What do you think about…..

By edbacon, November 1, 2011

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.

Porter Stansberry and Dr. David Eifrig are offering to collaborate on the Retirement Trader Newsletter. To cash flow the market they are suggesting we sell puts and calls on companies we want to own. They say they have a proven track record and will provide continuing recommendations. I am considering pursuing this, what do you think?
Best,

Ed

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13 Comments on " What do you think about….."

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Travis Johnson, Stock Gumshoe
Admin
4828
November 1, 2011 3:48 pm
These strategies are quite common, and if you’re looking for relatively low risk then they tend to be fairly low income generators except when volatility spikes. I don’t know what the track record is for the Retirement Trader, but it’s pretty expensive so you’d want to have a large chunk of cash to dedicate to option selling (you need cash to back up those commitments) in order to make the purchase price of the newsletter appear reasonable. Assuming that their strategy is effective, of course. There are several newsletters that sell options as a regular strategy — selling covered calls… Read more »
Bonsap
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Bonsap
November 4, 2011 1:08 pm
Hi Ed… I subscribed to this service and canceled it within a few months. To be fair in my comments, I should first tell you that I did not have the capital to buy the stocks once the options were triggered, and the strategy did not fit my personal investment objectives. However, in my opinion there are holes in the strategy, primarily associated with the fact that a falling stock can keep falling. David Eifrig is touted as a former Goldman Sachs trader where he was very successful. However, his picks tended to get triggered so you wind up owning… Read more »
blackwater
Irregular
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blackwater
November 4, 2011 1:20 pm
I have a memebership in RT as part of a package I bought with S&A Inc. Where else can you get your medical advice along with your stock picks and tricks? Current portfolio is heavy on dividend paying big blue chips, a typical mixture of bond funds and mortgage reits for fisxed income, and some commodity ETFs for Chaos Hedges. Doc Efrig come out occasionally with trading tricks & gimmicky stuff that I don’t have time to deal with since I am trying to enjoy being semi-retired and not be stuck to my brokerage account all day. I doubt I… Read more »
profmad
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profmad
November 4, 2011 6:17 pm
There’s another flaw in the Eifrig strategy of selling ATM covered calls. I have INTC, MSFT, CSCO, XOM and BP, all of which, I’d prefer to hold. But, in early September, I sold covered calls at strikes at least 3 standard deviations (in changes) above the then current prices, for 11/19. All are likely to be called way at strikes which are now much less than market. I shall make minor profits but will be out of the stocks. There’s no way the difference is made up by the premiums. Selling covered calls take away the upside when markets rise.… Read more »
blackwater
Irregular
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blackwater
November 4, 2011 6:27 pm
To Pod Micahel Adler I recently sold some covered calls for January 2012 on RGLD which were priced about 3 standard deviations up from the current price. The stock ran up steeply for about the next three weeks and the calls were in the money, stangely I didn’t get called out though the stock went on up another 5%. Then RGLD fell almost as fast as it ran up and went below the stock price at the time I sold the calls. Bottom line, I sold the calls to open for 6.10, and though they got in the money, I… Read more »
Travis Johnson, Stock Gumshoe
Admin
4828
November 4, 2011 7:41 pm

Not bad! It can be a bit nerve-wracking sometimes, eh? It’s been my experience that calls that are that far out from expiration don’t get exercised very often, but I don’t know if that’s universally true.

profmad
Irregular
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profmad
November 4, 2011 10:18 pm

It should be almost universally true. Options textbooks demonstrate that it is never optimal to exercise an option early unless there is an intervening cash flow, like a dividend.

profmad
Irregular
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profmad
November 4, 2011 7:31 pm

Mr. Prince,
Normally, options are not exercised until maturity although they may readily be traded before that. That more or less explains why your written calls were not called away. What saved your bacon was the sudden decline in RGLD (and your wise decision to get out of the trade).
I’d be SO relieved were my “world dominating dividend growers” to fall by 30% before November 19 but see little chance of it.

Tacticus
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Tacticus
November 5, 2011 4:25 am
Same thing happened to me with covered calls on MCD last month. Didn’t want to sell, but it made that jump from $85 or so up to over $90 unexpectedly, and remained there. Fortunately, I had sold the calls early enough in the month, that even buying them back while in the money, I still came out a little ahead. Think I waited until expiration day though. Same with Intel, but I took a loss there, although it’ll be more than made up for by the divs and future covered call action once things settle down a little. Those are… Read more »
Tacticus
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Tacticus
November 5, 2011 4:30 am

Oh, I should add that I am not a Retirement Trader subscriber, but I do subscribe to Retirement Millionaire, and one or two other S&A letters of the cheap sort. So I don’t know if there’s something specific about the strategy in that letter that I might approve or disapprove of, only that I use a similar one to that described here, and am familiar with S&A’s usual take on short options.

profmad
Irregular
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profmad
November 5, 2011 4:09 pm

I spoke too soon. My 22 covered call contracts of INTC, strike = 22, were called away on Friday when the price was near 23.74. Someone got impatient and could not wait for the optimal moment to exercise.
So my fears have been realized. I have since sold puts, s = 22, without much hope of being hit.
Is there any way of re-establishing my position without simply buying spot and realizing the loss of 1.74 = 23.74 – 22? ( if the price stays the same)

Stansberry CS
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Stansberry CS
February 17, 2012 9:38 am

If you have any questions about Stansberry and Associates, please do not hesitate to call customer service at 1-888-261-2693. We would be happy to assist you. We are open Monday – Friday 9-5 EST.

gummy2
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February 25, 2012 10:19 am

i thought i was to be logged in with user id??

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