CFB51 College Football Fan Community
The Power Four => Big Ten => Topic started by: Cincydawg on March 12, 2026, 08:27:48 PM
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(https://i.imgur.com/MC0qT0v.png)
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This is a choppy year for the markets. I don't expect any meaningful gains or losses at this point.
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I expect continuing significant gains for Tech stocks, especially those most closely associated with AI. First half will be a bit sketchy, second half will be strong.
There's no stopping that train by the way. Expect significant growth and signicant improvements to margins and operating income over time.
Yes, that implies, at the expense of workers and jobs.
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I expect continuing significant gains for Tech stocks, especially those most closely associated with AI. First half will be a bit sketchy, second half will be strong.
There's no stopping that train by the way. Expect significant growth and signicant improvements to margins and operating income over time.
Yes, that impliaes, at the expense of workers and jobs.
I have a lot of mixed thoughts on that front. My advice is to be careful.
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I'm careful.
I leave it to the professionals that do it for a living
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I have a lot of mixed thoughts on that front. My advice is to be careful.
My advice is buy low sell high.
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I've given that exact advice to the pros working for me
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I had "professionals" manage my retirement account for three years. They did a pretty decent job, I asked a lot of questions and tried to learn from what they did, and didn't do. They gave me the book by Howard Marks which was ... interesting. I've been managing on my own for the last decade or so and still doing reasonably well.
I don't get excited about market swings up or down. Well, actually, I usually do get excited, but temper my enthusiasm with a longer term perspective.
I haven't used options at all of late, Brad reminded me that I had used them in the past, more for insurance than gambling.
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So we've talked about these sorts of things in a lot of places on this board, but I think it may make sense to discuss things that we're doing, thinking about doing, are curious about doing, etc wrt to money.
I.e. a few weeks ago I had the combination of a planned stock sale and the need to buy a new car. I thought "maybe I should just pay cash from the proceeds of the sale" until I realized I could buy the car at 1.9%, right now that cash from the sale is sitting in a MM account making 3.35%, and I'm just waiting to decide what other ways I can put that money to use.
There are people more savvy by far than I on this board when it comes to financial matters, as well as probably people less savvy than me. So let's have an OT thread to discuss.
I'm going to pull over a few posts from the rankings thread and then kick it off with a riff on what CD said in the latest in that thread...
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One phrase I liked was "Get rich slowly." Another book I really liked way back was "The Only Investment Guide You'll Ever Need" by Andrew Tobias. He updated it sometime later. For a starting investor, which i was, I found really good practicable advice in it.
Another tactic I don't use often enough I think is stop loss orders. You see a stock you like at say $50 and decide to buy it, but you're of course not sure it's a winner, so you put in a stop loss order to sell if it broaches say $40. If it goes up to $60, you can lock in that stop loss now at $50 and play with "House money".
There are some more complicated tactics with options I use at times, pretty varied, another way to "buy insurance".
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Ok, so my merge didn't work as well as I'd have liked as those posts all predated my intro post... Oops.
But to quote CD:
I haven't used options at all of late, Brad reminded me that I had used them in the past, more for insurance than gambling.
Insurance, gambling, whatever you call it... When doing a covered call (out of the money), it seems that there are three scenarios:
- You write a call, it trades sideways and expires worthless, you pocket the premium: Win, because you kept the premium and still own the stock at the same value
- You write a call, it gains and expires in the money, you pocket the premium and are forced to sell the stock at the strike price: Win, in the sense that you gained both a premium and stock gains, but a partial loss depending on how far above the strike the stock went--you missed out on the upside
- You write a call, the stock falls in value, you pocket the premium but your principal is lower: Loss overall, but the value of the premium is a hedge as long as the stock didn't completely crater
Now, that's not every scenario. You don't *have* to let a contract go to expiry. If you have a scenario where it's advantageous to buy back your contract and walk away or roll it into a new call with different strike/premium/duration, you can play around with it.
