How I do it

I maintain a portfolio of core stocks, each with at least 100 shares. Instead of waiting for the stock price to increase, selling a covered call on those positions allows me to earn an additional 1.5%-4% each month, depending on how aggressive I want to be. 
If I’m ready to part ways with a stock, I tend to be more aggressive. It’s crucial to remember that if a stock reaches your strike price, you are obligated to sell it at that price. 

Example

 I own 100 shares of Uber with an average price of $40 per share. As of this writing in October 2023, Uber stock is at $41 per share. I can sell a covered call on Uber expiring in 30 days (about 4 and a half weeks) for November 24th at a strike price of $45 per share. Since I usually aim for a 1.5% return on covered call trades, I would be collecting $89. 
This is a trade I could execute right at market open before starting my workday, and it would take me less than 5 minutes. 

How I sell covered calls while working full time 

The reason I can sell covered calls while working full time is that I primarily engage in selling monthly covered calls. This means there’s minimal work once the trade is executed, except for managing the position if the trade goes against me. 

Leveraging returns 

I leverage returns from successful covered call trades in two ways: 

Buying more of the stocks I already own: If I believe the stocks I own are still undervalued, I slowly dollar-cost average into them to fully build out my position.
 

Buying a new stock: If there’s a stock I like but don’t yet own, I gradually build out my position. My regular income, along with the income generated from selling covered calls, helps me achieve this in a much shorter timeframe. 

I always believe that great companies don’t stay at low prices for long. I’m delighted if I can pick up additional shares because of the income generated from selling covered calls. Depending on the stocks you’re buying, consider their potential value in 5-10 years. 

Three rules I follow to stay grounded

        Always set price target alerts: 

• Acknowledge that you won’t be able to monitor your stocks at all hours of the day. 
• Price alerts will notify you when it’s time to log in and manage your position.
  

  Always have a profit target: 

• A good rule of thumb for me, is to close a trade when it’s 70% profitable. 
• For instance, using the example of the Uber trade discussed earlier, closing the trade at a 70% profit would result in earning about $62 from the initial $89 investment.
  
   

  Stay consistent with your trading plan:

• Emotions in trading can lead to losses and inconsistent results. 
• Deviating from established rules, such as the 70% profit target, in pursuit of more earnings may result in staying in a trade too long and potentially turning it into a losing one. 

While there is much more to selling a covered call, I am convinced that anyone can successfully sell covered calls while working full time. For additional information, check out this post about covered calls for more in-depth insights. 

The post How I Sell Covered Calls while Working Full Time appeared first on Financial Browsing.

 In today’s dynamic financial landscape, investors are constantly seeking innovative strategies to generate income from their investment portfolios. One such strategy that has gained popularity is the use of covered calls. Covered calls offer a unique way to earn consistent income by leveraging your existing stock holdings. This blog post aims to provide a comprehensive guide to using covered calls to generate income, offering insights into the concept, benefits, risks, and practical implementation. 

Understanding Covered Calls 

The beautiful thing about covered calls is that they are an extension of your investment journey and usually build on top of any pre-existing knowledge you already have about the stock market. What I mean by that is, someone is more likely to find out about covered calls if they are already invested in the stock market rather than getting involved in stocks solely because of covered calls. 

Mastering the use of covered calls to generate income, although not easy, is very rewarding and potentially life-changing. It will display your evolution as an investor, which will boost your overall portfolio returns. 

Definition and Basics 

The building block of covered call writing is stock ownership. You must own at least 100 shares of a particular company, once you do, selling a call option means you are willing to sell your shares at a predetermined price no matter if the stock price goes up or goes down. 

Stock Ownership

If you don’t currently own 100 shares of a company, this is where you want to start. Building your portfolio is a slow process, especially if you are on a fixed income. But with some long-term planning, consider that you will be able to make 2%-4% from your portfolio. The bigger the portfolio, the bigger the returns you will see.
Call Options 

A covered call is you selling a call option to a call buyer on the other side of the option chain. What this option buyer is hoping for is an increase in the stock price, which would result in the contract they bought being worth more than their purchase price.

Premiums

Your objective from this transaction is for the stock price to stay below your strike because that will mean that your trade was successful, and you got to keep all the premium you were paid for selling the call. For example, if you sell a weekly call option on PayPal at the $62 strike price when the stock is currently trading at $59 per share, you would collect and keep your premium if the stock price stays below $62 at the end of the week.
 

How Covered Calls Work

Using covered calls to generate income is a great way to increase your portfolio returns in any market environment. This strategy allows you to make your stocks work for you. Many people simply buy stocks and hope that they go up eventually; expanding your knowledge base to include covered calls will increase your returns by 2%-4% a month.
 
 

Benefits of Covered Calls

Covered calls and trading options in general are tools available to every investor that allow for income generation and hedging strategies. Investors who are not aware of these strategies usually watch their returns disappear in a market downturn or get forced to panic sell and end up selling too early.

Income Generation: Earn Premiums 

In my opinion, once you’ve been able to string together 4-6 weeks of successful trades and premiums collected, this is how you will know you have reached the ability to consistently start using covered calls to generate income. Once you’ve reached that point of predictability, you can start to expand into different strategies with the income, start paying yourself from the income, or start buying more stocks you value.
 

Risk Mitigation: Downside Protection 

Covered calls provide downside protection through the premium you successfully collect after every trade, the way this works is think of the premium you collect as lowering your cost basis. For example, if you bought 100 shares of Palantir stock at $14 which means you paid $1400, if you sold a covered call and collected a premium for the month of $56 which is about 4% your cost basis went from $1400 paid to $1344 or $ $13.44 per share. The numbers start looking even better the more often you do this. 

Capital Appreciation Potential  

The benefit of using covered calls to generate income is that you are compounding growth in your portfolio with every premium collected. The great thing about this strategy is that you can keep compounding this growth in your portfolio regardless of whether or not your stock returns are outperforming the market. 

Risks and Considerations 

With every options strategy there are risk and reward outcomes you must consider. This great thing about covered calls is that if the strategy is executed properly, you are not introducing any new risk to your portfolio beyond the risk you would’ve had simply buying and holding the stock.  

Limited Upside Potential 

This point is an important one, you have to be disciplined when trading covered calls, otherwise you’ll find yourself second guessing yourself every time the stock price goes up.  

Opportunity Cost

Conviction in the stocks you build your portfolio around is very important. Stocks are guaranteed to go up and down in the short term, but generally go up over the long term. When the price of your stocks starts to drop, you want to make sure that the stocks you own are worth owning; otherwise, you will be forced to hold on to a losing position for a long period of time and miss out on gains you could’ve had by investing in better stocks. 
 

 Even worse, if you find yourself in a panic you might sell a winner at the absolute worst time. Think about those early sellers of Tesla or Nvidia stock. 

Market Volatility

When the market is very volatile, you will notice severe price movements in your stock positions. These volatile moments could be opportunities to take advantage of the market and make great gains, or the time to sit on the sidelines and let things cool down. The worst position to be caught in is when a covered call goes against you on a stock you are not ready to get rid of.
 

Selecting Stocks and Options

Choosing your stock and options strikes are going to be a big determining factor of your success as a trader.  
 

Choosing the Right Stocks

I might’ve mentioned stock selection a couple of times already in this post, but it really is that important. Everyone finds out what their risk tolerance is once their portfolio value starts to decline, and you will discover how high your conviction is in your individual stocks when their value starts to decline by 30% or more. This is why choosing the right stock is important; you want to be so confident in your picks that a price decline just looks like a buying opportunity.
 

Evaluating Option Contracts

The evaluation process of any option contract should be focused on a couple of things. You want to make sure that the option has a lot of open interest, which is going to be great for liquidity when you need to exit the trade. Plus, you will not lose money on the bid and ask spread on your entry and your exit. 
 

