How we save and invest depends on our risk tolerance, to a large extent. We recently published a risk tolerance assessment document which will interest many members and subscribers.
Writing (selling) covered calls and cash-secured puts on an exchange-traded fund (ETF) which tracks the S&P 500 is suitable for investors whose risk tolerance is conservative to moderate. Doing so on an individual stock is for aggressive investors only.
Our Monday, August 24 post noted that one of our aggressive members made more than $21,000 for the week on a $500,000 portfolio, writing covered calls on an individual stock, Novavax (Symbol NVAX). However,
NVAX dropped more than $21,000, and overall, she lost money. But…
… that was the fourth week in a row in which she made over $20,000 writing covered calls on NVAX. It looks like she will be able to do so again today.
Writing (selling) covered calls on NVAX today when the market opens, expiry date Friday, Sept. 4 (NVAX C 04SEP20 108.00 US) should earn her a premium income of about $18,000. For the five weeks, she will have earned about $100,000 in premium income.
Her loss on NVAX is about $170,000. When we subtract the premium income which she will have received, her overall loss comes to about $70,000. If this trend continues for another for five weeks, she will come out ahead.
This history shows why only investors with a high risk tolerance should consider getting involved in selling derivatives on individual stocks.
Please note that the Monday Morning Program supports index investing.
I will keep you posted.
The Monday Morning Millionaire Program was designed to offer compressed investment convictions. 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.
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