So I'm sitting on a stock that I've got very large paper gains (cost basis <$32, current price $633). I want to sell that (and my other stock which I can't trade options) over time to diversify my portfolio. But with the very large paper gains, I'd be taking a massive principal haircut in taxes.
(Note for below: options contracts are in 100-share blocks. I'm doing it below in "per share" numbers because it's easier to think about it that way.)
So I'm playing around with the options numbers. Selling a call with a 790 strike and May 15 expiry is currently earning a premium of 56.97/share. If I write that option and it doesn't hit 790, that's just income in my pocket (minus taxes on the premium) for 2 months of doing nothing. And because I will still own the shares, I can write another option contract and do it again. If I got lucky and was able to do this with similar premiums for the rest of the year, it's would be 5 bites at the apple over 10 months meaning almost $300 per share in income--almost a 50% return while not doing anything. Not like I'd get that lucky with such a volatile stock, but that's why the stock trading sideways and pocketing the premiums is such a win.
If I were to write an option and it reaches that price and gets called away at 790, I'd have $846.97 per share in my pocket. But I'd owe (846.97-31.85)*.243 = $198/share in taxes. Well, 846.97-633 is >$200, so I'd still be in a positive principal position to where I am today. And now I'm still sitting on a ton of cash AFTER paying the taxes, so I'm forced to diversify the position I already wanted to diversify, but doing it in roughly a principal-neutral way.
That seems like the only way to lose on this trade would be a massive crash in the stock price. Which would screw me anyway. But right now if I sold the stock I'd be taking an immediate hit of almost $150/share on taxes anyway... So writing the option and the shares dropping a fair amount doesn't kill me, especially because if it remains a volatile roller coaster I still own the shares and can continue trying to earn premiums on options.
So... What's the downside here?
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Another variant would be to write put options at say $575 and let'er ride, or buy puts AND write OOM calls. You have to stay on top of this because one scenario leaves you with naked calls.
And you can write 3 month calls and buy 6 month puts, the famous butterfly straddle.
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I haven't used options at all of late, Brad reminded me that I had used them in the past, more for insurance than gambling.
I'm more of an options gambler but I'm also a little bit younger so it makes sense for me to have a higher risk/reward strategy.
I've almost never bought options (the insurance use) but I've sold quite a few. My advice though is to be VERY careful because there are a few problems including:
- When you sell options you gain and lose equity VERY fast. Ie, if you just own a stock and it goes up 5% your equity increases 5%. Conversely if it goes down your equity goes down 5%. Options are very different. If the underlying stock (or commodity or whatever) goes up or down 5% your stake could easily go up or down by 90%.
- There isn't MUCH insider trading because the Feds do a good job of watching that and they HAMMER violators when they catch them (Martha Stewart) but what insider trading there is tends to be done in the Options markets because of what I said in #1. Ie, if I have inside information that XYZ Drug Company's trial on _____ Drug was successful then I KNOW that XYZ Drug Company's stock price will increase by say 2%. If I just bought the stock that wouldn't make me much money. Even if I had a spare $1 Million (https://youtube.com/shorts/8H26qHVkvJk?si=6GjikpVzAq86STi4) I'd still only make $20k, that isn't enough to buy a new car. Now if I put say $10,000 into call options on XYZ and the price went up 2% I'd probably make enough to buy a brand new Corvette. This is why people trading on inside information usually trade options. It happens. I'll give another example from the fixed income segment. I've been involved in getting several credit rating upgrades for my municipality and each time I was informed IN ADVANCE by Moody's of what the credit rating adjustment would be. The reason for this advance notice is that I get an opportunity to protest (in the case of a downgrade, I don't think anyone would protest an upgrade). Anyway, when I got that advance notice it was VERY limited by Moody's, like literally about an hour and within the email they sent to me they had laid out the Federal Statute prohibiting trading on this information. Finally, because Moody's keeps the window so short, it would be REALLY easy to prove Insider Trading if I had done it because everything is timestamped.