Setting Strike Prices and Expiration Dates

Choosing your strike price should be based on what you’re hoping to achieve on your monthly returns. If you are hoping for a 2% return in a month, you would choose the strike price that corresponds to the premium you’d like to collect. Whether your trades are weekly or monthly depends on your schedule and how active of a trader you’d like to be. Monthly trades require less position management and are usually ideal for anyone who trades while working a full-time job. 
 

Implementing Covered Calls  

Once you are ready to start using covered calls to generate income, make sure to always start your trades with a lot of thought and consideration for what your potential losses might be. 

What I mean by that is, even when you are up on a position and your covered call gets in the money, unless you are prepared to lose your shares, that would be a situation where you want to buy to close that trade if you are still seeing a lot of upside in your stock position. 

Step-by-Step Guide 

This example below is a quick example of what a trade looks like on my brokerage account. Everyone has their brokerage of choice; I like Robinhood because they really have a user-friendly interface. 

1. Identify the stock you want to own
   As of this writing I am long a lot of fintech stocks, Paypal is stock I currently own because it’s been really beat down over the last couple years and the risk reward on the investment seems worth it, the financials for the company also looks pretty good.
2.  Determine the length (weekly, monthly) of your trades
   With my full-time work schedule I am currently using covered calls to generate income monthly, I find it’s a lot easier to manage monthly trades.

1. Calculate your returns
   This monthly return on PayPal is about a 2% return
   
   ,

• Calculating Potential Returns
  The more and more you trade for yourself you will figure out what returns you’d like to receive on a weekly or monthly basis. From what I’ve seen from experience, my consistent returns come when I target returns of 1%-4% per month. 

• Real-world Example
  the example below shows what a covered call trade on Palantir stock would look like. The time frame on this trade is 30-day trade. If the trade is successful, we earn 4% or $57. 

Advanced Strategies and Techniques

As you gain more experience through your trades and experience the inconsistencies of profitable and losing trades, you will realize that the covered call strategy and the likelihood of success mostly has to do with position management.
 

Rolling Covered Calls 

There are typically two main reasons to roll your covered call positions: first, to lock in profits early if the expiration date is still far away; second, to manage your risk when your call position is in the money. When your call is in the money, the main goal now becomes to minimize your losses. 

A great way to do this is by rolling your position which starts by closing your initial trade while simultaneously opening a new trade on the same stock for a later timeframe at a higher strike price to increase the chance of profit and hopefully breakeven on the overall trade. 

Collar Strategy: Adding Protection 

Adding protection, also known as hedging, is a tough concept to master as an option trader because it requires you to be both bullish and bearish. The way to initiate a collar strategy is by opening a covered position on one of your stocks and buying a put option on the same stock. 

What this trade does is protect your stock from a big price drop with the put you purchased. For example, if your cost basis on PayPal stock is $63, you might want to give yourself a 10% downside protection by buying a put option at the $57 strike price. 

. 

 You could be bullish on a stock position because it is currently undervalued, but you might start noticing that the market is in a short-term downtrend, purchasing a put would be the way to protect and maybe even profit from a down market. 

Tax Implications 

As an active option trader, you will find yourself paying short-term capital gains tax on your trades. Paying taxes is a great sign of success because it means that you are becoming a profitable trader. It’s never fun paying taxes, but that is just a part of the trade. If you are trading for retirement and are not in need of the money right away, a great strategy you can implement is trading options in a tax-advantaged retirement account like an IRA or a Roth IRA. This is a great way to trade without worrying about paying taxes on your profits in the short term. 

Monitoring and Managing Your Positions 

Learning to manage your trades will help you go a long way in becoming a successful options trader. When you sell options like a covered call, your position will go from being profitable to unprofitable as quickly as the stock prices movements. This is the perfect reason to have a strategy based on position management and rules in place on when to take profits. This will help you keep your emotions in check and simply follow your trading plan. 

Regular Portfolio Assessment 

Not being too overextended and having a condensed watchlist is one of the best ways to stay on top of opportunities when they present themselves. For example, if you initially opened a position on PayPal, and the stock has been trading sideways for a month or so, and your watchlist indicates that Uber stock has taken quite a dip, if you now feel that Uber is a better position to own because of the price drop, don’t be afraid to reassess your portfolio for the better stock. 

When to Roll, Adjust, or Close Positions 

We covered rolling as a great risk management strategy, but rolling can also be used when your trade is successful. As part of your trading plan, your success rate as an option trader will increase significantly by having rules in place on when to take profit. 

For example, when I trade, if my positions are within the 50%-70% range, I start considering taking profits. This rule is important because in a volatile market, your positions will flip between being profitable and unprofitable very quickly. 

Common Mistakes to Avoid 

As an options trader, no matter how experienced you are, you will make mistakes here and there. The key to your continued success will be to learn from those mistakes to become a better trader. 

The stock market is very unpredictable. The best you can do is make trades that have a high probability of success. 

Overlooking Market Research 

Staying connected to what is going on in the financial markets and global politics is an essential part of your success. For example, not knowing that inflation is rising and that the Federal Reserve is hiking interest rates to actively reduce inflation would limit your chances of success since you don’t have the full picture. 

Ignoring Diversification 

Keeping yourself well diversified is key to surviving as an options trader. It’s really tempting to want to put all your funds into one trade when the returns look attractive enough, but taking the less risky approach will make it more likely that your account returns won’t be destroyed by one bad trade. 

Failing to Plan for All Scenarios

Black Swan-type events are the unpredictable scenarios you want to plan for as an option trader. Consider what your portfolio would look like if you were too concentrated during the scare of March 2020 when the whole stock market crashed to an extreme level due to a lot of fear and uncertainty. Granted, if you were selling covered calls, you would’ve made money, but having a great risk-defined strategy is always best. 
 

 The goal is to make the returns, but also not give them back with one bad trade. 

Covered calls can be a powerful tool in your toolkit, providing an avenue to generate regular income while maintaining a certain level of risk control. Consider that most people, if they ever get started investing at all, simply just buy and hold stocks and hope for the best. I’ve learned the hard way that the market is very unpredictable and using covered calls to generate income is a great way to benefit from down markets and allow your portfolio to grow in any environment. 

With any investment strategy, it’s important to understand the mechanics, benefits, and risks before jumping in. I hope by following some of the details outlined in this post, as investors you can harness the potential of covered calls to enhance your portfolio’s income stream and potentially achieve all your financial goals. Remember, becoming successful at trading requires ongoing education, careful planning, and adapting to the ever-changing market conditions. 

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Understanding Cash-Secured Puts

A cash-secured put is an options trading strategy that involves selling a put option, this means you have the obligation to purchase 100 shares of the stock the put was sold on, you receive a premium for taking on that risk, while simultaneously setting aside enough cash to cover the potential purchase of the underlying asset if the option reaches the strike price and is exercised. 

 Let’s break down the key components: 

Identifying a stock

Stock selection is one of the most important parts of this strategy, you might decide that you want to own shares of a specific company for a multitude of reasons centered around the future value of the company. As part of your trading plan, form a strategy around how long you’d like to hold the stock for if you get assigned those shares. The less capital you have the riskier the stocks you initially pick will be. For example, if you only have $500 you will be limited to stocks that are under $5 a share since selling a put option consists of buying 100 shares of a given stock upon assignment. 

Securing cash

Set aside enough cash in your account to cover the potential purchase of stock.
The reason cash secured puts are an ideal strategy to undertake is because anyone can get started with this strategy whether they have $500 or $5000.  For every successful trade made you get to keep the premium you received, typically around 2%-4% per month. With time and the right approach your returns will slowly compound, and you will see your account size grow. Adding a little fuel to the fire with a consistent injection of cash into your account will only increase your returns over time. 

