OK, I did give up sailing one day (ok, maybe 2-3), but I do not plan to make a habit of this.
My QQQ strategy, which I owe to a lot of people I have communicated with, in public and in PMs, as well as a lot of reading and some excel spreadsheet work:
QQQ offers the benefit of being essentially a mutual fund of the largest tech stocks, flattening out the volatility but affording the benefit of the Naz's rise. However, CCs on the QQQ still require watching. Not as much as on individual volatile stocks, but it still requires watching. I was hoping to find a strategy that required minimal involvement, taking action once or twice per month, and going sailing or whatever the rest of the time ... while still giving great returns (25%+). That may exist but, alas, I still have not found it. I had hoped that doing CCs on the QQQ with accompanying puts to cover large drops would do it. It would, under good (normal?) circumstances, but not in a year like we have had, or in years with similar price moves. The problem is that if the price runs up, and one gets called every month (either ATM or slightly ATM), then the price comes back down for a few months, but not to the original level, one is capped on the up moves, loses on the down moves, and the put still expires worthless. Even with random prices, following QQQ's average and volatility (as I modeled with excel), one loses more with the put than without the put. Now, you still would be better off with CCs than being uncovered, or with a CD, but that is not the goal. The goal is to retire with a fairly good and secure income, with minimal involvement and a stress-free lifestyle. Oh, and without having a million or so to finance retirement :-)
What I am concluding is what those who are practicioners already know: that this can be done, but that the market must be watched, that one should buy on down days, write on up days, write all the way down, and roll up close to expiration if the move looks real. If one does all of those things, there are good profits to be made with CCs, 3-4% per month on the QQQ with minimal downside.
On more volatile issues, the profit margins are much better, but I have to ask, if one has to watch the market so closely, is this really stress-free? For me, especially at this early stage, I would much rather stay with the QQQ and watch for moves of 5-10% up or down, rolling down on those moves, probably letting myself be called on the up moves. And only with a portion of my funds (60%?), leaving the rest to either go long or to have as cash for down months or for buying back calls in rolling up, if needed.
I am still looking for an easier way to make money, but other than the 7-11 I have not yet found it.
Thanks to all of those on this thread, and to those I have PM'd with, who helped me understand this. |