- There is an old saying that "The market can stay irrational longer than you can stay solvent." That is SO VERY TRUE. I learned it the hard way back in the 2008 credit crash at a cost to me that ran into six figures. I say this as a warning. If you sell a bunch of XYZ short because you "just know" that it will go up and then it goes down instead there is a big temptation to just sell MORE short to make even MORE money when it eventually goes back up and that works but only if it actually does go up before the call date AND you can somehow keep your head above water until it moves your direction. If either of those things fails to happen you can find yourself getting a quarter-million dollar lesson in options and futures trading really quick.
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(https://i.imgur.com/iRD9uh6.png)
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Yup, options are leveraged to the hilt, generally.
I like ETFs, I mostly own "sector ETFs". One I like is SCHD, the Schwab dividend fund. It doesn't seek the highest dividends (which often are risky) but the ones with a record of increasing over time. I manage my wife's portfolios also, with a more conservative bent, and she owns SCHD.
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https://www.morningstar.com/financial-advisors/etf-tax-loophole-that-wall-street-is-exploiting (https://www.morningstar.com/financial-advisors/etf-tax-loophole-that-wall-street-is-exploiting)
The ETF Tax Loophole That Wall Street Is Exploiting
Section 351 ETF seeding is gaining traction with wealthy investors, but the practice may invite IRS scrutiny.
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Ok, so my merge didn't work as well as I'd have liked as those posts all predated my intro post... Oops.
But to quote CD:
Insurance, gambling, whatever you call it... When doing a covered call (out of the money), it seems that there are three scenarios:
- You write a call, it trades sideways and expires worthless, you pocket the premium: Win, because you kept the premium and still own the stock at the same value
- You write a call, it gains and expires in the money, you pocket the premium and are forced to sell the stock at the strike price: Win, in the sense that you gained both a premium and stock gains, but a partial loss depending on how far above the strike the stock went--you missed out on the upside
- You write a call, the stock falls in value, you pocket the premium but your principal is lower: Loss overall, but the value of the premium is a hedge as long as the stock didn't completely crater
Now, that's not every scenario. You don't *have* to let a contract go to expiry. If you have a scenario where it's advantageous to buy back your contract and walk away or roll it into a new call with different strike/premium/duration, you can play around with it.
So I'm sitting on a stock that I've got very large paper gains (cost basis <$32, current price $633). I want to sell that (and my other stock which I can't trade options) over time to diversify my portfolio. But with the very large paper gains, I'd be taking a massive principal haircut in taxes.
(Note for below: options contracts are in 100-share blocks. I'm doing it below in "per share" numbers because it's easier to think about it that way.)
So I'm playing around with the options numbers. Selling a call with a 790 strike and May 15 expiry is currently earning a premium of 56.97/share. If I write that option and it doesn't hit 790, that's just income in my pocket (minus taxes on the premium) for 2 months of doing nothing. And because I will still own the shares, I can write another option contract and do it again. If I got lucky and was able to do this with similar premiums for the rest of the year, it's would be 5 bites at the apple over 10 months meaning almost $300 per share in income--almost a 50% return while not doing anything. Not like I'd get that lucky with such a volatile stock, but that's why the stock trading sideways and pocketing the premiums is such a win.
If I were to write an option and it reaches that price and gets called away at 790, I'd have $846.97 per share in my pocket. But I'd owe (846.97-31.85)*.243 = $198/share in taxes. Well, 846.97-633 is >$200, so I'd still be in a positive principal position to where I am today. And now I'm still sitting on a ton of cash AFTER paying the taxes, so I'm forced to diversify the position I already wanted to diversify, but doing it in roughly a principal-neutral way.
That seems like the only way to lose on this trade would be a massive crash in the stock price. Which would screw me anyway. But right now if I sold the stock I'd be taking an immediate hit of almost $150/share on taxes anyway... So writing the option and the shares dropping a fair amount doesn't kill me, especially because if it remains a volatile roller coaster I still own the shares and can continue trying to earn premiums on options.
So... What's the downside here?
If you basically want to sell anyway then the only downside relative to that is that if the stock price craters you take the loss where if you had just sold you wouldn't.
