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Posted by Martin December 01, 2023
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Elon Musk and the Ad Wars: A Galactic Battle of Clicks and Laughs


In the vast universe of online advertising, one man has boldly gone where few entrepreneurs have gone before – Elon Musk. Love him or loathe him, there’s no denying that Musk’s approach to advertisers is as unconventional as his plans for a colony on Mars. In this blog post, we’ll explore the amusing saga of Elon Musk and his unique stance on advertisers, all while sharing a few chuckles along the way.

 
Elon Musk

 

The Elon Musk – Adversary Relationship:

 

Elon Musk, the man behind Tesla, SpaceX, and a fleet of other futuristic ventures, has always been known for his unorthodox behavior on social media. From tweeting about flamethrowers to contemplating the mysteries of the universe, Musk’s Twitter feed is a digital playground that advertisers both fear and, oddly enough, desire.

Musk’s approach to advertisers can be best described as a love-hate relationship. While he may not be the biggest fan of traditional advertising methods, the allure of a Musk mention on Twitter is like winning the lottery for some advertisers. Musk’s tweets have a tendency to go viral, catapulting brands into the limelight faster than a SpaceX rocket launch.

 

The Advertiser’s Dilemma:

 

Advertisers find themselves caught in a cosmic dilemma – should they risk the unpredictable nature of Musk’s Twitterverse, or play it safe with traditional marketing strategies? It’s a question that many marketing teams have pondered as they navigate the uncharted territories of Musk’s social media presence.

Musk, however, seems to revel in his role as the disruptor-in-chief. His disdain for traditional ads has been on full display, with tweets like, “Ads are like a crappy meal you didn’t order,” leaving advertisers scratching their heads and wondering if they should be offended or amused.

 

A Galactic Battle of Clicks:

 

In Musk’s universe, the battle for clicks is nothing short of a cosmic clash. While some may argue that his approach to advertisers is a bit too avant-garde, there’s no denying the entertainment value. Musk’s Twitter feed has become a digital spectacle, with advertisers eagerly watching and waiting for the next opportunity to ride the coattails of his online antics.

But is Musk onto something, or is he just trolling the advertising industry for laughs? Only time will tell if his disdain for traditional advertising will lead to a new era of marketing innovation or if it’s simply the manifestation of a billionaire’s eccentric sense of humor.

 

Conclusion:

 

In the ever-evolving landscape of online advertising, Elon Musk stands as a polarizing figure, challenging the norms and keeping advertisers on their toes. Whether you find his approach amusing or infuriating, there’s no denying that Musk has injected a dose of unpredictability into the world of marketing.

As advertisers continue to navigate the cosmos of social media, one thing is for certain – the Elon Musk-Adversary relationship is a comedic saga that keeps us clicking, scrolling, and wondering what the eccentric entrepreneur will tweet about next. So, buckle up, fellow netizens, as we embark on this intergalactic journey of clicks, laughs, and the perpetual battle for advertising supremacy in the Muskiverse.

 




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Posted by Martin November 26, 2023
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The Art of Dividend Investing: Maximizing Your Portfolio’s Potential


Dividend investing is a time-tested strategy that has been embraced by many successful investors. It involves purchasing stocks of companies that consistently pay dividends to their shareholders. These dividends are usually a portion of the company’s profits, distributed as cash payments or additional shares of stock. Through dividend investing, investors can not only receive a regular income stream but also build wealth over the long term. In this post, we will explore the benefits of dividend investing and provide insights into how to maximize its potential.

 
Dividend investing

 

Stability and Income Generation with Dividend Investing

 

One of the key advantages of dividend investing is the stable income it provides, making it an attractive option for income-focused investors. Companies that pay regular dividends are usually well-established and have a reliable revenue stream. These companies operate in industries that are less susceptible to economic downturns and market volatility, providing a level of stability to the dividends received.

Dividend payments can be reinvested into additional shares of stock, allowing for compound growth over time. This compounding effect can significantly increase the value of the initial investment, particularly when reinvested dividends are added to the principal.

 

Long-Term Growth Potential

 

While dividend investing is often associated with income generation, it can also serve as a powerful tool for long-term wealth creation. Investors who consistently reinvest their dividends can take advantage of the power of compounding to build a substantial portfolio value over time. By reinvesting dividends, investors are effectively buying more shares at different prices, which lowers the overall average cost per share and enhances the potential for future capital appreciation.

