Financial Education & Training to Improve Your Retirement
Before diving into the complexities of a covered call trade and how it can be used to generate portfolio income lets first define what an option contract is and what it means to each party involved. There are two main types of options, call options and put options. A call option is a contract that gives the holder (buyer) the right, but not the obligation, to buy a security at a specified price for a certain period of time.
In the Snider Investment Method, we sell options for a premium, which is the amount we receive for selling someone the right to purchase our shares at a particular price over a given period of time. This is the final part of the series, with each article explaining a different component that helps determine the premium of a stock option. The last article discussed stock price and how price movements cause premiums to increase or decrease. This final piece will focus on interest rates and its effect on option premiums.
A divorce attorney recently shared this joke with me:
Shortly after celebrating their 60th wedding anniversary, Bob and Mary file for divorce. When their friends ask why they waited so long, they reply, “We were waiting for the kids to be dead.”
What can I say; divorce attorneys aren’t known for their sense of humor. However, the joke brings to light an interesting trend that has emerged over the past couple of decades – couples divorcing later in life, also called, “gray divorce.” Marriage has typically been considered a lifetime commitment, but with the average life expectancy more than 30 years longer than it was a century ago, a lifetime is proving to be too long for a growing number of seniors. From 1990-2009, the divorce rate for those over the age of 50 doubled.
“You can blame the corrupt markets, evil hedge funds, or the big bad banks for your financial woes. You can even blame yours truly. Off-loading the blame may feel good at the time but it’s not going to build up your IRA or send your kids to college. Your finances are your responsibility and the best way to protect and grow your money isn’t a hot stock tip; it’s education.” I recently read this in an article on Breakout, a financial blog located on Yahoo.com and I couldn’t agree more.
With the each New Year we reflect upon the challenges we faced during the previous year while making resolutions for the next. Many of these resolutions I hear from family and friends are often either financial or health related goals as these seem to be the two areas in our lives that always seem as though they could be improved. I think the problem with most of the resolutions I hear made this time of year is that they are far too ambitions and often never end up being fulfilled. With this in mind I’ve compiled a list of simple financial do’s and don’ts for the coming year that can help you get your finances in order.
I recently read an article by Dave Carusso, CFP®, 20 Financial Planning Questions That You Need an Answer To!, which really hit home and I immediately thought about all of our clients and friends at Snider Advisors. The premise of the article was to answer a list of 20 questions that he viewed as things every person should know about themselves. The list ranges from questions about financial planning matters, to the “big picture” in life that everyone should reflect on as we enter the New Year. Hopefully the questions listed below will help you realize what is most important in your life right now:
There are many people out there today who own permanent (cash value) life insurance for many different reasons. Some people use permanent life insurance to protect their family from a tragic loss, estate planning strategies, or buy/sell agreements within their businesses. While it is our belief that for straight death benefit protection, term insurance is most often a better solution, there are situations where permanent insurance can make sense in an individual’s financial plan. The question that owners of these policies should be asking is, “Will my policy be there when I need it?”
After the financial meltdown in 2008-2009, many boomers are now in their 50’s and quickly approaching what was supposed to be their “Golden Years”. Their retirement picture today is most likely very different than it was just 5 years ago. Even with account values cut in half during the recession, there is still a way to save your way into retirement.
In spite of all these economic and political issues the S&P 500, including dividends, has still returned nearly 10% over the period. Nonetheless, most investors did not experience this level of returns because they let their emotions drive them in and out of the stock market at inopportune times.
Throughout the Trade Month, I get many phone calls from clients asking why one of their positions has increased or decreased dramatically in price. Stock prices reflect a company’s current value as well as a projection of the future. Since the projection of the future is constantly changing as each day passes, stock prices are always fluctuating. To understand why a particular position moves dramatically, we first have to see why stock prices move in general; supply and demand.
