to be able to have a “rule” in place to limit my downside exposure on each of my investments, e.g. IBD/William O’Neil recommend cutting losses at 7-8% for growth stocks in one’s portfolio.

    Is that compatible with your approach? I know from your books and blog that you don’t like stop losses, but do you personally have a limit at which you cut your losses on covered call holdings? Does the price to close out the open options positions factor into that rule?

    Thanks for your help!
    MIke

    • Alan Ellman June 26, 2018 4:22 pm #

      Mike,

      Yes, the BCI methodology has very specific guidelines for mitigating losses on declining stocks. Since we are in 2 positions (long stock and short call) we must close the short call first to avoid being in a risky naked option position. The guidelines to close our short call positions are referred to as the “20%/10%” guidelines in my books and DVDs.

      Now, once the short calls are bought back, we still own the underlying shares. Depending on market assessment, stock movement in relationship to the overall market and time remaining to expiration, we can make a determination whether to “roll down”, wait to “hit a double” (re-sell the option when sharer price rebounds) or sell the stock and move on to another covered call trade. See the exit strategy sections in my books/DVDs for details with specific examples.

      When the stock is significantly under-performing the overall market, closing when the price declines by 7% – 8% (up to 10%) is reasonable.

      Alan

  8. Alan Ellman June 27, 2018 5:14 pm #

    Premium members:

    This week’s 8-page report of top-performing ETFs and analysis of ALL Select Sector Components has been uploaded to your premium site. The report also lists Top-performing ETFs with Weekly options as well as the implied volatility of all eligible candidates.

    New members check out the video user guide located above the recent reports.

    For your convenience, here is the link to login to the premium site:

    https://www.thebluecollarinvestor.com/member/login.php

    NOT A PREMIUM MEMBER? Check out this link:

    https://www.thebluecollarinvestor.com/membership.shtml

    Alan and the BCI team

  9. MarioG June 28, 2018 1:32 am #

    6/27/18 Trading Experiences:

    Here is an update on my trades for Symbol GSG – ISHARES Commodity Indexed Trust ETF.

    6/26/18 – Sold my positions in 5 accounts at 17.4 with an automated Limit order of 17.4. The price was floating around 17.05 for some time and jumped to 17.4 level/.

    Return and commission / fees:
    Fidelity charged their normal trading fee of 4.95 for GSG. It is not a commission free ETF at Fidelity.

    GSG is commission free ETF at Etrade. Normal trading fee of 4.95 was waved. Only paid the SEC / Management free on Sell of shares. An additional charge appeared in my IRA account for $19.99 as a Short Term Investment fee. Charged if held less than 30 days.

    Return was 2% for 3 accounts for 12 days. The account with the short term fee of $19.99 was 1.9%.

    At the end of the year I will now get a Form Schedule K-1 instead of a 1099 which may add additional cost for the trade.

    Mario

    • Terry June 28, 2018 7:28 am #

      Hi Mario;

      Is the Short Term Investment fee something that Etrade is putting on you? Is it because you are in an IRA?

      Thanks;
      Terry

      • MarioG June 28, 2018 8:20 pm #

        Terry,

        Etrade:
        I can confirm and correct now that both accounts at Etrade (Individual and IRA) were charged a fee of $19.99 for a “Short Term Trading Fee for Commission Free ETF (GSG)”. When the stock was sold the SEC / Assessment fee was also charged (normal).

        I checked the trading fees at Etrade online and the $19.99 is a published fee. The fee is reduced to $15.99 if you have 150 plus trades or more per quarter.

        Fidelity:
        GSG is not a commission free ETF. Was charged standard 4.95 trading fee for entry and exit. SEC / Assessment fees was charged for the Sale leg.

        I checked Fidelity trading fees and for their commission free ETFs, a short term trading fee will be charged if held less than 30 days.

        Mario

  10. Richard June 28, 2018 4:11 am #

    Alan,

    A stock you may consider:

    CROX: Reasons

    1. I like their shoes. One of Peter Lynch’s criterion
    2. Nice look chat of slow grind upward
    3. Slippage fair
    4. Fair Value by Discounted Future Cash Flow is about 38 while price is about 18

    Negatives -> No Weeklies.

