Covered calls and Cash secured puts in TLT, GLD and SLV

A place to talk about speculative investing ideas for the optional Variable Portfolio

Moderator: Global Moderator

Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by Kbg » Tue Aug 23, 2022 5:33 pm

Cortopassi wrote:
Tue Aug 23, 2022 4:00 pm
Mostly I decide not to take those way OTM trades.

Bringing my youngest to college next week. Oldest started her job in Chicago two weeks ago. Going to have an empty nest three weeks from now! :-[
On the first - Selling short term puts and/or calls repeatedly can earn you quite a bit of extra change with the occasional hit that can take a while to dig back out of...but if you just keep pulling the handle it's going to work out. Just think "I'm my own little insurance company and occasionally I have to pay out." Anywhere from say a 3-10 delta is not a bad place to target.

On the second - Yeah, big transition and kinda sad too!
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 3338
Joined: Mon Feb 24, 2014 2:28 pm
Location: https://www.jwst.nasa.gov/content/webbL ... sWebb.html

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by Cortopassi » Tue Aug 23, 2022 5:38 pm

Kbg wrote:
Tue Aug 23, 2022 5:33 pm
Cortopassi wrote:
Tue Aug 23, 2022 4:00 pm
Mostly I decide not to take those way OTM trades.

Bringing my youngest to college next week. Oldest started her job in Chicago two weeks ago. Going to have an empty nest three weeks from now! :-[
On the first - Selling short term puts and/or calls repeatedly can earn you quite a bit of extra change with the occasional hit that can take a while to dig back out of...but if you just keep pulling the handle it's going to work out. Just think "I'm my own little insurance company and occasionally I have to pay out." Anywhere from say a 3-10 delta is not a bad place to target.

On the second - Yeah, big transition and kinda sad too!
Sad for sure. But also, we did a damn fine job!

I totally get the idea of little bits of cash here and there. It would be easy enough to get $5-40 every week from GLD and TLT, two where I still own 100 shares each to do this sort of thing. Considering the commission is 50 cents, yeah. I will sell them tomorrow!
User avatar
Xan
Administrator
Administrator
Posts: 4392
Joined: Tue Mar 13, 2012 1:51 pm

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by Xan » Tue Aug 23, 2022 5:56 pm

I'd say the odds are 90+% that "Ethan92" is a spam bot. But let's see whether he weighs in again.
User avatar
dualstow
Executive Member
Executive Member
Posts: 14228
Joined: Wed Oct 27, 2010 10:18 am
Location: synagogue of Satan
Contact:

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by dualstow » Tue Aug 23, 2022 8:36 pm

A bot created by Corto to get this conversation going again 😂
Sam Bankman-Fried sentenced to 25 years
Ethan92
Junior Member
Junior Member
Posts: 2
Joined: Tue Aug 23, 2022 3:21 pm

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by Ethan92 » Wed Aug 24, 2022 2:44 pm

Cortopassi wrote:
Wed Jan 26, 2022 3:23 pm
This is just a topic for anyone interested in following what I'm doing.

After many years of watching gold and silver go up, down and generally nowhere, and the same with TLT, I decided to start selling calls on a portion of my holdings (currently 25%).

What this entailed originally is selling far OTM calls to bring in a little income while still participating in much of the potential upside. After doing that for ~2 weeks (I am writing weekly options) I couldn't justify to myself why I was giving up premium by trying not to get called. In the 2 weeks since I have been writing the calls at at the money strikes to maximize premium.

I did get some portion of shares assigned last week, so this week I added writing cash secured puts to the mix to get more premium and possibly get the shares back. If the puts expired out of the money, I won't get the shares, but I can write puts again next week for more premium.

I had done this in the past with poor results, mainly because I was looking for very volatile stocks with high premiums, and got burned in the financial crisis holding a lot of underwater stock.

Since I do the PP now, I will always be holding TLT and GLD (and for me, SLV), so if I'm holding at a depressed price, I would have been holding anyway.

To track my performance, I am comparing my premiums collected divided by the total dollar value of the shares under this option setup as of Jan 1, versus the current dollar value gained or lost compared to the value on Jan 1 (buy and hold).

As of today, the buy and hold paper loss on my SLV, GLD and TLT shares I am writing on are down $3548, or -0.89%. Conversely, option premiums collected since Jan 1 total $4301, or 1.08% up.

