Jan 262017

It finally happened. The Dow index broke 20,000 points for the first time in history. It’s never been so high before. If the stock market was a rapper, it would be Snoop Dog. ūüėÄ With valuations being stretched so much it’s important to be very selective about what investments we buy now. One wrong move and we could accidentally buy a stock that is nearing its peak.

Lowering Investment Risk With Covered Calls

So after looking at my options, ūüėČ I contributed some money into¬†my TFSA earlier this month and purchased 200 units of BMO’s Covered Call Utilities ETF¬†(ZWU.) This is enough to make it DRIP.

A covered call is an options strategy which¬†generates income for investors, even in a bear market. We basically sell¬†a call option on a stock that we already own. In doing so, we receive some money called a premium. ūüôā

Related post: How to write a covered call (buy/write options) 

Option strategies have slightly different risk considerations than owning¬†a stock directly. For covered calls, we¬†always get to keep the premium. But¬†if the stock goes above the strike price, we¬†have capped the gains¬†we can make. Call options can¬†reduce¬†our risk because if the stock falls, then at least we’re getting paid to wait until it climbs back up.

This is why covered call strategies work best on low volatility stocks that are not expected to move up or down a lot. Essentially we want the stock to remain steady, or grow slowly. But most of the profit should be made from the juicy premiums. ūüôā I do not believe¬†utility and telecom stocks can¬†continue to grow at double digit rates, given how expensive¬†their valuations are.

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Mar 192015

A couple days ago¬†I made $220 in about 5 minutes from¬†trading options. Today I will explain exactly what I did, why I did it, how others¬†can do the same if they wish to, and the risks involved with this¬†maneuver.¬†Out of all the option trading strategies out there, buy write options are probably the least risky, especially done with underlying large cap, blue chip stocks. They¬†also require minimal knowledge, no money down, and are¬†accessible to the general public. ūüėÄ

So first, what the heck is a Buy Write options strategy? Simply put it’s when we buy a stock, and then write (sell) a covered call against the stock we just bought heh. ūüėČ

The reason we might want to implement a buy-write is because we believe the stock will not move a lot in either direction in the near future and we want to generate some extra returns in the mean time!

Through a suggestion from a friend I decided to perform¬†my first buy write strategy earlier this week. I chose to do it using the National Bank of Canada, which is one of the largest financial companies in the country¬†with a strong balance sheet and growing profits. ūüôā Canadian banks are ideal for doing Buy Writes with because they are fairly stable and grow their dividends over time.


So let’s quickly run through¬†my thinking process. What is the purpose of buying a stock and then writing a call option against it? For me, it’s to make some quick and easy money with minimal risk, but a high chance to beat the market. ūüėÄ

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