Exit strategies for covered call writing and sell cash-secured puts is one of the 3-required skills that must be mastered. The mid-contract unwind (MCU) exit strategy is used for covered calls when share price moves substantially above the strike price, leaving the strike deep in-the-money. One of the characteristics of a deep ITM strike is that the time-value cost-to-close approaches zero as it trades near parity (all intrinsic-value). This strategy is normally implemented mid-contract before Theta (time-value erosion) has removed opportunities for additional time-value profit.
There are times, however, when increased market volatility will allow MCU opportunities later in the contract. As market volatility increases, so will the time-value of our option premiums. Such was the case on March 18, 2020.
Comparison chart of the S&P 500 and the VIX (CBOE Volatility Index) in March 2020
This 3-month chart shows the VIX up 461% and the S&P 500 down 29%. This huge spike in market volatility created MCU opportunities with only 2 1/2 days remaining to expiration of the March 2020 contracts.
MCU with SH, XLP and XLV
I March 2020, the coronavirus crisis was causing the spike in volatility and decline in the overall market. I held a position with SH (inverse ETF, short for the S&P 500). Because the market was falling precipitously, SH moved up substantially leaving the call in place deep ITM. The MCU exit strategy was implemented and 2 SelectSector SPDRs (XLP and XLV) were purchased and calls were sold.
Brokerage screenshot of 3/18/2020 MCU trades
MCU Trades on March 18, 2020
- SH $27.00 call was bought back at a time-value cost-to-close of $0.11 per share
- The cash was used to purchase shares of XLP and XLV
- Covered calls were sold on the newly-acquired shares generating an additional $1041.00 in option premium
Discussion
Exit strategy opportunities can occur at unusual times. We must be prepared identify and take advantage of these moments. MCU exit strategies are generally reserved for early-to-mid-contract because it depends on adequate time-value to execute. However, in times of increased market volatility, MCU may be implanted much later in a contract.
Options Industry Council (OIC) Webinar
The webinar I presented on behalf of the OIC on Wednesday was recorded and is available now. Register for that recording here:
https://event.on24.com/wcc/r/2208030/247187BF8F6258EB78ABDA084FE7468A
I hope you enjoy and benefit from my presentation.
Your generous testimonials
Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a last name unless given permission:
Hello Alan,
The purpose of my email is to once-again-friend- say “Thank You”! I tell many of my students and friends about what I learned from you and have directed them to you and your Youtube videos.
So once again- thank you Alan. What a blessing to have this knowledge and now- success!
Sincerely,
Randy
Upcoming events
1. East Michigan AAII Chapter: Live Webinar
April 23 @ 7:00 pm – 9:00 pm
Covered Call Writing to Generate Monthly Cash-Flow
Option Basics and Practical Application
Thursday April 23rd
7 PM – 9 PM
Login information to be sent to premium members.
2. Money Show Vegas Online Virtual Webinar
Tuesday may 12th
3:20 Pm – 3:50 PM
Details to follow.
***********************************************************************************************************************
Market tone data is now located on page 1 of our premium member stock reports and page 8 of our mid-week ETF reports.
*********************************************************************************************************************
Hi Allan,
I attended you seminar and read all of your books (I think all of them) and liked to trade poor man’s CC as my account is small for buying 100 shares of many companies so the PMCC is a good alternative before I build a big enough portfolio to trade a regular CC.
And my question was what do you do when the LEAPS gets OTM or how do you manage that trade?
I bought PPL LEAPS (January 2021) call at 30 strike when the stock was trading at 35.42 and way before this crash. But now the stock is at 25 (it was at 19 at some point) and as my shorts are becoming worthless and not too many good strikes at the 30-ish level I am a bit unsure how to trade it from here.
I am buying back the short calls, wait for bounces to get back in but it is hard to get a decent premium at 30 strike, so in order to get a decent premium I would have to go below 30 LEAPS strike.
Would you do this and then eventually keep raising the short call strikes as the stock moves higher or let it go even though for a loss?
i am asking to see how would you manage it to learn, not as an advice what to do now as I plan doing what I am doing and keep lowering my cost basis.
Thank you for your input!
Martin
Martin,
As it relates to the PMCC strategy, there are 2 important factors related to your situation.
1. Did the trade structuring meet our trade initialization formula assuring that if share price moved up significantly, we can close at a profit? It did, so nice job on setting up the trade.
