A sincere thank you to all those who took part in our recent survey about the usefulness of the Monday Morning program and those who entered comments.

You can see the results below.

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“The Monday Morning Millionaire Program objective is to help me be a better investor.”

Agree 97.4%,   Neutral 2.6%,   Disagree 0.0%

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 “The Monday Morning Millionaire Program offers useful support when I need it.”

Agree 64.1%,   Neutral 33.3%,   Disagree 2.6%

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 “I would recommend the Monday Morning Millionaire Program to others.”

Agree 89.7%,   Neutral 10.3%,    Disagree   0.0%

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A SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) of these results shows that we need to concentrate on providing better, personally useful support to our members.

We will do a similar survey one year from now and hope that we see improvement.

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We have designed the Monday Morning Millionaire Program to offer abstracted investment education. Over the last two decades, the program has outperformed over 90% of portfolios, including professionally managed ones.

The program does not provide any investment advice or endorsements.

Members can read our posts in less than five minutes. Following and studying the links embedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

We will keep you posted.

The Monday Morning program encourages index investing by buying an exchange-traded fund that tracks the S&P 500. Historically, over the long term, this passive investing strategy has been the best way for growing savings and is are likely to remain so for many years.

Many of our members are interested in derivatives (puts and calls) — which is NOT passive investing, so we write about that once in a while. We have recently been following the puts and calls record of one of our members who lost $232,407.50 in a $500,000 portfolio when her Novavax (NVAX) shares quickly dropped by over 50%.  She paid  over $174 each for them, having bought them because the premiums on covered calls were attractive.

By selling just out-of-the-money covered calls on NVAX every Monday after that, with expiry date on Friday of the same week, she brought her losses from $232,407.50 down to $26,341.25  by November 13!!

However, at the market close on Monday, November 16, NVAX shares dropped further, bringing her losses back up  t0 $103,984.05. Going in the wrong direction even though it is an improvement on the original loss of $232,407.50.

She plans to continue selling just out-of-the-money covered calls on NVAX every Monday with expiry date on Friday of the same week.

At the close of the market last Friday, November 27, the bid-ask range for just out-of-the-money NVAX calls was $9.85/$10.15. That is more than two and a half times as much as it was on the previous Friday at $3.20/$3.65. Two and a half times more interesting!

Last Friday, November 27, she was assigned and her shares were called away. She ended up with a cash balance of $333,412.18.

When the market opens at 9:30 AM today, she plans to buy all the NVAX shares possible, using that cash balance. It will come to 2,600 shares.

NVAX is trending upward. Since the trend is your friend (until it isn’t), she plans to sell covered calls further out of the money at $130 (NVAX C 04DEC20 130.00 US). That will allow four dollars for growth and still get a handsome premium of a minimum of $8.00 per share, based on last Friday’s closing numbers. Of course, that could change.

If no growth takes place, she should receive $20,800 ($8.00 times 2,600). If the growth which she hopes for does take place, she will receive an additional $10,400 ($4 times 2,600).

She never netted that much in a week, practising dentistry!

Tomorrow, we will report on her results for today. Next Saturday, December 5, We will let you know how she made out at expiry date of this adventure.

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We have designed the Monday Morning Millionaire Program to offer abstracted investment education. Over the last two decades, the program has outperformed over 90% of portfolios, including professionally managed ones.

The program does not provide any investment advice or endorsements.

Members can read our posts in less than five minutes. Following and studying the links embedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.l

Happy Thanksgiving to our American friends!

One half of Monday Morning members are Americans and the other half are Canadians, with a few from other countries. Canadians celebrated Thanksgiving on Monday, October 19.

Coronavirus not withstanding, what benefits can we derive from COVID-19?

From a recent edition of the British Medical Journal:

“Skies are bluer, fewer cars are crashing, crime is falling, and some other infectious diseases are fading from hospital emergency departments.”

