Our First Trade

I guess it’s at least a little exciting.

That is, making the first official trade on LEAPtoProfit

The only problem is that it’s more of an “OTP Legacy” kind of trade.

That is, it was a trade, in this case the sale of calls on a position that was opened during the days of “Option to Profit.”

Still, let’s dissect out what the thought process was behind this trade.

If you go to “How Does it All Work,” you will see the basic thought processes that are involved in making a LEAP trade.

In this case, Newmont Mining (NEM) was trading at about $38.45.

I looked at the January 2020 options, which expire in about 18 months.

That’s longer than I would generally look, but Newmont Mining is already an old position, going back about 5 years, so what’s another 18 months?

For me, i has clearly been a “Buy and Hold” position that has, to this date, exceeded the S&P performance by about 20% (about 10% when considering dividends).

I looked for a strike price about 10% higher than the current price.

What I received was a premium of $3.85/share, or approximately 10% of the current share price.

To that, I add the imputed dividends of $0.84 over the next 6 quarters, or about another 2%

That means, if the shares are assigned, the return for this trade would be approximately 22% or about 14% annualized.

Maybe that’s not much for some people, but it lets me sleep.

And it just gave me a fair amount of cash.

I can use that cash as cash or I can use it as part of PRIP Strategy if I was still in that asset accumulation phase of life.

The trade looked like this:

To Trade Alert Subscribers it came through as:

OTP LEGACY – STO Newmont Mining (NEM) 1/17/20 $42 calls $3.85 bid

Hopefully, there will be some more trades coming, particularly some new positions either going directly into LEAPS or working our way there through Leapfrogging.

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A Different Way of Measuring Performance

After a hiatus of a year from writing articles for anyone, I recently had the good fortune of getting re-acquainted with some long time readers of these pages.

A new reader was less than welcoming and had some serious questions about performance, which included the use of non-standard metrics, with a particular emphasis on the impact of tax rates.

I’m all about non-traditional, but I bristled a bit when considering the thought of being compared to a standard that no one else was using or to try and normalize individual considerations, such as trading in a tax deferred account versus a taxable account or using a discount brokerage versus a more costly one.

Over the years, I’ve been far more interested in the generation of a return in excess of what the market could offer and was always happy to pay taxes on any good fortune or to take advantage of existing tax laws and benefit from the use of strategic losses.

For me, having retired from a pretty lucrative profession at a relatively early age, “return” was a very tangible concept and not a paper construct.

I wanted and I needed cash. I also wanted and needed it in a reasonably reliable stream.

Continue reading on Seeking Alpha







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Happiness With a Losing Trade

One’s definition of “loss” or “gain” may be a very personal one.

In business courses I had taken while in public health school, there was always an emphasis on “opportunity costs,” and some than 30 years later that concept constantly inserts itself as I look at and measure outcomes.

The “opportunity cost” is a simple concept. It basically asks the question “What did it cost you by not investing in an alternative?” Often, to standardize that question, the alternative investment is selected to represent something of low risk and high liquidity.

You generally don’t prove your point or disprove someone else’s point by selecting a non-standard, or little known alternative or an outlier.

Additionally, you don’t prove your point by selecting a specific or narrow period of time, which itself, may be an outlier.

What prompts my thoughts this week is a disagreement with a reader over a number of tenets of investing in which I believe, had incessantly practiced and had  expressed in  an article last week, “Re-Thinking Buy and Hold.”

But also, another reader had shared his own experiences with early assignment of “In The Money” call options just prior to the ex-dividend date and that prompted my response in general about dividends and early exercise, but then with specific details of a trade that same week in shares of General Motors (GM).

That purchase of General Motors turned out to be very timely for telling a story.

Continue reading on Seeking Alpha



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Re-Thinking Buy and Hold

I had been a classical “Buy and Hold” investor for years.

Part of it had to do with what used to be the exorbitant costs of trading back in the days when either you listened to what E.F. Hutton had to say or you took the advice of one of his competitors.

You surely couldn’t do it on your own.

