Understanding Assignment Of In The Money Options – Investor Questions
Recently I received an interesting email from an investor, David who posed questions about...
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- The AuthorBecome Fully Informed People work hard, save and then turn to a financial planner, broker or other “experts” and hand over their life savings, hoping they can turn it into a retirement nest egg. 35 years ago I took the same approach and found how dismal returns can be. I decided it was better to learn how to manage, invest and grow my savings. I decided to become fully informed. That was back in 1975 and today more than 35 years later I have continued to invest in some of the best companies in the world. Some stocks I have picked, such as Coca Cola, or Royal Bank Of Canada I have traded for more than 10 years. Over that time period I have sold covered calls and naked puts to slowly reduce my cost basis in the stock to the point of zero. I thought it would be interesting to start this website and pick some stocks to see how they turn out during what many are calling the worst financial crisis since The Great Depression. My style may be different from others. I believe in following strong, large cap companies and working with options and stocks on those…
- The Author Of FullyInformed.comI am a Canadian, who has been investing since the 1970′s. When I was younger I bought a variety of stocks and mutual funds and found that overall I was not getting the return I had hoped. There were many years when my portfolio showed negative gains. I found that the brokerage firm I was using ended up losing more often than gaining. By 1974 my portfolio was down more than 60% and I was shocked. My broker complained that it was a secular bear market and no one was making money. But I had two young children to care for, mortgage payments, loans and more. I had to find a better solution. I felt that I had to learn to care for my own investments. I felt that since the brokers were losing my money I couldn’t do worse and I would only have myself to blame. I cashed out of the market and put everything into a GIC for 1 year. It earned 3.5%. I read every book on investing I could find and then sought out a mentor. He explained that the secret to investing and growing my money was to earn small monthly amounts through options…
- My Strategy ExplainedFoundation Of My Strategy: I believe that no one can forecast with accuracy the direction of stocks and markets. We can surmise when a bear market is upon us and when a bull market has returned. Gurus will tell us that the market over time always goes higher and that stocks always move higher, eventually. I once owned stock from past years that not only did not ever recover but collapsed and some disappeared all together. While it is true that I can write off my capital losses, I find it small consolation that I can write off my losses against my gains. What also bothers me is that when a stock is rising, not one adviser can tell you when to sell. Instead they say “overweight” or “underweight” or use “tight stops” or “stop losses”and such jargon. The Learning Process: In the end I cashed out of the market all together and put my capital into a GIC for 1 year. Then I read every book on investing I could find and sought out a mentor. The mentor explained that the secret to investing and growing my money was to earn small monthly amounts through options on large cap…
- Rules Of My StrategyMy Strategy Explained: – The Rules As the years have passed I have worked towards creating a set of rules that I can follow in order to stay consistent in my investing strategy. These rules are responsible for ensuring that my investments remain profitsble every year. Below are the rules I have developed over 35 years of investing through stocks and options. They are all important but perhaps one of the more important rules is to keep 30% of my capital in cash, 30% in bonds and 40% in stocks. These are the rules I have developed over the past 35 years: I only purchase large cap stocks and NEVER look at penny stocks or any high flier. I do not need to follow hundreds of stocks, just a handful of the best stocks or ETFs. By buying into large blue chips I am more confident the company will be viable in the future. Therefore I can, with confidence, commit more capital to any position that is down. I NEVER commit all my cash to stocks. I keep 30% in cash, 30% in laddered bonds and 40% in stocks. I ONLY work with stocks that have tradable options available. In…
- My Business Of InvestingOne of the biggest mistakes I made when I first started investing was not treating my investing like a business. Instead I basically followed the advice of my broker, my friends, or articles I read in money magazines. I truly did not have a clue what investing was all about. But as years passed and I either lost money or made very little I realized that I had to get serious. I decided to treat my investing like a business. Here is how I began to turn the corner on my investing. I learned that in order to be consistently successful I needed to take a completely different approach to my investing. The first thing I did was stopped trading. I didn’t sell anything immediately but I bought nothing more. I did not return phone calls from my broker. Instead I read a number of books about various companies and why they were successful; companies like Wal-mart and Coca Cola. Next I spent 6 months at a local college taking a course on managing a business. I learned hundreds of things and over the next year here is what I implemented. Running My Business: There Must Be A Profit: In…