“The reduction in traffic accidents is unparalleled.”

“NASA satellites have documented significant reductions in air pollution—20-30% in many cases—in major cities around the world.”

“A pandemic is a terrible way to improve environmental health, but it may provide an unexpected vantage to help understand how environmental health can be altered. It may help bring into focus the effect of business as usual on health outcomes that we care about.”

“In some sense, it helps us imagine the future. Getting there could come through better regulation and technology.”

To that, we from Monday Morning add that nations which have at one time gone to war with each other are now cooperating to defeat a common enemy. This could lead to cooperation in other areas such as climate change.

Further, many companies could conclude that some of their work could be done from the homes of their teams, making millions of square feet of unused office space available for conversion into low-cost housing.

All of us in the developed world have a great deal to be thankful for – every day!

Last Friday, November 20, we surveyed our members with the question below.

How many years’ worth of cash or a cash-equivalent do you keep?

Thank you to all who participated.

Poll results

Option	Percentage
1. None	10.60%
2. I am fully in cash and not at all in the market	2.10%
3. Between one and two years worth	40.40%
4. Three to four years worth	21.30%
5. Five years worth or more	25.50%

Below, you can see the Monday Morning Program comments on the survey results.

Gerald Loeb, the most quoted man on Wall Street before Warren Buffett, said: “It is far better to let cash lie idle than to buy just to “keep invested” or for “income.” In fact, it is really vital—and just this one point, in my opinion, represents one of the widest differences between the successful professional and the loss-taking amateur.”

Buffett has always kept a large percentage of the Berkshire Hathaway portfolio in cash.

Successful investors know that the money that they will need in the next few years does not belong in the stock market but should be kept in cash or a cash-equivalent like the money market or certificates of deposit.

1. Nearly 11% of our members keep no cash or cash-equivalent in their portfolios. That is, they are fully invested. Wall Street loves people like that. Wall Street makes no money on the cash we keep uninvested. If a fully invested position is temporary, that is acceptable. Otherwise, these portfolios are guaranteed to underperform.
2. About 2% of our members are fully in cash and not in the market at all. Here again, this is acceptable if it is a temporary position. Otherwise, the loss of purchasing power is guaranteed.
3. Close to 90% of our members keep between 1 to 5 years’ worth of their portfolios in cash or a cash-equivalent. Their risk tolerance a capacity determines the number of years. This approach is entirely in keeping with the Monday Morning philosophy. Congratulations!

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We have designed the Monday Morning Millionaire Program to offer abstracted investment education. Over the last two decades, the program has outperformed over 90% of portfolios, including professionally managed ones.

The program does not provide any investment advice or endorsements.

Members can read our posts in less than five minutes. Following and studying the links embedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

 

Today, we report on yesterday’s covered call activity by our intrepid investor who lost $232,407.50 in a $500,000 portfolio when her Novavax (NVAX) shares quickly dropped by over 50%.  She paid  over $174 each for them, having bought them because the premiums on covered calls were attractive.

By November 13, she brought her losses from $232,407.50 down to $26,341.25 by selling just out-of-the-money covered calls on NVAX every Monday after that, with expiry date on Friday of the same week.

On Monday, November 16, NVAX shares dropped further, from $96 per share to $85 per share, bringing her losses back up  t0 $103,984.05.

She plans to continue selling just out-of-the-money covered calls on NVAX every Monday with expiry date on Friday of the same week.

She sees her NVAX shares as a money tree. Regardless of the value of the money tree at any time, it is throwing off cash on an ongoing basis.

Yesterday, she sold 33 covered call contract on NVAX at just out-of-the-money strike price $89.00 expiry date  this coming Friday, November 27 (C 27NOV20 89.00) and got $10,675 in premium income, bringing her loss to $93,309.05. ($103,984.05 minus $10,675.)