Dividend stocks tend to outperform non-dividend-paying stocks over the long run. Companies that prioritize dividend payments often have strong business models, solid earnings growth, and responsible financial management. These characteristics can translate into superior total returns for investors.

 

Portfolio Diversification

 

Dividend investing can also be an effective means of diversifying a portfolio. Including dividend-paying stocks from different sectors and industries can help spread risk and reduce the impact of any single stock’s performance. By investing in a range of dividend stocks, investors can create a more balanced and resilient portfolio that can weather market fluctuations.

Dividend stocks typically belong to established companies with proven track records. These companies operate in various sectors, including consumer goods, utilities, finance, and technology, among others. By diversifying across these industries, investors can capture a broad representation of the economy and limit exposure to any one particular sector.

 

Choosing the Right Dividend Stocks

 

When it comes to dividend investing, thorough research and analysis are crucial to selecting the right stocks. Investors should consider several factors before adding a dividend stock to their portfolio.

Dividend Yield: The dividend yield is a measure of the annual dividend payments divided by the stock price. It indicates the return an investor can expect from their investment in the form of dividends. While a high yield may be attractive, investors should also evaluate the company’s ability to sustain and grow its dividends over time.

Dividend Growth: The growth rate of a company’s dividends is a key consideration. Companies that consistently increase their dividend payout tend to have a positive outlook and a solid financial foundation. Investors should look for companies with a history of steady or increasing dividend payments.

Dividend Payout Ratio: The dividend payout ratio compares the dividends paid to shareholders with the company’s earnings. A low payout ratio suggests that a company has room to increase future dividend payments, while a high ratio may indicate that the company is paying out more than it can afford.

Financial Health and Stability: Evaluating a company’s financial health is essential before investing. Factors such as revenue growth, profit margins, debt levels, and cash flow should be considered to assess the company’s stability and ability to sustain dividend payments.

 

Conclusion

 

Dividend investing offers a host of benefits, including stable income generation, long-term growth potential, and portfolio diversification. By selecting the right dividend stocks and adopting a patient and disciplined approach, investors can build a portfolio capable of generating consistent income and capital appreciation. While dividend investing requires careful research and analysis, it can be a rewarding strategy for those looking to maximize their investment potential.

 




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Posted by Martin November 25, 2023
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Americans achieved record spending, online shopping up 7.5%


As the news about holiday spending is coming, we achieved a new record! Just this morning, the news reported $5.6 billion on stuff. In the evening the news reported that shoppers spent over $10 billion; 7.5% up compared to 5.4% last year and 3% to 4% expectations.

That’s great. But the question remains: how will Wall Street react to it on Monday? Remember, we are probably still in a “good news is bad news” mentality, and the investors may perceive this spending as bad news, such that the FED may keep rising interest rates because resilient customers may drive inflation up. We have to sit and wait.

 




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Posted by Martin November 25, 2023
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Americans keep spending


Yesterday, I wrote a post with a link expressing that retailers were worried about Americans not spending enough this holiday season. Their reasoning was:
 

  1. Dwindling savings
  2. Increased credit card debt
  3. Stubborn Inflation and high prices everywhere
  4. Student loans repayment kick off

 

They also expressed concerns about shoppers delaying their purchases and ordering less “stuff,” as they saw in October. They predicted that the US holiday sales would rise 3% to 4% compared to 5.4% a year ago and issued “muted annual sales outlook.”
 

Well, as Mr. Scrooge says: “Bah… Humbug!”

 
Spending
 

Americans were spending like crazy again. And according to MarketWatch (subscription needed), the hottest items were “Disney Little People figurines (seriously?), and Mattel’s Uno Show ‘Em No Mercy card game (no wonder, people are poor and live paycheck to paycheck when wasting money on this, but hey, spend, so we, the investors, make money).

Shoppers spent a record $5.6 billion this season shopping online, up 5.5% compared to last year. See, retailers were worried that shoppers would spend only 3% to 4% from November to December 2023, but they spent 5.5% on Black Friday stuff only!
 

What does this tell us? That all these predictors and forecasters are usually wrong. Take their pessimistic views with a salt of the grain (big one), and invest in established good-standing companies. And when the markets sell because predictors and forecasters are freaking out, take it as an opportunity instead of running away with the herd. And if you are trading, trade the chart in front of you, not the forecasts, feelings, predictions, or guts.

