Investment Goal #7 - Selling Puts to Own Stock / Generate Income

  • I spent most of 2017 learning about crypto investments, including buy and hold, swing trading, lending, and building a custom Ethereum mining rig.
  • In 2018, I focused on high-yielding US stocks.
  • In 2019, I decided to explore options trading, starting with selling puts against dividend-paying stocks, and my ultimate goal was to have $3,000-$4,000 in cash for option trades by the end of the year.

If 2017 I spent learning a lot about crypto investments, starting a simple buy and hold, swing trading, lending on, and even building a custom Ethereum mining rig.

2018 was more about high-yielding US stocks.

Seems that for 2019 I have a new subject to explore - options trading.  Now, I have heard about options a lot in the past ... it's just I have never had any interest in them, as it has always seemed like a scam to me, now I'm not saying it's a scam, but I'm also not advocating for it, as I believe options just like crypto, stocks are a high-risk investment and theoretically, you could lose some or all of your money.

Instead, I have decided to make my first options trade to better educate myself and hopefully make some profit. I want to start with probably (IMHO) the easiest approach - selling puts against dividend stocks.

Here is actually a really good read from which I will take a few excerpts Why selling puts against dividend-paying stocks is a win-win strategy

Financial advisors of all sorts will tell you that options are very dangerous, you may lose money, it is a gamble, it is not for average investors, you shouldn’t trade options with your retirement money, and much more similar nonsense.

Mostly, people who are discouraging you from trading options have never traded options. They are just playing their old scratched record they have been taught at their last seminar.

If you understand the basics of options, and how you can make money using them, you will find out, that trading options are very easy, simple, and not risky at all. The best way to find out for yourself is to take a small trade and try it. If you do not want to commit your own cash trade in a paper money account first. I did it myself recently even after two years of trading I still use a paper money account to practice trading. My small account doesn’t allow me to trade as often as I wish, so for the rest of the time, I use a paper money account.

Now as in the case with crypto, I decided better once do it for real, than continue thinking what if.

As I already have Lynx Broker, I made sure to apply for options trading permission and additionally created a paper trading account just to get familiar with the process and experiment with a couple of strategies.

It's fun to note, that my first experience with trading actually comes from the crypto and not vice versa. 

Backtesting BTC/EXP RSI on Gekko Trading Bot

As I don't have a lot to invest, for my first options trade I decided to go with a "cheap" high-yielding NLY dividend stock (this stock has a dividend yield of about 10%). and is trading at $10

The ultimate goal is to have about $3,000 - $4,000 in cash for option trades by the end of 2019. 

If I would manage to have a 1.5% yield monthly that would be a very very good result for me now.

I Will start small, with $1,000 in April (that's why choosing NLY). If I will manage to take 20%/per year from option trades I will be very happy. If I will keep my $4,000 afloat - I still will be happy.

If I will lose some 500-1,000 I won't be so happy anymore, but I will have a good lesson.