How do all of you invest your money?

[Jonleehacker]

To each their own.


So because someone is the best at bullshitting or begging they deserve to be paid? That's the least accurate statement I've seen in a long time. You sound more like a union employee than an entrepreneur.


Thank you for explaining speculation and hedging to me. I was completely unaware of these terms or their existence.


In all seriousness, the stock market allows for companies to fund and raise money for growth and development without having to give any control up of their company. It's the original source of crowd funding! IPO's or events where companies sell shares are moments where you are providing the company with an investment. It's investment to you is entirely speculatory.

Sorry man, my comment was rude. You had every reason to go off on me.

Hope you'll accept my apology.

 

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[Warchild]

The key element that people dont know about Buffet is that his initial wealth growth was from using the cash in an insurance company he bought early on in his career. He used the cashflows and surplus money generated to invest/buy other companies.

 

[odihost]

The key element that people dont know about Buffet is that his initial wealth growth was from using the cash in an insurance company he bought early on in his career. He used the cashflows and surplus money generated to invest/buy other companies.

True, but although we don't have the cash flows, we can still use his strategy. When my money is still small, I can use my salary as the cashflow. Most of my salary goes to stock. And when the portfolio is getting bigger, you need another strategy. Using cashflow from our own business and switching between expensive stocks to cheaper stocks.

 

[ManOnTheMoon]

Gas money, healthy food and a sauna once in a while

Even if it sounds funny, but I think that is the most clever way to invest money. All the other stuff is way too insecure for me to invest in.

 

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[cmckay]

I chose not to gamble in the stock market through traditional stock buying practices. Instead I chose to Make The Market by utilizing and selling covered calls. That way it doesn't matter to me if the stock market goes up or down, I'm still making an income and average between 3-6% a month. I started with my $60K severance package last year and was just rolling the income back into the account. In less than 2 years I've now got $107K sitting in the acct paying me a min 3%/ month so I can focus on finding a fastlane now and not have to worry too much about outside income.

 

[MonTexan]

I invest in real estate and various side ventures and also trade the market, primarily via ETFs. While I hate to gamble in a casino, I have no trouble playing the double and triple levered ETF market. In a casino I know with mathematical certainty that I will lose over the long run but with the market at least I can apply logic and brainpower to place bets with likely positive EV.

I've been working a pretty cool side project with some friends for the past several months that has the potential to be pretty huge. It's a mineral lease deal...will probably start a thread to discuss before long. Wish I could make B&P again this year as it would make a good presentation but doesn't look like that'll happen. Will miss you crazy kids! And the Scottsdale cougars, of course.

 

[Pete799p]

LOL.

Poor example and an apples-to-oranges comparison.

Warren Buffet invests in stocks that he can control and/or assert policy. He isn't on his eTrade account buying stocks.

Carl Icahn does the same thing.

These billionaire stock investors all share a common investment strategy --- GET CONTROL where INFLUENCE can be ASSERTED. (Via large share ownership, voting blocks, and seats on the board of directors) -- in other words, they seek to influence company policy to THEIR WISHES to effect shareholder value.

CAN YOU DO THAT? Commandment of Control anyone?

When you light up your eTrade account and buy a stock, you have no control. No influence. No decision making power. (I wouldn't call your shareholder voting power particularly influential)

Sorry, but when you invest in a stock, determining when to buy or sell is the only control you have.

Not to mention that Warren Buffett is one of the most successful entrepreneurs in the world. He generated all of the money he has today to invest through businesses, ie his first investment company similar to a modern day hedge fund, and his insurance company.

 

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[Rickson9]

I chose not to gamble in the stock market through traditional stock buying practices. Instead I chose to Make The Market by utilizing and selling covered calls. That way it doesn't matter to me if the stock market goes up or down, I'm still making an income and average between 3-6% a month. I started with my $60K severance package last year and was just rolling the income back into the account. In less than 2 years I've now got $107K sitting in the acct paying me a min 3%/ month so I can focus on finding a fastlane now and not have to worry too much about outside income.

Impressive! How do you determine good candidates to write covered calls on? How many contracts per month are in play? What % of the capital each month? Thanks for any insights!