Selling a put option: Selecting a strike price 

 When you are in the process of deciding which stock to open a position on, one of the things that will determine how successful you are as an option seller is how you select your strike price on trades, this means the cost per share at which you are willing to own the shares. 

 Typically, when you select a strike price, you’ll want your entry point to be below the current share price of the stock to give you a margin of safety, but sometimes there will be some exceptions to that rule depending on how aggressive you’d like to be. For example, a stock like PayPal which as of July 2023, is down 80% from its highs might warrant a more aggressive approach than a stock like Tesla that is up almost 50% in a few weeks as of the writing of this article. 

When you see opportunities in the market, your strategy should be flexible enough to take advantage of them. When you are selling puts you must assume you will eventually get assigned, so it makes more sense to get assigned shares of the stock that is down 80%. One of the main goals of using this strategy is to gain a better entry price and purchase undervalued stocks. 

The two best put selling strategies

The biggest determining factor of your success as a put seller is understanding what your approach is to any given trade. Your approach to one trade might be to gain a better entry on the stock you are trading, or your approach could be to simply generate income with no intention of getting assigned. 

Let’s look at these two approaches. 

Put selling to gain a better entry price

With this put selling approach your goal as an option seller is to gain a better stock entry with the added benefit of collecting a premium which again is usually between 2%-4%. This premium also lowers your cost basis on the stock position you are expecting to get assigned.

As long as you’ve done some solid analysis on the stock, getting assigned the shares you should be something you look forward to.
 

Put selling to generate income

When you sell a put option as an income generating strategy, this means your strategy is to never get assigned any shares. This approach is a little more advanced and it allows traders to safely make a return of around 2%-4% per month without any of the risks associated with stock ownership. Risk management is at the core of this strategy. Once you open a position and your trade goes against you, the safest thing to do is to close the position at a loss and open a new trade.

There are some positives and negatives to each of these Put selling strategies. 

Risk and reward of each Put selling strategy 

Again, selling put options to generate income is a slightly less risky approach because you are automatically risking less capital. In our PayPal example you would need about $6700 to purchase those shares in case of assignment; consider that if PayPal shares drop 20% or more from the time of your purchase, you’d be down big on your position and might be forced to hold the shares longer than you would’ve wanted to.
 

 Put selling in the hopes of gaining a better stock entry might have downside risk which means the stock might go down even more before it goes back up, but I would describe the risk of put selling for income generation as being the complete opposite, consider that since you never own the shares you always run the risk of missing out on the upside potential of the stock. 

 Both worst case outcomes for each strategy are okay in my opinion. There is some level of risk with every option trading strategy, the objective is to understand and manage those risks. 

Research and prepare
 

 Consider that if you’ve done your research and have determined that a company’s shares are significantly undervalued relative to its fair value, you shouldn’t blink if the stock drops below your entry point. It might even be a perfect opportunity to purchase more shares. 

 Once the market recognizes the price mismatch that company’s shares have the potential to rally 30% or more. Those returns would far outweigh the 2%-4% return you would’ve been making from your income-generating strategy.  

The key is to do a good fundamental analysis of all the stocks you trade, and, if you determine that you were wrong in your assessment of the value of the company, don’t be afraid to cut your losses and move on.
 

My goal with this article is to have Cash-Secured Puts explained in a way that can be actionable shortly after reading this article. This strategy can be a powerful tool for investors seeking income generation and the opportunity to acquire stocks at a discounted price. 

 By understanding this concept, and its advantages, plus the risks associated with this options trading strategy, anyone can be successful and make informed decisions aligned with their financial goals and risk tolerance. 

If you liked this post, check out our post on covered calls to learn more ways to make additional income from your stocks. 

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What are Options?

Before diving into the world of option trading, let’s start with the basics of call and put options. Options are financial derivatives that give the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (known as the strike price) within a specified timeframe. The underlying asset can be stocks, indices, commodities, or even currencies.

Call Options

Call options provide the buyer with the right to buy the underlying asset at the strike price within the specified timeframe. Traders usually purchase call options when they anticipate an upward price movement in the underlying asset.

Put Options

Put options, on the other hand, give the holder the right to sell the underlying asset at the strike price within the specified timeframe. Put options are typically used when traders expect the price of the underlying asset to decline, or if they are looking to protect against downside losses from one of their stock positions.

Option Greeks

Options Greeks help you understand exactly what is going on with a call or put option you own in relation to the stock price. It’s easy to understand that if you buy a call option and the price of the stock goes up the value of your call option will also go up, but by how much? Option Greeks like Delta, Gamma, Theta, Vega, and Rho help understand the correlation between how much an option will increase if the stock goes up by 5%.

Advantages of Option Trading

Option trading offers several advantages that make it an attractive strategy for investors. You have the potential for higher returns through leverage, the ability to profit in both rising and falling markets, all while managing the limited risks associated with options through good risk management practices.

Option Trading Strategies

Option trading provides a variety of strategies that traders can employ to achieve their investment goals. covered calls, cash secured puts, protective puts, long calls, spreads. These different approaches encompass income-generating strategies, hedging strategies for wealth protection, and speculative strategies for potentially explosive gains.

Risks and Risk Management

As with any investment strategy, option trading carries risks. It is crucial to understand and manage these risks effectively. The best way to achieve this is by minimizing your exposure on every trade. Someone with a smaller portfolio might be more aggressive searching for large gains, where as someone with a bigger portfolio might opt for a safer approach centered around wealth protection.

Getting Started with Option Trading

To begin your option trading journey, you’ll need to open an options trading account with a reputable broker. The main difference between brokers in my experience, is the ease of use of the platforms, and the fees and commissions they charge. One of your main goals as an option trader is to maximize your gains as best as you can. As you gain experience, you’ll discover which brokerage best aligns with your trading style, whether it offers a simple user interface or advanced charts and data.

Educating Yourself

Option trading requires continuous learning and staying up-to-date with market trends. The broker you use will have a lot of educational content to help you maximize your trades and improve as an option trader. I always do my best to follow anyone that I feel might have more experience than I do to learn from their experiences and take what works best for me to improve. Twitter is a great resource and there are plenty of option investor who are open and provide their knowledge at no cost. 

Option trading can be an exciting and profitable investment strategy, but it’s essential to understand the basics of call and put options before diving in. In this article, we covered some of the fundamental concepts of option trading, explored its advantages, and highlighted key considerations for risk management. Armed with this knowledge, you can embark on your options trading journey with more confidence. There will be some bumps on the road, but continue to build your expertise, the rewards are worth it. 

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Every buyer of an option has a seller on the other side—an easy concept to grasp, but not something I’ve spent much time pondering in the broader context of option trading. This becomes particularly relevant when you’re actively using an option strategy with assignment risk, such as a covered call strategy. 

 Why should you consider selling covered calls?  

Covered calls give individual investors the ability to increase their market returns by leveraging each 100 shares they hold in their portfolio, far beyond what a traditional buy-and-hold investor would achieve. Personally, I became a fan of this strategy because, when used wisely, it carries a very low risk of significant losses. And if you’re familiar with options, you know that significant losses are often associated with most option traders. 

 How to get started: 

 If you’re new to trading and don’t own any stock positions, your first task is to go shopping for some stocks. To enact the covered call strategy, you need to have at least 100 shares of a particular stock. Everyone has a different approach based on their risk tolerance, but let’s say you have $5,000 that you’d like to deploy into the market. My strategy would be to look for 5 stocks that cost $10 or less to add to my portfolio. It’s worth mentioning that the method you use to pick those stocks is crucial—you should have solid fundamental or technical reasons for selecting them. 