    Richard

    • Alan Ellman June 28, 2018 6:57 am #

      Richard,

      There are certainly several positives to this security.

      In the BCI methodology we require a rigorous screening process for a stock to become “eligible” for our watch lists and CROX falls a bit short of these requirements. This does not mean that we can’t be successful using CROX but rather that there are other choices that will give us a better chance for a successful trade.

      The screenshot below shows the IBD SmartSelect screen results (fundamental and technical rankings for both the stock and its industry) and we see a mixed bag.

      I will also post below the current technical chart which shows a recent technical breakdown which is predominantly overall market driven.

      Thanks for sharing.

      CLICK ON IMAGE TO ENLARGE & USE THE BACK ARROW TO RETURN TO BLOG.

      Alan

    • MarioG June 29, 2018 12:15 am #

      Richard,

      Thanks for the suggestion… Interesting product line. Has a lot of stores to sell its products. Based in Colorado. Looks like I have a store across the street near my home.

      Mario

  11. Alan Ellman June 28, 2018 6:57 am #

    CROX technical chart.

    CLICK ON IMAGE TO ENLARGE & USE THE BACK ARROW TO RETURN TO BLOG.

  12. Mahesh June 29, 2018 4:33 am #

    Hi alan,

    Should i buy itm, otm or at the money call options?

    How about the same for put options?

    Can i buy stand alone long call and put options instead of using them as insurance cover for covered call and protective put?

    How do i trade roku at this time? I feel the stock is poised for a bull run.

    Shld i buy call options or long the stock?

    Thanks
    Mahesh

    • Alan Ellman June 29, 2018 7:42 am #

      Mahesh,

      The BCI methodology focuses on the sell-side of options. You are asking about the buy side. I’ll briefly respond.

      The moneyness of option selection (calls and puts) depends on market assessment, chart technicals, personal risk tolerance and return goals. There is no single appropriate response.

      Buying options has the advantage of creating opportunities for large gains if the option holder is correct directionally. It has the disadvantage of having time restrictions for the price movement and has Theta (time value erosion) working against the option buyer. For success, Delta (stock price movement) must overcome Theta within a given time frame. Buying options is appropriate for those with higher risk-tolerance. Average retail investors should take their time understanding these risks before endeavoring to go long with stock options.

      From a personal perspective, there was a time (late 1990s)when I did buy options on stocks I had a bullish perspective. There were months that I made huge profits and others where I realized huge losses. That’s when I made the decision that I preferred being on the sell-side. It was the right decision for me and my family.

      Here is a link to an article I published on the moneyness of options for the sell-side perspective:

      https://www.thebluecollarinvestor.com/moneyness-of-call-and-put-options-understanding-strike-prices/

      Alan

  13. MarioG June 29, 2018 9:34 am #

    Trading Experiences 6/29/18:

    In anticipation, setting my STO for Hit Double Sell To Open for NSP, SPLK. Never know what happens on Opening Bell surge etc.

    I reduced the STO Price slightly but will fine tune it later with Delta / Gamma review.

    My 4 Accounts Portfolio is now down 6/28 5.06% from high on 6/15/18. Many positions down 5-10%. Bought some new positions on dip in market. 10% in Cash. Some long positions.

    Question on Taxes for everyone: I have paid my two Estimated Taxes for 1st 2 quarters and have filed for an extension. Since It looks like I will not be close to last year’s gain of 24%, I see no reason to pay ahead Uncle Sam for gain i will not achieve in 2018.

    Considering filing with TurboTax Form 2210 Underpayment of Estimated Tax and fill out and submit Schedule AI (last page of form) with my 2018 Taxes (not 2017 Taxes) which is called “Annualized Income Installment Method (AI for short) which is used by seasonal taxpayers whose income varies during the year. That way I can reduce my next two Estimated Tax requirements for 2018 taxes and not be penalized in 2018 for not paying the standard Estimated Tax (1/4th each quarter of Tax Due).

    Has anyone gone that route as well? Any comments?

    Of course, I can eliminate Form 2210 work and just pay the Estimated tax and get a big refund at the end of the year. I am earning 1.5% in my checking account after my local bank created a novel checking plan which eliminated my need to keep budget and emergency money in 1 year CDs and Money Markets and just keep a good balance in my checking account. I would prefer the money there.

    Mario

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