Fender's final approach to retirement.

[fenders53]

(08-09-2021, 01:40 PM)crimsonghost747 Wrote: A little thought on the whole screen time thing.
I know options are a pretty big part of your cash flows. And that might cause some issues.

Now I know that you will find yourself trading during your retirement too. Sometimes you just get bored and let's face it, options can be fun. At least when you get them right. But I would really love to see you in a situation where the other streams of income are enough. This is just so that trading is indeed a fun hobby you do and your monthly income or even your splurging money is not dependent on it at all. Then, and only then, will it truly become a hobby and you can put it down if you feel like it and go fish for two weeks without a worry in the world.

If options/trading are a big part of your monthly income, you will think about those on your 2 week fishing trip. Or at least that happened to me a couple of times during my year off when I made it a mission to survive on investment income alone.

Honestly I think that during retirement you should be able to spend what you want without worrying about the money. I know this is more of a dream than reality to most, but that's how it should be. Same goes to where that money comes from - it should be on autopilot. Doesn't mean you shouldn't trade, but you should trade because you want to trade, not because you want more money.

These are just my own feelings. As you might remember I had a "mini-retirement" and I honestly didn't know if I was ever going to come back to work. But I quickly noticed that I wasn't enjoying it as much as I could have been because I was worrying about finances. So a few more years of work and more predictability into my cash flows and then I'll consider retiring again.

I failed to adequately respond to this.  You really have nailed down many of my concerns.  

Options are indeed a huge part of my port income.  I've traded them for decades but put them through a real three year test.  Fortunately there were a couple hard market dips so I am confident I understand the risk reward.  35% of my port routinely yields $3K/MO.  $4K+ perhaps three times a year.  A sustained down period like fall 2018 and it can be months of sub $2K because you are forced to buy shares in a downtrend and the capital is tied up.  The key of course is to make sure 80% of these companies pay a decent dividend so the income stream is not completely turned off.  SPEC stocks pay huge option premiums so it requires a lot of discipline to only have a few of those open at once.  

You are right I have to work around vacations or I will think about my investments.  It's not too hard to lighten up before I leave, and make sure overly speculative contracts expire near my dates.  Being forced to buy some discounted JNJ shares isn't the same as a high flying SOFI or ENPH contract.  I have sold them often enough to know it's a matter of time before I would get bit.  A majority of the SPACs are still down 50% this year.  The reality is until we have a correction even my DGI blue chip type put sells aren't as safe as they were a few years ago.      

The real challenge is going to re-allocating my portfolio in a timely manner.  Glad I am starting now.  I'm not comfortable buying a huge quantity of SPY or any other ETF right now.  I need to make progress though so I will gradually sell puts on the indexes until I get some shares.  At least I will get some income in the meantime.  Infrastructure package is likely to keep inflation high and the FED can't wait forever to address it.  The markets are going to get rattled at some point.  I'm invested enough while I wait.

[rayray]

Fenders, good topic and valuable information since a few of us are right behind you.

4 different income streams will be very valuable for stability, diversification while reducing stress levels.

I'm assuming, being not only a saver but a proactive financial planner, taking your personal financial self being by the horns you've done a good job and shouldn't have many worries. Once that time comes to hang up that working career you'll probably realize that money will not be as big of a worry as it seems at the moment. The emotional part is the thought of entering the next stage of life, to retire can be very emotional and can play on different levels, some good some bad--it's a process to work through on a individual basis.

It's true that long term investments are very valuable, whether they pay divi's or not. Time in the market is more valuable then timing the market--it's just the way it works.

I don't play options, I get the jest of it but was never interested enough to fully understand or feel comfortable with it. KISS investing works best for me, a mix of growth and value investments, with some paying divi's and some don't. I'm not going to lie, I love divi's but what's not to love about growth stocks? A mix of both work well for me, but I've been in this game for 25 years, the lumps were well earned as I'm sure yours have been well earned too.

[fenders53]

Thanks Ray,

We don't disagree that buy and hold is generally a great long-term strategy. As far as growth vs dividend, at some point along the way I figured out that we have no idea what is best for the next decade. If you put 100% of your port n FANG 10 years ago you are the smartest investor ever. PEP and JNJ might be best for the next 10. Straight up market will take a long break soon enough. When I mix it up something is always working and I fell more comfortable.

I evolved on options too. Back in the 90's I figured out that most option buyers are bad at math. You can win buying options but you better know what you are doing. Most don't and I sell to them and let the probabilities work against them. The best thing about options is I can go long on an Aristocrat, and easily double the dividend with extremely conservative call sells a few times a year. The organic dividend is nice of course but I can "fix" a bad dividend with a very high degree of success. My annual total return on utilities exceeds the index by at least 25%, and income is easily doubled with options. It's not at all complicated. I just have to be the "house" and not the gambler. I make considerable money on HRL every month while the stock goes nowhere. It's almost like a CD that pays 8% if the stock is flat for a year. HRL is dead money to the average buy and hold investor.