 




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Posted by Martin November 24, 2023
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The best time to buy REITs is now (even if you think otherwise)


People are avoiding REITs, and many said they wouldn’t touch them with a ten-foot-long pole. It is interesting to see the irrational behavior of people not experienced in investing. For example, in 2021, when Realty Income (O) was trading at $70 a share, everybody was rushing in and buying. Everybody was claiming to be a long-term investor investing for a long haul and years of passive dividend income. Fast forward, and Realty Income is trading at $53.31 (24% discount), and they say they wouldn’t buy it.

 
REITs
 

Some claim that REITs destroyed their investment and that they would never recover as the FED keeps raising interest rates, and that would be a headwind for this investment vehicle. Others are expecting a recession, which would further press the REITs down. People do not want to invest in these stocks for many reasons.

But this is the right time to do so! Many REITs are down 20% -30 %, and if you claim to be a long-term investor, here is your opportunity! So listen to your guts. If you are scared and want to run away from REITs, do the opposite.

Yes, REITs are sensitive to interest rates. But the best time to invest in them is at or near the end of the interest hike cycle. And we see inflation dropping (still high but going lower), which means that the FED is probably done hiking the rates. That will help REITs to recover. And even if we are going into recession, the FED will cut the rates even more. Again, that would uphold REITs. They may tank eventually on fears of people defaulting on their loans and an overall crash in the housing market, but they will recover. Many of them increased their dividend during recessions.

For example, the Realty Income, as mentioned above, tanked almost 50% in 2009 from $28 a share to $15, but if you were brave enough and bought when the stock was down, you would have gained 426% profit by 2020. And that was just a capital gain. Include dividends into the mix, and you will be an ultimate winner. So why are you scared today? Are you investing for the next year or two or 10 or 20 years?

I wrote about REITs on this blog multiple times. In 2012, I asked the same question: “Why are REITs falling and will they recover?” Today, we are asking the same question. And many of the REITs recovered.

 

But not all REITs are made the same!

 

Not all REITs are good despite being cheap today. Some are wealth-destroying yield traps, and you should avoid them. For example, in the past (or even in my past article), I wrote about ARR or AGNC. If you look at their history, they are littered with dividend cuts and reverse splits. To inexperienced investors, they may look fine and offer a significant income. They destroy it and bring in long-term losses.

 
REITs loss
 

To find a stock worth your attention and money, you want to look at the underlying performance. Is a particular REIT cheap for a reason or because of unreasonable panic in the dumb Wall Street?

 

REITs to avoid – DHC

 

DHC is an example of a REIT you would like to avoid. The company was started in 2003, and since 2006, it experienced declining fundamentals. Yet the management kept increasing dividends until 2018—a pure yield trap. In 2018, it all went bust. Earnings loss of 132% forced the REIT to cut the dividend, and recovery is nowhere to be seen.

 
REITs loss
 

REITs to avoid – ARR

 

And we can see the same misery in ARR. The company was founded in 2010 and has had rapid growth. But it was a fake growth spurred by stock dilution and loans. It eventually ended in 2012:

 
REITs loss
 

REITs to consider – MPW

 

Compare the performance of Medical Trust (MPW) with AGNC, ARR, or DHC. You will see a completely different picture. MPW is now a widely hated stock. No one wants it. It was attacked by Hindenburg research and heavily shorted. Many investors must avoid it, citing issues with some of the renters MPW rents their properties. They claimed that MPW is loaning money to their tenants to keep them from defaulting, thus distorting the occupancy and rent income reports. Others argue that MPW is selling their properties to keep their dividends and books in line.

But these were the results of the 2020 Covid distortion, and the company is working hard on improving the situation and their books. The company cut its dividend recently (which it didn’t have to), further enhancing its financial situation.

But if you look at their funds from operations, we saw a decline in 2008 – 2009 (which was obvious) and now in 2023. Anywhere in between, the company was doing great. By 2025, it is expected to have its FFO stabilized and (hopefully) going up again. Nothing has changed for this company, and the recent price decline is nowhere justified. The fair value is around $15 a share, so buying now can provide a significant return.

