COMMON SENSE OPTION STRATEGIES FOR GENERATING PORTFOLIO INCOME

Transcription

1 COMMON SENSE OPTION STRATEGIES FOR GENERATING PORTFOLIO INCOME

2 DISCLAIMER The intent of this presentation is to help expand your financial education. Although the information included may be relevant to your particular situation, it s not meant to be personalized advice. When it comes to investing, insurance, and financial planning, it s important to speak to a professional and get advice that is tailored to your unique, individual situation. All investments involve risk including possible loss of principal. Please see our Performance Discussion and Owner s Manual; they are an important part of this discussion.

3 Thanks for joining us! PRESENTATION SLIDES Immediate download of today s slides FREE SPECIAL REPORT How to Climb the Market with an Option Ladder ONLINE COURSE Option Investing 101 COVERED CALL SCREENER Access to Snider Advisors free Covered Call Screener

4 SNIDER ADVISORS Snider Advisors is a boutique, registered investment advisor, based in Dallas, TX. Helping our clients strive to be better investors has been priority number one since we opened our doors in September of SNIDER ( ) support@snideradvisors.com

5 A long-term strategy that uses a combination of stocks, covered calls and cash-secured puts, and cash management techniques in a uniquely powerful way in an effort to generate portfolio income.

6 COVERED CALL ANATOMY You DO OWN the stock COVERED You SELL a CALL You re obligated to SELL SHARES at the strike price on or before the expiration date You will receive OPTION PREMIUM, which you get to keep, regardless of the expiration outcome.

7 HIGHER VOLATILITY = HIGHER OPTION PREMIUM

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9 THE CONCEPT BONDS AND CDS BOND MATURITY STOCK PRICE COVERED CALLS The goal is to try to smooth fluctuations in interest rates. 1-year Bond 2-year Bond 1 st Purchase 2 nd Purchase The goal is to try to smooth fluctuations in stock prices. After the first bond matures, you invest the proceeds into a new five-year bond. 3-year Bond 3 rd Purchase If you re are called away above your cost basis, you close position at a profit. As bonds mature, you re spreading out the distribution of income. 4-year Bond 4 th Purchase You may be able to sell calls against your lower-priced shares. 5-year Bond 5 th Purchase

10 STOCK SELECTION STOCK SELECTION POSITION ALLOCATION

11 STOCK SELECTION Potential to generate income? OBJECTIVE SPECIFIC BUSINESS ANALYSIS Is this a stock you want to own? How will it fit in your portfolio? PORTFOLIO DESIGN

12 POSITION ALLOCATION STOCK SELECTION POSITION ALLOCATION

13 POSITION ALLOCATION SUFFICIENT CAPITAL TO: Have a share price high enough to generate richer option income. Have a share price high enough to accommodate possible price decline. Make future purchases. Cover potential trading costs.

14 THE TRADE Sell to Open 1 April $40 Call Buy 100 shares of XYZ at $37 a shares Covered Call BUY 100 shares of XYZ at the Market. Good for the day. SELL TO OPEN 1 contract of XYZ Apr CALL at the Market, Good for the day DB DB DB DB DB DB

15 TIME PASSES MARCH APRIL

16 EXPIRATION $50 $40 $30 $37 Strike Price: $40 XYZ Closes Below Strike Call EXPIRES Still OWN 100 shares $20 $10 $0 MAR APR

17 TIME PASSES MARCH APRIL MAY JUNE JULY AUGUST

18 WHERE YOU STAND $50 $40 Average Cost: 600 shares at $30.50 $37 $36 $34 $30 $20 $10 Each month you ve purchased 100 shares AND you used your shares to sell Covered Calls $29 $24 $23 Today s Purchase: $23 $0 MAR APR MAY JUN JUL AUG

19 SELL COVERED CALLS Bid Price: $1.25 Strike Price: $25 Bid Price: $0.00 Strike Price: $32.50

20 WHERE YOU STAND $50 Strike Price: $25 $40 $37 $36 $34 Sell 2 Calls at $25 Strike Price $30 $20 PROFIT POTENTIAL: Gross Option Income $1.25 x 200 = $250 $29 $24 $24 $23 $23 $10 Gross Capital Appreciation if Calls are Exercised $1.50 x 200 = $300 $0 MAR APR MAY JUN JUL AUG

21 SELL COVERED CALLS Sell to Open 2 September $25 Calls Covered Call SELL TO OPEN 2 contracts of XYZ Sep CALL at the Market., Good for the day

22 WHERE YOU STAND $50 $40 $37 $36 $34 Sell 2 Calls at $25 Strike Price $30 $29 $20 $24 $24 $23 $23 $10 $0 MAR APR MAY JUN JUL AUG

23 TIME PASSES AUGUST SEPTEMBER

24 WHERE YOU STAND $50 $40 $37 $36 $34 Sell 2 Calls at $25 Strike Price $30 $29 $20 $24 $24 $23 $23 BELOW Strike: $10 Calls Expires You still own 600 Shares $0 MAR APR MAY JUN JUL AUG SEP

25 WHERE YOU STAND $50 $40 $30 $20 $37 $36 $34 $29 Sell 2 Calls at $25 Strike Price $24 $24 $23 $23 ABOVE Strike: Calls Exercised Sell 200 Shares 400 Shares Remaining $10 $0 MAR APR MAY JUN JUL AUG SEP

26 PROCEED WITH CAUTION To avoid this... Try to look like... Limit the number of purchases you make within a particular price range.

27 PROCEED WITH CAUTION MUST KNOW FACTS: While you hold the position, you may experience an unrealized loss. If you sell while the stock price is below your average cost, you will experience a loss. You may not be able to sell calls against your stock every month.

28 More Positions Greater Consistency

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30 DISCLAIMER The intent of this presentation is to help expand your financial education. Although the information included may be relevant to your particular situation, it s not meant to be personalized advice. When it comes to investing, insurance, and financial planning, it s important to speak to a professional and get advice that is tailored to your unique, individual situation. All investments involve risk including possible loss of principal. Please see our Performance Discussion and Owner s Manual; they are an important part of this discussion.

31 Thanks for joining us! PRESENTATION SLIDES Immediate download of today s slides FREE SPECIAL REPORT How to Climb the Market with an Option Ladder ONLINE COURSE Option Investing 101 COVERED CALL SCREENER Access to Snider Advisors free Covered Call Screener

32 COMMON SENSE OPTION STRATEGIES FOR GENERATING PORTFOLIO INCOME