I don't pay any taxes. I am 62 and my wife is 60...Retired. I don't want to take SSI right now. Also I want to earn less than $67,000. a years...Obamacare. If we are below 67K, we qualify and save about $23,000.+ a year with a medical tax subsidy. Still have over $30,000. a year in medical and dental expenses we write off. I also have 2 rentals and a small farm...depreciation. Give to non profits. No taxes...You get the idea. We also have 3 Roth IRAs. Every year for about 5 to 6 years, we converted some of our IRAs to Roths. All taxes have been paid...Well we earned so little we hardly ever paid taxes. As some of you know, we are limited in what options we can write in a Roth IRA. So this can dictate some of what we can and can not do. Have assets, but not great earnings. IRAs grow, house, farm, and rentals appreciate in value. Trust accounts at Schwab and Fidelity grow. Have CDs...We have diversification.
Concerning the VZ example...Let's just look where the stock is and how I can make a decent profit from it. Current stock price at $48.04...Dividend is currently 4.89%. Lets round these to $48. and 5% for simple math. I get the 5% given...If they hold their dividend and the stock is not called away early. Even if it is called away early I will usually get one or two dividends. The other side may exercise their option pre ex dividend...But most wait...I usually keep the dividend (very important). I currently could pick up the Jan 2019 $50. for $2.50. If it gets called away, I will get the $2. in profit ($48 to $50, yes minus commissions). So I will pick up (depending on the ex dividend dates)...$2.00+$2.50+$2.00 (last number is guesstimate dividend) over a 11 month period. With compounding of the covered call money and the dividend in the money market fund (about 1.5% by May/June) I am making over 6% return over 11 months. Tax free. If the stock stays down...I'll write another covered call. Even if the stock drops down to $44. in Jan 2019, I still am ahead of a CD when you add the compounding of interest. This is something that makes sense to me. I don't know if you can see this?? Also, I can walk away from the market (for weeks at a time) and still get my return. If my option drops to five cents or below, Schwab will allow me to write a put (commission free) to clear my position...To write another covered call. Yeah, boring. But it's just me and my thought process...
Concerning the VZ example...Let's just look where the stock is and how I can make a decent profit from it. Current stock price at $48.04...Dividend is currently 4.89%. Lets round these to $48. and 5% for simple math. I get the 5% given...If they hold their dividend and the stock is not called away early. Even if it is called away early I will usually get one or two dividends. The other side may exercise their option pre ex dividend...But most wait...I usually keep the dividend (very important). I currently could pick up the Jan 2019 $50. for $2.50. If it gets called away, I will get the $2. in profit ($48 to $50, yes minus commissions). So I will pick up (depending on the ex dividend dates)...$2.00+$2.50+$2.00 (last number is guesstimate dividend) over a 11 month period. With compounding of the covered call money and the dividend in the money market fund (about 1.5% by May/June) I am making over 6% return over 11 months. Tax free. If the stock stays down...I'll write another covered call. Even if the stock drops down to $44. in Jan 2019, I still am ahead of a CD when you add the compounding of interest. This is something that makes sense to me. I don't know if you can see this?? Also, I can walk away from the market (for weeks at a time) and still get my return. If my option drops to five cents or below, Schwab will allow me to write a put (commission free) to clear my position...To write another covered call. Yeah, boring. But it's just me and my thought process...
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