Monday, December 5, 2022. How our fearless, intrepid investor made out last week and her plans for today

We previously stated that writing (selling) 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 risk in selling covered calls entirely comes from the market movement of the underlying security. When she owned NVAX, it dropped to a greater, far greater, extent than the premium income derived from selling covered calls on the security.

She ignored habit number three, which is to buy the American economy as a whole by using an exchange-traded fund that tracks the S&P 500. That means no picking individual stocks.

Additionally,  she learned 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!

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

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Monday, November 28, 2022. How our fearless, intrepid investor made out last week and her plans for today

Writing (selling) 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 risk in selling covered calls entirely comes from the market movement of the underlying security. When she owned NVAX, it dropped to a greater, far greater, extent than the premium income derived from selling covered calls on the security.

She ignored habit number three, which is to buy the American economy as a whole by using an exchange-traded fund which tracks the S&P 500. That means no picking individual stocks.

Additionally,  she learned 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!

Last Monday, November 21, our fearless, intrepid investor  wrote (sold) covered calls on SPY, strike price $6.00 out of the money, expiry date Friday of the same week, that is, November 25. (C 25NOV22 400.00)

She made $US0.75 per share in premium income. Then what happened?

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?

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How much time do you spend driving to and from work? October 18, 2022 survey results

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.

How much time do you spend driving to and from work?
No time 17.9%
Less than 15 minutes 39.3%
15 to 59 minutes 28.6%
Over an hour 14.3%

You can you read some worthwhile comments below.

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Monday, November 21, 2022. How our fearless, intrepid investor made out last week and her plans for today

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 was assigned and made 1.1% on her investment. You can’t go broke taking a profit.
During the same time, the market, as represented by SPY, went up 5.17%!!
Two points here. First, there will always be investments that are better than the ones you just made. And second, simply buying and holding an exchange-traded fund that tracks the S&P 500, SPY is ideal, is an effortless way to do well. With huge fluctuations. That is why the money which we will need in the next few years does not belong in the market.
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.

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?

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The case against picking stocks and our fearless, intrepid investor’s performance and plans for today, Monday, November 14

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?

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Momentum investing. The trend is our friend….until it isn’t!

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!

 

Monday, October 31, 2022. How our fearless, intrepid investor made out last week and her plans for 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.

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?

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Monday, October 24, 2022. How our fearless, intrepid investor made out last week and her plans for 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?

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Learn the rules so you can break them. Is now a good time?

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.

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