2. If share price declines substantially (in this case below the LEAPS strike), has our bullish assessment of the underlying changed? If yes, we must close at a loss.
In this case, it appears that share price went down along with most other stocks due to the coronavirus crisis. We treat this like a gap-down when we are using traditional covered call writing and still have confidence in the underlying security.
The active management leg of the trade is the short call and have our 20%/10% guidelines in place. Rolling-down to (now) out-of-the-money strikes is a reasonable approach if we decide to retain the LEAPS.
Alan
Alan,
Thank you for your confirmation, it helps a lot.
One last question, would you do anything with the LEAPS or leave them alone?
Martin,
If we decide to retain the underlying as the basis of our trade, no action is necessary with the long LEAPS until expiration approaches and we are considering rolling that long position. In the BCI methodology the guideline is to roll the long LEAPS 3 months prior to contract expiration.
Alan
Alan,
Please clarify. How can you roll down and sell new short calls on a stock that that the long call of PMCC (Original position: buy long Leap Call, sell short call for premium) position has gone OTM because of the market downturn. Aren’t you essentially selling a naked short call because you can’t sell the long OTM PMCC call to cover the case where the short call goes ITM at expiration?
Don’t you have to wait for the stock to recover to at least the strike of the long call before selling a short call leg for additional premium?
MarioG
Mario,
In this scenario where a short call is sold at a lower strike than the LEAPS strike, an “option requirement” is created. This means that should the trade be closed, the client will be required to fund the difference from the cash account.
My understanding is that if there isn’t enough cash in the account to cover the difference, the client will be asked to cover that loss. I do not believe that shares will be sold to cover it but that may be a specific broker decision.
Alan
Hi Alan:
I hope you are well and keeping your distance.
I just finished your 8 part video series on covered calls. A lot of great information explained very well. Thanks for giving me that introductory info. As you can see, I’m soon to be working on the put side.
I’m wondering if you recommend a minimum account size to successfully use your strategies and your Premium service. You often talk about accounts of 50k or 100k and I’m not there yet.
Thanks,
Steve
Steve,
For broad diversification with less cash required, we can use exchange-traded funds (ETFs), a strategy I use in my mother’s portfolio. We would need between $25k – $35k with today’s pricing.
If we need to build portfolio value prior to option-selling, here is a link to a book I wrote focusing in on using index (mutual) funds with longer-term goals:
https://www.thebluecollarinvestor.com/stock-investing-for-students/
Alan
Good morning, Alan.
Quick catch up and question before your book arrives (it’s on the way).
I’m trading in a TD Ameritrade account using ThinkorSwim and can sell CCP and have done the PCP (I know it as the Wagon Wheel) several times. Most recently with GILD.
Question: The next monthly contract (after April 24 expires) will be May 15. How far in advance do you start your process? I see references to 4 and 5 week positions. Do you usually wait until the current monthly contracts expire?
Thanks,
Frank
Frank,
Yes, I roll options on or near expiration Friday as close to 4 PM ET as possible leaving enough time to execute all desired trades. If Friday is not convenient, then Thursday.
I enter new trades on Monday (or Tuesday) after expiration Friday. 8 Monthly contracts are of 4-week duration and 4 are of 5-week duration over the course of a calendar year..
I find it convenient, from a management perspective, to have all my contracts with the same expiration date.
Alan
Alan,
It seems I am getting deeply interested in your work.
Can you kindly explain the exit strategy in call and the put? I remember your answer to the last question in the webinar, when you mentioned that after selling (short?) a call for say $2 premium, then you immediately place a buy back (long) for the same call option for 20% ie for $0.40? Am I understanding this accurately? But what if the $48 strike Call has a ask price of more than $0.40? Or is this a limit call because if the price of stock fall tremendously, then this could be possible that the ask price for Call option for $48 could get down to $0.40. Your calculator does not have this aspect. Am I right? I hope you understand my confusion and lack of understanding?
This also implies that you settle for a net premium of $1.60 (2 – 0.40)? Right?
Your response to this will be highly appreciated.
Thanks and stay safe.
Arun
Arun,
There are different exit strategy guidelines for calls and puts. The example I gave during the Q&A from the webinar is if a call is sold for $2.00, we immediately enter a BTC limit order for $0.40 (20% guideline). Mid-contract we change the limit order to $0.20 (10% guideline). If the BTC limit order is executed, we can then take follow-up steps that will generate additional time-value premium or close the entire position and use the cash to enter a new position. The rationale and detailed examples are given throughout my books and DVDs.