 Due to the nature of selling covered calls, I know that my hypothetical $5,000 portfolio will be a high-risk one filled with speculative stocks. These are companies that are not yet profitable but have significant upside potential. I’d structure my portfolio this way because option selling revolves around collecting premium, which is the money you receive for taking on the risk of potentially losing your shares. The amount of premium you receive is tied to the implied volatility of the option, which is mainly influenced by the risk-reward profile of the stock in question and any significant news events that fuel speculation about the stock’s future price movements.  

The riskier the stock, the higher the premium you receive. Take stocks like Palantir or Sofi, for example. Owning these stocks involves perceived risk since they recently went public, but their future prospects look promising, and the market loves to speculate on their growth potential. 

 How does selling a covered call work? 

By now, we’re halfway through this post, but can you answer the question of how does selling a covered call work? In my newly built portfolio of stocks, I now own Sofi. Let’s examine how much we can potentially earn on a weekly or monthly basis from this position. The number of trades you can make in a month will depend on your work and personal life. Let’s assume you can trade once a month; a good rule of thumb is to aim for a return of around 2% to 4%. I’ve found that focusing on those returns has brought me the most success and consistency in my trades. 

 Sofi is currently trading at $5.39 per share as of May 24th, 2023. So, a 100-share position in the stock would be worth $539. We’re aiming for a roughly 4% return on this stock, which amounts to approximately $20 worth of premium collected in a month. Let’s dive into an example: to open this trade, you would sell a call on Sofi at the $5.50 strike price with an expiration date of June 23rd, 2023. The premium received for this option is $27. By June 23rd, if Sofi is trading at $5.50 or higher, you would be obligated to sell your shares at that price. Additionally, you would receive $0.11 per share for the stock if we assume you purchased it at $5.39. This would result in a total return of $38, equivalent to around a 7% return in one month. 

 The above example is simplified, mainly focusing on the trade breakdown. Initially, you may experience a few losses, but over time, you’ll gradually determine your win rate. It’s ideal to aim for a win rate of around 85% to 90% of your trades. If you find that you’re losing a significant number of trades, take the time to identify what might be going wrong and adjust your approach accordingly. Commissions play a significant role in your options trades, as the fees you pay per trade directly impact your returns. Research online platforms that offer free or low commissions to find the one that works best for you. 

 The biggest risks of selling a covered call:

1. Risk of missing returns: Consider a scenario where the Sofi stock goes up 10% over the month you sold your covered call. Comparing that increase to your trade, you would have missed out on approximately $53, which is a difference of about 3% from your original trade. This is one of the significant risks of covered calls. 

1. Stock price decline: Let’s say you bought the shares at $5.39, but the stock price drops to $4.50 per share. This means you would be down approximately 16% on your position. If you made the same trade and were forced to sell the stock at $5.50, which is below your cost basis, you would have incurred an overall loss of about 9% after considering the 7% return you initially made. 

1. Assignment risk: When selling calls on a stock with a dividend, such as Apple, the counterparty may exercise their right to buy the shares before the expiration date if the stock’s ex-dividend date coincides with the option’s expiration date. They do this to collect the dividend and boost their returns, and that can only happen if they own the shares before the ex-dividend date, leading them to exercise their right to purchase your shares earlier than you intended. 

1. Opportunity cost: This scenario becomes a concern when you make poor decisions regarding the stocks you choose to purchase when selling covered calls. Always keep in mind that you may need to hold the stock for a long time if there is a significant decline in the stock market. Therefore, ensure that the stock you purchase is one you like, so you can purchase more shares as the price drops. 

 Now, how does selling a covered call work? There is much more to the strategy of selling covered calls, but I hope this post at least sets you on the right path. Experience will be your best teacher. Trial and error will help you perfect your strategy but remember not to put your entire portfolio at risk on one trade. Over time, you will become more comfortable and confident, and what initially seemed like a large risk will no longer feel that way with your growing experience. Many platforms offer trading simulators for practicing paper trading before you start with real money. This can be a great approach to limit the risk of losing money as you get started. 

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While a simple buy and hold strategy of the S&P 500 index is suitable for most people, I have always been a hands-on investor. Instead of the traditional approach of investing in a 401k and aiming to become a millionaire by 65, my goals were always to achieve more. I wish I had known more about low-risk, high-reward option strategies such as buying long calls, puts, selling cash-secured puts, and selling covered calls, which can significantly boost market returns when executed correctly. 

So, why should one trade options? 

For a while, I felt quite pleased with myself as a few of my individual stock positions gained 25-30% over a two-year period, seemingly beating the market. I believed that consistent investing of at least 10% of my paycheck each month would bring me closer to my financial goals. However, it was during the pandemic, when I witnessed market crashes and the rapid erosion of market returns, that I was introduced to options and the first strategy I learned of is hedging, which is essential in option trading. 

As I watched all my positions lose their gains, I felt a sense of helplessness. It seemed like my only options were to either panic sell all my positions or hold onto them, hoping for a rebound which could’ve taken weeks or even years. However, as I learned more about options, I discovered a third alternative. 

Protective Put: 

Selling stocks in which you still have faith, particularly if the company’s fundamentals remain strong, is never ideal. Hedging, a commonly used option strategy, protects against losses when a company’s stock price is falling. By purchasing a protective put option, you can safeguard yourself from further losses. For instance, if your cost basis on a stock is $45 per share, you can buy a put option at the $40 strike price, with a future expiration date of 3 months to a year. This way, if the stock price falls below $40 at any point during that period, the increasing value of the put option would offset the declining value of your stock. 

Getting started with option trading: 

If you’re considering venturing into option trading, I encourage you not to make options your primary focus right away. First, determine the type of investor you are or want to be. Are you a value investor who prefers holding blue-chip names like Coca-Cola and Apple? Or are you a growth investor with a higher risk tolerance, looking for companies like Nvidia, AMD, and Tesla? The reason I stress this point first is because the positions you buy, hold, and trade will form the foundation of everything you do with options. 

The Wheel strategy: 

One of the most popular option trading strategies is the Wheel strategy. The first part of this strategy involves a put writing strategy known as a cash-secured put. To begin, you need to choose a stock you want to buy and determine a price at which you would be comfortable owning it. Then, you sell a put option on that stock at a specific strike price, which means you have the obligation to buy 100 shares of the stock if it reaches that strike price before a predetermined expiration date. 

For example, let’s consider Tesla stock, which is currently trading at around $164 per share. If you believe this price is too high, you could decide to sell a put option with a strike price of $150, expiring three months from now (the week of July 21st, 2023). This put option would pay you a premium of about 5% or $890. 

If you have a bullish long-term outlook on Tesla but don’t want to pay too much for owning it, you wouldn’t be disappointed if the stock price dropped to $150. If Tesla doesn’t drop to $150 per share by July 21st, you keep the premium without any obligations, and you can open another position to collect more premium. You can repeat this process over and over. The only requirement for this strategy is having the collateral ($15,000) to take ownership of the shares. Since stocks don’t only go up, eventually you may be assigned the shares. 

On the other side of the strategy, there is a potential downside. For instance, if the stock price falls to $125 per share, as the option seller, you are still obligated to buy the stock at $150 per share. This would result in starting your position in Tesla down by $25 per share or 15%. However, there is some good news. Remember the $890 you received initially? Well, that premium factors into your cost basis. So even though your position is down, your cost basis is technically around $141 per share instead of $150 per share, meaning you are down by approximately 11%. 

Another positive aspect is the ownership of the shares. If you have strong conviction in the long-term outlook of Tesla or any other company you like, you would be pleased to own the stock at a discounted price. Once you own some shares, you can move on to the second part of the Wheel strategy: covered calls. 

Covered calls: 

Now that you own 100 shares of Tesla, you can write a covered call. In this strategy, you essentially put your shares up for sale by selling a call option at a predetermined strike price. By doing this, you have the obligation to sell those shares if the stock reaches that strike price, and in return, you receive a premium. Let’s continue using Tesla as an example. 