- Having A PlanMy Strategy: The Importance Of A Plan My Capital Allocation This article was written in October 2010. With the unprecedented credit crisis still underway, I feel it is important to understand why I allocate my capital as- 40% stocks – 30% bonds – 30% cash. As my strategy employs 40% of my capital always in stocks I like to have a strategy that I can use no matter the financial climate. The Federal Reserve and Stocks While the Fed is busy propping up stocks, you can also tell from company earnings where fair value is. While many companies are showing excellent earnings, those earnings have to be taken into context with everything from reducing the number of workers employed to the amount of long term debt that has been re-written by almost 75% of US companies. When factored in, the earnings picture is pretty much the same as it was in 2006. By establishing trend lines and valuation points, it really assists me in knowing what strategy to employ when the market reaches specific levels. An investor can do the same thing with individual stocks particularly when selling naked puts. It becomes easier and easier to know when to sell…
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- Not Real Time TradesMy site is not for real time trading and it not designed for readers to copy or duplicate my trades as posted. Any reader who tries to duplicate my trades as posted will never be successful as my trades are never in real time but are delayed. Sometimes those delays can be a few days to weeks as I am quite a bit older and as some readers and forum members know, I have a number of serious health issues that often can end me up in a hospital for more than a few days. I built this site to share my strategies, talk about my ideas and to establish a yahoo forum for investors to present their strategies, questions and comments. Years ago when I started investing, it was a very difficult time. If by sharing my trades, strategies I am using and my ideas I can get readers thinking about their own personal finance, then I believe I have helped. As well I hope that through my site readers see the possibilities of the various strategies I use and can design their own or tweak mine to suit their own level of comfort in investing. Hopefully through sharing…
- The Importance Of StrategyFinancial Investment portfolios need sound strategies which protect and provide growth despite the endless barrage of financial and political calamities. The problem for many investors though is what financial investment strategy to use. Many investors seem to look upon a financial investment as nothing more than gambling but they are wrong. The Greek Debt Crisis which has mushroomed into the Europe Debt Crisis has taken the attention off the United States Debt Crisis, and to be fair, probably the World Debt Crisis. The debt of the world seems incredibly scary for investors. The other day a fellow investor told me he wishes he had spent all his savings because then he wouldn’t have to worry about his financial investment portfolios so much. Having a strategy for his financial investment portfolios would make a world of difference and stop his worrying. I read an interesting article today on Seeking Alpha where the author talks about a fellow investor who isn’t investing until the Europe Debt Crisis gets resolved. Select this financial investment link to read the article. I am sure there are many investors who feel the same way. The problem is that once you pull back from investing waiting for…
- Stock CommissionsMy Strategy Explained : Commission Rates Commission rates eat into profits. There is no doubt about it. People who invest in mutual funds are often paying enormous commission rates which many are unaware of. The same holds true for option traders. In Canada competition is limited among discount brokers so it is important to shop around. I think probably one of the best companies for keeping rates in check is Interactive Brokers. In Canada they charge in Canadian dollars which is a plus for Canadian investors. In the US, they naturally are charging in US dollars and seem to have the best rates of any brokerage. Like all companies, they have to make a profit somehow and one of the areas they make a profit in is with small charges for such things as being short stocks. Some clients pay as much as $8.00 a month to short a stock. They also have exchange streaming fees which depending on the number of transactions can be as high as $10.00 a month or more. On my website I felt it was important to show a balanced commission rate when detailing out my trades. Therefore on my positions I have used the…
- Trade ExampleExample Of My Strategy – Coca Cola Stock Coca Cola Stock Symbol – KO This article was written on April 29 2010. I have developed my investing style over the past 35 years. It is important to remember that for me, I have a large chunk of cash sitting ready to jump into my stocks. For example, if Coca Cola Stock fell to $40.00 over the next few months, I would be writing puts all the way down and collecting stock when I was finally ready to be assigned. I only trade large caps and only a handful. On the stocks I follow, I read everything I can. I know how much money I have available and how much I am ready to put to work and at what prices. KO Stock is a good example. I am presently holding puts at these levels: $57.50; $55.00; $52.50; $50.00 Coca Cola stock today (April 29 2010) is at $53.36. Look at the chart below for the past year. It has run up from $42.80 to above $59 around Dec 11 2009 and since then it appears to me to be in a trend down. It now appears range bound and has…