 

[odihost]

I chose not to gamble in the stock market through traditional stock buying practices. Instead I chose to Make The Market by utilizing and selling covered calls. That way it doesn't matter to me if the stock market goes up or down, I'm still making an income and average between 3-6% a month. I started with my $60K severance package last year and was just rolling the income back into the account. In less than 2 years I've now got $107K sitting in the acct paying me a min 3%/ month so I can focus on finding a fastlane now and not have to worry too much about outside income.

That's amazing. Will that work when your money is getting bigger? 1 million?

 

[treinjapan]

All the above, plus Lending Club to mix it up a bit and have some fun:

https://www.thefastlaneforum.com/investing-trading/20293-any-lending-club-experiences.html

 

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[cmckay]

Impressive! How do you determine good candidates to write covered calls on? How many contracts per month are in play? What % of the capital each month? Thanks for any insights!

It varies. I try to keep 3 different companies in play each month (third of the capital for each purchase)...ensuring that they are not in the same industry while avoiding some industries. Keeping the stock price above $20, so depending on the price I'll have 5 contracts or even 8 contracts. Each month is different and depends how much I want to keep in cash, etc. Check the markets for 2 min at the end of each day....pretty simple

 

[cmckay]

That's amazing. Will that work when your money is getting bigger? 1 million?

Why not? Just larger purchases and more contracts. Possibly more diversity in companies so as not to influence the mindset of the gambling 95% chasing the volume.

 

[Jake]

Thanks. I was going to ask the same question as Rickson. I recently started writing covered calls and I'll be using it as a stream of income once I finally quit my job. Do you have any way to screen for stocks to find good candidates or do you just go looking?

Seems like a great way to bring in income if you can avoid a large drop (which will probably happen every so often) and if it hits your strike you end up with income and some cap gains.

 

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[cmckay]

Price drops are irrelevant, the exercise price is usually in the money and pretty tight with the market price. That way I can increase income from the intrinsic value along with the remaining time value of the call. I write them usually no more than 21 - 30 days before the exercise date...tops, and never the first week after the 3rd Friday of the month!

 

[Jake]

Price drops are irrelevant, the exercise price is usually in the money and pretty tight with the market price. That way I can increase income from the intrinsic value along with the remaining time value of the call. I write them usually no more than 21 - 30 days before the exercise date...tops, and never the first week after the 3rd Friday of the month!

How are they irrelevant? Do you write deep in the money calls? I don't see them yielding much. This is the problem I see with writing covered calls: Capped upside, unlimited downside. Sure, you still get the income, but a drop below the premium you've been given still puts you in the red. I've been trying to think what the best strategy would be in this case but the severity of the drop would determine that I guess.

If I sell a $10 call on a 9.90 stock for .50 or whatever and the stock drops to $8.70 or so I could probably keep selling $10 calls for decent income until it moves up or while it stagnates. If the stock drops down to $6..what is the plan of action? $10 calls won't yield much premium and if you're writing calls below that(without getting into exact numbers here) your shares could possibly get called away for less than you've originally paid and earned from the initial purchase and write premiums.

Thanks ahead of time for your response. My initial analysis seems too good to be true and I know an inevitable significant drop could wipe out a lot of gains.

I was talking to a friend about this today and I sent him this:

"Running some numbers on options and selling calls and this may be what gets me back to Thailand full time. Just looking at Nokia for example $4 strike with the price sitting at 3.99 brings in .27 or $27 per call. Without accounting for commissions you can make $1350 by selling 50 calls or 5000 shares. so $20,000 brings in $1350 in income. $100k brings in $6750 per month or in even less than a month. Expiration is jan 19th. Of course this doesn't account for volatility on the downside but that's still an awesome return. 6.75% a month or 81% a year."