Needing to achieve a 10% price rise just to cover your round-trip trading costs made frequent trading basically impossible for most, especially early in their careers.

But I did listen to E.F. Hutton and I happened to have been one of the lucky ones who took a cold call from a young stockbroker, as they were called back then, who turned out to be a wonderful ally in support of my financial interests and those of my parents.

He was “Buy and Hold” all the way, even when it was an entirely commission based relationship. He traded more often when we went to a managed account and trading costs weren’t directly my costs.

Then he died.

I never micro-managed my accounts with him, but I always kept an eye on them from day to day and used to wonder why we didn’t trade more often, as noting the frequent ups and downs and all of the lost opportunities.

It was sort of like holding that perfect banana.

How long do you hold it before the rotting process kicks in?

Hindsight is great.

Continue reading on Seeking Alpha








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Welcomed Back

It had been a full 14 months, give or take a few days, since I had published an article on Seeking Alpha.

Seeking Alpha was the vehicle that helped me get the old “Option to Profit” to go beyond just a handful of paying subscribers when it first got off the ground and I was looking for something to do with myself that wouldn’t result in the growth of hair on the palmar surface of my hands.

I had never really wanted to have a volume of subscribers, especially since I was sending real time text message and email alerts at the time and the model included lots of real time text message communication and hand holding with subscribers.

Pricing the service at $200/month was a good way to keep subscriber numbers down, as was the poor quality of the offering and amateurish website.

I don’t even recall who had told me about Seeking Alpha, as I never really prowled around looking to write anywhere other than on my own space and I certainly wasn’t interested in reading anything, especially if they were being written by “posers” like me. Continue reading “Welcomed Back”

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Come On Volatility

I’ve always been fascinated by the concept of “volatility.”

When I say “always,” I don’t really mean “always,” but for at least the past decade or maybe a bit more.

Volatility is one of these things that is really hard to comprehend, even though it really shouldn’t be, even as it is applied to stocks and stock markets.

Volatility is nothing more than what is defined by an equation.

Even if that equation may be a complicated one, there is something that should be comforting about the certainty of it and its calculation. There is no art to it.

It is all about science.

Subjectivity versus objectivity.

Emotion versus cold, hard facts.

Volatility is simply the result of an equation that measures “variance,” which as everyone who has taken an elementary course in statistics or bio-statistics knows as being itself related to the more commonly recognized expression: Standard Deviation.

Who am I kidding? No one recognizes that expression, or if they do, it’s been misinterpreted when I’ve used it sitting at an out of town bar, trying to strike up casual conversation with someone far younger and far more attractive than me.

Anyway, there is lots of confusion over what volatility represents and I’m confused by it, as well, even as I think that I understand it.

The confusion really enters once a marketplace for volatility had come into being.

The equation, which should be primary, is now more of a junior consultant.

Continue reading at Seeking Alpha




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A New Someday Began Today

Image result for whewWhew.

What a week.

There are lots of statistics and factoids being tossed around this week.

Every one of them is pretty fascinating and each one lasts in the apses of my mind for about a second.

None of them are very important and none of them are worth remembering, because there is very little in life that isn’t transient.

Just when you think yu’ve seen the depths comes something lower and just when you think you have found paradise, somes a realization that it can then never get better.

But it does,

So the very old phrase “This too, shall pass,” has lots of meaning. Continue reading “A New Someday Began Today”

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It Could Have Been Worse

Perspective means so much.

On days like today things could have been much worse.

For me, as an option seller, it is always a case of balancing the fear of missing out (“FOMO”) with the need to have protection.

Sort of like balancing out missing the joys of fatherhood with fatherhood.

As long as we’re talking about me, my decisions are usually predicated on what I perceive as a simple mathematical truism.

I’d rather miss out on a 10% gain than have to gain 11% to make up for a 10% loss.

That may not really answer the question, but in the longer term, even as my perspective on what constitutes “long term” changes, I would rather miss out on some gains than have a deeper hole than a care to dig out from.

But also knowing that in the longer term the market goes higher, it typically is a question of just keeping your capital and your wits. Continue reading “It Could Have Been Worse”

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