I'm 55 and have about 200k in bonds yielding around 4.5% which feels inadequate for my retirement income needs. I keep reading about systematic options strategies that can generate 8 to 15% with defined risk, which would make a massive difference to my planning. The problem is I've never traded options in my life and the complexity is intimidating when I look at all the terminology, I understand stocks and bonds just fine but options feel like learning a completely different language. What I'm trying to figure out is whether this is realistic for someone my age to learn, or if the learning curve is so steep that I'd make costly mistakes before becoming competent. I also want to understand the time commitment because I don't want to spend my semi retirement glued to a screen watching markets. For those who made this transition later in life, how did you actually learn and what does the realistic day to day look like once you know what you're doing?
I keep hearing that options income beats bond yields but I have no idea how to actually start
byu/Sirius-ruby ininvesting
Posted by Sirius-ruby
11 Comments
The terminology sounds scarier than it actually is, once you understand the basics it becomes intuitive pretty quickly.
It sounds way harder than it actually is once you start doing it, all the terminology feels overwhelming until you realize most of it becomes intuitive pretty quick. I learned through insideoptions.io in my 50s and after a month or so of paper trading it really wasn’t as bad as I expected going in
Check out gambling sub to at least learn what not to do.
Yes options have higher yields, but way higher risk. Every stock or instrument you write options on is mesured id IV, how volatile the underlying asset is. Something like coca cola has a way lower yield than say Palantir that moves 5% daily.
What you risk with selling Puts, is that you get a premium for buying something for a lower price, and well that is great if that is something you wanna own. Problem is if it keeps going down and down, you might end up with all your money in lets sat a stock suddenly yielding nothing, and you can only sell at a loss, or wait for it to go up.
When it comes to selling calls, you are more or less only guaranteed a small yield, wether it goes down, or maybe you loose out of alot of upside. But you will always get a small return as long as it doesnt drop the same amount.
Rather than managing the options yourself, there are ETFs out there that do this for you. That may be worth considering.
There are ETFs that attempt to generate income from options trading. They are run by professionals that do only that, so perhaps that may be a place to start while learning more. Examples are JEPI, JEPQ, XYLD, QYLD, DIVO, SPYI, and more, most own shares of the underlying index funds and sell options on them to generate yields higher than the index provides. Options trading requires time and research to work well, and limits the capital gains on the underlying funds in return for more monthly income. I would also consider just moving more assets to equities if you are 10 years away from retiring. But that depends on your goals and plans.
I sell covered calls on my underlying shares. Usually weeklies that are 10% OTM.
Why do you have that much at 55? Did you panic sell to move into safety? You should find and hire a trustworthy pro. You’re likely messing up the last 10 years of solid income.
Have some fun learning options, great, but the majority should be truly planning towards specific goals. Your mistakes have likely already been more costly than a good pro would have cost you. This is no insult. Best of luck.
In order to be profitable trading options you need to understand how volatility behaves and how it gets priced. It’s certainly learnable, but that’s not to say it does not take a decent amount of time and effort.
If you’re looking for something quick and easy that is more or less set and forget then options are probably a bad fit. Don’t fall for people touting ‘income’ strategies like the wheel; it’s a long term losing proposition.
Didn’t some kid who didn’t fully understood options accidentally let an option go to expiration when he was “in-the-money” and he was on the wrong side of the trade? Due the nature of how each option is 100 shares of the underlying he owed so much underlying shares he panicked and…..something something happened….(can say, don’t know which bot might ban me on the wrong keywords)
So you want to know about options income? Understand that it bears bond income because of the LEVERAGED nature. It’s also a double edged sword, you can make a lot quickly and you can lose everything just as quick.
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