Quitting day job to collect weekly premiums - realistic?

[sle]

Why go through the headache of trading if I can get ~10% just holding RUT long term?

I think you are confusing expected returns on capital with retirement portfolio income. You can't generate income of 10% on a simple equity portfolio (unless you have a steady source of insider color or something).

In case of this guy, he'd want to take out X dollars out of his retirement egg. People here are suggesting that he can lead a lifestyle that's equal to 15% of his holdings. I think that's very aggressive and will blow him up fairly quick.

Honestly, I think realistic number for an average person is 4 to 5% draw on his inception capital and for a trader that's very good it's probably 6 to 8. There are many other parameters to this, such as age, health, other investments etc.

 

[ironchef]

I think you are confusing expected returns on capital with retirement portfolio income. You can't generate income of 10% on a simple equity portfolio (unless you have a steady source of insider color or something).

In case of this guy, he'd want to take out X dollars out of his retirement egg. People here are suggesting that he can lead a lifestyle that's equal to 15% of his holdings. I think that's very aggressive and will blow him up fairly quick.

Honestly, I think realistic number for an average person is 4 to 5% draw on his inception capital and for a trader that's very good it's probably 6 to 8. There are many other parameters to this, such as age, health, other investments etc.

You are absolutely correct. I was looking at returns whereas you were talking about income: The amount withdrew. Thanks for pointing out the differences.

From an income stream point of view, 15% is aggressive.

Regards,

 

[TheGoonior]

Here's a question: If that's your investment strategy, why quit your day job? Once you have your list of companies you are use, it takes less than 10 minutes a week to enter your orders. If these are stocks you want to own long term, why not take the premiums/dividends and invest in shares on the way down? At least then you can profit from a bounce if it happens. Also, it's much easier said than done to ride that horse to the bottom...

 

[sle]

Here's a question: If that's your investment strategy, why quit your day job?

The reason to quit a day job is to have more time to do something else. One of the allures of "passive income" is the "passive" part - spend a little time doing it and play the rest of the time.

PS. I recon the OP is in his early 40s - that's when the urge to get off the treadmill is the strongest. But no, 800k is not enough to retire these days

 

[TheGoonior]

For sure...I was merely suggesting that it is the perfect opportunity to run an extended test while you are employed to see if the method is sustainable in practice. If it works, great. You retire. If not, at least you are still employed.

 

[qxr1011]

Is it realistic to think this can become a primary source of income?

nope

 

[sle]

nope

I think the right answer is "how much do you spend?"

Someone who's spending 20k a year can comfortably retire on with a nest egg of 800k. So maybe the answer is to cut expenses rather then try to come up with better trading strategies.

 

[Stymie]

Hi All

Suppose you have a working capital of about 800k. Now you do weekly cash secured puts on stocks you are confident to own if assigned, and if assigned sell calls until the stocks are called away. Of course this only works if the market does not crash like in 2000, 2008, etc. Is it realistic to think this can become a primary source of income?

Building on this, what is the equivalent strategy in a total bear market for the above? I don't want to sell any call spreads.

Thanks for your help.

Weekly puts have little premium and high gamma risk.
The problem with the strategy is that stocks that go straight down or then go straight up will result in losses. If you sell puts and end up owning the stock and you sell a call which has any premium, if the stock rebounds you will be taking a loss which means your strategy had become inverted. If the Stock keeps dropping, the liquidity in the options dry up at some point and there is no more short term call premium to short. You are stuck with a loser. If the stock drops below five dollars, the options typically stop trading. Dividends are not relevant.

My suggestion is to buy your favourite stock on a day when the stock drops and vols spike. Sell long dated ATM straddles which translates into 40% returns for the year. If the stock drops, then you own more shares at a much lower level. Then you sell another at the money straddle when exercised which again will lock in a 40% return over one year if the Stock stays flat or rallies. At some point you're going to make more money than any of these hedge fund managers. Then use your time for skiing or regattas. That's the end game for me.

 

[Maverick74]

Weekly puts have little premium and high gamma risk.
The problem with the strategy is that stocks that go straight down or then go straight up will result in losses. If you sell puts and end up owning the stock and you sell a call which has any premium, if the stock rebounds you will be taking a loss which means your strategy had become inverted. If the Stock keeps dropping, the liquidity in the options dry up at some point and there is no more short term call premium to short. You are stuck with a loser. If the stock drops below five dollars, the options typically stop trading. Dividends are not relevant.

My suggestion is to buy your favourite stock on a day when the stock drops and vols spike. Sell long dated ATM straddles which translates into 40% returns for the year. If the stock drops, then you own more shares at a much lower level. Then you sell another at the money straddle when exercised which again will lock in a 40% return over one year if the Stock stays flat or rallies. At some point you're going to make more money than any of these hedge fund managers. Then use your time for skiing or regattas. That's the end game for me.

Most ridiculous thing I ever heard. Thanks for providing the liquidity though.

 

[viruscore1]

Weekly puts have little premium and high gamma risk.
The problem with the strategy is that stocks that go straight down or then go straight up will result in losses. If you sell puts and end up owning the stock and you sell a call which has any premium, if the stock rebounds you will be taking a loss which means your strategy had become inverted. If the Stock keeps dropping, the liquidity in the options dry up at some point and there is no more short term call premium to short. You are stuck with a loser. If the stock drops below five dollars, the options typically stop trading. Dividends are not relevant.

My suggestion is to buy your favourite stock on a day when the stock drops and vols spike. Sell long dated ATM straddles which translates into 40% returns for the year. If the stock drops, then you own more shares at a much lower level. Then you sell another at the money straddle when exercised which again will lock in a 40% return over one year if the Stock stays flat or rallies. At some point you're going to make more money than any of these hedge fund managers. Then use your time for skiing or regattas. That's the end game for me.

when's the last time you sailed the mac regatta ?