RUW
12-06

People really don't understand the power of compounding and option premiums. That's why they buy and hold shares for 5 years.

Case 1: Let's say you got it for $20k and after 5 years it grows to 200k (10x). 

Case 2: Let's say you collect option premiums weekly at 2%. Then your 20k will grow in 5 years to $3,444,091.28. Why? Because, each week you collect 2% interest (premium) and reinvest this new total the following week. So, it grows exponentially. 

What about tax? Let's say you pay 40% tax.

Still you ended up with $779,026.46

And if you just hold the shares (without options), then you get discounted tax by 50% as in Australia. The post tax amount (20%) for case 1 is $164,000. 

2% options are not inherently riskier as they are with good companies or ETFs. However, I push the envelope a bit and collect 5%, which is high risk, high reward. Do you really think holding a 20k stake in a single stock with unrealised gains for 5 years is less risky? 

Happy investing. [Cool]  

Disclaimer: Options are inherently riskier due complx nature and steep learning curve. Opinions above are my own. Please do your own due diligence.

EDIT: attached 1 month RoR.

Modified in.12-07
Santa Rally Begins! How to Trade December?
S&P 500 has risen 5.73% this month. With the index continuously hitting new highs, several Wall Street investment banks have raised their targets for U.S. stocks in 2025. Nearly all major investment banks predict further gains for U.S. stocks next year. The most optimistic is Deutsche Bank, which has set a year-end 2025 target of 7,000 points for the S&P 500. However, analysts also caution investors to consider the risks of high valuations. --------------- How's your protfolio going in November? Will santa rally happen after so many gains in November? Are you bullish on S&P 500?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • camcamcam
    12-07
    camcamcam
    I couldn't agree more
  • cheezzy
    12-06
    cheezzy
    Power of compounding
  • Chesterton
    12-06
    Chesterton

    By selling puts you mean?

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