Alan
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 04/10/20.
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 Blue Collar Investor Team
barry@thebluecollarinvestor.com
Hi Alan,
I read your article
https://www.thebluecollarinvestor.com/negotiating-the-best-prices-when-buying-and-selling-options/
I came across this as I stumbled across the bid ask spread making approx 10% on some contracts on Thursday.
I was buying less than ten contracts and the bid ask spread price wasn’t updating as I was buying and selling. The spread was around $36 (1.03B 1.36A).
My question to you is does your service provide finding these stocks? Do you have any additional training on how to trade these? I was purely buying and selling these contracts from between 1.03 and selling 1.19 at the most.
Figure it would be a nice strategy if I could scale it somewhat but before going further decided to google and that’s how I found your piece.
Thanks
Kevin
Kevin,
It appears that your strategy entails buying/selling options based on the b-a spread. These prices are based on the price of the underlying stock, implied volatility of the stock, time to expiration and the “moneyness” of the strike (ITM, ATM, OTM).
Our services includes providing several watch lists for short-term option-selling. Now, buying and selling options based on the spread (I don’t use this approach) puts us in a hole because we have to overcome the spread to start making money. This article I published 5 years ago may be useful for your approach:
https://www.thebluecollarinvestor.com/how-to-negotiate-better-option-prices-using-the-show-or-fill-rule-30-rebate-expiring/
Alan
Hi Alan,
Greetings to you! Hope you are in good health!
In such bizarre and extremely unpredictable market conditions can you advise some less risk options strategy to trade instead of Covered calls or Cash Secured Puts?
The Market rises,falls too much for my liking and comfort every week.
A lot of my good quality stocks have now fallen so heavily! that they are at present unfit to generate good Premiums for Covered Call trades because my cost basis is too high. I am holding them for better times.
P.S. I am thinking of Iron Condor combo Options. What advice can you offer?
Thanks a lot
Andrey,
As I published several weeks ago, I moved to 50% cash because on the unknown impact the coronavirus crisis will have on the global economy and our stocks. There is still no clarity in this regard. Here are some strategies that will mitigate in bear and volatile market conditions for the cash remaining:
Deep ITM calls
Deep OTM puts
Protective puts (collar strategy)
Low implied volatility stocks
Low implied volatility ETFs
Use of inverse ETFs to move our portfolios closer to a Delta-neutral position
A few weeks ago I posted this link to a video i created on how I managed one of my portfolios during the March contracts:
https://www.youtube.com/watch?v=Ok9I4w2r2bc&feature=youtu.be
I do not trade iron condors so cannot comment on them.
Alan
Hi Alan,
All the strategies that you recommend are very sound and helpful for those who wish to remain trading in this extremely volatile and uncertain market.
My question is : does it make sense to trade for such small returns at such high risks ?
It seems to me that the chances for a global recession are much higher than for a fast recovery.
Roni
Roni,
I agree 100%. I’ve been stressing for weeks that most retail investors should be in a certain percentage of cash. For me, it’s 50% with a Delta-neutral portfolio. For some it will be a higher percentage (perhaps 100%) and for some lower.
Alan
Alan,
thanks for prompt response (as always).
Yes, I am 100 in cash since early March.
Be careful with the virus.
We just lost the father of one of our salesman’s wife 59 years old. And I have my financial manager (45) in intensive care. She was recovering from brain surgery, and picked it up at the hospital.
We are all praying.
Roni
Roni,
Sorry to hear… so many sad stories.
Alan
Hi Andrey,
I’m in a very similar situation like you are. I was slow to act during the market decline and all my positions are well below the cost basis at the moment. I own mostly large cap tech companies that I’m comfortable to hold long term, so I decided to move to ‘portfolio overwriting’ mode until situation will get more clear selling far OTM 1-month strikes and giving a lot room for price appreciation. Most companies will report earnings in late April and early May so after this month’s expirations I will wait until the earnings reports to see how these businesses were impacted. I’m also started to build inverse ETF (SH) position to hedge against the possible market decline. If the next few days the market will keep rising I will sell more stock and will replace it with inverse ETF’s. I decided not to sell covered calls on inverse ETF’s, just ‘buy and hold’. I don’t believe the current rebound is sustainable as situation remains very unclear and S&P 500 is only -15% YTD giving us the second opportunity to exit. I think it makes sense to sell weaker positions now and replace them with inverse ETF’s to mitigate the risks.