Assuming Tesla shares are currently trading at $164 per share, instead of merely holding the shares and waiting for them to appreciate over time, you can sell a $185 call option expiring on July 21st. By doing so, you collect a premium of approximately $735, which translates to roughly a 4% return over two months. Essentially, if Tesla reaches $185 per share by July 21st, you will have to sell your shares at that price, regardless of how high the stock price goes. 

At first glance, it may seem like a favorable outcome. You gained $21 per share in share price appreciation, along with the collected premium, resulting in approximately $2,835 in profit from your Tesla shares. 

Making a profit is always a positive outcome, but you may later realize the missed potential. For instance, let’s say shortly after this trade concludes, Tesla’s stock price rises to $200 per share or even higher. This means you would have missed out on the additional upside potential of the stock. 

This is where your outlook for the company becomes crucial. If you believe the stock still has more room to grow, you can choose to buy back the call option and accept a loss on the position. Keep in mind that buying back the call option would likely be more expensive than the $735 premium you received, depending on how much the share price increased.  

Alternatively, you can be less aggressive in choosing the strike price of the calls you write by opting for higher strike prices, such as $190 or $195. This reduces the likelihood of the stock reaching that strike price but also lowers the premium you would receive. People are often enticed by writing aggressive calls to generate higher premiums on their stocks. 

Investing in any asset always involves a risk-reward factor, and we take on risks in hopes of better returns. The objective is for those returns to surpass what we could achieve by investing in savings accounts or bonds. This mindset guides me when weighing the pros and cons of any option strategy I utilize. 

It’s easy to get caught up in the excitement of turning $1000 into $10,000, and many individuals who engage in option trading have experienced the thrill of chasing those returns. However, after learning some lessons the hard way, they typically abandon strategies that fell more like gambling and instead seek more stable and risk-defined strategies, such as the ones we discussed. 

These strategies are just one of several utilized by prominent hedge funds in the public markets. I used all the resources available to me to reach a point where I felt less overwhelmed and confused when considering how to implement these strategies, trial and error was the best teacher for me personally. Check out the Chicago Board Options Exchange to learn more about option trading, jumping right in usually results in financial loss. Your brokerage account might also have some great resources you can utilize as well.  

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Time management strategies play a vital role in achieving personal and financial success. Many of us constantly search for the answer to the question, “How do I become successful?” and I firmly believe that the answer lies in effective time management. In the past, I may not have given this concept much thought, considering it a simplistic response. However, over time, I’ve come to realize that time management is the key. 

We often fantasize about meeting a successful person we admire and asking them about their path to success, only to receive the clichéd response: “Hard work.” While hard work is undoubtedly important, the missing piece of the puzzle lies in understanding why we may be toiling away without seeing the desired outcomes. This is where the significance of employing these 9-time management strategies comes into play, strategies that anyone can utilize to achieve success. 

Acknowledging the need for hard work is a given. The real challenge lies in understanding why our efforts might feel fruitless and discovering how we can enhance our daily productivity. Implementing these 9-time management strategies will empower individuals to achieve success and gain a sense of fulfillment from what they do. 

Personally, I despise the feeling of reaching the end of a day only to realize that I haven’t accomplished anything substantial. It’s disheartening when our days control us instead of the other way around. 

One pivotal aspect of effective time management strategies is understanding your driving force. If you’re uncertain about what truly motivates you, that’s perfectly fine. Dedicate 15-20 minutes each day to sit quietly and reflect on your deepest desires. It may take a couple of days or even weeks, but eventually, the answers will come to you. 

Once you have identified your goal, it’s crucial to follow through and ensure that you maximize your time to achieve what you truly desire. This is where honing your time management skills becomes invaluable. By consciously making time for what’s truly important, you’ll find that your days no longer pass you by, and you will accomplish more of the things that matter to you. 

How do you change that? 

 To effectively implement these 9-time management strategies for success, it is crucial to develop a plan and maintain consistency in forming new habits. Focus on each day without getting overwhelmed by the progress you’ve made or how far you still have to go. Here are the strategies: 

1.  Decide on what you want: 

Figuring out your life’s purpose and aspirations can be a complex journey, similar to the days  spent in a guidance counselor’s office contemplating your college major. There are three ways to assist yourself in this process: 

• Identify your passions: Think about the activities that ignite your enthusiasm and bring you immense joy. It could be a burning desire to be a firefighter or any other pursuit that makes time fly by. Effective time management involves engaging in activities aligned with your passions, and I sincerely hope that everyone reading this can experience that sense of fulfillment. 
• Recognize your natural talents: Consider the tasks that you effortlessly excel at. It could be your innate ability to shine in front of a camera, which might lead you towards a career in broadcasting. If you fall into this category, it’s essential to set specific goals. Merely going through the motions day after day won’t be fulfilling in the long run. Embrace daily challenges that allow you to leverage and enhance your valuable skills. 
• Explore your interests and desire to learn: If you haven’t discovered a burning passion or identified natural talents, focus on acquiring new skills and becoming an asset in your field. While you may not initially feel passionate about the chosen skill, the desire to learn is present. For example, working in sales which I did for many years, might not initially seem appealing, but by immersing yourself in the role and continuously developing your expertise, you can find great fulfillment in assisting clients/customers and positively impacting their lives. Maintain a goal-oriented approach in this category by consistently expanding your skillset and setting new milestones. 

By implementing these strategies, you can align your time and efforts with your goals, passions, talents, or interests, leading to greater fulfillment and success in the long run. Remember to stay committed, consistent, and open to continuous growth.

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 I think the minimalist movement has the right idea. As a short-term experiment, I would be open to trying that lifestyle. The normal things in our lives get taken for granted. Once we start to eliminate, we discover what we truly can and can’t live without. 

Identifying necessary versus unnecessary spending  

 This idea of guilt-free spending is very real. The ultimate balance in achieving financial independence is reaching a point where your spending is guilt-free. It is quite a balancing act, but once you get it right, most of the stress in your life associated with spending will fall away. 

 Think back to the last time you paid the important bills and had one of those good months where some money was left over. Have you ever felt conflicted about how to spend it? Going back and forth on whether to spend it responsibly or treat yourself to something well-deserved or overdue? 

Chances are, if you are like most of us, you chose the latter. Unfortunately, like most of us, you will have some feelings of guilt for spending on yourself. This is where everything hangs in the balance. If you can differentiate between unnecessary and necessary spending, you will be in a much better place in the long term. 

 What is necessary and unnecessary spending? The answer is subjective, but let’s look at some examples:

Scenario 1

 You’ve been working 30 days straight, long 12-hour shifts without having time to do anything but work, go home, and do it all over the next day. At the end of that month, with some extra funds available, although you have debt, you spend it on some R&R. 
 

Scenario 2

You’ve been working 4-day work weeks, relatively short hours for about a month. You spend plenty of your free time and money on yourself and on hangouts with friends and family. At the end of that month, you find yourself with some extra cash. Although you have debt, you choose to spend those extra funds on yourself. 
 

Invest back into yourself 

 If you’re like me, you hopefully see the first scenario as a good way to spend money without feeling guilty about it. When you need time to take care of yourself, take it. Be kind to yourself in knowing you are human and need breaks. I can relate to having such a burden on my shoulders that I would feel guilty, feel like I was letting family members down if I stopped for a second and did something for myself. 

 Remember, spend money without feeling guilty about it, the best way to take care of anyone is for you to be at your best. As you slowly start to win those small internal battles, your mind will be filled with less conflict, and success will slowly follow. 

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Always get back up

We all react differently to bad news, it takes some of us more time to bounce back than others. Maybe the fact that you are reading this post means that you are looking for answers. Personally, this year has led me to ask why before and after every major decision I make. The reason I do this now is to evaluate if my feelings are the same before and after those big decisions. From there, If I don’t feel good about a decision, I have no reservations about starting over.  This is a great tool we can all use to break us out of our routine or whatever is keeping us from turning back or starting over.

