Taking Early Retirement

A Nice Fourth of July!

If you live in the United States, I hope you enjoyed a nice Fourth of July!

Making 7%?

Let’s go backwards in time to May 10, 2016. I discussed selling covered calls and I want to let you know how I am doing with that strategy. I bought IMAX on April 8, 2016. I sold a call that had an expiration date of April 19th and after commission I made $36. I laid out $2977.31 and in a few weeks I made $36. Annualized that $36 worked out to 14.5%.

Mark Ford in the post I made on May 10th, says to expect 7% from stocks over the next 10 years. I made 14.5%. That’s about twice what Mark says I can expect. When the option I sold in April expired, I sold another call and made $24 after commissions. Annualized this worked out to be 9.6%.

O.K. this is a little closer to what Mark said I can expect. The call I sold expired and the stock was not called away. So in June I sold another call and made $40 after commissions. Annualized it works out to 16.1%.

Take the three months (April, May and June) and add the premiums together and divide by 3 and the result is 13.4%. There was nothing fancy in what I did. I bought 100 shares of common stock that I expect will go up to $39. IMAX does not pay a dividend. But IMAX does have options and if you own 100 share lots, you can sell call options and make a little money while you wait for the stock to go up.

Is 13% better than 7%? Umm, yeah. About twice as good. 7% by the way is what a lot of annuities pay if you take a lump sum and convert it to a monthly amount. JJ (Jeremiah John) told me about the annuity that his company was offering him when he retired.

7% is an Annuity Payout

It seems that JJ had a pension where he could either take a lump sum or a joint monthly payout for he and his wife. The joint monthly payout times 12 and divided by the cash value was just over 7%. In other words JJ would have to find someplace where he could invest his money and get 7% in order to get the same amount of money that the annuity would pay out to JJ and his wife.

At the time of his retirement, JJ and I had a discussion and he asked me if I thought he could do better than 7% annual interest on the lump sum. At the time, JJ and I were developing our Covered Calls Course. And at that time, JJ and I were making an average of 15% per month on our covered call accounts.

Long story short, JJ took the lump sum. He, with my assistance lately, is still making twice what the annuity would have paid him and he still has the lump sum that can go to his heirs. The annuity did not have this feature. You got cash or a monthly check – not both.

JJ wrote a blog post about annuities a while ago. I want to follow up with an update and a warning that I see for annuities in the near future. the blog post I write will raise some flags that you ought to be aware of when considering your early retirement options.
For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!

Jim Fortune

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Hi There!

A short video and a poll to help me decide on some artwork. Take a listen . . .

Let me know what you think.

Podcast: Play in new window | Download

“The Gambler”

“The Gambler” by Kenny Rogers pretty much says it all when it comes to investing in the market. “You’ve got to know when to hold ’em, Know when to fold ’em” . . . ”  I’m pretty conservative when it comes to the market. I like Blue Chip stocks, that pay dividends, if I can get them. I like the stocks to be in good sectors and moving up in value. I also like to sell covered calls on these Blue Chip stocks. And I’m pretty good at selling these calls – to make extra income.

I’m so good, in fact, that at my last get together with JJ (Jeremiah John), I asked him if I could introduce a course to his readers on Covered Calls. He got back with me the next day and said “Yes.” That was in late February, 2015.

I like covered calls best when the market is flat or moving up. I don’t like to trade when the market is up for a month and down for a month and up for a month and . . .   Well you get the idea. Let me show you what I mean.

Market Performance 2015 - 2016

As you can see, some of the market swings this past year did not last a month. It was a little too choppy for me and I was sitting on the market sidelines and in cash from March 10, 2015 until March 1, 2016. Since I was a little skittish, I stayed out of the market this year until April. Then I purchased IMAX. Here is a snapshot from my account from last week. You’ll have to click the image to see the detail.

On the extreme right hand side of the image is the purchase price of the stock back when I bought it on April 8th. In the middle of the screen you can see I am up $311 when I took the picture. And on the left of the image, you can see the stock was up $.09 at the time I took the picture. Underneath the line for the stock, you can see a listing for an option I have on IMAX. Also on the right you can see what the price was, and the next column over is a number that is -1. This shows that I sold an option and collected $44 on the sale.

Let me decipher the code for the option so you can tell what I sold. The code is IMAX160520C35. The first part is the stock that the option is matched to – in this case IMAX. The next six numbers are the date the option expires or 16-05-20. Next is C for Call and the 35 is the price of the option. So, if IMAX is selling for $35 on May 20, 2016, I have contracted to sell to the option holder my stock at $35. If the stock is not selling at $35 on May 20, 2016, I get to keep the $44 that I sold the option for.

You can see I have already made 10% on the stock. If the stock goes to $35 on May 20th, I stand to make a heck of a profit – 17.5%. In six weeks. I think the stock will go to $39, but time will tell.

I’d like to tell you a little bit more about my course in my next post.

For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!

Jim Fortune

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