The problem with a stock like Nok is it runs up and drops fast. You cap your upside to capture the premium but the downside still exists. The boring stocks don't seem to yield much in premium..maybe I just need to keep looking

 

[ewH]

If anyone else reading this thread is as lost as I was, here is a nice article about covered calls https://www.tradeking.com/education/options/5-tips-for-writing-covered-calls

 

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[Jonleehacker]

"Running some numbers on options and selling calls and this may be what gets me back to Thailand full time. Just looking at Nokia for example $4 strike with the price sitting at 3.99 brings in .27 or $27 per call. Without accounting for commissions you can make $1350 by selling 50 calls or 5000 shares. so $20,000 brings in $1350 in income. $100k brings in $6750 per month or in even less than a month. Expiration is jan 19th. Of course this doesn't account for volatility on the downside but that's still an awesome return. 6.75% a month or 81% a year.

There is no such thing as a free lunch in the stock markets, so just because someone goes on a forum and makes it sound easy... don't believe it. This strategy requires knowledge and skill to make it work.

Market timing is definitely a large part of this method.

I think a $4 stock is bad candidate as it's naturally going to be more volatile.

Since this method has first come up a few days ago, I had the same thoughts as you... it was a golden strategy, but I've been studying it extensively since then and you still need to be able to trade well to do well with this system over time. It works best in sideways or oscillating markets... this is an important point.

Think about how you can use a put to protect the downside, it will reduce the return, but cap the risk, otherwise the risk/return is inviting disaster.

 

[Jake]

There is no such thing as a free lunch in the stock markets, so just because someone goes on a forum and makes it sound easy... don't believe it. This strategy requires knowledge and skill to make it work.

Market timing is definitely a large part of this method.

I think a $4 stock is bad candidate as it's naturally going to be more volatile.

Since this method has first come up a few days ago, I had the same thoughts as you... it was a golden strategy, but I've been studying it extensively since then and you still need to be able to trade well to do well with this system over time. It works best in sideways or oscillating markets... this is an important point.

Think about how you can use a put to protect the downside, it will reduce the return, but cap the risk, otherwise the risk/return is inviting disaster.

I agree. I've been reading about it for the past month or so and I've sold a few calls. I used NOK as an example with my friend because we're both invested in the company.

Low volatility doesn't award much premium. Low volatility with out of the money calls + a dividend could yield a decent return but probably not 3% a month..as far as I've seen.

 

[Rickson9]

Since this method has first come up a few days ago, I had the same thoughts as you... it was a golden strategy, but I've been studying it extensively since then and you still need to be able to trade well to do well with this system over time. It works best in sideways or oscillating markets... this is an important point.

Very true.

The core of being successful in options is understanding one's method for choosing the underlying stock in the first place. Once a method for selecting a stock is understood backwards and forwards, it becomes more effective to incorporate options around the method.

 

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[cmckay]

There is no such thing as a free lunch in the stock markets, so just because someone goes on a forum and makes it sound easy... don't believe it. This strategy requires knowledge and skill to make it work.

Market timing is definitely a large part of this method.

I think a $4 stock is bad candidate as it's naturally going to be more volatile.

Since this method has first come up a few days ago, I had the same thoughts as you... it was a golden strategy, but I've been studying it extensively since then and you still need to be able to trade well to do well with this system over time. It works best in sideways or oscillating markets... this is an important point.

Think about how you can use a put to protect the downside, it will reduce the return, but cap the risk, otherwise the risk/return is inviting disaster.

JonLee is absolutely correct. I apologize that I've made it appear easy, my first year was a little stressful until I found a strategy that was consistent. Read lots of books, if you do something without knowing how it works the only one to blame for failure is your own ego.

IMO: I stay with stocks whose prices above $20 for the very fact of volatility, it's been trending up for over the last 6 months, the 50 Day SMA is above the 200 Day SMA, no auto, banking,drug, or chinese companies. Oh, institutional investors hold 10%+ of the stock (let them do the extensive research).

Notes:

- No one system works 100% of the time, you must stick to your system even when you BELIEVE it has let you down
- Thoughts come first... Emotions second
- Just like with the fastlane, discipline is learnt, this must be maintained as "practice makes permanent"
- The market punishes those who are undisciplined (this is the only real "work" element
- If I'm not 100% certain I'll use a protective put, this limits the income but has saved me more than once.

 

[Xyros]

how do all of you invest or reinvest your money besides your business? stocks, bonds, mutual funds?