Sunny
Alan,
I love the material you have developed! 8 years ago i finished grad school and i really liked finance. I had two different finance teachers that mentioned that covered call writing is a really good investment strategy, so i made a mental note. Now I am jumping in with both feet. I recently finished your “Complete Encyclopedia for Covered Call Writing” and just received the second volume in the mail with an exit strategy DVD and guide book. Thank you very much for your work! After i finish reading the most recent purchased materials, i am going to sign up to your site as a premium member.
With the slow stochastic oscillator, can it be generally said that if a value is between 20 and 80 and is trending up its a bullish signal? Also, if the reading is between 20 and 80 and is trending down is a bearish signal?
My next two questions I am guessing I don’t fully understand the material… On page 60 of volume 2 of your Encyclopedia it list the stochastic oscillator is from neutral to bullish. Since it has touched the 80 twice and crossed once, wouldn’t this be a bearish sell signal per volume 1 of your encyclopedia page 67?
On page 60 of volume 2, it lists the volume as bullish. Since the most recent day is positive but much lower than average, wouldn’t this be a sign of a trend reversal and a bearish signal?
Thank you very much for your time,
-Nathan
Nathan,
I admire your attention to detail. You’re off to a great start.
My responses:
1. Yes, an uptrend between 20 and 80 is a mild bullish signal and a downtrend between 80 and 20 is a mild bearish signal. Neither is as significant as a double move above 20 or below 80.
2. I defined the stochastic oscillator as neutral to bullish because the overall trend is accelerating and, at the time of the screenshot, the oscillator was above 80. A movement below 80 for the second time would be a definite red flag.
3.The volume was framed as “confirming the bullish trend” The recent trend was up. Now, the very last day in the chart may not tell the whole story as the chart may have been created mid-day.
When we view a technical chart with multiple indicators, we evaluate it as a mosaic of trend and momentum indicators with volume confirmation (or not). No single indicator determines our decisions. As a matter of fact, technical analysis is only one of our rigorous screening requirements, fundamental analysis and common-sense principles being the other two.
The mosaic portrayed on page 60 (Volume 2) is a bullish overall chart which, if along with a bullish overall market assessment, would lead us to favor OTM call strikes.
Keep up the excellent work and thank you for your generous
remarks.
Alan
Hi Alan
I have bought and read at least 3 of your books on selling calls and puts. Your books are well written, easy to understand and have provided me with many tips. I really appreciate your sharing your expertises with us. You have given us a clear instructions on what (underlying stocks to buy), the strike price, length of the option (one month) and exit strategy, as well as other useful information.
One thing I cannot find from your books is about the timing of our entry of selling options. When we should initiate a new sale of the covered calls or cash secured puts?
Thanks again!
Lisa
Lisa,
I enter my Monthly option trades on the Monday or Tuesday after expiration Friday. This allows us to avoid the negative impact of time-value erosion (Theta) which accelerates later in the contract.
Check out the Theta discussion on pages 158 – 160 of “The Complete Encyclopedia for Covered call Writing- classic edition”
Alan
Hi Alan,
Thanks for your reply!
Will you wait for the stock price going up intraday or during the week to write the call as the premium increases along with the price ?
Lisa
Lisa,
I write the calls immediately. If the calculations meet our initial time-value return goal range, we complete the initial trade. Share price can decline as well as appreciate.
Alan
Hi Alan
I assume you write the puts immediately as well? I have tried to time selling calls/puts for better premium. i.e. Selling puts when the equity price drops and selling calls when the price is up. Recently many of my calls have missed out the upside appreciation due to the market rally. Besides selling out-of-the- money calls, are there better alternatives? Thanks so much for your guidance!
Lisa
Lisa,
Yes, I sell puts at the time my analysis leads me to make the bullish evaluation. This means that the stock, option and initial time-value return goal range meet the BCI rules and guidelines.
Timing the market is impossible in the very near-term. There will be times when we miss out on additional profit opportunities but in the long-run, we will beat the market on a consistent basis as long as we have mastered the 3-required skills.
