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.
Comments
By selling puts you mean?