Ie, you own the stock currently at $633. If you sell it you get $633 less tax. If you sell a call option at a strike of $790 that expires three months out (Saturday, May 16 because it is always the third Saturday of the Month) and you get $56.97 you pocket $56.97 and your assessment of the three possibilities is almost exactly on. There is a fourth unlikely but possible scenario. American options (unlike European ones) can be exercised by the holder ANYTIME up until expiration so the stock might go up to $800 and get called then go back down below $790 before the expiration. This is RARE but it does happen (usually for dividend reasons. Ie, if the XD date is say May 8 and it is trading at $800 on May 7 I might exercise the call on May 7 to get the dividend on May 8 but the earnings report usually comes out on the XD date so if that is bad news on May 8 the stock might drop to $600. This would be fine for you since you'd get the $790 and the $56.97 and the only thing you'd miss out on is the May 8 dividend.
The main three you are spot on:
- Stock closes on May 15 between $633 and $790. You still own the stock and you have $56.97 (less taxes) that is basically found money.
- Stock closes on May 15 above $790. You sell the stock for $790 but it is really $846.97 because you also got the option money as you explained above.
- Stock closes on May 15 below $633. You still own the stock and you have $56.97 (less taxes) that is basically found money. The downside is that you didn't take the $633 when you could have and you STILL own the stock. Now if it closes above $576.03 you could sell on Monday, May 18 at anything over $576.03 and still be in just as good a position as you would have been in had you sold for $633 today. However, if it craters and closes at say $233 then you are MUCH worse off than you would have been if you had simply sold the stock for $633 today. NOTE BELOW
NOTE: You can insure against this. If you take the $56.97 and use some of it to buy puts at say $470 that would offset. Ie, if the stock went down to $233 then you'd pocket the $56.97 that you got for the call and put the stock to someone else at $470. This is a form of a straddle.
When I do options I usually do straddles. The advantage of straddles is that you can't possibly lose on both sides of the transaction so it effectively doubles your return while keeping the risk only moderately higher.
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Since I don't pay attention to politics, I can't call it anything more than dumb luck that we decided to move from BCBS Gold to Bronze this year, which is now eligible for HSA. So I was quite excited to learn that we can now access one of the best tax-advantaged investment vehicles.
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Explaining straddles:
I'll use General Motors (GM) as my example because obviously everyone has heard of GM. The stock currently is at about $72.50 mid-day, March 13.
A May call at $80 can currently be sold for $1.64. NOTE: Volume in options is LOW so the bid/ask spreads can be LARGE. Right now the bid is $1.64 and the ask is $2.51. When you trade stocks you don't need to worry about that because there is so much volume that the bid/ask spread is typically nominal.
A May Put at $65 can currently be sold for $1.48. The spread is again large, $1.48 vs $2.01.
This is all just for example because you usually don't actually sell the May options until the March options expire, then the volume picks up. Anyway, on with the example:
I own 1 share of worth ~$72.50. I sell an $80 May Call for $1.64 and a $65 May Put for $1.48. For those less familiar with Options what that means is:
- The $80 Call means that my GM Share can be called away from me for $80 anytime between now and the third Saturday in May.
- The $65 Put means that another share of GM can be put to me for $65 anytime between now and the third Saturday in May.
So in total I've collected $3.12 which means that if GM shares are trading anywhere between $61.88 and $83.12 on May 14 I'm ahead. More detail:
- If GM closes above $83.12 it WILL BE called away from me at $80 and I'll be worse off than I would have been if I had just kept the stock and sold it when it got there.
- If GM closes between $80 and $83.12 it WILL BE called away from me at $80 but I got that $80 plus the $3.12 for the options so I am better off than I would have been selling the stock in this range.
- If GM closes between $65 and $80 then it will neither be put to me nor called away from me and I'll just pocket the $3.12 as basically "found money".
- If GM closes between $61.88 and $65 then it WILL BE put to me at $65 but I'll still be better off than I would have been without the options because my effective price is $61.88 ($65 less the $3.12 that I got for selling the options).
