Blog

What will did she do when the NYSE opened at 9:30 AM today?

When SPY rose just to below $US400.00, she brought back the covered calls which she sold (C 25NOV22 400.00), meaning that she was out of her obligation to sell her SPY shares below market price to the buyer of her covered calls. The cost of buying the back was lower than the premium income she received when she sold.

She was now in a position to sell more covered calls on SPY and the new, higher price level.
On 11/25/22, she sold SPY covered calls @ $409.00 and got a decent premium income.

At the money was $403.00, allowing $US6 per share for growth.

What will did she do when the NYSE opened at 9:30 AM today?

Again, a thank you to all who gifted a membership or a one-on-one zoom meeting to friends and relatives. We think that they make ideal gifts. Consider it.

And again, our sincere gratitude to all members who took the time to respond to our Friday, November 18 survey about time spent driving. Time is an irreplaceable resource. We appreciate your involvement.

You can you read some worthwhile comments below.

Our fearless, intrepid investor spent two weeks sailing on a 42-foot catamaran in the British Virgin Islands with no internet connection. Knowing this would be the case, she wrote covered calls on SPY, strike price $10.00 out of the money, expiry date three weeks away instead of her usual one week away. (SPY C 18NOV22 396.00)

She did lose $US10,990.00 in her “fun” portfolio over one year, writing just out-of-the-money covered calls on Novavax (NVAX) on Mondays, expiry dates on Fridays of the same week.

What she learned from her NVAX experience is to write (sell) covered calls sufficiently out-of-the-money to earn about 1% per month or slightly more. That would significantly reduce the possibility of being assigned!

Using that approach, she has done well, being assigned occasionally, like the BVI case you see above.

What will did she do when the NYSE opened at 9:30 AM today?

The title of this post is the actual title of a ten thousand-word paper by Aizhan Anarkulova et al, published in SSRN on September 22, 2022.

As we frequently state, historically, 1.) over the long term, 2.) properly selected US market index exchange-traded funds, 3.) held in tax-advantaged accounts, 4.) in an appropriate asset allocation, have been the investors’ best way for growing savings and are likely to remain so for many years. Examples are easy to find. Here is another one.

When Facebook went public in 2012, it earned $3.7 billion, yet the stock price fell 50% that year.

From then on, until August 2021, its shares were up 2000%!! Unmatched, unbelievable!

The stock is now down almost 75% from all-time highs, falling more than 20% last Thursday alone.

Last fall, it had a market cap of over $1 trillion. It now has a market cap of $266 billion; that is, it lost more than $800 billion in a little over a year.

Except for Apple, Microsoft, Google and Amazon, $800 billion is greater than the market cap of any stock in the S&P 500. Investors who held the S&P 500 did far better in a boring manner.

Enough said against picking individual stocks. Let us visit our fearless, intrepid investor now.

Writing just out-of-the-money covered calls on Novavax (NVAX) on Mondays, expiry dates on Fridays of the same week, our fearless, intrepid investor lost $US10,990.00 in her “fun” portfolio over one year. The loss is mainly caused by picking a stock, a no, no, as our Facebook example shows.

What she learned from that experience is to write (sell) covered calls on an exchange-traded fund representing the S&P 500, such as SPY, sufficiently out-of-the-money to earn about 1% per month or slightly more. That would significantly reduce the possibility of being assigned!

Using that approach, she is doing well.

What will she do when the NYSE opened at 9:30 AM today?

The price trend of any security is more likely to continue than it is to reverse itself. Nevertheless, it will reverse itself someday. Investing in a security based on its price trend is called momentum investing. Momentum investors buy securities that have had high returns over the past year or so and sell those that have had poor returns.

With no guarantees, momentum investing can outperform the buy and hold strategy which we promote. However, it does require ongoing monitoring with the associated major time commitment.

For scholarly answers to investing questions, unbiased answers not designed to get you trading, see Social Sciences Research Network (SSRN) . It is an outstanding source of academic, evidence-based information. The SSRN economic papers are difficult for the layperson to understand, but the abstracts are manageable.

If you are interested, see what SSRN has to say about momentum investing.

Luck hardly matters with the habits of the Monday Morning Program.

Good luck!

As we previously stated, our fearless, intrepid investor lost $US10,990.00 in her “fun” portfolio over one year, writing just out-of-the-money covered calls on Novavax (NVAX) on Mondays, expiry dates on Fridays of the same week.

What she learned from her NVAX experience is to write (sell) covered calls sufficiently out-of-the-money to earn about 1% per month or slightly more. That would significantly reduce the possibility of being assigned!

Using that approach, she has done well.

What will did she do when the NYSE opened at 9:30 AM today?

As we previously stated, our fearless, intrepid investor lost $US10,990.00 in her “fun” portfolio over one year, writing just out-of-the-money covered calls on Novavax (NVAX) on Mondays, expiry dates on Fridays of the same week.

Mistakes are practice shots if we learn something from them. What did she learn from her NVAX experience?

Instead of writing just out-of-the-money covered calls on any security, she decided to write covered calls sufficiently out-of-the-money to earn about 1% per month or slightly more. That would significantly reduce the possibility of being assigned!

What will did she do when the NYSE opened at 9:30 AM today?

There are several dozen chess principles or rules that chess players observe. A good chess player knows the right time to ignore chess principles.

Can the same approach apply to investing?

Yes it can, and now could be the time. The Monday Morning approach to investing equals the US market at all times. Throughout a market cycle (peak to trough to peak) very few investors, including professionals, can equal the US market. The average investor trails the market by 40%.

Monday Morning investors have six habits.

1. Save.
2. Do it yourself.
3. Buy the American market as a whole by investing in an exchange-traded fund that tracks the S&P 500. (No stock picking.)
4. Buy and hold. (No  attempts at market timing.)
5. Rebalance to your asset allocation when market movement in either direction throws it off.
6. Avoid complexity.

Some members have a “fun” portfolio. What do they  do in their “fun” portfolios? They pick individual stocks, trade actively, invest in penny stocks, day trade, trade in derivatives and generally behave in ways that make Wall Street happy.

Nobody needs a “fun” portfolio. However, something worthwhile occasionally comes up in a “fun” portfolio that can be done in a core portfolio, to some extent.

We could be there now.