Monday Morning members know that investing in securities has given the best returns in over 100 years, with fluctuations. The comparative chart below, which we frequently show, illustrates that.
Our asset allocation allows us to tame the fluctuations.
On 2.21.02, we wrote about the three main reasons why people trade options. The one which interests us is to generate extra income.
Two days ago, 3.01.2021, investors selling covered calls on the S&P 500 generated 0.6% returns for the week! Multiply that by 52 to annualize it, and what do you get? Two days ago, 50,000 contracts were sold. When you consider that about 1 1/2 billion shares trade on the New York stock exchange daily, that’s close to 0%.
It is true that for many, options can be “financial weapons of mass destruction” as Warren Buffett once called them. Nevertheless, investors can do so safely when they know what to do. Buffett also said that risk is not knowing what you are doing. He himself invests in options; he knows what he is doing.
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