- If GM closes below $61.88 then I am out money because I'll have the share I originally owned plus $3.12 but I'll also have to buy another share at $65 and both shares will be worth <$61.88 each.
Basically I'm betting against volatility.
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Another variant would be to write put options at say $575 and let'er ride, or buy puts AND write OOM calls. You have to stay on top of this because one scenario leaves you with naked calls.
And you can write 3 month calls and buy 6 month puts, the famous butterfly straddle.
Yeah, I looked at buying OOM puts while selling OOM calls. That limits downside risk because my downside can never be lower than the put, but it's requiring liquidity (eating into the premium I earn on the calls) and that balance against the premium of the call means I'm limiting my upside even further, and not allowing the premium to offset taxes on the upside. And if I sell at the lower price I'm still paying taxes at the sale, which let's say I buy a put at $450 is still roughly $420/share in cap gains, so my effective sale price is actually closer to $345.
I'm more of an options gambler but I'm also a little bit younger so it makes sense for me to have a higher risk/reward strategy.
I've almost never bought options (the insurance use) but I've sold quite a few. My advice though is to be VERY careful because there are a few problems including:
- When you sell options you gain and lose equity VERY fast. Ie, if you just own a stock and it goes up 5% your equity increases 5%. Conversely if it goes down your equity goes down 5%. Options are very different. If the underlying stock (or commodity or whatever) goes up or down 5% your stake could easily go up or down by 90%.
- There isn't MUCH insider trading because the Feds do a good job of watching that and they HAMMER violators when they catch them (Martha Stewart) but what insider trading there is tends to be done in the Options markets because of what I said in #1. Ie, if I have inside information that XYZ Drug Company's trial on _____ Drug was successful then I KNOW that XYZ Drug Company's stock price will increase by say 2%. If I just bought the stock that wouldn't make me much money. Even if I had a spare $1 Million (https://youtube.com/shorts/8H26qHVkvJk?si=6GjikpVzAq86STi4) I'd still only make $20k, that isn't enough to buy a new car. Now if I put say $10,000 into call options on XYZ and the price went up 2% I'd probably make enough to buy a brand new Corvette. This is why people trading on inside information usually trade options. It happens. I'll give another example from the fixed income segment. I've been involved in getting several credit rating upgrades for my municipality and each time I was informed IN ADVANCE by Moody's of what the credit rating adjustment would be. The reason for this advance notice is that I get an opportunity to protest (in the case of a downgrade, I don't think anyone would protest an upgrade). Anyway, when I got that advance notice it was VERY limited by Moody's, like literally about an hour and within the email they sent to me they had laid out the Federal Statute prohibiting trading on this information. Finally, because Moody's keeps the window so short, it would be REALLY easy to prove Insider Trading if I had done it because everything is timestamped.
- There is an old saying that "The market can stay irrational longer than you can stay solvent." That is SO VERY TRUE. I learned it the hard way back in the 2008 credit crash at a cost to me that ran into six figures. I say this as a warning. If you sell a bunch of XYZ short because you "just know" that it will go up and then it goes down instead there is a big temptation to just sell MORE short to make even MORE money when it eventually goes back up and that works but only if it actually does go up before the call date AND you can somehow keep your head above water until it moves your direction. If either of those things fails to happen you can find yourself getting a quarter-million dollar lesson in options and futures trading really quick.
I don't want to get into naked calls, shorting stocks, or anything like that--at least as a relative newbie. I own the stock so I'd be selling OTM covered calls. And I'm basically (as far as I understand it) not really "using margin" on that. The only possible risks I see:
- Call expires ITM (or goes ITM during the duration of the contract and is called away). Now I've got the premium plus the gain but if the stock absolutely explodes my "risk" is that I haven't captured the upside above the strike price. Given that I might write a call at 790 I'm effectively betting the stock doesn't go above 790. If it does? Ok. I'm just going to have to live with leaving money on the table. I'm still ahead (even less taxes).