That's currently a delta $7849 in favor of the option writing. On the paper loss, TLT is the major negative factor; GLD and SLV are somewhat up.

The most enticing thing is the $4301 is REAL income in my accounts, not paper gains that can and do vanish.

I am finding this attractive at this point. It literally only took me 15 minutes Monday morning to makes the trades, and maybe a 1/2 hour on the weekend to track and see what I needed to do (a lot of that was building a spreadsheet).

Many people call this the "Option Wheel"

What a crappy day today!
Funny story I liked it
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 3338
Joined: Mon Feb 24, 2014 2:28 pm
Location: https://www.jwst.nasa.gov/content/webbL ... sWebb.html

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by Cortopassi » Wed Aug 24, 2022 5:20 pm

If not a bot someone with a weird idea of funny...!
User avatar
Xan
Administrator
Administrator
Posts: 4392
Joined: Tue Mar 13, 2012 1:51 pm

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by Xan » Wed Aug 24, 2022 5:44 pm

Cortopassi wrote:
Wed Aug 24, 2022 5:20 pm
If not a bot someone with a weird idea of funny...!
Yeah. I've banned it but left its posts, which are too funny.

Interesting that it started a worthwhile conversation!
User avatar
dualstow
Executive Member
Executive Member
Posts: 14228
Joined: Wed Oct 27, 2010 10:18 am
Location: synagogue of Satan
Contact:

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by dualstow » Wed Aug 24, 2022 8:02 pm

Aw, I liked Ethan92
Sam Bankman-Fried sentenced to 25 years
barrett
Executive Member
Executive Member
Posts: 1982
Joined: Sat Jan 04, 2014 2:54 pm

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by barrett » Thu Aug 25, 2022 1:43 pm

Cortopassi wrote:
Tue Aug 23, 2022 4:00 pm
I've also looked hard at immediate annuities, if anyone else has any I'd be interested in the experience. With interest rates back up, I am highly leaning toward putting some portion of my net worth with a good company and getting a lifetime income stream.
Any recommendations for researching annuities? Books you have read, etc.? I know that Bogleheads almost always recommend SPIAs. Is that what you are looking at too? This is an area of personal finance where I am severely under educated.
User avatar
vnatale
Executive Member
Executive Member
Posts: 9423
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by vnatale » Thu Aug 25, 2022 2:03 pm

barrett wrote:
Thu Aug 25, 2022 1:43 pm

Cortopassi wrote:
Tue Aug 23, 2022 4:00 pm

I've also looked hard at immediate annuities, if anyone else has any I'd be interested in the experience. With interest rates back up, I am highly leaning toward putting some portion of my net worth with a good company and getting a lifetime income stream.


Any recommendations for researching annuities? Books you have read, etc.? I know that Bogleheads almost always recommend SPIAs. Is that what you are looking at too? This is an area of personal finance where I am severely under educated.


This might be a good resource, though somewhat dated.

https://www.fool.com/retirement/2016/11 ... -know.aspx
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 3338
Joined: Mon Feb 24, 2014 2:28 pm
Location: https://www.jwst.nasa.gov/content/webbL ... sWebb.html

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by Cortopassi » Thu Aug 25, 2022 3:33 pm

Guys,

I have been using this site. https://www.immediateannuities.com/

Easy to plug in values, and gives you payout info without needing to enter an email or anything.

I am starting to keep track of payout rate. They absolutely have gone up. Right now at 55, if I put in 500k, life with cash refund (this is joint me/wife, and if we die before principal is used up beneficiaries get the remaining), starting in 5 years, is $2865 a month. $34,380 a year.

Fine print is: The Cashflow or Payout Rate is 6.88%.

There is no indexing for inflation, they stopped doing those types a while ago I believe. I sort of worry about this aspect.

I've also started looking at a couple covered call type ETFs, DIVO and JEPI as I mentioned. Both have outstanding yields, and do some covered calls (not on 100% on holdings) to juice things. Might be an interesting option to mimic an annuity.

If, if, if...I cashed out everything I currently have to our name (except the house), I could start an immediate annuity at a $7900 a month rate. And still keep working. But totally easily livable at that rate (we currently use about 1/3 of that in regular living)

The only question then becomes healthcare.

And this number will go up after a presumed rate hike in Sept. I cannot forecast the future, but after Sept might be a good bet to take advantage of rates.