I got where I am investing aggressively and ignoring the market day to day. That is where 70% of my investments need to return to in retirement, but more lean into safer stocks now. I can still have fun with a smaller amount of my port. I would be forced to be more selective if I make that a smaller part of my game. I enjoy making money of spec stuff like SOFI and TTCF while it is in a death dip, knowing I can add some long shares at some point if I choose to. The gamblers will pay me stupid premiums while I wait for a bottom or a market crash. I enjoy this with a small part of my port.

[NilesMike]

" The gamblers will pay me stupid premiums while I wait for a bottom or a market crash. I enjoy this with a small part of my port."

I think that is a very misunderstood part about options-that most expire worthless and therefore buying is bad.

1. There is no edge in selling options.
2. There is no edge in buying options.
3. Most options that are bought are done so to hedge something, not to speculate.

I know we make money selling options but that is because of the dance we do. That is the edge not the selling of premium.

Just as many would be never short a naked put-too risky but it has the same risk profile as a CC with one less commission. LOL

Options are but a tool to express one's opinion on market or volatility direction. No tool is correct for ALL situations.

Good luck to all.

[rayray]

(08-21-2021, 10:27 AM)NilesMike Wrote: " The gamblers will pay me stupid premiums while I wait for a bottom or a market crash. I enjoy this with a small part of my port."

I think that is a very misunderstood part about options-that most expire worthless and therefore buying is bad.

1. There is no edge in selling options.
2. There is no edge in buying options.
3. Most options that are bought are done so to hedge something, not to speculate.

I know we make money selling options but that is because of the dance we do. That is the edge not the selling of premium.

Just as many would be never short a naked put-too risky but it has the same risk profile as a CC with one less commission. LOL

Options are but a tool to express one's opinion on market or volatility direction. No tool is correct for ALL situations.

Good luck to all.

this is why options give me a headache

[fenders53]

(08-21-2021, 10:27 AM)NilesMike Wrote: " The gamblers will pay me stupid premiums while I wait for a bottom or a market crash. I enjoy this with a small part of my port."

I think that is a very misunderstood part about options-that most expire worthless and therefore buying is bad.

1. There is no edge in selling options.
2. There is no edge in buying options.
3. Most options that are bought are done so to hedge something, not to speculate.

I know we make money selling options but that is because of the dance we do. That is the edge not the selling of premium.

Just as many would be never short a naked put-too risky but it has the same risk profile as a CC with one less commission. LOL

Options are but a tool to express one's opinion on market or volatility direction. No tool is correct for ALL situations.

Good luck to all.

The math says 70% of the options I am selling expire worthless at a rate of about 500 trades a year.  If I do it your way and take a smaller profit it's well over 80%.  With a roll 2/3rds of the minor losers are fixed in a few weeks.  I could tell you I am 29-0 selling VSTO options with 100% gain and zero rolls.  I could list at least a dozen tickers I have sold a dozen or more times with zero fails and rolled under 10% of the time.    

You can probably dazzle me back with some wonderful option buys.  You'll do you and I'll do me.  If it was smart to buy the options I am selling I'd probably know after a couple thousand trades the past few years.  I'm pretty sure you aren't buying them.

My boring option methods will pay all the bills 6 to 8 months a year in retirement.  11 months is more accurate for years now but the market doesn't go up forever.  The pension income would be OK with no help so that will work during extreme down market periods.

[NilesMike]

"If it was smart to buy the options I am selling I'd probably know after a couple thousand trades the past few years."

You are mostly selling naked puts, right? Pretty close to the money as well, right? A neutral to bullish directional opinion. If you or I had a bullish opinion, why we would we buy puts? We wouldn't, but guess who may?

You brought up NUSI strategy of using a collar for protection and capture some of the upside. THAT'S who is buying your puts. They hope the put expires worthless as they capture the upside.

That's the part that gets into people's heads, thinking that you are selling a put to me and I bought it as a speculative trade with bearish opinion. That is definitely not the case.

[fenders53]

No I am not selling naked puts and I'll quote and drag this over to the option thread. I desire conversation with the normal people on this thread LOL. It's going to be a long one and I don't want to run them off. They are smarter on taxes and buying and holding AAPL 10 years ago lol.

[rayray]

(08-21-2021, 11:39 AM)fenders53 Wrote: No I am not selling naked puts and I'll quote and drag this over to the option thread.  I desire conversation  with the normal people on this thread LOL.  It's going to be a long one and I don't want to run them off.  They are smarter on taxes and buying and holding AAPL 10 years ago lol.