The Monday morning program encourages passive investing by buying an exchange-traded fund that tracks the S&P 500. (SPY Is an excellent example.) Known as index investing, historically, over the long term, it has been most investors’ best way for growing savings and is are likely to remain so for many years.

However, many of our members are interested in puts and calls so we write about that once in a while. 

Our intrepid investor is considering writing just out-of-the-money covered calls on Sorrento Therapeutics Inc. (SRNE).

The percentage return on the premiums is higher than on NVAX and Morningstar rates the stock price as undervalued at a 28% discount.

The Sunday Morning Program discourages stock picking, but occasionally, with luck, it can outperform. (Habit number three is to buy the American economy as a whole by acquiring an exchange-traded fund that tracks the S&P 500. No stock picking!)

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We have designed the Monday Morning Millionaire Program to offer abstracted investment education. Over the last two decades, the program has outperformed over 90% of portfolios, including professionally managed ones.

The program does not provide any investment advice or endorsements.

With fewer than 400 words, members can read this post in less than five minutes. Following and studying the links embedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

 

The Monday morning program encourages passive investing by buying an exchange-traded fund that tracks the S&P 500. (SPY Is an excellent example.) Known as index investing, historically, over the long term, it has been most investor’s best way for growing savings and is are likely to remain so for many years.

However, many of our members are interested in puts and calls so we write about that once in a while. 

On Monday, November 9, we wrote about a Monday Morning Program member who lost $232,407.50 in a $500,000 portfolio when her Novavax (NVAX) shares quickly dropped by over 50%.  She paid  over $174 each for them, having bought them because the premiums on covered calls were attractive.

To regain her losses, she sold just out-of-the-money covered calls on NVAX every Monday after that, with expiry date on Friday of the same week. By November 13, she brought her losses from $232,407.50 down to $26,341.25!! Something to cheer about.

However, at the market close on Monday, November 16, NVAX shares dropped from $96 per share to $85 per share, bringing her losses back up  t0 $103,984.05. That is an improvement on the original loss of $232,407.50 but is going in the wrong direction.

Encouraged by her experience of selling just out-of-the-money covered calls on NVAX every Monday with expiry date on Friday of the same week, she plans to continue doing that.

At the close of the market last Friday, November 20, the bid-ask range for just out-of-the-money NVAX calls was $3.20/$3.65. Based on that, she will collect a premium of $12,691.00. ($3.43, that is halfway between $3.20 and $3.65 multiplied by 37 contracts, or 3,700 shares).

She sees her NVAX shares as a money tree. Regardless of the value of the money tree at any time, it is throwing off cash on an ongoing basis.

We will keep you posted.

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We have designed the Monday Morning Millionaire Program to offer abstracted investment education. Over the last two decades, the program has outperformed over 90% of portfolios, including professionally managed ones.

The program does not provide any investment advice or endorsements.

With fewer than 400 words, members can read this post in less than five minutes. Following and studying the links embedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

 

The chart below shows the actual quarter to quarter growth of the US economy since 2016.

Retail investors like Monday Morning Program members justifiably always felt that the stock market and the economy moved in parallel. When the market was doing well, they were doing well. Conversely, when the market was doing poorly, investors (not Monday Morning Program members) were doing poorly.

True to form, the 32.9% drop in the US economy from its previous quarter coincided with the worst market drop in history.

That phenomenon began to diverge in 2020. On March 23, 2020, Federal Reserve announced extensive measures to support the economy.

From that point on, up to last Friday, the market grew by 38% even as the economy continues to do badly! One of the measures taken by the Federal Reserve was introduction of the lowest interest rates in history! That encourages stock market investing.

Monday Morning Program Members rebalanced to their personality selected asset allocation and took profits. They are smiling.

When the inevitable reversion to the mean takes place and the market drops, Monday Morning Program members will continue smiling as they snap up the bargains which will develop.

As we frequently state, with the Habits of Monday Morning Millionaires, luck hardly matters.

Good luck!