- Stock craters. That's not an options risk... That's a risk of holding any stock. However I don't have to ride it all the way down until the contract expires. As the stock falls, the premium on a 790 call (especially as we're getting closer to expiry) will drop massively as well. So I use some of the premium from the sale to buy out my contract. I give up some premium but I'm now free and clear of the contract so if I decide the stock is going to KEEP falling I can at least exit.
On an OTM covered call written for a 25% upside strike price, I basically only make the premium if the stock goes up 2%. I mean, on paper my stock is worth 2% more, but that's an unrealized gain so it could go down 2% an hour later. So I don't see how covered calls will have *wild* swings or dramatic risk...
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I expect continuing significant gains for Tech stocks, especially those most closely associated with AI. First half will be a bit sketchy, second half will be strong.
There's no stopping that train by the way. Expect significant growth and signicant improvements to margins and operating income over time.
Yes, that implies, at the expense of workers and jobs.
Will be interested how smooth that growth is. Mostly the process of converting investment into paying customers to match said large investment.
It that it won’t end up at that point, but could see some growing pains as that comes together.
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Explaining straddles:
I'll use General Motors (GM) as my example because obviously everyone has heard of GM. The stock currently is at about $72.50 mid-day, March 13.
A May call at $80 can currently be sold for $1.64. NOTE: Volume in options is LOW so the bid/ask spreads can be LARGE. Right now the bid is $1.64 and the ask is $2.51. When you trade stocks you don't need to worry about that because there is so much volume that the bid/ask spread is typically nominal.
A May Put at $65 can currently be sold for $1.48. The spread is again large, $1.48 vs $2.01.
This is all just for example because you usually don't actually sell the May options until the March options expire, then the volume picks up. Anyway, on with the example:
I own 1 share of worth ~$72.50. I sell an $80 May Call for $1.64 and a $65 May Put for $1.48. For those less familiar with Options what that means is:
- The $80 Call means that my GM Share can be called away from me for $80 anytime between now and the third Saturday in May.
- The $65 Put means that another share of GM can be put to me for $65 anytime between now and the third Saturday in May.
So in total I've collected $3.12 which means that if GM shares are trading anywhere between $61.88 and $83.12 on May 14 I'm ahead. More detail:
- If GM closes above $83.12 it WILL BE called away from me at $80 and I'll be worse off than I would have been if I had just kept the stock and sold it when it got there.
- If GM closes between $80 and $83.12 it WILL BE called away from me at $80 but I got that $80 plus the $3.12 for the options so I am better off than I would have been selling the stock in this range.
- If GM closes between $65 and $80 then it will neither be put to me nor called away from me and I'll just pocket the $3.12 as basically "found money".
- If GM closes between $61.88 and $65 then it WILL BE put to me at $65 but I'll still be better off than I would have been without the options because my effective price is $61.88 ($65 less the $3.12 that I got for selling the options).
- If GM closes below $61.88 then I am out money because I'll have the share I originally owned plus $3.12 but I'll also have to buy another share at $65 and both shares will be worth <$61.88 each.
Basically I'm betting against volatility.
Ahh, so you were selling puts too, not buying them. The problem with that, for me...
100 shares of stock is worth $63,300 right now. If I sell a put at 570, that means that if the put exercises I need $57,500 liquidity for each block. The premium of a 790 call and a 570 put is only 121.97, so I'd earn $12,197 (less taxes) which is far lower than my current liquidity. If I write a put at 570 and a call at 790 against my entire position in that stock, I'd have to sell a significant portion of other holdings to buy if the put exercises. And it's on a concentrated position in a stock I want to diversify away from, so I don't necessarily want to own more of it right now.
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You can of course sell say 10 shares at market price, or put in an order above current market.
There isn't anything magic about 100 shares these days, though there used to be.
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A one possession game with 2 minutes left is about all you could ask for.
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Will be interested how smooth that growth is. Mostly the process of converting investment into paying customers to match said large investment.
It that it won’t end up at that point, but could see some growing pains as that comes together.
