It is already 2022! Time flies … Maybe it is my age? or my kids? Or work keeps me busy all the time but my feeling is that time goes by, even faster now. From a financial perspective it is important to get time in our favor.
How can we do that?
- I think the long term investments put us on the path of taking advantage of time. It is impossible to predict short time moves of the market and it is much profitable to be in good business for a long time.
- Any asset that adding to its equity over time also a good option, real estate is an great example of that.
- Compounding interest over time. When we reinvest our profits to make more profits. No doubt compound interest snowball makes us rich.
- In 2021, I have found another way to benefit from time passing by. It is selling options (contracts). These options are sold for some predefined period of time and this is why time is in our benefit here.
All these four items take part and play a role in our future financial freedom.
Well, the item 4 is totally new income stream for me. So I have been researching it extensively so I can maximize my profits and use it correctly. If you have a stock portfolio, you have selected, you know their purpose. Of course you will be happy to get these stocks you like at a discount. Options give you such an instrument. There are a lot of info about options trading on youtube so it is a good idea to learn about it prior trading them.
Practical Example of Taking Advantage of Time
Let’s look at an example of taking advantage of time selling options.
Here is the graph of Coinbase Global,Inc company (COIN) , this company makes its money from commissions users use coinbase platform to sell and buy cryptocurrencies. I do not have firm opinion on the crypto currencies in general but it is obvious that this new market is getting traction. Since Coinbase makes profit regardless of crypto currency prices I think it is good investment opportunity.
Analyst estimates are positive, revenue and EPS are in up trend. So I am fine with holding this company shares if the option gets assigned, this means I will have to buy 100 shares.
Back to options trading, I have sold PUT COIN 28JAN22 210.0 P one contract, it is my obligation to buy 100 shares at the strike price $210 until Jan 28, 2022. Selling this option out I have got option premium of $460.
Looking at the Coinbase price graph, the share price never closed below $210, the shares were mostly purchased at the price of $232. I do not see from technical analysis that the price will reach $210. If the price will go below $210 I am ready to own 100 shares of Coinbase.
How do I take advantage of time in this case? The share price of Coinbase can go sideway. It can go up or it even can go slightly down for about three weeks and I still make $460. Out of four price directions in three of them, I am making money. The only case I am getting the shares is if the price goes sharply down, but in this case I will own 100 shares of a good business.
This month I have traded options for C$ 2,532 and paid C$ 4.37 commissions for all these trades.
I am exited about this new income stream. This income stream gives me an option to take advantage of my already existing portfolio and making money while waiting for attractive prices for businesses I would like to buy shares of.