For members interested in covered calls, for an update on the Novavax experience of one of the members we have been reporting on, log in before the market opens tomorrow.

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We have designed the Monday Morning Millionaire Program to offer abstracted investment education. Over the last two decades, the program has outperformed over 90% of portfolios, including professionally managed ones.

The program does not provide any investment advice or endorsements.

With fewer than 350 words, members can read this post in less than five minutes. Following and studying the links embedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

On Monday, November 9, we wrote about a Monday Morning Program member who lost $232,407.50 in a $500,000 portfolio when her Novavax (NVAX) shares quickly dropped by over 50%.  She paid  over $174 each for them having bought them because the premiums on covered calls were attractive.

To regain her losses, she sold just out-of-the-money covered calls on NVAX every Monday after that, with expiry date on Friday of the same week. By last Friday, November 13, she brought her losses from $232,407.50 down to $26,341.25. Something to cheer about!

Her plans to sell more covered calls on NVAX yesterday went askew by the fact that the shares began to drop from $96 per share. By noon, they were trading at $85 per share.

She sold 35 contracts just out-of-the-money (strike price $90, expiry date Friday, November 20,  that is, C 20NOV20 90.00) and received $12,250. Using that money, she bought another hundred shares of NVAX, further bringing down her overall per- share costs. She then sold another just out-of-the-money contract and received $350.00 after commissions.

$350 is not much money, but the 3.89% return on investment for the week is exceptional. ($350.00 divided by $90.00 multiplied by 100)

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On Monday, November 9, we wrote about a Monday Morning Program member who lost $232,407.50 in a $500,000 portfolio when the Novavax (NVAX) shares which she bought because the premiums on covered calls were attractive. She paid  over $174 each and they quickly dropped by over 50%.

Every Monday, she sold just out-of-the-money covered calls on NVAX with expiry date on Friday of the same week.

After 13 weeks, ending on November 2, she brought her losses from $232,407.50  down to $26,341.25.

Writing covered calls and cash-secured puts is risk-free. Immediate cash in the investor’s pocket. A bird in the hand. Any risk entirely derives from ownership of the underlying security connected to the transaction.

Our member continued to write covered calls on NVAX every Monday with expiry date of Friday of the same week. When her shares were called away, she bought them again, albeit at a higher price, in order to continue writing cover calls and receive their attractive premiums. (Two times, when the shares dropped sufficiently in her view, she bought more to bring down her average per-share cost.)

One of our members, A. K. DDS, stated that his only concern was that as the markets edged higher, she lost the opportunity to participate in that growth. Indeed, investors selling covered calls limit their upside on the underlying security; they do so in exchange for the option premium.

More than 2,500 years ago, Aesop taught us that a bird in the hand is worth two in the bush. The options premium is a bird in the hand.

As a variation on this theme, investors can choose to write covered calls a little further out of the money. They will get a smaller premium than they would writing covered calls just out-of-the-money, but they can participate in some of the growth of the underlying security if it takes place.

If!

Last Monday, November 9, our intrepid investor did precisely that. She wrote covered calls with a strike price of $102 instead of her usual just out-of-the-money position. She received a premium of $9,100 immediately with a possible additional amount of $10,000 ($3.00 times 3,500) if the stock reached $102 by Friday, November 13. As we stated above:

If!

As it happens, last Friday, NVAX closed at $96.60. The two in the bush were not there. Just out-of-the-money premium would have given her nearly twice as much as she got.

This experience underscores another market truism. We can always choose better investments with hindsight.

She did, however, trim her losses on NVAX to $17,241.25 ($26,341.25 minus $9,100).

What are her plans later today when the market opens at 9:30 AM Eastern time?

When the market opens today at 9:30 AM Eastern Time, she plans to sell 35 covered call contracts on NVAX at a strike price of $100.00 and expiry date this coming Friday, November 20 (NVAX C 20NOV20 100.00).

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