 
REITs loss
 

REITs to consider – ABR

 

Arbor Realty Trust is less pretty than MPW when looking at their FFO. However, insiders are buying, and their recent operations seem to be picking up (that could be why insiders are buying). Their funds from operations are cyclical. This REIT, unlike MPW, is an mREIT that initiates bridge and mezzanine loans for commercial and residential properties. Many of its loans originate through Fannie Mae and Freddie Mac programs. The company has managed to pay dividends since 2012 (it cut them and stopped paying between 2008 and 2012) and has been increasing them since then. The FFO is shaky, and thus, investing in this mREIT needs to be done with caution.

 
REITs loss
 

REITs to consider – O

 

Realty Income is a darling of all dividend growth investors. All of them have this stock in their portfolios. And if you look at their performance, you will see that this is the best time to add this diamond to one portfolio.

The stock has been overpriced since 2009, with a brief decline in 2019 and today. Buying this stock today may be a decade-long opportunity that will not come again. Like it or not, its FFO jumped up in 2021-2022 after the Covid debacle and is estimated to keep going up. The stock’s fair value is around $51 a share, so buying at the current price or below $51 is a great deal. I doubled my holdings in the last few weeks to grab this opportunity.

 
REITs loss
 

REITs to consider – OHI

 

OHI is another medical REIT providing nice dividend income (current yield is 8.44%), with its price decline unjustified. The stock was undervalued for many years but still offers excellent value and entry points.

 
REITs loss
 

REITs to consider – VICI

 

VICI is another undervalued REIT. The company owns almost the entire strip in Las Vegas (except Bellagio), and their lease contracts are 40+ years in the future. And even if the lease expires, I do not think the current tenants, for example Caesars Palace, would pack their belongings and move elsewhere. So this is a done deal. This REIT is also widely hated and dismissed by retail investors (I do not understand their reasonings) and it is providing great long-term value plus increasing dividends.

 
REITs loss
 

There are many other REITs out there that you should review and consider investing in. But before you do, do your homework and check their price and dividends history. If you need more time, invest only small amounts and regularly. But if you pick some of the gems today, you will avoid making a big mistake.

 




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Posted by Martin November 24, 2023
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Markets digesting Thanksgiving turkey


Today, the markets closed early after the Thanksgiving holiday. It was a slow moving (non-moving) day perfect for Iron Condors. Today, we will see how shoppers will deal with the Black Friday deals and how it impacts the markets in the coming weeks.

The markets didn’t move much and we are seeing the momentum slowing. That can be a concern. The trend is still firmly bullish but the markets are overbought and the momentum is losing steam:

 
markets
 

This can change in the coming weeks depending on how the markets react to Black Friday shopping. Retailers are signalling their worries over consumers’ spending. They are expecting lower sales this season but they were worried many times in the past too and their worries never materialized. Though, this can be different this holidays. Student loans repayments kick in and consumers may have less cash on hand to spend.

The next question is how would Wall Street react? If spending this holidays comes hot, will they freak out over fears that the FED may keep interest rates high to curb spending more, or will they cheer great and resilient economy (and consumer)? If it comes back down and disappointing, will the Wall Street see it as good news that the FED may start cutting the rates or will they freak out that the economy is crumbling (and recession coming)? Pick your side.

Nevertheless, this calm holiday time was great for our Iron Condor. We had SPX 4510/4500 puts and 4605/4615 calls which expired worthless for the full profit delivering 3.43% return in 2 days (101.93% annualized return).

I expect the next week, at least early days next week, to be still slow. We have another trade (Iron Condor) we opened on Wednesday and today, before the market closed, we opened another Iron Condor, both with Monday’s expiration. I think, as the markets stay calm on Monday and maybe Tuesday, that these trades will also expire worthless.

This is good for our Crumbs trading. So far we opened 41 trades and we only had 3 losers, that is 93% win ratio. I like this strategy!

 




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Posted by Martin November 22, 2023
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How to start trading options


On social media like Facebook, Reddit, or Twitter, I keep finding this question all the time: “How to start trading options.” And it can be intimidating to start trading options if you are new to them. Where to start? What to do? Recently, I found a question from one Redditor saying that he read a book telling him to “find an edge – a discrepancy between theoretical value (model) and price,” then “enter a position and leave when the edge is gone.” And then you have Greeks, which to follow? How to use them? How do we calculate them?

