Have Your Cake and Eat It Too

This is an update of my Blog originally posted on February 15, 2015

Most TV commercials are just plain boring or worse, usually worse. Every now and then a commercial comes along that makes an impression. I usually don’t remember what they were selling, I just remember the commercial. In this recent commercial the father is repairing a lawn mower when his young daughter enters and asks why the father is not watching the football game. He offhand replies that “you can’t have your cake and eat it too”. Then the commercial continues, but at the end the girl makes a statement referring back to the beginning, saying “dad, if we have cake we should eat it”.

Yes indeed, if we have cake why not eat it? So how does this apply to our investments? If our investments could be thought of as the cake, then eating the cake could be looked at as enjoying income or profits from our investment.

Normally you enjoy income from your investments by receiving dividends or selling a stock at a profit. But there are other ways to “eat” or generate income from an investment portfolio. One way is selling or writing covered calls against an individual stock. A covered call strategy is very effective; in fact there are dozens of ETFs that are based on a covered call strategy, such as IRR and GGN, to name two. Most of these types of ETFs pay a healthy dividend in the 8-10% range, attesting to this strategy’s effectiveness.

The only trouble with implementing a covered call strategy, as an individual  investor, is that it takes a lot of time, experience and know how to do it successfully. You not only have to understand your  individual stock, you also have to understand the use of options. Options are a whole new ball game, covered call writing just adds another level of complexity. And if you don’t do it right your stock gets called away.

Never fear, there are other ways to eating cake, that is, generating income from your stock portfolio. I have been doing it successfully since 2002. My income producing strategy, is explained in my newly released eBook “The 74% Solution, Short Term Stock Index Trading With Exchange Traded Funds”.

Basically what I do is make short term trades of one to five days in  several stock index ETFs. Since most of my capital is invested in various stocks, I use margin  on the stock portfolio to make short term trades; always keeping a large enough cash balance to cover occasional losses. Overall the strategy is profitable with 74% of trades closing with a profit. In 2014 this strategy produced an income of $938 which more than doubled my dividend income of $411 from my stock holdings. To provide full disclosure this trading strategy produced a loss of $511 in 2015, no trading strategy is perfect; also none of my stocks were called away, even though I had a loss, I still owned all my stocks, including the ones paying dividends. However 2016 was again a good year, trading income of $646 and dividend income of $466, again more than doubling the dividend income.

This income producing strategy, unlike covered call writing, takes very little time to implement, and no expensive charting or option tracking software is needed.

Every evening, after the market closes and at my own convenience, I use a free stock charting service to track the several ETFs that I use. If a trade setup materializes, I plan a potential trade for the next day, using a clearly defined entry point and money management-position sizing rules. If the next day confirms the trade setup, it only takes ten to fifteen minutes to make the trade.

Easy pizzy lemon squezzy; low cost, low time requirement, low stress, high probability of profit equals extra income for your portfolio. Have your cake and eat it too.

Click on the ebook icon in the sidebar or go to “Products” page to obtain your copy of this amazing trading strategy “The 74% Solution”.