Options

  • 11 May
    Sven’s View On Options

    Sven’s View On Options

    • Options allow for outsized returns, but unlike most stocks, they can also lead to unlimited losses or a total loss of the investment in the best case negative scenario.
    • However, returns of 1,000% aren’t rare and options are a great way to increase your income or protect your returns.
    • As options have an expiration date and some carry unlimited risks, you should really only use them if you know what you are doing.

    Introduction

    An Investiv Daily subscriber recently asked me what I think about options as I never write about them.

    Options have become very attractive in this environment of low dividend yields and high price to earnings (P/E) ratios, especially for those who want to achieve extra income by writing options (writing an option involves opening an option position with the sale of a contract where the buyer gets the right to buy or sell a certain stock at a certain price for a period of time while the seller gets the option premium).

    Today we’ll discuss options, different types of options, how can they be used, and when and who should use them. More →

  • 09 Apr
    Sunday Edition: How Bad IS the Worst-Case Scenario?

    Sunday Edition: How Bad IS the Worst-Case Scenario?

    If there is any single issue that generates more uncertainty, anxiety, and questions than any other about the Rebel Income system, I think it may be the perceived downside that comes with a stock assignment. Some of that uncertainty is a good thing, because it is true that selling put options (considered a naked transaction by brokers) without an understanding of the potential consequences leaves you more exposed to risk. However, I also believe that most of the fear that people tend to have about put selling is misinformed. More →

  • 02 Apr
    Sunday Edition: Should You Use Stop Losses?

    Sunday Edition: Should You Use Stop Losses?

    Occasionally I get emails from subscribers about my approach to stop losses on the stocks I hold in my portfolio. If you’ve subscribed to my Rebel Income, I expect that you’ve noticed I never write about stop losses on stocks I am assigned from my put selling trades. This isn’t a simple case of omission, but instead a deliberate piece of the income generation system I use. I don’t use stop losses on any stock I am assigned on purpose. More →

  • 01 Jan
    Sunday Edition: Pitfalls & Risks Of Chasing Yields

    Sunday Edition: Pitfalls & Risks Of Chasing Yields

    When the purpose of your investments is to generate useful income, it’s natural to look around at all of the different investment vehicles available to you to find the highest yield for your dollar. The problem is that in today’s economic environment, investment yields work much differently than they did 20 or 30 years ago. More →

  • 11 Dec
    Sunday Edition: Pigs Get Fat – Hogs Get Slaughtered

    Sunday Edition: Pigs Get Fat – Hogs Get Slaughtered

    The saying I’m using for today’s headline gets used in a lot of different settings, so the odds are pretty good that just about everybody has heard it at one time or another. When I started to learn about directional, short-term trading strategies like swing and trend trading, I had this idea drilled into my head to reinforce the mindset that acting quickly on exit signals, especially if I was profitable, was far better than waiting on the mere hope the stock might keep moving in my favor and give me a bigger profit. It was useful to me then because it helped me start to learn and develop the discipline to disconnect my emotions as much as possible from the investments I made. More →

  • 02 Oct
    Sunday Edition: Diversification or Accumulation?

    Sunday Edition: Diversification or Accumulation?

    Joel Greenblatt, in my opinion, is one of the greatest value investors of all time. 

    One thing that sets him apart from many other investors is his willingness to concentrate on a handful of deeply undervalued companies rather than diminish his returns through over diversification, or as Warren Buffett once said “diworsification.

    So how many stocks is the right amount to own to be diversified enough, yet not diminish your potential returns? More →

  • 25 Sep
    Sunday Edition: Why Assignments From Put Sales Enhance Income Generation

    Sunday Edition: Why Assignments From Put Sales Enhance Income Generation

    I have wanted to write this for quite some time because it needs to be said. I’m sure I will piss off a few people but I can live with that if a few others grasp the wealth building concept I’m trying to make.

    A little over two years ago we launched our Rebel Income newsletter with a focus on income generation by selling put options, collecting dividends, and writing covered calls.

    The impetus behind launching this service was the current retirement crisis where most retirees have severely underfunded retirement accounts—the average account balance of those between the age of 55-64 is $104,000—and we live in a world of negative interest rates. More →

  • 28 Aug
    Sunday Edition: The Misunderstood Role of Stock Dividends

    Sunday Edition: The Misunderstood Role of Stock Dividends

    In Today’s reprint of Thomas’ Rebel Income newsletter ($1,164 annual subscription), he discusses the often overlooked but incredibly important role dividends play in your overall returns.  

    As you’ll see, over the last 25 years, $1 invested in 1990 has grown to almost $10 today including dividends. Whereas that same $1 without dividends has only grown to $6. That’s a 40% difference in overall wealth creation.

    In the Rebel Income picks, Thomas always looks to sell put options on fundamentally solid companies that pay strong dividends, since dividends are the single best indicator of true company strength. More →

  • 21 Aug
    Sunday Edition: Stop Losses and Value-Oriented Income Generation

    Sunday Edition: Stop Losses and Value-Oriented Income Generation

    Today’s Sunday Edition discusses the biggest reason why your investments might be underperforming, and why the Rebel Income system isn’t subject to this one fatal flaw, which might explain the nearly 30% annual returns over the last two years.

    In a study conducted by Dalbar Inc.—the nation’s leading financial services market research firm—through 2014, the 20-year annualized S&P return was 9.85% while the 20-year annualized return for the average equity mutual fund investor was only 5.19%, a gap of 4.66%. More →

  • 14 Aug
    Sunday Edition: Why Stock Assignments AREN’T a Bad Thing

    Sunday Edition: Why Stock Assignments AREN’T a Bad Thing

    If an investors is looking for a quick entry into a highly liquid stock he may choose to use a market order rather than a limit order.  

    However, if he wants to guarantee the price he pays for his shares he will always place a limit order, which will typically be at or below the current quote, unless he is a breakout trader, then his buy limit order may actually be above the current stock price.

    Another stock entry technique—which is arguably better than a limit or a market order, especially when trying to buy at or below the current market quote—is to first sell a put option on the stock you wish to acquire and hope for assignment. More →

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