Note that one of the key things utee said was tech stocks closely associated with AI... The two holdings I have aren't "AI stocks". We just sell the stuff they need to build out these massive data centers, and their demand FAR outstrips supply.
I'll use the flash (i.e. SSD) industry as an example. When COVID hit, the WFH craze caused a significant demand for SSDs for PCs, chromebooks, tablets, etc. Suddenly people either needed to buy compute devices they didn't have, or needed to pull in the refresh of compute devices they owned but were a bit old. At the same time, the big cloud companies were expecting tremendous demand growth for their services, so they were buying everything they could for datacenters. The market was flying high.
Well, then we had a supply chain issue. And in a supply chain issue, if you have the components for 95% of a data center, you can't build 95% of a data center--you build 0% until those critical 5% of components become available. But the big companies... Kept on buying. They kept on buying and building up inventory positions they couldn't deploy, thinking the supply chain issues would work themselves out and they'd need the inventory. This was happening all through 2021...
Well, around the middle of 2022, they pretty much all wised up, right about the same time. And they... Just stopped buying. Demand hit the FLOOR. Prices fell. All the NAND flash makers were losing money. They were reducing what they call "wafer starts". NAND flash I think takes about 6 months from wafer start to having finished product. They needed to reduce supply to get into balance. So they cut back significantly, as the major data center customers digested the inventory positions they had. This led to losses, layoffs, and probably the most depressing time I've seen in my industry since the dot com bubble burst.
The pain lasted through about the end of 2023. 2024 we started to recover, but as you can imagine, producers were gunshy about ramping up production too quickly in case the pain wasn't over. You know, "Fool me once, shame on me. Fool me--you can't get fooled again." Everything normalized, and 2024 was a return to normal.
Well, starting in 2025, that return to normal went completely the opposite way. To the point where I know people saying that in 35-40+ years in the industry, they've NEVER seen anything like it. ChatGPT changed everything, and now there's absolutely booming demand for GPU, CPU, DRAM, SSD, HDD, networking, land, electricity, physical hardware like data center racks, etc... The capex being spent on data center buildout is enormous. And the industry was NOT ready and didn't build the supply for it.
So we're in a severe supply shortage across the entire industry. You see this in media if you look at anyone who has tried to build a high performance PC these days... Prices are through the roof. For consumer type equipment, between the 2023 trough and now, prices are at least doubled, but in many cases are 3-4x. The webinar I did a couple weeks back, the company I was doing it with was talking about the prices they'd seen, and 1 year pricing in the enterprise SSD market were up 3x--and prices are still increasing.
Well, that means that all the companies selling these products are posting revenue, gross margin, earnings, etc numbers that are REALLY good. And it's why my two holdings have 52 week lows of $28.83 and $27.89, while trading at 275.51 and 653.79, respectively, right now.
Most of the industry doesn't see supply catching up at least through 2027, and possibly through 2028.
I'm not going to predict the future of these stocks, and nothing I say should be used to do so... I don't know what the future holds. But that's what utee is talking about... Not what the AI stocks themselves are doing, but what's happened to the companies building the stuff they need to continue this massive AI data center buildout.
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A one possession game with 2 minutes left is about all you could ask for.
do you have $$$ on this game?
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Note that one of the key things utee said was tech stocks closely associated with AI... The two holdings I have aren't "AI stocks". We just sell the stuff they need to build out these massive data centers, and their demand FAR outstrips supply.
I'll use the flash (i.e. SSD) industry as an example. When COVID hit, the WFH craze caused a significant demand for SSDs for PCs, chromebooks, tablets, etc. Suddenly people either needed to buy compute devices they didn't have, or needed to pull in the refresh of compute devices they owned but were a bit old. At the same time, the big cloud companies were expecting tremendous demand growth for their services, so they were buying everything they could for datacenters. The market was flying high.
Well, then we had a supply chain issue. And in a supply chain issue, if you have the components for 95% of a data center, you can't build 95% of a data center--you build 0% until those critical 5% of components become available. But the big companies... Kept on buying. They kept on buying and building up inventory positions they couldn't deploy, thinking the supply chain issues would work themselves out and they'd need the inventory. This was happening all through 2021...