- Strategy: Addendum Oct 2010Looking Down The Road With the unprecedented credit crisis still underway, I feel it is important to understand why I allocate my capital as- 40% stocks – 30% bonds – 30% cash. As my strategy employs 40% of my capital always in stocks I like to have a strategy that I can use no matter the financial climate. While the Fed is busy propping up stocks, you can also tell from company earnings where fair value is. While many companies are showing excellent earnings, those earnings have to be taken into context with everything from reducing the number of workers employed to the amount of long term debt that has been re-written by almost 75% of US companies. When factored in, the earnings picture is pretty much the same as it was in 2006. By establishing trend lines and valuation points, it really assists me in knowing what strategy to employ when the market reaches specific levels. An investor can do the same thing with individual stocks particularly when selling naked puts. It becomes easier and easier to know when to sell puts out of the money, at the money or in the money and whether to go one month,…
- Trade Advice & SuggestionsEvery week I receive requests from readers asking for specific trade advice. Many of the questions revolve around do I think this or that trade would be a good idea. I am also asked quite often about specific stocks and specific option trades. In particular which option strikes do I think would be good to sell or to buy. I cannot give out specific trade advice not only because my site is not designed for this, but also because every investor has their own goals, objectives, levels of investing comfort, risk aversion and capital needs. Investing in stocks is incredibly risky. Stocks are called risky assets for very good reasons. Many investors have lost large amounts of capital by investing in stocks and many have invested without having established plans, goals, objectives and paper traded to learn how to implement different strategies. I set up my website, www.fullyinformed.com to present my ideas and the strategies I have used for many years. My hope is that through presenting my ideas, other investors will contemplate their own goals and objectives and begin to develop their own strategies. I also hope that my website will get investors thinking about the very nature of…
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- Portfolios
- 40% Goal Portfolio
- Ahead Of The Fed Portfolio
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- SPY ETF Hedge Strategy (SPY)These are trades done using the SPY ETF to profit from rallies, pullbacks, dips and corrections using the Spy Hedge Strategy.
- SPY ETF Market Direction Portfolio
- Tomorrows Trade PortfolioThe Tomorrow’s Trade Portfolio is designed to profit by reviewing trade ideas before markets open and determining the entry points for trades in advance. There is a new trade each trading day.
- Trade Ahead Of Earnings StrategyThe Trade Ahead Of Earnings Strategy is designed to profit from earnings volatility that often occurs in stocks after earnings announcements.
- VIX Index (CBOE Volatility)VIX Index is the CBOE Volatility Index which measures imlied volatility of the S&P500 index options. The VIX is calculated by the CBOE (Chicago Board Options Exchange) and is often referred to as the fear index as it tries to measure the stock market’s anticipated volatility over the next 30 day period. The VIX Index has both put and call options available for weekly trading. The VIX Index strategy was designed in 2004 and has been traded profitability since then. The VIX Index was introduced in 1993. It’s trading symbol is VIX but many trading platforms use ^VIX or .VIX when searching and trading against the VIX Index.
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- Bear Markets and CorrectionsBear Market Strategies for profit, protection and income.
- Collar Option or Married PutCollar option or married put is often viewed as insurance against loss. Collar Option Strategies or Married Put Strategies can generate significant profit and income and provide short-term and long-term investors terrific investment opportunities and savings.
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- IWM ETF – Small Cap StocksIWM ETF tracks the results of the Russell 2000 Small Cap Stocks index. These are the options trading strategies done in 2016. The goal is selling options for income.
- Rescue and Repair Strategies
- Selling Put OptionsSelling Put Options is an options trading strategy that can create large profit and income potential and is a prime strategy for selling options for income.
- Super Charge Buy-Write StrategyThese trades are done using Covered Calls and are designed for quick profits while keeping capital at risk in the market for short periods of time often a single day.
- Walk That Profit Home to Momma Strategy
- Selling Put Options
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