Champagne, coke and girls! I invest my cash in pleasure

 

[Pete799p]

JonLee is absolutely correct. I apologize that I've made it appear easy, my first year was a little stressful until I found a strategy that was consistent. Read lots of books, if you do something without knowing how it works the only one to blame for failure is your own ego.

IMO: I stay with stocks whose prices above $20 for the very fact of volatility, it's been trending up for over the last 6 months, the 50 Day SMA is above the 200 Day SMA, no auto, banking,drug, or chinese companies. Oh, institutional investors hold 10%+ of the stock (let them do the extensive research).

Notes:

- No one system works 100% of the time, you must stick to your system even when you BELIEVE it has let you down
- Thoughts come first... Emotions second
- Just like with the fastlane, discipline is learnt, this must be maintained as "practice makes permanent"
- The market punishes those who are undisciplined (this is the only real "work" element
- If I'm not 100% certain I'll use a protective put, this limits the income but has saved me more than once.

What about utilizing a stop loss as a way to cap your downside potential or possibly buying back your old call and selling another as a way to minimize a loss. This is assuming that the company you are writing on has not completely broken down.

 

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[Kak]

I have a guy that does it for me. I am an entrepreneur, not an investor.

I read the WSJ every day so I am not totally lost. I do want to pick up some investing books just to learn about it.

 

[tamo42]

I use options selling as my main stock income strategy. Mostly weekly covered calls or 3 month iron condors.

Then to hedge the whole thing I buy otm vxx calls.

 

[MJ DeMarco]

Mostly weekly covered calls

Just so everyone understands...

Selling covered calls (Buy Stock / Sell Calls) is the exact same thing as just flat out selling puts on the company. The risk reward is exactly the same. (unless you're also collecting a dividend on the company stock you bought.)

I somewhat cringe when someone alludes that covered calls are "safe" -- they're exactly the same as writing puts in terms of risk/reward - they both are neutral to bullish, and both take advantage of time decay.

https://www.tradeking.com/education/options/strategies/short-put

https://www.tradeking.com/education/options/strategies/covered-call

Here's the risk-reward chart for both strategies -- I'd post both charts, but why bother? They're exactly the same.

The only way I'll sell covered calls is if I'm in a dividend stock that I'm holding for the long haul. For example, SOUTHERN company, that way I collect dividend and call premium...

Otherwise, if I'm neutral to bullish, I believe selling/writing puts are the better play, IMO.

 

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[tamo42]

I'm a big fan of selling puts, but the weeklies often don't make sense unless you are very good at technical analysis.

It comes down to how far otm you can get and still maintain an acceptable yield.

So typically selling puts works better on a 2-3 month time frame and selling covered calls works better on a weekly timeframe.

 

[Rickson9]

For myself, I sell puts when I want to be a shareholder, but the price is just a tad high. I'll keep collecting the premium until it drops to a price where I am put the stock.

For example, Jay Schottenstein purchased a few million dollars of American Eagle in 2009 when it was around $12 per share (the Schottenstein family owns about 26.5% of American Eagle and Jay himself owns about 3%). Since I liked owner operated businesses, I started writing puts on American Eagle at $12 per share. After collecting premium for awhile I was eventually put the stock. In that particular case, I got the stock at the same price as Jay.

If I want to unwind a position, I will write calls until I am called away.

 

[ronlove]

If anyone wants to learn more about covered call or naked put strategies for generating income, I'd recommend checking out Ron Groenke's website and software. I like his software, and I've met Ron. He's a fine man! RL

 

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[CEBenz]

buy the subscription.
its worth it.

This x2

 

[scine]

I chose not to gamble in the stock market through traditional stock buying practices. Instead I chose to Make The Market by utilizing and selling covered calls. That way it doesn't matter to me if the stock market goes up or down, I'm still making an income and average between 3-6% a month. I started with my $60K severance package last year and was just rolling the income back into the account. In less than 2 years I've now got $107K sitting in the acct paying me a min 3%/ month so I can focus on finding a fastlane now and not have to worry too much about outside income.

Love the concept, but still quite the new guy in that area. Where would you suggest I look to educate myself on this? Or, would you happily take someone like me under your wing? Thanks!