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Lumpy Dividends and Options

Dividend payments, like oatmeal, may be smooth or lumpy. Smooth dividends are predictable, usually once per quarter. It is easy for options traders to believe these dividends are guaranteed, because they usually continue uninterrupted quarter after quarter. This also makes it easy to predict total return over a longer time span.

Ratio Calendar Spreads

The ratio calendar spread is well-known to some, but for others the risk/reward aspects are not well understood. One way to cover a short position is to own 100 shares of the underlying stock. Another, more creative way is to sell a shorter-term expiration position and buy a longer-term position.

Coming to Peace With Market Volatility

From 1950-2019, the average annual US equity market premium (return of the total stock market minus the return of one-month US Treasury Bills) was 8.37% per year. This was a large average annual risk premium for owning stocks.  The premium was volatile, with a Standard Deviation of approximately 15% per year.

1,300% Gain in One Day? Not so Fast

Would you like to book a $1,300% gain on a one day low risk trade? I would. That would imply that you turned your $100,000 account into $1,400,000 in just one day. Do it couple times - and you are a billionaire. Sounds too good to be true? It is possible in a Twitterworld. In a real world.. not so much.

Relative Yield of an Option

What is the “relative yield” of an option? There is a tendency to think of yield in terms of dollar value in premium alone, but to not factor in other elements. This makes side-by-side comparisons invalid unless adjustments are made. Dollar value by itself ignores the true yield, not to mention moneyness and time aspects.

Where I Invest My Own Money

As our contributor Jesse mentioned, “Don’t tell me what you think, tell me what you own.” As our readers and members know, we offer a wide variety of trading and investing strategies, but I'm often asked where I'm investing my own money. In this article I will share how my personal holdings look like.

Is This Rally for Real?

After being down over 35% from the all time high, S&P 500 has rallied over 20% from the recent lows in just two weeks. Is this rally for real? Or is it just a bear market rally, a "dead cat bounce"? What the "experts" are saying? Has the market bottomed? Will the selling resume?

Financial Planning Lessons From the Pandemic

The first quarter of this year will end up being one of the most volatile quarters of our investing lives. Many lessons can be learned. Perhaps none are more important than the basic principle of maintaining sufficient cash liquidity in the form of an “emergency fund” during both our working and retirement years.

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