 

Can you see what is wrong with it?

 

Everything! None of it matters. It is all useless. The Redditor who asked the question was approaching options with the wrong mindset. Remember this: never, ever approach options as if they were stocks. Options are not an equity; they are not anything tangible you own, and they have no value to buy. They do not represent the business or capital. They are just a contract. Dream. They are dreams and promises. One dude says, “I have something, and I will sell it to you if you are interested. If XYZ happens in the future, what deal? oh, by the way, if I hold this deal for you, you will pay me a small fee, agreed?” That is an option. Just a deal. A contract that people can buy or sell.

So, if options are just a dream, what do you do with dreams? What do you do with dreams and promises? Remember, you sell dreams to people. You do not want to be the sucker buying dreams. You sell dreams. And that is your edge.

I have seen this again and again out there. People buying options then brag about thousands of percent of the profit they made and then boom, they blow their entire account in a few months. Just go to Wallstreetbets on Reddit. That subreddit is full of suckers buying options. They all think options are like a stock. They buy it and then expect the price to go up so they can sell and grab the huge profit… But the option doesn’t do what they expected, and they lose everything. They then learn about Greeks, predictions, edges, and magical prophecies and wonder how they can use them to their advantage.

 
Here is how you start trading options.

 

1. Always sell options

 

That’s it. Do not argue with it. You never buy options, only sell them. You buy options only as a hedge, protection, or a part of a complex option strategy but never as an income-producing vehicle.

 

2. Use options as a tool to buy or sell a stock

 

Although you do not have to use options to sell or buy a stock, you still want to look at them as if you wanted it. Remember, options are just a contract. You do not sell an option for the sake of the option itself but as if you wanted to buy the stock (or sell it). This has huge implications for everything else. So even if you are not interested in owning or selling the stock, remember, you are entering into a contract that says so.

 

3. Have enough capital to trade options

 

As I said above, selling options is a contract promising or accepting conditions of the contract, and therefore, you need to have resources to fulfill the contract’s obligations. If you do not have the resources, you will get burned. Burned. It is like going to buy a house or car, signing a bill of sale, and then realizing you do not have money. It will be considered a fraud. In many states, you will probably prosecuted or sued by the other party. With options, there will be no legal consequences except wiping out your account and ending up owning money to yourself, your family, and maybe even to the broker (if you screw up).

So, when selling options, make sure you have enough capital to meet your obligations should they occur. If you are selling puts, have enough money to buy the stock. If you are selling a call, make sure you own the stock. Once you become an experienced trader, you can start trading “naked” (without enough capital or underlying stock), but as a novice, forget going naked (if you have the urge to sell naked, feel free to undress in front of your computer and trade nude, but forget about it when trading options).

 

4. Trade options against stock you are OK to own

 

You can trade high flying stocks once you are experienced but if you are just starting you want to trade slowly and you want stocks that will not burn you the first day of your trading. It is great (and it feels great) to trade Tesla (TSLA) but that stock can turn around on a dime and it can wipe you out. Pick stocks that provide decent premium and if the stock goes against you, and you will be required to buy 100 shares of the stock, you will be OK with it. Rememeber, you are selling a contract and as a seller, you will have obligations. And if you sell puts, your obligation will be to buy 100 shares of the stock; if you sell calls, your obligation will be to sell your stock. If you trade a contract against a stock you never wanted to own, or do not have money to own it, DON’T!!

The best way to start is to pick a stock you like (I personally love using dividend stocks for this purpose) and sell a put against it. If the trade goes against you, you buy 100 shares and you are OK with it. You hold the stock and sell calls. This is a wheel strategy. It is easy and simple and it gives you confidence in trading options. After “wheeling” your stock, you gain enough experience and confidence to trade other stocks.

 

5. Don’t be greedy!

 

This is important. Never sell options for the sake of the premiums you can collect. This the same mistake people make with investing in dividend stocks. They buy dividend stocks because of the huge dividend yield but then they get burned badly when the company cuts the dividend or the stock price goes down like a rock. Options can do the same thing to you. Do not go after huge premiums. I know it feels good to be collecting $200, $300, or even $1000 in premiums every week or every day. I know the feeling. I am guilty of this myself.

But, this also depends on whether you actually want to buy (or sell) the stock. If you want to buy the stock, then go closer to the money (see later) and collect a larger premium, but if you are interested in generating income, then don’t do it. Go as far away as possible.

