A lot has changed since I last updated my strategy. The biggest change is that I decided to stop trading all sorts of long or short SPX trades as listed on subsequent pages of this section. Yes, I realized that this type of trading is not for me. But you must give me a credit for trying hard. I refused to accept the nature of this trading and agree that this was not the way to make money long term. It is fine to make a trade or two when opportunity arrives and grab nice profit here and there, but, I was not able to make it a sustainable profitable trading. I had a few successful months, quickly made $20 or $30 thousand dollars just to get it wiped out by one bad trade. And I decided to stop it and go back to what I was always writing about on this blog (but rarely followed myself – sad).
· Dividend Investing – asset accumulation
This is the primary goal and strategy this year – aggressive accumulation of assets. I will be buying dividend stocks, ideally dividend aristocrats and accumulating them to the point when I reach 100 shares so I can trade options against those positions.
I consider the stocks to be my property, like real estate, which I will monetize by collecting dividends, and trading options around those positions.
We will never sell our property (stocks). Once we buy shares, we will not sell. It is like a home you buy. You do not buy a house just to sell it next day because someone thinks your windows are not pretty. No, we buy and hold. That’s why we want to buy a good quality stocks so we can hold them. We want businesses, which grow their dividends, and their managers and CEOs act responsibly. Difficult task as I will have to learn a lot on how to choose the proper companies. In the past, I tried to simplify my selection to pick companies which were on the dividend aristocrats list, yet, it didn’t help much either as in 2020 a few dividend aristocrats cut their dividend.
I will use the benefit of zero commissions trading and will be buying shares of the selected stocks one by one. Now, I can buy one or two shares and start collecting dividends, and it will cost me nothing.
· Monetizing stock positions – Options trading
As I said above, I will be monetizing my stock holdings by trading options around those positions. If I save enough cash to trade puts, I will sell put options to buy the stocks (100 shares). The premium from the put option will be immediately reinvested to increase my stock holdings. I will invest into the same underlying stock which generated the income, or re-invest into another stock (mostly the ones which I do not own 100 shares yet, to quickly raise the position up).
If the put gets in the money, I will attempt rolling the put lower and away, but only if such roll will result in a credit trade. If a roll cannot be done for credit, I will let puts assign.
If I do not have enough cash to trade puts out right, I will be just accumulating the stocks until I reach 100 shares. Once I reach 100 shares, I immediately proceed to selling covered calls. Income from covered calls will be reinvested either back into the company acquiring more shares or another stock to raise shares to 100.
If a call option gets in the money, I will attempt to roll higher and away. This can be done for a credit, or I may allow to roll for a debit as long as the debit is smaller than a gain on the stock by raising the profit ceiling. For example, if an original strike was 36 and I roll the call to 40 strike, I raised the ceiling by $4 dollars per share. Thus the debit paid must be smaller than that otherwise I will let the calls assigned, sell the stocks and start selling puts again.
All collected dividends will also be reinvested to raise stock holdings to 100 shares.
Occasionally, I will be trading other options strategies, such as Poor man’s covered calls (PMCC), Butterflies, or equity spreads, to generate investable income, which will be reinvested back to acquire equities.