Comments on: Simple Interest And Compound Interest https://www.thebluecollarinvestor.com/simple-interest-and-compound-interest/ Learn how to invest by selling stock options. Wed, 04 Jun 2014 07:07:41 +0000 hourly 1 By: Adrian https://www.thebluecollarinvestor.com/simple-interest-and-compound-interest/#comment-19607 Wed, 04 Jun 2014 07:07:41 +0000 http://www.thebluecollarinvestor.com/?p=9486#comment-19607 Alan, thanks again for that detailed answer given. So I would most likely go through more stocks in the lookout for higher returns, and possibly sell ITM options too.
But it’s here I have to also assume that if I wanted to sell an OTM strike on a stock with great chart technicals yet the return is too low for this strike, but happens to be in my 2-4% goal for the ITM strike, then going with this ITM strike(regardless of the chart) is what I guess I would do here – please tell me if this is wrong.

– And it’s now that I have 2 questions about after-hours practice, and the last one on an alternative chart for comparing price performance.
1. Firstly if I have been papertrading the shares after-hours because of the time difference where I am from, and wondered whether this should only be done during market hours, or could I keep putting on practice trades after- hours?
2. Would you say that the premiums usually are a bit higher during market hours compared to after-hours when market closed?
3. And something I forgot to ask you the other week back is, when I go to compare the price performance (S&P500) to any stock, then could I instead of using the “price comparison” on my chart software use the “relative strength” line? (if not then it doesn’t matter, it just seems easier to plot trendlines on the RS line than the other one, which is shown behind the price.)?

I’ll get back to do a bit more chart study so may not post here again for a while but thanks for your time in helping me.

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By: Alan Ellman https://www.thebluecollarinvestor.com/simple-interest-and-compound-interest/#comment-19605 Tue, 03 Jun 2014 11:02:29 +0000 http://www.thebluecollarinvestor.com/?p=9486#comment-19605 In reply to Adrian.

Adrian,

One of the many benefits of the BCI methodology is that you can adjust the techniques to your personal risk tolerance. I have published a myriad of times that my goal for initial option returns is 2-4%/month but in my mother’s account I use a more conservative 1-2%/month. We have many members that set higher goals with greater risk.

For a full month (we are currently mid-contract) I rarely have an issue finding an adequate number of underlying securities that meet my goal. If you are looking only @ stocks in bold (strongest technically) I can see where this would be a problem.

One reasonable approach to this dilemma would be to look at all eligible stocks (even non-bold…these are still great candidates) and write in-the-money strikes if technicals are of concern. I have found over the years that even stocks with mixed technicals will out-perform in bull market conditions and using out-of-the-money strikes can enhance returns. In neutral or slightly bearish markets, stocks with mixed technicals can be matched with the more conservative ITM strikes.

Alan

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By: Adrian https://www.thebluecollarinvestor.com/simple-interest-and-compound-interest/#comment-19604 Tue, 03 Jun 2014 07:49:18 +0000 http://www.thebluecollarinvestor.com/?p=9486#comment-19604 Alan, I need to ask a rather long question below, of the charts versus the better returns so to choose the best stocks.

– Sometimes when I select stocks off the running list using my own order of priorities for this, I find that the % return on my selected strike prices to not be very high. The technical charts(my top priority) may look perfect and trending up(or at least above the EMA’s), but I would then find poor calculated returns from around the 0.5% – 1.5% ranges.
Do you suggest I keep going through the running list in my maximum price range until I get at least five stocks with a minimum 2% return, – or should I just use these stocks anyway with great chart technicals, rather than some that may have a “2%+” returns but maybe also a more concerning chart situation to them? (eg. resistance level just above price, etc)?
What do you think is best to do in this situation? Thanks

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By: Alan Ellman https://www.thebluecollarinvestor.com/simple-interest-and-compound-interest/#comment-19594 Sun, 01 Jun 2014 16:40:59 +0000 http://www.thebluecollarinvestor.com/?p=9486#comment-19594 In reply to Saul.

Saul,

There is no one formula that applies to all contract adjustments. In the case of AAPL, it is straightforward. The number of contracts sold goes from 1 to 7 and the strike price of 620 is divided by 7: 620/7 = 88.57. Below is a screenshot showing the contract adjustments as seen on the CBOE site. CLICK IMAGE TO ENLARGE & USE THE BACK ARROW TO RETURN TO THIS BLOG.

Alan

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By: Saul https://www.thebluecollarinvestor.com/simple-interest-and-compound-interest/#comment-19593 Sun, 01 Jun 2014 16:08:25 +0000 http://www.thebluecollarinvestor.com/?p=9486#comment-19593 Alan,

I recently sold the Apple 620 call option for June. Since there will be a price change on the 9th how will this effect my position?

Thanks for all your help.

Saul

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By: Barry B https://www.thebluecollarinvestor.com/simple-interest-and-compound-interest/#comment-19591 Sun, 01 Jun 2014 03:33:42 +0000 http://www.thebluecollarinvestor.com/?p=9486#comment-19591 Premium Members,

The Weekly Report for 05-30-14 has been uploaded to the Premium Member website and is available for download.

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 BCI YouTube Channel link is:

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

Best,

Barry and The BCI Team

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