I bought and held my way to a decent sum of dollars, of course, a big downturn can change that very quickly since I'm fully invested for the most part. I'm about ready to be moving some ETF/mutual fund dollars to cash for redistribution into certain equities, slowly.

So far, I make about 32k in Dividends annually

Buy and hold and try not to sell has been my schtick for a while now

[fenders53]

(08-21-2021, 02:50 PM)rayray Wrote:

(08-21-2021, 11:39 AM)fenders53 Wrote: No I am not selling naked puts and I'll quote and drag this over to the option thread.  I desire conversation  with the normal people on this thread LOL.  It's going to be a long one and I don't want to run them off.  They are smarter on taxes and buying and holding AAPL 10 years ago lol.

I bought and held my way to a decent sum of dollars, of course, a big downturn can change that very quickly since I'm fully invested for the most part. I'm about ready to be moving some ETF/mutual fund dollars to cash for redistribution into certain equities, slowly.

So far, I make about 32k in Dividends annually

Buy and hold and try not to sell has been my schtick for a while now

I make less than that in dividends, but I can easily exceed that with some of my port selling options.  I could alter the income by completely eliminating my cash position.  I'm not comfortable with that move at these valuations a year before retirement.  In the event we see a significant pullback n the next few years, then maybe that makes sense.  I am actually inclined to have a bit higher allocation in stocks at age 70 than 60.  The first few years will involve some planned purchases I that won't be repeated later.  I want a few nice things like a newish walleye boat I have saved for decades to buy, but I'm am a simple guy.  A nice vacation to XXX can cost $3K or 10K.  I'm the guy that is gong to spend $4-5K, have a nice time and put $1K n my daughters retirement account. 

In the meantime I will keep making extra cash selling options and put some of the profits away as safely as possible and still get a little yield.  This would be less complicated if a 3% medium term bond yield were possible.  Until then I am going to have to do it a little less conventionally. I was suppose to do a 2-3 fund Boglehead port and call it a day.  I haven't given up on landing there someday.     

And taxes are going to bother me.  I'll probably end up working part-time to pay Uncle Sugar his cut lol.  We'll see.

[rayray]

yea, i've always said take 10 investors and you can have 10 different strategies with none of them being wrong, some better then others but not exactly wrong. the point is having a strategy that one feels comfortable with implementing successfully.

over the years i've been slowly moving money from mutual funds/etf's to individual equities because when i do retire i don't want to be moving large amounts of dollars from one type of investment to another--it seems that i'm never really that good at buying stock, it either drops and i see red for a while or it skyrockets lol...it never fully goes as plan but that's where time in the market has served me well, with little to no movement. suppose i could have done better by taking money off the top and buying something else, i've done it in the past only to see that investment make some really nice gains while the new equity doesn't do much--so idk....

selling on pops and redistributing takes a lot of time--i'm more passive

and yes...taxes bother me too!!

like you i plan on having a few different income/investment streams

mine will be whatever they may be when time comes

social security
pension--maybe a buyout?? time will tell
traditional ira
roth ira
regular brokerage account

about two years ago (i lose track of time) felt that i had enough money in tax deferred accounts, dropped contributions from 18% to 6%....enough to get the company match and build up that brokerage account--that if i should retire before 59 1/2 that i better have access to monies that are not tax deferred--don't really want to play irs rules to access that money if i go earlier then planned...72t rules....kplan rule of 55 etc etc etc

i did inherit a traditional ira that has to be depleted within 10 years

[fenders53]

My pension income streams will be solid in a year and a few years later extremely solid. Working for the GOV forever has it's upside. It's not even fair compared to the typical pension offers today (if there is one at all).

It seems the more I educate myself on financial options the more complicated my plans have become. I am glad I held and aggressively funded my 401K from 1995 to 2018. All through Bush's presidency I really wondered if my retirement plan was going to work out but I kept raising my contributions. My one and only real attempt at market timing was around 2008. I smelled it coming and went from 95% equities to 50%, then averaged back in every quarter during the GFC beatdown. I got lucky and now I get to retire on original schedule. I was determined to enjoy a few years of retirement very early and I did. Checked off some things from the bucket list. I should have went back to work a year earlier. Now I have about a year of living broke because I can't get to my money without tax penalties. My 83yr old mother tries to loan me money lately. She is a good mom. My net worth is nearly 10X hers. I finally had to show her one of my brokerage accounts so she would stop stressing it.

For most of us some sacrifice must be made to retire early. More on topic, I have decided that I should not be so arrogant to think I really know what the next ten years bring for the equity markets and I better plan for all outcomes. I've been wrong half the time but just powered through it with new investment money. It's not so hard to mix it up some and reduce the stress.