At a minimum, knowing these numbers has given me some peace of mind.
barrett
Executive Member
Executive Member
Posts: 1982
Joined: Sat Jan 04, 2014 2:54 pm

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by barrett » Thu Aug 25, 2022 4:44 pm

Thanks for the resources everyone. Have already headed down the podcast rabbit hole that Desert suggested. If you don't hear anything from me for a few months, that's where I am.

Cortopassi, are serious that you can live on a third of $7,900? Even if you stop working? If so, I believe that my wife and I have become totally detached from reality.

I have also become more interested in annuitizing some portion of our assets with interest rates rising. Just not sure what parameters would be best for us with wife still working and a bunch of our assets in tax-deferred (too ignorant so far to know if that even matters).

But damn! $2,633 per month? Really? What kind of saintly woman did you marry? O0
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 3338
Joined: Mon Feb 24, 2014 2:28 pm
Location: https://www.jwst.nasa.gov/content/webbL ... sWebb.html

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by Cortopassi » Thu Aug 25, 2022 8:22 pm

barrett wrote:
Thu Aug 25, 2022 4:44 pm

Cortopassi, are serious that you can live on a third of $7,900? Even if you stop working? If so, I believe that my wife and I have become totally detached from reality.

But damn! $2,633 per month? Really? What kind of saintly woman did you marry? O0
Absolutely. And that is probably on the high end since a lot of the numbers still include two extra mouths to feed!

I have seen that you can annuitize part of all of IRA and 401k money, so you don't even need to cash it out and take a penalty, for example.

When I see the gyrations of the market lately, the need to do this grows more and more. I am dead tired of trying to smartly invest in the market and get slapped down for it.
User avatar
vnatale
Executive Member
Executive Member
Posts: 9423
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by vnatale » Thu Aug 25, 2022 9:57 pm

I think that I'd read quite a while ago that buying an annuity is equivalent to buying a bond from the company issuing the annuity?
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
WilliamSmith193
Junior Member
Junior Member
Posts: 1
Joined: Fri Aug 26, 2022 3:37 am

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by WilliamSmith193 » Fri Aug 26, 2022 3:40 am

dualstow wrote:
Mon Jan 31, 2022 10:30 am
vnatale wrote:
Mon Jan 31, 2022 10:11 am

1) "Only" 25% does not feel like "only" to me!

That’s what i was thinking, too.

My friends write covered calls.
For my illusory/feel-good gains, I prefer dividends.
https://forexstore.com/forex-diamond
But, Corto seems to be doing fine.
I think this is faulty thinking, but I'm trying to understand your point. If gold is up 1% for the day, and I hold an IAU for $100,000, I have "made" $1,000. If I sell some IAU stock to get the $1,000 into my main cash account, does that make the gain real? This may sound kind of confusing, but I think you get the idea. It's all calculations and calculations that show profit or loss. If you have nevertheless entered the field of trading, try to learn it or, if you have a chance, buy a forex bot as I did. The calculations above are just made by this bot. Who wants to choose a suitable one here . And do not rush to trade this will only lead to losses. Good luck.
barrett
Executive Member
Executive Member
Posts: 1982
Joined: Sat Jan 04, 2014 2:54 pm

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by barrett » Fri Aug 26, 2022 6:24 am

Cortopassi wrote:
Thu Aug 25, 2022 8:22 pm
barrett wrote:
Thu Aug 25, 2022 4:44 pm

Cortopassi, are serious that you can live on a third of $7,900? Even if you stop working? If so, I believe that my wife and I have become totally detached from reality.

But damn! $2,633 per month? Really? What kind of saintly woman did you marry? O0
Absolutely. And that is probably on the high end since a lot of the numbers still include two extra mouths to feed!

I have seen that you can annuitize part of all of IRA and 401k money, so you don't even need to cash it out and take a penalty, for example.

When I see the gyrations of the market lately, the need to do this grows more and more. I am dead tired of trying to smartly invest in the market and get slapped down for it.

(I grabbed this from an earlier post) I am still out of the market. Missed the summer bull run, at least in stocks. I am currently 78.7% cash. At least now, between SHV, i-bonds and 2.2% savings accounts, there is some better feeling about being in cash! My effective rate is currently 3.48%.
I am impressed by your household spending. I never really run our numbers because my wife is a spender (also works hard) and I just figure we'll need a high draw rate in retirement. But I am pretty sure that our food spending alone has been close to your total spending in recent months, though much of that is because we spend a lot of time on the road and frequently eat in restaurants. So not apples to apples.

