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Cutting expenses only looks like more income generation ability until there is nothing left and expenses and unexpected spending keep increasing
So you need to do both as best as you can
I wish I had less of a cushion, said no one ever in retirement
we work hard for our money all our working years …
investing is our money working for us .
we have choices though as far as what kind of job and pay we get our money .
we can have it work for minimum wage in fixed income , we can have it earn market wages in index funds or diversified stock funds , or we can get it a part time job like those who dabble in the markets with only a fraction of their money or via timing in and out .
Quote:
Originally Posted by BeerGeek40
What lessons have been learned from this?
I've learned nothing to be honest other than no more calls to short the market on here. I made my usual 7-9% as I do almost every year, and am not changing anything as we move into 2024.
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most of us want our money to get a good job so it can work for us .
in this case you are letting your money work for less then market wages
so the choice is yours ..market wages , less then market wages , minimum wage or a part time job.
but don’t try to justify getting a LESS THAN JOB for your money by saying but i will spend less .
the spending side should always be controlled and fat trimmed , that goes without saying .
but that has nothing to do with respecting your money with at least getting it market wages if you are sending it out to work.
if it is just a stay at home MONEY , then fixed income is fine , but i think most want to get market wages if they are sending it off to work.
now , what constitutes market wage doesn’t mean 100% equities once one is in that red zone , but it does mean that a strategy is dictating market wage not the seat of one’s pants or what they think .
whether we think markets will crap the bed or be great , the strategy is the same . but we do want to avoid that part time job , where excessive amounts go uninvested and sit in minimum wage.
so the different stages we go thru as our money works for us should and will have different strategies by design not what we think .
but of course if we are not going to be sending our money off to work for us then the above won’t apply
Last edited by mathjak107; 01-02-2024 at 02:03 AM..
Call with a $500 strike is $90. That gives you the right, but not obligation, to buy at $500 until expiry. Current value is $495
So if the stock goes to $700 by December 20th, the option goes to $700 - $500 = $200. It cost you $90, so you made a $110 profit or a 122% return. Meanwhile, if you owned the stock, you would have only made a 41% return.
If the stock goes to $600, the option goes to $100, so you made $10 or an 11% return. If you owned the stock thought you would have done 21%.
If the stock trades flat at $495, you lose your $90 for a -100% return, stock holder is flat.
If the stock craters to $200, you lose your $90 for a -100% return, stock holder is down 60%. Obviously losing everything is worse, but maybe the option trader put in less in the first place?
So, it's a way to make much, much more if the stock goes up a lot in a short time at the cost of losing everything if the stock trades flat or down in the timeframe.
Anyway it's a great way to get rich fast if you're right or get poor fast if you're wrong.
“Like the alcoholic enticed back into the gin bottle by the innocent tasting of beer, the stockpicker who invests in options as insurance often cannot help himself, and soon enough he’s buying options for their own sake, and from there it’s on to hedges, combinations, and straddles. He forgets that stocks ever interested him in the first place. Instead of researching companies, he spends all his waking hours reading market-timer digests and worrying about head-and-shoulder patterns or zigzag reversals. Worse, he loses all his money.” - PETER LYNCH
Call with a $500 strike is $90. That gives you the right, but not obligation, to buy at $500 until expiry. Current value is $495
So if the stock goes to $700 by December 20th, the option goes to $700 - $500 = $200. It cost you $90, so you made a $110 profit or a 122% return. Meanwhile, if you owned the stock, you would have only made a 41% return.
If the stock goes to $600, the option goes to $100, so you made $10 or an 11% return. If you owned the stock thought you would have done 21%.
If the stock trades flat at $495, you lose your $90 for a -100% return, stock holder is flat.
If the stock craters to $200, you lose your $90 for a -100% return, stock holder is down 60%. Obviously losing everything is worse, but maybe the option trader put in less in the first place?
So, it's a way to make much, much more if the stock goes up a lot in a short time at the cost of losing everything if the stock trades flat or down in the timeframe.
Anyway it's a great way to get rich fast if you're right or get poor fast if you're wrong.
Thank you,
That explanation is very helpful. I understand it now. It sounds like a better way to make money than just buying the stock. Paul Pelosi has more than likely been trading this way for years. That’s why they are so wealthy.
Donna
Thank you,
That explanation is very helpful. I understand it now. It sounds like a better way to make money than just buying the stock. Paul Pelosi has more than likely been trading this way for years. That’s why they are so wealthy.
Donna
I will advise you though it is harder than it looks.
It is not easy to predict short term movements in stocks or options.
Not even for professional traders with decades of experience.
I personally would not touch options, just too risky for the money I earned through the years. I had a buddy who tried learning about options and dabbled and, at first, made some decent gains but eventually he got greedy and lost far more than he made so he no longer does it.
“Like the alcoholic enticed back into the gin bottle by the innocent tasting of beer, the stockpicker who invests in options as insurance often cannot help himself, and soon enough he’s buying options for their own sake, and from there it’s on to hedges, combinations, and straddles. He forgets that stocks ever interested him in the first place. Instead of researching companies, he spends all his waking hours reading market-timer digests and worrying about head-and-shoulder patterns or zigzag reversals. Worse, he loses all his money.” - PETER LYNCH
Thank you,
That explanation is very helpful. I understand it now. It sounds like a better way to make money than just buying the stock. Paul Pelosi has more than likely been trading this way for years. That’s why they are so wealthy.
Donna
I’m not sure it’s a better way, you have to be right, right on more than one thing and it’s time bound. Simply buying the stock is easier with less downside risk but also less upside
I personally would not touch options, just too risky for the money I earned through the years. I had a buddy who tried learning about options and dabbled and, at first, made some decent gains but eventually he got greedy and lost far more than he made so he no longer does it.
Totally. Anyone I've ever known has had that exact same experience. The time required is another huge detractor for me.
People tend to want some element of sophistication or "excitement" with their investments.
I often think of this quote:
“All of humanity's problems, stem from man's inability to sit quietly in a room alone.” - Blaise Pascal
I don’t plan on using options as either insurance or for the call options Nancy Pelosi bought. The only options I would try would be covered calls. I merely wanted to understand the strategy, and several posters have explained it well. I somewhat understand what she did, but too complicated for me to try.
Thank you,
Donna
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