Doing the right things like saving in your 401k, Roth IRA, and HSA accounts are all great but how many of us are saving and investing with no real reason except that it’s what we are supposed to be doing. We put our lives on auto pilot without question and expect all the answers to be waiting for us when we retire.

If you haven’t thought about short and long-term goals in a while, make time to remind yourself. Ideally every day if you can.  

Ask questions of yourself

 Once in a while it’s good to ask ourselves, Why?
-Why am I waiting till I’m 65 to retire?
– Am I putting off things that make me happy?
– Why am staying at this job if I don’t enjoy it?

We struggle to find the sweet spot in life. Do we stay in that well-paying job we hate, or do we make the switch to that lower-paying job we love? Most people will usually choose the former. Unfortunately for some of us when we realize we put off being happy in the long run for money, it is too late to turn back the clock.

Happiness for many of us always seems to be 20,30,40 years down the line. The end of the rainbow (retirement) seems to be where many of us say “When I get there I’ll finally be happy”. I don’t think the long-term goal of retirement is bad, but happiness should be found along the way; in life’s small moments (i.e., short-term goals).

My life changed for the better when I finally stopped for a second to take a breath and figure out the balance of where and what I got Happiness out of every day. 

Stop saying tomorrow

When it comes to  self-evaluation, it’s always easy to say I’ll sit down and do it tomorrow. We always find other things to do to pass the time and before we know it, the day passes us by and we’re left saying the same thing we said the day before “I’ll do it tomorrow”.

That cycle will continue until you make a change, don’t wait for another traumatic outside event to remind you of how short and fragile life is.

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What is your skill?

Creativity can be a great thing during times like these. Do you draw for yourself, do you write poetry in your down time? Maybe you love to read. Why not monetize those drawings by seeing if there is an interest in your work, why not find a freelance drawing gig, post your poetry online, or do online book reviews.

We often don’t give ourselves enough credit for the things we are good at. If the ability to make money by posting your poetry online- or anything you love for that matter- doesn’t exit make it your goal to be the first. When you are actively involved in something you love you will put your all into it. I love seeing and reading about new creative ideas. I recently heard about virtual piano lessons, who would’ve thought that would ever be a thing.

The first thing we do when we are looking for job ideas is Google “How to make extra money on the side”. We spend so much time looking to what other people have done, which has its benefits- cutting down on the learning curve being the biggest. Ultimately when we do that, we’re limiting our own creativity.

Have confidence in your skill

Starting something new is very intimidating and frustrating. What gets most of us started is ultimately the same thing that gets most of us to quit- our pride. We don’t have the pride to say we never gave it a shot, but by also not wanting to hurt our pride, the moment it appears we might fail, we throw in the towel before it happens just to say we quit vs we failed.

Don’t take yourself seriously, take your work seriously. Any time you start over thinking and the pressure gets to you, remind yourself to let your work speak for itself, be confident in the skill you develop; your success will come from the quality of your work, which will create word of mouth.

Work through the fear

Are you the fantastic singer who only sings in the shower? the fantastic cook who only cooks for friends and family? the great actor who has stage fright? Self-improvement is a daily process if not a lifetime process. You can improve as you go, don’t wait until you have it figured out before you start. Improve yourself as you take chances. This is the best way to learn about yourself.

Dig deep to find out why these feelings and fears resurface when you’re so close to breaking through. Remember, There’s nothing you can’t overcome.

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Something I used to do often and was never embarrassed about was to get advice from the top salespeople in my department. What I noticed was my feelings often changed once I got to know each individual. I still wanted to be a top producer myself, but I no longer viewed them as competition. When you compete you want to do well and a part of you hopes that the other person you hope to beat doesn’t do as well.

Don’t compete against someone’s success Compete for your own

If you knew someone was working as hard as they did to support a sick family member, to pay off a massive debt, or to send their kids to college. How could you root against them? Once you find those things out, if you are like most people there will be an instant shift, you will start cheering for this person instead of going against them anytime you see them do well.

Competition is great because it’s a reminder that there is no ceiling if you work hard enough.

It’s good to look at how hard others are working because it reminds you that when you think you’ve reached your limit, you haven’t. You think you’ve done a good job by working a 10-hour day, only to see that someone worked 14 hours. That pushes you.

Healthy competition makes you better, unhealthy competition makes you jealous. Be very mindful of your thoughts. The line between the two is almost unrecognizable.

Ask yourself, do you want to better yourself or do you want to be better than someone else?

I’ve often been in sales environments where the company was having its best month ever; which means everyone from the top salesperson down to the bottom of the salesforce had their best month ever. No matter how great their months were relative to what they had accomplished before, there was always jealously and envy aimed at the top salesperson because of how much more money he or she was making compared to them.

Don’t compete set goals

The most important thing you have to do in your work or personal environment is define what success means to you. Once you do that, you can create a barrier around what makes you happy, which is hitting your goal. When you look over at the person next to you who was more successful or had the better month, you’ll think “so, what?”. Their goal wasn’t my goal.

A goal gives you a point of satisfaction

The downfall of many is that they don’t set a goal for themselves, so there is never any point of satisfaction. The beautiful thing about setting a goal is even if you fall short, you might be disappointed, but the feeling will differ from jealously felt for others. You will be motivated to improve yourself. To try again.

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How many of you would agree that wasting time is hard work?

Like you, I’ve had those lazy days of laying on the couch and doing nothing. Midway through the day I always find myself having a hard time looking for something to watch on TV. It doesn’t matter that I have the best prescription for a lazy day, My phone in one hand streaming through my social media feeds and the remote in the other.

Hulu, Prime video, Netflix, each with new and original content I could be watching. It doesn’t matter how good the shows are, I’ll never know. Somehow I always endlessly scroll through all the options and ultimately fall back to old reruns.

What is the solution?

Turn your biggest indulgence into a resource. We all have them. If you enjoy watching TV, turn to informational shows or documentaries on things you enjoy, if you typically spend hours on end listening to music take one of those hours and start listening to podcasts, if you spend hours on end on social media find out if there is any value to the content you are posting and build off of that.

Our Cell phones in this day and age are our biggest tools, our biggest resources. I am a believer in using the time we spend on our phones to our advantage rather than an additional time-wasting tool. If you like to write, write on your phone, if you like to read your phone gives you the ability to carry your books with you everywhere you go, if you don’t like to read listen to the latest podcast.

Organize your to do list

There is a difference between taking a much needed mental health day after days, weeks or months of working hard; and procrastinating when you have a full to do list. Listen to your mind and body, you will quickly know the difference between the two.

Before you beat yourself up for not getting anything done once you realize half the day is over and you’re still sitting on the couch. Take a second to organize your to do list in order of importance. Take care of the most important thing on your list and see how you feel. If you have some time and want to keep going, tackle the next one and then the next one.

Don’t try to do it all at once

A lot of times we are paralyzed by how many things we need to get done and the immediate defensive reaction is to leave it all for the next day so we don’t have to make any decisions. This wouldn’t be too bad except tomorrow usually looks a lot like yesterday.

There is a certain satisfaction that comes from accomplishing a task that is on our to do list. The latest thing I did and was putting off for months was doing some spring cleaning around my home, it felt great getting rid of old things and clearing up all the clutter. I was left with this great feeling of accomplishment but was also left asking myself “what took you so long?”.

On a small scale it doesn’t seem too bad because of the level importance of spring cleaning but if we think about how many other things we’re putting off in the same way on a bigger scale things start to look more serious.

Maybe you had plans of going back to school, plans of starting your own business, or maybe you’ve been thinking about fixing a relationship with someone close to you.

