Hi Ze,
I sell puts, but must have cash and/or equity as collateral.
So when I sell a put the cash comes into my account and then I have the cash pledged as collateral if and when it is assigned. So the brokerage account considers me short the put, and has a margin requirement against my short sale.
I seldom have margin - sometimes when stock is assigned, but I track my dividend revenue stream to where if assigned ,my dividends pay it off quickly.
I do that on my self directed IRA, which I rolled over from my 401K at age 59 1/2 and my taxable account.
When I sell a put, it is always on a stock I want to own and at a dividend yield I'm happy with. Then time decay is my friend and I OK with either assignment of keeping the cash.
It takes the fear out of market swings for me.
I started doing this almost 8 years ago, and I wished I had figured it out decades ago.
It is putting time decay on your side!
"In time decay I trust!"
I learned to invest from following Ted Warren back in GMI 1974. His style requires patience.
When buying and owning a stock, good yielding dividends pay you to wait - so being patient is more palatable.
When selling puts, time decay pays you to be patient as well.
Combining the two approaches has been a slow continuous building of wealth based on investing vs. speculating.
The worst that happens is a stock you own suspends or reduces its dividend.
That does happen, but in the overall scheme of things, it produces very few losers and builds wealth which has a lower tax rate ( dividends at a max of 20%, personal income at a max of 37-38).
I do that with half my account. The other half is lower dividend yields with a higher growth stocks.
If those get a nice multiple runup - I convert them into high yielding dividend aristocrats.
I'm now retired so building a dividend revenue stream has been my goal for the last 8 or so years.
It took me awhile to get comfortable with that approach, but after drinking the kool aid, I love it and sleep well at night - even in March I sold nothing except far out puts based on my dividend income and am in the green on almost every put I sold.
I'm of the opinion that annuity companies do this for steady income. They charge the heck out of you for their stewardship.
I like to do it myself and see the account grow faster.
Any questions - just ask.
Glad to help us all enjoy life with some of the joys capitalism provides.
That's what SI is all about!
DING DING DING
Have a great weekend!
Bob |
