Best place to invest today?

Vanguard STAR fund

When the market is flat is when active funds shine. Best place to invest is in a well diversified portfolio.

Good point. I'm in all low fee index funds right now.

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Can you walk through the numbers on selling puts?

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Stock XYZ is trading for $10. 100 shares would cost you $1K plus your commission, likely no more than $2.

You sell a $9 put out to October 2017, someone pays you $.50 for the put. One put gives someone the right to sell you $100 shares of XYZ at $9. They paid you $50.00 (.50 X 100 shares).


If the stock doesn't get below $9.00 by expiration date, you keep their premium ($50). If the stock goes to $8.75, the shares are put to you at $9 ($900) but your cost of entry is reduced by premium collected (-$50), so you really bought the shares at $8.50 (exercise costs, commission etc need factored in).

If XYZ goes to $15, likely your $9 put you sold for .50, goes down. Let's say it goes down to a nickel. You can buy back the put for a nickle (closing your exposure). Collected $50, paid $5 to buy to close.

10-12% yield isn't uncommon doing this. Annualized.

But you selling naked, which is to say selling a derivative on a security you do not own, so be prepared to own the stock if things go badly. And you'll own it at the strike price you sold the out at. But likely naked only insofar as your broker let's you. You're going to have margin and cash requirements to do this. At least the vast majority of retail traders aren't going to be getting portfolio margin, and greatly reduced interest rates, costs to exercise, commission etc.

But if you have an account minimum of I think $25K, maybe it's $100K, Interactive Brokers will portfolio margin your account if you pass their risk management requirements, and you'll have direct access to choose where to place the trade, potentially some commission rebate for adding liquidity to the market, and including dark pools of liquidity (to the extent any retail trader can ever get).

I think my trades are below .01 per share, and I think my interest rate is 1 something.

I don't trade a lot, but I do write options, so the lower cost to carry's greatest benefit to me is increased yield when I sell puts. Most times you're really making maybe 5%, but making 5% in some situations in 2 mos, so the annualized yield is pretty large, but it is work. It isn't something you can just do and forget.

Which brings me back to one of the points I've tried to make. My short term put selling strategy is designed to produce yield. My long range put selling strategy is all with stocks that if I end up owning them, I don't mind owning them.

I sell a lot of puts on junior precious metals miners. It is almost entirely for yield. And the puts I sell are largely way, way out of the money. I did get some of these companies put to me, but I kept them until fairly recently, when the junior miners led the minor recovery in gold and silver, and I dumped the securities. But I follow commodities, and the junior miners I sold puts on weren't in any danger of going broke. Following this, I knew when (and that in this case was a couple of years) gold and silver recovered, junior miners are always a leading indicator, and always jump up dramatically. They overreact. Consequently why I sold as soon as feasible. But that money just sat there for a couple of years. One was paying less than a penny in dividend.

I get exactly what you're doing. And although cash on cash wouldn't necessarily be a measure many "experts" would use, I notice that you do use it, and I make some assumptions based on that. Good ones.

I'm just not really a tech investor. I don't understand it, and I own little of it due to this. I look at it. I see people make money. I get frustrated by that. All the time.

But one rule I've never broken in major fashion, and it could possibly be a very large error on my part, is never buy anything you don't understand.

Now from that you could draw a conclusion that for whatever reason I don't have the ability or desire to learn about it. And this is something I've thought about a lot lately. Stubborn. Contempt prior to investigation. It has cost me at a minimum opportunity. I posted about it on here once.

But back to one of your main points. Covered calls, and cash secured puts are about as conservative as one could possibly get. So is buying VIX insurance on one's portfolio.

I also like synthetic longs a lot. Someone on here once tried to explain to me my cost to carry equaled exactly that of taking a long position.

Another guy on here knows his options very good as well. He was making a killing during the Chinese "crisis". I think on AAPL. That dude is brilliant. He's just not as outspoken as you and I.

Something you might find interesting is that Buffett has come out and said LEAPS (widely thought to have (possibly too much) time premium built in), are highly susceptible to market inefficiencies, and an extremely inexpensive way to take long term long positions. In his case I think selling puts is a long position. But you and I already consider this long as well for selected stocks we wouldn't mind owning.

I've been watching AAPL and also AMZN. Trying to learn a bit more. Now isn't the time for me. Pre election. No meaningful correction in a long while. No clear trend on industrial or base metals. Earnings has been the largest financial engineering I can recall in my lifetime. AKA, borderline fraud.

There is going to be consequences to the easy monetary policy. I don't know exactly what it will be.. And I'll state the "experts" haven't even imagined in what form these consequences will come.

But consequences bring opportunity if one has cash at the right time. So I'm mostly waiting, and have been for some time now. Miss out on upside? Yes. But also scraped profits off of the equity run up and reallocated some of this already as well. Realized gains. Not gains on some website. For the most part the equity that remains is mostly "house money." I just think it would be ignorant to not take some profit after the largest run up in stocks I've ever seen.

Separate topic. Are you the gentleman that owns on SB? If so, have property values recovered? I own in Broward. Pompano. Lauderdale by the Sea. In that area. I'm thinking about downsizing that part of my stuff. Long distance landlording to the extent I have to do it now isn't what I want to be doing. I think I'll keep 2-3 condos, and let someone that has more energy, and is more aggressive play in that arena.

Separate topic to the second power. How do you stand that overpriced and marginal food when you down there? I went down there to see the Orange Bowl, and I stayed for three weeks. I considered buying on the west side of Biscayne. I retrospect I should have. I could have gotten in for $80K, and I think the cheapest stuff right now is 4X that. That was winter 08-09. But the food, and the prices people paid for garbage food made me hate the place. I drove to mid town for breakfast, and for dinner went into Broward every night. Fogo de Chão was about the only place worth paying for, and even then overpriced for marginal food. I thought the Latin line dancers in the street was a neat thing to see. And one New Year's Eve the Moonies showed up in a bus. Yes, no lie, the friggin Moonies showed up in SB New Year's Eve. Talk about a dichotomy.

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Stock market seems flat

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More reason to buy them, if you're investing for the long term.