Whatever it may be, we have to stop saying or thinking I’ll take care of it tomorrow. Odds are we won’t.

The first step is in the importance of the task to you. If its important make it a priority. If its not, be honest with yourself and stopping saying you’re going to do it.

Creating a new habit is hard, but it is always worth it in the end.

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You tend to self-sabotage because it’s not the idea of actually being successful that terrifies you, it’s the steps you have to take to get there. The success associated with being the best at what you do invites compliments but also opens the door to negativity which is terrifying. Fear has a way of keeping us stuck in place.

This Fear of standing out cripples a lot of us. All we can think of and imagine are the bad things that will happen, all the bad things people will say. Minimize those negative thoughts by thinking of the good things that can happen by you contributing your best to the world. I promise that list will always be longer.

This fear of standing out comes from three places.

1. Fear of what other people think

Have you ever been in a work environment or even out with friends, where you were listening to someone’s  opinion on a subject and to your core you disagreed wholeheartedly with them but you pretended not to, just to avoid any negative backlash?

2. Fear of being left behind

This brings most of us to our high school and middle school days. Actually enjoying going to class, doing Homework and getting straight A’s, was not the popular thing to do in school. So, what did we all do naturally, we held ourselves back to fit in with our friends.

3. The pressure of expectations

Many can relate to this: You are in a work setting, you start performing really well, which catches the attention of your supervisor.

All of a sudden, he knows who you are, says good morning more often than before walking down the hall, even greets you by name, it’s a great feeling.

Shortly after, those compliments you receive for doing well start to feel like a constant pressure to produce. Those walks down the hallway become constant reminders of how well you did or didn’t perform the day before.

Eventually the pressure of those expectations being put on you over and over again causes you to do less than you know you are capable of; you do this to avoid that constant spotlight. Before you know it, those hellos walking down the hallway slowly diminish, and eventually you blend back into the fold with the rest of your coworkers. Back to where you started.

Pressure only exits when you are doing something for others and not yourself. Find what you are passionate about and you will naturally put your all into it and want to be the best at it.

Always do you best

Fight those instincts that make you want to quit with everything you have. Remember that ultimately that’s what success is, a series of good habits repeated day in and day out.

There are some things that we should all do for ourselves. Making an attempt at something we want but are scared of should be one of those things. There is always something amazing on the other side of fear.

Remember The happiness or success you’re looking for might not come from accomplishing your goal, but you will certainly get it from the pursuit of your goals. You might even realize that you are already happy once you get there.

The post The Fear of Standing Out; Don’t Let It Hold You Back appeared first on Financial Browsing.

He then introduced himself and told us about the purpose of his visit and his speech. In our case it was because we were due to graduate soon.

The guest speaker asked for two volunteers to demonstrate the point he was about to make. He then asked my classmates two questions.

1. What do you want to do after you graduate?
   2. How much do you want to make?

Both of them went on to describe their dream job and the resulting income. I remember the income figures were high because they got my classmates murmuring in the background.

Always expect that things will not be easy

Once they were done talking, our guest speaker quickly knocked those numbers down stating that neither one would likely achieve those income goals.

He went on to give numbers on the average students earnings after graduation.

He Described through his charts that the average graduate usually starts with a salary anywhere from 35k-50k and gets two pay raises in his working career.

The first comes: After a bit more experience on the resume a few years after graduating. The effect is a chance at a promotion, multiple job opportunities, the sky is the limit at this point.

The second comes: Years more down the line after 20 plus years of experience in the workforce, resulting in a final career pay increase.

He was detailing a 40-50-year work history. As I was sitting listening and looking up at his charts, all I kept thinking was, who does this guy think he his?

The harshness of what he was saying struck a nerve; here we were seniors in college with all these hopes and dreams. Meanwhile someone we didn’t know was coming in to tell us at best only one of us in the room would achieve the level of success we were all hoping for.

Always be optimistic about the future

I came out the class thinking two things:

1. I don’t want my life charted out and read out to me by a stranger.
2. This speaker’s speech was dated. I’m not even sure I wouldn’t have said the same thing if I was around in 1970.

We’ve always lived in times where opportunities were endless. The opportunities change over the years but they are still there. Your work does not have to stop after you get home from your 9-5. Now with the internet and your phone the only limit is your imagination.

That’s the speech I would’ve wanted him to give to the class.

Years later I’ve often wondered how many of my classmates let the speakers speech demotivate them and how many got even more fired up like I did, determined to never prove him right.

Always keep a positive attitude

Inspiration and motivation are one of the biggest keys to success in anything we do in life, there’s a reason we look for it in outside sources when we can’t find it in ourselves.

Earning a high income is not the definition of success and not all us sitting in that room had that goal. However, all of us had ambition. We can be ambitious at any stage in our lives but we are especially so as young students ready to conquer the world.

Revisit those goals

Without a goal we don’t know where we’re going. Don’t wait till your next job interview or your next date to hear the question.” Where do you see yourself in 5 years?”

There’s a great confidence in setting financial goals, professional goals or personal goals and surpassing them.

It is so easy to let life pass us by. For example most of us will get a job, then work in the same place for 30 years because it’s the safe thing to do and it pays the bills. All the while falling into this mundane routine of going to work, going home, watching TV, falling asleep and doing all over again the next day

Don’t let your life be part of someone’s Chart

All of us reach a point where we think we haven’t accomplished what we thought we would at our current age.  There’s always someone ready to tell you what the odds against succeeding are. Ultimately the important thing is to reconnect to your most important goals in life and realize that it’s not too late. Start every day with a purpose and it will all fall in place.

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You pretend to enjoy spending 15 bucks for a drink at a nightclub when you know the whole bottle costs 12, pretend to enjoy expensive brunches on the weekends, pretend to enjoy going to lounges and spending $100s all the while you cringe at the thought of every dollar leaving your pocket.

Why do you do this?

To keep up, or rather to not get left behind. Your friends call you every weekend to go out, and you get away with saying NO now and then but eventually you realize too many NO’s will cause that phone to stop ringing and the thought of that is terrifying.

There it goes The loss of the millionaire mindset.

This is how it starts for many of us, losing the mindset that has the potential to turn us into millionaires. Save, budget, invest, and account for every dollar.

The biggest way to help ourselves at any stage of life is to control our spending. For some of us, It truly is a struggle because of debt and bills that seem to be insurmountable, but for this small group it is a choice made from fear of being left behind.

Eventually that inner voice that makes you question yourself every time you overspend will get smaller and eventually disappear; that lifestyle you never enjoyed will become the new normal.

This is how many of us live our lives. I’m writing this amid all the social distancing craze because of the Covid-19 virus and find myself thinking of how everyone is being impacted differently. Most of us will come out of it unchanged, but hopefully a few will come out of it a little different.

This will not apply to everyone and might not make sense to others. If this resonates with you, please take notice and make a change.

Are you itching to go back to the way things were or looking forward to a change?

We’ve all seen the endless posts on social media about those who are eager to get back out there and resume life as they knew it with their friends; back to the expensive weekend brunches and the expensive lifestyle. Nothing wrong with that if it’s coming from a place of enjoyment.

Let’s talk about those of you who are thankful for this break from all your social pressures. Take this time to assess if your current relationships are matching up with your current goals, short or long.

Fear of losing friendships and relationships should never be an excuse for compromising the vision of what you want your life to be.

Social distancing the reset button you needed

Don’t look back on the successes you didn’t achieve financially because of time spent not budgeting saving and investing. Your goal might not be to become a millionaire, but I’m sure it falls somewhere in between.

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Happiness is tied to your level of stress, your level of stress among other things is more commonly tied to how well you are able to take care of your daily expenses. Start by defining what happiness means to you. We get so caught up in looking at neighbors and friends looking at what they have and then start playing the comparison game.