I really need to understand how annuitizing IRA money works. My gut tells me that it doesn't offer any tax advantages but likely smooths out withdrawals over the years. Of course there's a good chance that it also lowers the total amount that can be withdrawn over time but I could see being OK with that.

I am curious if, as an exercise, you have compared income from annuitizing everything vs. Just going 100% to "cash" and assuming a steady effective rate of return for the next 30 years or so. That would seem to alleviate some of the inflation risk vs. holding everything in SPIAs.

Just kind of thinking out loud here.
User avatar
vnatale
Executive Member
Executive Member
Posts: 9423
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by vnatale » Fri Aug 26, 2022 7:47 am

Desert wrote:
Fri Aug 26, 2022 7:10 am

Cortopassi wrote:
Thu Aug 25, 2022 3:33 pm

Guys,

I have been using this site. https://www.immediateannuities.com/

Easy to plug in values, and gives you payout info without needing to enter an email or anything.

I am starting to keep track of payout rate. They absolutely have gone up. Right now at 55, if I put in 500k, life with cash refund (this is joint me/wife, and if we die before principal is used up beneficiaries get the remaining), starting in 5 years, is $2865 a month. $34,380 a year.

Fine print is: The Cashflow or Payout Rate is 6.88%.

There is no indexing for inflation, they stopped doing those types a while ago I believe. I sort of worry about this aspect.

I've also started looking at a couple covered call type ETFs, DIVO and JEPI as I mentioned. Both have outstanding yields, and do some covered calls (not on 100% on holdings) to juice things. Might be an interesting option to mimic an annuity.

If, if, if...I cashed out everything I currently have to our name (except the house), I could start an immediate annuity at a $7900 a month rate. And still keep working. But totally easily livable at that rate (we currently use about 1/3 of that in regular living)

The only question then becomes healthcare.

And this number will go up after a presumed rate hike in Sept. I cannot forecast the future, but after Sept might be a good bet to take advantage of rates.

At a minimum, knowing these numbers has given me some peace of mind.


Yeah, the lack of inflation adjustment is a very serious downside. Because of that issue, I'd probably only annuitize a slice of retirement assets.


You can buy annuities with an inflation adjustment .... but at a then heavy reduced payout.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 3338
Joined: Mon Feb 24, 2014 2:28 pm
Location: https://www.jwst.nasa.gov/content/webbL ... sWebb.html

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by Cortopassi » Fri Aug 26, 2022 8:06 am

barrett wrote:
Fri Aug 26, 2022 6:24 am

I am curious if, as an exercise, you have compared income from annuitizing everything vs. Just going 100% to "cash" and assuming a steady effective rate of return for the next 30 years or so. That would seem to alleviate some of the inflation risk vs. holding everything in SPIAs.

Just kind of thinking out loud here.
I have run having everything in a currently 2.2% savings account and 3% SHV ultra conservative, "still available" to me funds.

In fact that's my current setup, 78% cash, 19% gold, 3% stocks.

That 78% in those yielding amounts get me just over what we would typically spend, about $36k a year.

I've not done a full on budget for a long time, so i am just pulling numbers out of my head for various categories. As I said, not including healthcare, so that's a potential biggie. Also still have 4 years of college to cover for my younger one!

But of that minimum, $10k is alloted to RE taxes. Which I can't see paying that much in retirement, either moving to a smaller place, or somewhere where taxes are not as high.

If we get another 0.5 to 0.75% bump next month, I'll be in really good shape mentally to feel even better about being in cash, but I foresee soon that rates will probably need to go the other way because something in the system will blow up.

If I am willing to be a little more risky eventually and hold some good blue chip dividend stocks, or something like JEPI / DIVO, even more ability to possibly do this without having stuff locking into a annuity.
barrett
Executive Member
Executive Member
Posts: 1982
Joined: Sat Jan 04, 2014 2:54 pm

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by barrett » Fri Aug 26, 2022 8:24 am

Cortopassi wrote:
Fri Aug 26, 2022 8:06 am
That 78% in those yielding amounts get me just over what we would typically spend, about $36k a year.
Probably just stating the obvious, but that's an annual income of $36k while still not having given up all of your principal as would happen in the theoretical scenario of annuitizing everything.
Cortopassi wrote:
Fri Aug 26, 2022 8:06 am
If we get another 0.5 to 0.75% bump next month, I'll be in really good shape mentally to feel even better about being in cash, but I foresee soon that rates will probably need to go the other way because something in the system will blow up.
This gets at something that I am dealing with as well, namely that much of our non-I-Bonds fixed income is in one-year treasury ladders. Hoping to time things so that I go to longer maturities at exactly the right time. Unlikely, I know.

