Agree on that.
I'm sitting on cash right now but am likely to trade something before the week is over. I have company arriving in an hour or so, so I might not do anything till he leaves on Wednesday. I don't want too many distractions when I enter trades: same 2-leg trade, all in, two accounts.
Virtually all my trades are Covered Call (CC) trades that expire within a week. That's a way of having some insurance written against the trade, but the insurance is income to me rather than a cost (as is conventional insurance one might buy) so it's a key (and profitable) part of all my trades. That's taking a lesson from Warren Buffett, as he owns several insurance companies. He also owns Dairy Queen -- I envy that. Warren Buffett has a sweet tooth.
So I tailor all my trades to what I expect from the market and sector and stock of interest over the next few days. I never plan on owning anything more than a week.
As hinted above I trade what I think is one of the best stocks in the sector, so I get higher leverage compared to trading an ETF or the whole market. An ETF also has lower risk because it contains many companies. I can also have lower risk trades by buying one company then selling it Calls.
The majority of the time I will sell the Calls (insurance) that expire the same week immediately after purchasing the stock. That gives me a profit upon total trade entry. Occasionally, I'll buy the stock but wait for price to rise a little before selling the Calls. Sometimes during the week I'll adjust the trade by closing the Calls (realise partial profits) and sell new Calls at a different strike (expiration date or price or both).
On rare occasions when I'm sitting on cash, I'll sell Puts (thus creating income) as a means of trying to be Put the underlying shares at a lower price at expiration, or just collect income on the cash that must sit in the account while short Puts. I'm real careful doing this as I don't want to be Put a stock just as the floor collapses beneath it.
You don't have to believe the following, but it is true: using the above methods, my two accounts (Ind and Sep) each closed last year up 110% before taxes. I use ETrade and their site can produce a performance chart for last year, so I could post that here as proof.
I could have made more last year but I made the mistake of falling in love with one of my stocks and it took me about two months to regain what I lost: when your favorite toy starts to fall apart -- just get rid of it and don't hope it fixes itself. Hope and what-ifs are not indicators.
