Tag Archives: options

Bond bubble? MSFT sells 5 yr bonds at < 1% yield

I’m not one of those bond bubble guys, mainly because I see eerie parallels between the Japanese experience and what the US is currently going through, but there is some crazy stuff going on in bond land. Late last week Microsoft (MSFT) sold 5 yr bonds at a yield of less than 1%, 0.993% to be exact. This set a record for the lowest yielding 5 yr corporate bond offering ever. The first thing I said to myself was ‘whoever is buying these bonds is nuts?’ Lets look at the details and see what simple alternatives an income investor has. … Continue reading

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Risk management in an option selling strategy

The most important part of any kind of trading plan is proper risk management. This is the area where most traders fail and end up wiping out their accounts. In this post I’ll outline the components of a good risk management strategy and use the option selling strategy I’ve discussed before (here and here) as an example. Actually, risk management applies to any kind of trading whether its selling options on stocks or just buying or selling the stocks themselves. It really is a money management strategy. We’ll just use option selling as one example. There are three major components … Continue reading

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Increase your odds of making money from selling options

Today I want to look at a few simple ways to increase your odds of making money from selling options. Option selling, i.e. selling cash secured puts, is my primary strategy to generate income from my trading portfolio. I talked about the details of my strategy in this post. The strategy is simple enough but obviously the success of the strategy is dependent on which stocks you choose and the strike prices for the options. It is also critically dependent on having a proper risk management strategy but I’ll leave that topic for another post. A common way of choosing stocks and … Continue reading

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Advanced income strategy – the leveraged covered call

Today I wanted to present an alternative way to generate income using options. In a previous post I discussed selling options as a great way, and my preferred way, to generate income. In my Investing for A Living retirement model this is the predominant strategy I use for the ‘trading’ portion of my portfolio, usually the 20-30% cash part of the total portfolio. While selling options is a great way to generate income there are times when it is too risky or the option premiums are too low to justify the risk. When volatility is very low, as it is … Continue reading

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INTC & MSFT options look attractive

Its been a while since I’ve talked about option selling as an income strategy. Actually, my first and only post on the topic was back in mid November of 2010. With the US stock market on a nice uptrend since that time and with volatility being low it hasn’t been a great time in general to sell options. The options yields, premiums as a % of stock price, just haven’t been that great. But all that seems to have changed this week. Lets see what opportunities selling options during these times gives the income investor. While there are opportunities to … Continue reading

Posted in Options, Stocks | Tagged , , | 6 Comments

Christmas wish list, part 2

Today we woke up to a cool rainy Florida winter day, a perfect time for me to reflect on the next 5 stocks on my Christmas wish list (part I here) with a nice cup of hot cocoa by my side. I’m going to keep the list to the top 10 lest I revert back to my childhood ways of writing Christmas wish lists that could have been classified as short stories. Here ya go: 6. PM, Philip Morris International: until not too long ago, part of Altria. It is the international tobacco leader and exposed to more growth than … Continue reading

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Option selling as an income strategy

I’ve covered one of my alternative investment strategies for retirement portfolios already, in my post on structured products. Today, I’ll introduce the primary strategy I use to generate income from my cash balance – option selling. Cash is an important part of any asset allocation. It allows an investor to take advantage of opportunities in stocks when markets pullback and it protects the rest of your portfolio if unforeseen spending requirements arise. The problem with cash, particularly in today’s environment, is the negative real interest rates you earn on any cash investments. Fortunately, you don’t have to put up with … Continue reading

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