On a more general note, it's good that we are now having more conversations like this on this forum without being labeled PP heretics. Over adherence to the dogma means that a lot of helpful back & forth doesn't take place as easily.
User avatar
vnatale
Executive Member
Executive Member
Posts: 9423
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by vnatale » Fri Aug 26, 2022 8:50 am

Desert wrote:
Fri Aug 26, 2022 8:18 am

vnatale wrote:
Fri Aug 26, 2022 7:47 am

You can buy annuities with an inflation adjustment .... but at a then heavy reduced payout.


Right. The last time I checked, the inflation adjustment was so expensive (low payout) that it eliminated it from consideration.


Exactly.

As I stated above ... it seems that when you are buying an annuity it seems analogous to buying a bond from that insurance company. Your bond payments are only as secure as the viability of the issuing company which would be the same with future annuity payments.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 3338
Joined: Mon Feb 24, 2014 2:28 pm
Location: https://www.jwst.nasa.gov/content/webbL ... sWebb.html

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by Cortopassi » Fri Aug 26, 2022 10:23 am

barrett wrote:
Fri Aug 26, 2022 8:24 am

Probably just stating the obvious, but that's an annual income of $36k while still not having given up all of your principal as would happen in the theoretical scenario of annuitizing everything.

On a more general note, it's good that we are now having more conversations like this on this forum without being labeled PP heretics. Over adherence to the dogma means that a lot of helpful back & forth doesn't take place as easily.
1) Yes. Definitely if I can justify not having money in an annuity, I will stay out of them.

2) I am only specifically looking at this post, and haven't looked at anything on the forum for >2 months. I hope the temperature has cooled off all over. Almost seems like a dream to me all the time spent bickering back and forth on politics and such.
User avatar
vnatale
Executive Member
Executive Member
Posts: 9423
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by vnatale » Fri Aug 26, 2022 12:48 pm

Cortopassi wrote:
Fri Aug 26, 2022 10:23 am

barrett wrote:
Fri Aug 26, 2022 8:24 am


Probably just stating the obvious, but that's an annual income of $36k while still not having given up all of your principal as would happen in the theoretical scenario of annuitizing everything.

On a more general note, it's good that we are now having more conversations like this on this forum without being labeled PP heretics. Over adherence to the dogma means that a lot of helpful back & forth doesn't take place as easily.


1) Yes. Definitely if I can justify not having money in an annuity, I will stay out of them.

2) I am only specifically looking at this post, and haven't looked at anything on the forum for >2 months. I hope the temperature has cooled off all over. Almost seems like a dream to me all the time spent bickering back and forth on politics and such.


My judgment is that in the 3 years and 4 months that I have been here civility here is at its all-time peak.

You have been missing out on a lot of excellent discussions on a wide range of topics.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
joypog
Executive Member
Executive Member
Posts: 561
Joined: Wed Apr 27, 2022 7:42 pm

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by joypog » Fri Aug 26, 2022 1:19 pm

According to MangoMan its cause all the upstanding members have been chased out and it's a raging leftist forum nowadays.

I mean, just look at the consensus opinion on the student loan forgiveness thing. >:D
1/n weirdo. US-TSM, US-SCV, Intl-SCV, LTT, STT, GLD (+ a little in MF)
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 3338
Joined: Mon Feb 24, 2014 2:28 pm
Location: https://www.jwst.nasa.gov/content/webbL ... sWebb.html

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by Cortopassi » Fri Aug 26, 2022 2:07 pm

joypog wrote:
Fri Aug 26, 2022 1:19 pm
According to MangoMan its cause all the upstanding members have been chased out and it's a raging leftist forum nowadays.

I mean, just look at the consensus opinion on the student loan forgiveness thing. >:D
Sounds like Pug... ;D
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

Re: Covered calls and Cash secured puts in TLT, GLD and SLV

Post by Kbg » Sat Aug 27, 2022 8:13 am

Post Reply