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Writing (selling) just out-of-the-money covered calls on any security generates the largest percentage return if the expiry date is close, say, a week away or in the same week. It also results in having a 50% chance of being assigned, that is, having to sell the security below market price. Then, to stay in the game, investors are required to buy high. Our approach to investing is to sell high!

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!

For the last few weeks, she has been doing that with Intuitive Surgical (ISRG) with good results. ISRG has dropped by a far greater extent than the premium income that selling covered calls on the security has produced, but intelligent investors ignore short-term fluctuations. She likes ISRG and is happy to hold long-term.

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

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There are 18 hours of talking heads discussing the stock market every day! (Not to be confused with American new wave band using that name.) Investors would not miss out on anything helpful if they spent no time at all, listening to talking heads.

Despite that attitude, I have become a talking head, hoping to state something worthwhile.

Follow https://youtu.be/ay3B3XCcqkw to see yesterday’s show. Stop looking as soon as you find it boring.

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

Good luck!

 

 

Writing just out-of-the-money covered calls on Novavax (NVAX) every Monday, expiry date on Friday of the same week,  our fearless, intrepid investor lost $US10,990.00 in her “fun” portfolio over the course of about one year. She bought 1,100 shares at $US300 a share for a total of $US330,000.00. Last Friday, September 30, NVAX closed at $US18.20! Her shares would have had a market value of$US20,020.00 ($US18.20 times 1,100) but she got out earlier plus she did earn something from the weekly premium income that she received reducing her losses to the $US10,990.00  mentioned above.

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 (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!

She likes Intuitive Surgical (ISRG), so she bought 300 shares at $243.7592 per share for a total of $US73,127.76. ISRG will continue to generate premium income even when it declines in the short term. In. The. Short. Term.

Indeed, ISRG has dropped by a far greater extent than the premium income that selling covered calls on the security has produced.

Intelligent investors ignore short-term fluctuations. She likes ISRG and is happy to hold long-term.

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

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Paul Krugman

In a New York Times column last Tuesday, Nobel Prize-winning economist  Paul Krugman predicted interest rates would return to virtually nothing once the inflation fight is over.

Krugman predicted a return to near-zero interest for two reasons.

First, long-term rates have a delayed effect and advanced economies central banks have raised rates this year from near zero to 3.25% with suggestions that there could be more to come.

Second, Krugman also pointed out that job openings are greater than the number of available workers.

“This was the best economic news I’ve seen for a long time,” he stated.

The two are strong evidence of a cooling economy. Ultimately, Krugman claims that this would cause interest rates to return the near-zero pre-pandemic levels. Looking for better returns, investors would get back into the market, pushing it upward.

The Monday Morning approach to investing ignores market movements in either direction. We don’t have money we will need in the next few years in the market. When it rises, we take profits and when it drops, we buy bargains to maintain our personal asset allocation, which for most of our members, is 50/50.

Luck hardly matters with the habits of that Monday Morning.

Good luck!

 

Writing just out-of-the-money covered calls on Novavax (NVAX) every Monday, expiry date on Friday of the same week,  our fearless, intrepid investor lost $US10,990.00 in her “fun” portfolio over the course of about one year. She bought 1,100 shares at $US300 a share for a total of $US330,000.00. Last Friday, September 30, NVAX closed at $US18.20! Her shares would have had a market value of$US20,020.00 ($US18.20 times 1,100) but she got out earlier plus she did earn something from the weekly premium income that she received reducing her losses to the $US10,990.00  mentioned above.

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

“The market can stay illogical longer than investors can stay solvent.” (John Maynard Keynes) Is NVAX an example?

Instead of writing just out-of-the-money covered calls on any security, she decided 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!

She likes Intuitive Surgical (ISRG), so she bought 300 shares at $243.7592 per share for a total of $US73,127.76. ISRG will continue to generate premium income even when it declines in the short term. In. The. Short. Term.

Indeed, last Friday, September 30, ISRG dropped to $US187.44 per share giving them a value of $US56,232.00 ($US187.44 times 300) for a total loss of $US16,895.76 in her “fun” portfolio. ($US73,127.76 minus $US56,232.00).

Intelligent investors ignore short-term fluctuations. She likes ISRG and is happy to hold long-term.

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

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On September 28, 2022, from an Aurora, Ontario dentist

As a Canadian investor, would you suggest I purchase something like “XUS” instead of “IVV”?

 

On  September 28, the S&P 500 was down 19.51% year-to-date and the Toronto Stock Exchange was down 10.08%. Both are up from September 27 but still in bargain territory and far from profit-taking territory.

Year to date is short-term. Intelligent investors think long-term.

Over the last decade, the Canadian market is up 129.13%. The US market is up 214.03%.

When will we get to profit-taking territory?

No one knows.

“I don’t know” is the correct answer to a vast number of investing questions. Nevertheless, many seldom-right-but-never-in-doubt gurus will voice their opinions. Read what they say for amusement only. Better yet, don’t read them at all.

Intelligent investors know that profit-taking levels will arrive someday. They don’t invest any money they will need for necessities in the next few years.

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

Good luck!

 

 

Writing just out-of-the-money covered calls on Novavax (NVAX) every Monday, expiry date on Friday of the same week,  our fearless, intrepid investor lost $US10,990.00 in her “fun” portfolio over the course of about one year. She bought 1,100 shares at $US300 a share for a total of $US330,000.00. Last Friday, September 16, NVAX closed at $US30.41! Her shares would have had a market value of$US9,123.00 ($US30.41 times 1,100) but she got out earlier plus she did earn something from the weekly premium income that she received reducing her losses to the $US10,990.00  mentioned above.

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 (sell) covered calls sufficiently out-of-the-money to earn about 1% per month. That would significantly reduce the possibility of being assigned!

She likes Intuitive Surgical (ISRG), so she bought 300 shares at $243.7592 per share for a total of $US73,127.76. ISRG will continue to generate premium income even when it declines in the short term. In. The. Short. Term.

Indeed, last Friday, September 23, ISRG dropped to $US190.52 per share giving them a value of $US57,156.00 ($US190.50 times 300) for a total loss of $US15,971.76 in her “fun” portfolio. ($US73,127.76 minus $US57,156.00).

Intelligent investors ignore short-term fluctuations. She likes ISRG and is happy to hold long-term.

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

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Year-to-date, last Friday, September 23, the Toronto Stock exchange index (TSX) was down nearly 13% and the US market is represented by the S&P 500, was down almost 22%.

Markets go through at least one big pullback every year and one massive one every decade. Get used to it. It’s just what they do. We wrote about that previously.

Without cherry-picking, the US market has been the best place to invest for some 200 years. To deal with the expected massive fluctuations, any money which we will need within the next few years should not be in the market. Also, we should maintain at all times an asset allocation a large part of which is cash or near cash.

60/40 is common, as is 50/50 and similar allocations. The differences are minor. The length of time in the market is major.

What can we expect the markets to do now?

Without a doubt, they will recover and hit new highs. Nobody knows when that will happen but intelligent investors know it will happen.

And what should investors do at this time?

Reviewing our Jan 21, 2019 post add this time would be helpful.

The review will show you what to do.

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

Good luck!