Cycle Trading

[Duma]

I have one more story that may be of major interest. The accounts I talked about in my last post are mine and my wife's IRA accounts. When I pulled out of Vanguard several years ago, I moved the money into what I call my #3 Van account at Interactive Brokers. I have done well with the account matching or being just under the S&P. It is a pretty large account, so I don't want to trade it too much just the same way I will treat my IRA accounts.

I trade it with 115% leverage to make up for the whips when I sell a bit when I get nervous. So far it has been better to not sell at all. But we don't know when the big pb is coming, so trying to be a bit proactive.

I have a plan for 2021 that I will replace 20% of the account with QQQ. This should help a bit. I also plan to try a covered call strategy very small to start.

This idea came from a good friend that moved to Phoenix this winter. He trades I think a pretty large account and is very aggressive with covered calls. He has bought 100 shares of many of the big names like ROKU, NFXL, APPL, MSFT, etc. Every 2 months he sells a 2month out call that will give he a 60% return. He did not give me the details of how he calculates the 60%, but I will show you how I do it.

So I also have a list of solid companies that I also watch. FDX, NVDA, PAYC, PYPL, and SQ.

I have picked one as a starter and see how it goes. SQ.

Here is my worksheet I made up last week. SQ is currently trading at 221. A 57 day option at 240 will get me 13.50. That is 6% downside protection. If the stock doesn't move I return 39% annually and if the stock were to go to the strike each month it would return 68%. I think this is his 60% number.

I will buy when I get a solid 60min buy signal. I got a M3 buy Fri, but I want to wait until I see M65 go flat and maybe a M5 xo. The daily is showing a bit of a pb, but it doesn't look serious yet, so I will try the 60min buy and exit if it turns around. I am not ready to just buy and hold that many shares. I would rather trade from a daily chart, but I want to get my feet wet.

My friend has done this for enough cycles (2 mo each) that he has built up a big cushion, so he just holds all the time and just keeps selling calls. If the stock blows through his strike, he buys back the call so he keeps the stock, and sells another call. Nothing is really lost and he in on his way to his 60% number.

As far is holding 100% of the time, I think there could be a time to sell. I will hold that for another discussion.

Something to think about. I think it has real possibility.