Everyone’s goals in life are different which is great. That’s the way it should be; We all have a different drive and strive to achieve different levels of success; that not only allows the world to progress, it leads to new innovations and discoveries every day, but there is no shame in not aspiring to be the next Elon Musk.

It is however important to define what you want out of life. A lot of times we don’t give ourselves the chance to find out if we like something if we ever try at all sometimes is a big surprise.

Lacking the patience to let things develop would be a great way to describe our everyday lives. This causes us to miss a lot of opportunities.

When you say you hate your job did you really give yourself a chance to actually enjoy it?

I am all for leaving a job that doesn’t make you happy if you truly are in a miserable situation. I have been in sales my whole life and went into it right out of High School, having no experience was very scary and intimidating. I thought about quitting every time I couldn’t close a client; with time I got better and more confident. Safe to say I’m glad I didn’t quit.

The world of sales is like a revolving door I’ve seen people start the position and quit within a day of starting the job. Always give yourself a chance to become good at something before you quit; there’s a great feeling of joy and satisfaction that comes from being good at what you do. It gives you that desire and energy to wake up every day.

That being said, don’t make the mistake of staying at job you hate for the money. If you don’t get that feeling of satisfaction we talked about, it might be time to look at different options. The world is full of examples where we see that making a lot of money doesn’t guarantee happiness. Choose Happiness first and the rest will follow.

In this scenario: Who is happier?

The person at a job they enjoy making $45k a year with a sound base of budgeting and investing knowledge or the person making $100k a year who dreads walking into his job in the morning, saves very little of his money and has no clue how to budget and save.

Learn to budget

I believe learning to budget is a lot like most things in our lives; we start off strong, then eventually something pulls us off course. In the case of budgeting, its usually social pressures to keep up with friends and family.

My recommendation to anyone would be to add up all your living expenses for the year and calculate how much you expect to spend every year on the essentials (Mortgage, car note, car insurance).

Once you’ve done that, break that total amount into a monthly cost. If your monthly income is higher than your monthly spending you’re off to a good start; if it’s not then you need to start looking at your budget and start cutting down on non-essential spending.

Spend According to your goals

Once you have your budget locked down, everything becomes easier and you enjoy knowing that you have that part under control. Start putting away those 6 months of emergency funds to always be ready for those unexpected expenses.

Spend your time and your money towards what happiness means to you; If your goal is to be comfortable while enjoying your weekends with family plan those weekend trips and nights out.

On the other hand, if you are 25 and your goal is to retire by 45 then your goal might be to save your first $25k to invest in your first property.

It’s not how much you make its how much you keep and invest

Always keep that in mind when you think you need an additional source of income. I thought that for the longest time before I started paying attention to how much I was spending. These days there are so many ways to produce additional streams of income. I recommend anyone consider it, but remember without a budget that’s just more money you’re not keeping track of.

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Let’s talk about New year resolutions, some of us love to set them, some of us don’t; but ultimately all of us look at the new year as a fresh start. We are either leaving negativity behind us, continuing on with something great or more commonly looking at the new year as a chance to do so something better or become more.

As the new year approaches, this is the perfect time to talk about the New year resolutions that you and I and a lot of people failed to meet from the prior year and the new ones sure to be set for 2020. Let’s take a second to analyze why we repeatedly fail to fulfill those commitments to ourselves. First, let’s look at the goals that make the top of the list every year.

The top resolution goals every year never change, and I’m sure you can guess which ones they are.

1. Diet or eat Healthy

2. Exercise more/ lose weight

3. Being more successful financially

It is important to mention that you should be commended for setting a resolution goal every year. Individual resolutions are all different, but the aim stands to be the same for all us. We want to be better individuals, which will hopefully compound into more individual successes in different areas of our lives.

Only about 8 percent of people succeed at reaching their resolution goals.

Why is it so hard to accomplish goals?

The two main reasons we fail to reach individual goals are:
1. The expectation that we should do everything perfectly, the moment we don’t we use that as an excuse to quit.
2. We simply have too much going on. Too many goals.

The 5/25 Rule

Warren Buffett made this rule famous a few years ago, and I’ve used it since the first time I heard it. Essentially the rule states; if you were to make a list of the top 25 goals you have, eliminate the bottom 20 and focus only on the top 5. The reason for this is that many of us without realizing focus too much on things we kind of want rather than the things we really want, and that leads us to not accomplishing much. So, take a second to make your list and anything that doesn’t make the top 5 should be eliminated.

We all know the secret to being successful, we just use it at our convenience.

Think on that a little more. What was the last thing you wanted really badly, and what did you do to get it?

The easiest time that I’ve ever had losing weight was when one of my buddies and I had a month-long bet that at the end of the month, one of us would lose more weight than the other.

For 30 days nothing else mattered to me, my competitive nature and the free lunch at the end of it was enough to drive me to get up at 5am every day for a month to workout, follow a strict diet, all without questioning why I was putting myself through it. I already knew the answer.

How many of you have a similar story? Whether it be a bet, defiantly proving our parents or our friends wrong about a relationship, or a career choice. We all have those moments where we’ve exhibited the same intense will, focus and motivation to succeed.

We all have it in us, we just use those skills very sparingly. More commonly when we are looking to prove someone wrong.

So what does it take?

1. Goal setting
2. Keeping a vision of your goal in front of you everyday
3. Consistency
In your moments of difficulty, you will ask why? The answer comes from always knowing the reason you set your goals and keeping that reason in front of you every day. Always remember to focus on your main goals vs too many things at a time. You’ve already proven you have what it takes to do it in the short term, accomplishing your long-term goals are no different.

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This isn’t good or bad, it’s all relative. There are social media influencers out there who most likely exceed that number and pull in six figures annually.

What I do believe is if we are going to spend close to half of our working hours on our phones, that time should be put towards our interests or at least discovering what those interests are.

I have a great interest in personal finance and achieving retirement goals. Spending those 3-4 hours following people that have accomplished what I’m striving for would be in my best interest.

Our days are made up of small successes and the act of managing your phone time is a good place to start.

What would you spend your time doing if you had to choose?

Some of us are luckier than others because we’ve already gone through this self-discovery stage, for most that is not the case. Dig deeper into passions that may have gone by the wayside over the years.

If you were interested in starting a blog, you could find a step-by-step guide and have a website up in a matter of hours; if you were interested in photography, you have the tools available to create, edit and share your content all in one.

The opportunities are endless. As we enter a new decade, think back to early 2010 when smartphones and social media as we know them to be today were in their infancy.

Stay consistent enough to create a new habit

Like I mentioned at the beginning, this is not an argument for pulling ourselves off our phones. I doubt that’s realistic; at least for me, I knew it was a losing battle.

It’s all about time management and in today’s society our phones are a big part of that.

If you were forming a budget, you would first look at what you’re spending the most money on, and start looking at ways to reduce that cost or put the money being spent to better use.

When it comes to healthy eating habits, it’s always better to think lifestyle change than short term diet. This is no different. The overall goal is building a long-term habit, not a temporary fix.

Invest in yourself
Investing time in yourself is always the first place to start when it comes to achieving any long term success. Half of your time is already committed to certain tasks before you even wake up.

The easiest way to set a clear direction for how you spend your time is to set a goal. It could be short term or long, financial or personal.

Without a goal we end up wasting time without knowing why, or even giving it a second thought.

Odds are you are not the busiest person in the world, but I can bet we’ve all felt like we were at some point in our lives.

Two things we all have is downtime and a phone. The first thing we turn to when we have downtime is our phones.

Turn that hour of lunchtime or that 15-minute break into something productive.

Manage your time
Your days might be so busy that you’re always on the move, but always remember to make time for what’s important.

Time is your most important resource, be creative, use it well and all your successes will surely follow.

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