Alan
Hi Allen-
Thank you for sharing your knowledge through your courses. I have a question about writing covered calls on an ETF such as TLT.
The Div-Ex date for TLT appears to be on the 1st of every month. If one were to write OTM calls on TLT the day after the Div-Ex date, one would need to exit the trade by expiration date, (the 3rd Friday of the month).
Would this be enough time in the trade? What would you recommend doing in a situation such as this?
Assuming that price is flat going into expiration, there does not appear to be enough time in the trade for time decay to “kick in.”?
Many thanks,
Robert
Robert,
TLT has the advantage of the availability of Weekly options. We can write Weekly calls each week with the exception of the week of the ex-date. If the ex-date is early in the week, we may even be able to use that week as well and write the call on the ex-date.
Alan
Hello Mr. Ellman
I hope you are doing well. Thank you so much for inspiring me to take the leap into being the CEO of my income. Could you please help me with this scenario.
If I bought 100 shares of Haliburton at 4.87 per share, then sold an option on it with a strike price of 5. If the stock price rises to 9 and I bought 10 additional shares of HAL my new average price of entry will be 5.24 this summation represents the current entry value of my HAL shares, correct? (487 + 90) \ 110 = 5.24
If I sold those additional shares I just bought at 9 directly each share should be a profit of 9 – 5.24 = 3.76, correct?
Final question, the only risk that exist is if the share price is below the strike price on expiration I would be stuck with something higher than market price or could I simply subtract the profit I made thus far 3.76 x 10 = 37.6 from 487 = 4.87 x 100 and treat it as the true value of my 100 shares that i kept as a result of the share price falling below the strike price?
Thank you
Able
Able,
If you buy and sell 10 share at $9.00, there is no change in your overall position… no gain and no loss. If you take no action, your shares will be sold at $5.00 or $500.00 per contract.
Now, if you put an additional $90.00 into the trade, you will receive $90.00 on the sale of those shares + $500.00 from contract assignment, leaving the same net return of $500.00.
Alan
Hoyt,
I wish to inform you that I have read and answered yor message in the “AskAlan 169”.
Roni
Roni,
Many thanks for your reply. You and your wife are always in my prayers.
I am glad you are doing well. Please continue your safety measures until a vaccine is available. That is our plan. It’s rough but that is what it is.
I agree on staying out of the market at this time. I fear we will retest the March lows. We always have except for the minicrash in December of 2018. I have just seen a report where it was shown that 50% of the decline we have had is done in non-market hours. It’s the first time ever that it has happened to this extent. Lots of potential reasons and conclusions can be drawn from this. But one thing is very clear. We small investors need to be very careful.
Take care,
Hoyt T
Cheers Hoyt
Premium Members: 2 New reports now available
This week’s 8-page report of top-performing ETFs and analysis of ALL Select Sector Components has been uploaded to your premium site and is available in the “ETF Reports” section.
Also, the Blue Chip report of eligible Dow 30 stocks for the May contracts has been added to the member site on the right side of the page.
NOT A PREMIUM MEMBER? Check out this link:
https://www.thebluecollarinvestor.com/membership.shtml
Alan and the BCI team
Dear Alan:
I just became a premium subscriber and look forward to learning a lot from you! I’ve gone through all the Beginner’s Corner videos and some other material. I’ve been writing covered calls or a few years, but without much of a strategy.
I have a question about rolling out and up on a current position I have. I would like your opinion on whether it makes sense.
I purchased 200 shares of NVDA in 2019 at $151/share for a cost basis of $30,200. I wrote my first covered call on it just yesterday; May 8 $275 call, 2 contracts. The premium I received was $2180. I was proud of that, but today the stock went up $14/share to $283.95. I read an article suggesting that the price runup may be related to a short squeeze.
So, if I do nothing, and the price stays above $275, I will sell 200 shares on May 8 for $55,000. Add the option premium of $2180, and I will have made $26,980, or about an 89% return in roughly 1 year. Not bad.
I am considering rolling out and up. At the time I am writing this email, it appears to me that the premium I have to pay to close the option is $4098, and I could write May 8 $295 calls for a premium of $2224 for a loss of $1874, still profiting $306 from the original calls. That would provide upside potential ($295-$275) of $20 per share for 200 shares ($4000).