 

Ok, here is a sample of trading options:

 

Before I show you my selection process, here is a summary of the above notes:
 

  • always sell options
  • alway use options as a tool (contract) to buy or sell stocks
  • always trade against stocks that you are OK to buy or sell
  • always have enough capital or underlying stock (wheel it)
  • don’t be greedy

 

Pick a stock

 

Create a list of stocks you want to trade. Choose stocks that are in the range of $30 – $100 a share. Pick stocks you are OK to own. Use dividend stocks in case you end up buying them and sitting on them for some time. During that time, they will pay you dividends. Once you have the list, go through them and start looking for premiums and buying power requirements.

Here is my list for stocks I want to use for trading “crumb puts“:

 
trading options - list
 

These are a bit expensive stocks, so at the beginning you may choose cheaper stocks. The next column shows my desired strikes for “Crumb” trading. The last column shows an approximate buying power needed to sell the put option against that stock. This is a buying power in a margin account. In the cash account, you will need the entire amount equal to 100 shares (remember, you are selling a contract promising that you would purchase 100 shares of the stock).

But even if you have the stock, it still may not be the right one:

 
trading options - selecting strikes
 

So if you want generating income, you want to go far away from the money. I strive to select a strike that is 20% (or near it) below the current price. The trade below has a 96% probability of profit. How likely will this stock fall 20% in 37 days? Although it may happen during panic selling, it still is not going to happen in one day, so you will have time to get out before it happens. If you want to buy 100 shares of AMZN, you can go closer to the current price.

 
trading options - selecting strikes
 

But as I said before, this stock has a relatively large buying power requirements, that means, you have to have that money to sell the put. But you also need to have more money than that. If the stock starts slipping lower, the buying power requirement will go up too (if the stock reaches your strike, the requirement can quadruple or increase five times, so instead of $1,200, you will need $4,000 or $5,000 to cover this trade). If you do not have the money, do not trade this stock.

 
trading options - selecting strikes
 

Here is your buying power requirements and potential gain and loss:

 
trading options - selecting strikes
 

The maximum loss can be scary, but as I mentioned, that will happen only if the stock goes to zero. It is the same as if you bought 100 shares of Amazon (AMZN) at $146 a share (spent $14,600 total capital) and the stock dropped to zero. Your loss will be $14,600 a share. With this trade example, you would be buying 100 shares of AMZN at $125 a share, so your loss would be $12,500 (minus the premium) if the stock goes to zero. So, risk-wise, it is the same no matter if you buy a stock and it goers to zero or sell a put and the stock goes to zero (unless you manage to buy it back before it goes to zero).

With this options trading, I do not need to know anything about Greeks, edges, biases, technical analysis, predictions, or anything. All I need to know is my probability of this trade and trade it again and again. And with this trade, my probability of profit is 96%. The buyer’s probability of this exact trade is just 4%.

I was not trading like this before because I was greedy. I didn’t consider $26 premium large enough to bother. So I went closer to the money, collected $300+ in premiums and got burned. The stock dropped and I kept carrying around a busted trade tieng money in a helpless trade.

Today, I look at it from a different perspective. I consider the premium I collect to be a dividend. If I manage to collect $26 premium every month, that will be $78 in premium every quarter, or $312 annual income. That is as if Amazon was paying me $3.12 annual dividend. That is 2.13% yield. Not bad for a stock that doesn’t pay dividends.

To get this income, I only need to use about $1,200 of my capital without buying 100 shares of the stock. So my yield is technically 26%… And with 94% probability of collecting this money every month without worrying about assignments, I will take it every time.
 

Trading options can be intimidating and it may appear complicated and overwhelming, but it is actually very simple and easy. Just try it in a paper account first, using the rules above, and once you know the ropes, start using your real money. Create your money making machine.