This would be my first attempt at a rollout and up, but based on the numbers, it seems to me that the upside potential would make this a good strategy. However, I am a little unsure of myself and would love your opinion. I am also unsure what influence the short squeeze will have on the price; the article said the short squeeze should end this week. Would that suggest prices will drop?
Sincerely,
Larry
Larry,
You currently have a successful trade. The question is whether executing an exit strategy at this time will benefit our position. I rarely will roll-up in the same contract month (the poor man’s covered call is an exception). Rolling out-and-up (to the next contract month) is one of our important go-to exit strategy opportunities. Use the “What Now” tab of the Ellman Calculator to run the numbers. This strategy is reserved for in-the-money strikes as expiration is approaching. In this case, we are a long way from expiration. Here is a link to an article I published on this strategy:
https://www.thebluecollarinvestor.com/evaluating-returns-when-rolling-out-and-up/
When the strike moves deep ITM mid-contract, we have the mid-contract unwind exit strategy to evaluate:
https://www.thebluecollarinvestor.com/closing-a-covered-call-writing-position-mid-contract-a-real-life-example/
Since you are a premium member, you have free access to the Elite version of the Ellman Calculator where the “Unwind Now” tab will calculate these MCU returns and cost-to-close.
I do believe that many stocks have appreciated in value lately from short covering. There is still time to expiration to determine how much of an impact this may have had on NVDA.
Reviewing the exit strategy chapters and sections in my books and DVD programs will provide confidence in how to manage our trades.
Keep up the good work.
Alan
Alan,
I have several portfolio stocks for which I sold “overwriting” covered calls. They are now way ITM and the option prices are high.
I’d rather not unwind as I want to hold these stocks.
Given the market volatility, do you think I should consider rolling out and up? Would you take the option loss and let the stocks run?
2 of the calls expire this FRI, the other is 5/15.
Thanks,
Ed
Ed,
Use the “What Now” tab of the Ellman Calculator to determine the best strikes to use if the decision is to retain the shares and roll-out-and-up. I use this strategy close to contract expiration (4 PM ET). I usually start rolling my options between 1 PM and 2 PM ET on expiration Friday.
With earnings season upon us, make sure to check the upcoming ER dates.
Alan
Thanks – yeah, I put off the decision until tomorrow already and I did look at the What Now tab. It’s a good tool.
Do you recommend using cash secured puts in this weird market condition of a bull rally amidst a bear decline? Or stick with covered calls on new capital?
Ed
Ed,
Using out-of-the-money cash-secured puts to enter covered call trades (if the put is exercised) is a reasonable approach in bear and volatile markets. I refer to this as the PCP (put-call-put) strategy in my books/DVDs. If we believe a bottom has been reached, then traditional covered call writing would be a great approach. The latter will present opportunities to participate in share appreciation when using out-of-the-money call options.
When deciding on a strategy approach or whether or not we are ready to move more cash into the market, we must ask ourselves if we have reliable data to make a sound decision? If we do not have a high level of confidence, taking a defensive approach should be given serious consideration.
Alan
PREMIUM MEMBERS: New Blue Hour Webinar
“VIX Covered Call Writing”
Now available on your member site. Scroll down on the left side.
Alan and the BCI team
Hi Alan,
I tried to find it your site but I couldn’t find it. What is the EXIT POINT USING 3% EXIT STRATEGY when selling naked puts mean?
Thank you for your time,
Gerry
Gerry,
The BCI exit strategy guideline after selling OTM cash-secured puts is to close the trade when share value drops 3% or more below the OTM strike sold.
Alan
Hi Alan,
I was reading the student book and you mentioned to start with Indices for accounts less than $25K. You mentioned indices with less commissions
Could you please give me few examples with symbols. I was looking for fidelity , schwab ..etc but don’t know which one to pick
please help me with 4-5 symbols or more 🙂 so i can look at the chart , look at the performance history and pick the bests …Thanks in advance!
Kossila
Kossila,
In my book, “Stock Investing for Students”, I stress the use of broad-market, low expense-ratio mutual index funds to launch our wealth-building portfolios. S&P 500 index funds are perfect securities for this purpose. The chart patterns will look the same but I’m happy to share these ticker symbols:
Fidelity: FXAIX
Vanguard: VFINX and VFIAX
Schwab: SWPPX
The most important factor with these funds is the expense-ratio (costs charged by the fund). All of these are investor friendly.
Alan