 




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Posted by Martin November 22, 2023
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Stock market’s unimpressive move up on tech stocks boost


The market moved up on tech stocks boost. But it was a quite unimpressive move. We jumped in the morning on Microsoft’s upper hand over OpenAI circus hiring Sam Altman back and now negotiating his return back as a ChatGPT CEO. NVDA reported earnings and crushed it again, but surprisingly, the stock went down ($487.38 -12.02 -2.41%); I bet many Wall Street Bets gamblers who were loading on calls are now scrambling why did it happen. Well, NVDA said something about China. China is not good, NVDA is down… Wall Street only sees a few inches beyond their own tip of their noses. So don’t be surprised. We got tech stocks boost but apparently not as big boost as one would expect. But this unimpressive move played well to our trading.

 
tech stocks boost
 

We had a trade – an SPX Iron Condor – expiring today (4,460/4,470/4,625/4,635) and it is now well out of the money. Our protection was at -1.56% and +1.85% but the market moved +0.38% since opening this trade. It will expire for a full profit providing 3.43% gain in 2 days (102.91% annualized return).

This morning I opened two new Iron Condors (you can subscribe for alerts here) as I expect this sideways calm move for the rest of the week which will play well with these trades. Tomorrow, the markets will be closed and on Friday it will trade only until 1 pm ET so our trade set to expire on Friday will not have much time to go against us. I expect it to be a winner too.

 




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Posted by Martin November 21, 2023
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Markets down supposedly waiting for NVDA


Media are spinning their narratives telling us what they think (usually after the fact) what is going on. And now they tell us that the markets are down because of investors waiting for Nvidia (NVDA) earnings report after the bell. If it was true, that would make the market extremely stupid. They are selling now, to be buying after the bell today or tomorrow morning should NVDA report good results. Will they?

 
NVDA
 

But the spinning continues. We are also down because of the FOMC meeting minutes we are about to be enlightened with soon. And the bad retail sails indicating that the consumer is spending less. But other articles, and usually on the same network, tell us that Americans are spending like crazy when their savings rate dropped to 3.9% from 8.9% average. And then we have Black Friday coming. If that turns strong, rally will continue. If weak, Wall Street will freak out that a recession is coming.

Why am I even saying this? Because, there will be always something to worry about. Something Wall Street will freak out about, media telling us that this was it, the sky started falling and permabears who were usually wrong for decades will come out of their holes predicting another doom and gloom. And when they will be right with their predictions (once every ten years), they will be elevated by CNBC as the ones who “correctly predicted the market crash” and they will be paraded around for months.

So, this time, it is NVDA being blamed for today’s “sell off” (note, market down 0.41% is not a selloff), tomorrow, it will be something else. Ignore it. Have your plan in place and follow it diligently. Even though the market is overbought and the momentum is losing steam. It doesn’t matter.

 




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Posted by Martin November 20, 2023
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SPX broke up from a very short consolidation


Last week the market broke up from, what I think, was a very short consolidation pattern. After the big rally sparked by a better-than-expected CPI report last week, the markets stalled and traded sideways for a few days. This happened right under the major resistance at 4,525. So, the question appeared, was this going to hold or were we doomed and headed to bouncing down again? I bet, many bears who were predicting doom and gloom all year long were wishing for a crash. But today, the markets broke above that consolidation and spiked higher. Unfortunately, the consolidation was not very strong so the subsequent rally may not be very strong either (the longer the market stays in a particular pattern, the more meaningful it becomes). Moreover, we are probably going to see the end of the year rally (Santa Claus rally).

 
SPX consolidation
 

This trend helped our trades. Last Friday, we placed a new “Crumbs Iron Condor” with today’s expiration. We had 4,465/4,470 puts and 4,580/4,585 calls and we collected 0.30 ($30) credit. This trade provided 102% annualized return as it expired worthless for a full profit.

We also rolled some older SPX call spreads into put spreads in expectation of an end of the year rally.

We think the markets will continue going higher as inflation will be easing more, and FED will start cutting the rates. I recommend stop listening to all the talking heads and doom and gloom predictors predicting their end of the world. They were predicting the market crash since 2009 and they were 99% wrong. And they will always be wrong.

Tomorrow, we will get the FED’s FOMC meeting notes that will come under scrutiny from investors seeking a clue whether there would be any hint of rate cuts next year. I think, it is foolish but short-sighted Wall Street does that. I think we will not see anything different from what we already know. The FED would probably stay a bit hawkish and the markets may shrug it off and continue higher. If they see a hint of rate cuts, expect the market to blast off. We are also heading to a short week due to the Thanksgiving Day, so on Thursday, the markets will be closed and on Friday the markets will close early (at 1 pm ET). This is typically a quiet week and markets tend to drift higher.

 




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