Well, around the middle of 2022, they pretty much all wised up, right about the same time. And they... Just stopped buying. Demand hit the FLOOR. Prices fell. All the NAND flash makers were losing money. They were reducing what they call "wafer starts". NAND flash I think takes about 6 months from wafer start to having finished product. They needed to reduce supply to get into balance. So they cut back significantly, as the major data center customers digested the inventory positions they had. This led to losses, layoffs, and probably the most depressing time I've seen in my industry since the dot com bubble burst.
The pain lasted through about the end of 2023. 2024 we started to recover, but as you can imagine, producers were gunshy about ramping up production too quickly in case the pain wasn't over. You know, "Fool me once, shame on me. Fool me--you can't get fooled again." Everything normalized, and 2024 was a return to normal.
Well, starting in 2025, that return to normal went completely the opposite way. To the point where I know people saying that in 35-40+ years in the industry, they've NEVER seen anything like it. ChatGPT changed everything, and now there's absolutely booming demand for GPU, CPU, DRAM, SSD, HDD, networking, land, electricity, physical hardware like data center racks, etc... The capex being spent on data center buildout is enormous. And the industry was NOT ready and didn't build the supply for it.
So we're in a severe supply shortage across the entire industry. You see this in media if you look at anyone who has tried to build a high performance PC these days... Prices are through the roof. For consumer type equipment, between the 2023 trough and now, prices are at least doubled, but in many cases are 3-4x. The webinar I did a couple weeks back, the company I was doing it with was talking about the prices they'd seen, and 1 year pricing in the enterprise SSD market were up 3x--and prices are still increasing.
Well, that means that all the companies selling these products are posting revenue, gross margin, earnings, etc numbers that are REALLY good. And it's why my two holdings have 52 week lows of $28.83 and $27.89, while trading at 275.51 and 653.79, respectively, right now.
Most of the industry doesn't see supply catching up at least through 2027, and possibly through 2028.
I'm not going to predict the future of these stocks, and nothing I say should be used to do so... I don't know what the future holds. But that's what utee is talking about... Not what the AI stocks themselves are doing, but what's happened to the companies building the stuff they need to continue this massive AI data center buildout.
I appreciate the long explanation, although I read the top and thought, “Ahhh, he means in a gold rush, don’t just sponsor mining, also invest in picks and shovels.”
That reading makes more sense.
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Note that one of the key things utee said was tech stocks closely associated with AI... The two holdings I have aren't "AI stocks". We just sell the stuff they need to build out these massive data centers, and their demand FAR outstrips supply.
I'll use the flash (i.e. SSD) industry as an example. When COVID hit, the WFH craze caused a significant demand for SSDs for PCs, chromebooks, tablets, etc. Suddenly people either needed to buy compute devices they didn't have, or needed to pull in the refresh of compute devices they owned but were a bit old. At the same time, the big cloud companies were expecting tremendous demand growth for their services, so they were buying everything they could for datacenters. The market was flying high.
Well, then we had a supply chain issue. And in a supply chain issue, if you have the components for 95% of a data center, you can't build 95% of a data center--you build 0% until those critical 5% of components become available. But the big companies... Kept on buying. They kept on buying and building up inventory positions they couldn't deploy, thinking the supply chain issues would work themselves out and they'd need the inventory. This was happening all through 2021...
Well, around the middle of 2022, they pretty much all wised up, right about the same time. And they... Just stopped buying. Demand hit the FLOOR. Prices fell. All the NAND flash makers were losing money. They were reducing what they call "wafer starts". NAND flash I think takes about 6 months from wafer start to having finished product. They needed to reduce supply to get into balance. So they cut back significantly, as the major data center customers digested the inventory positions they had. This led to losses, layoffs, and probably the most depressing time I've seen in my industry since the dot com bubble burst.
The pain lasted through about the end of 2023. 2024 we started to recover, but as you can imagine, producers were gunshy about ramping up production too quickly in case the pain wasn't over. You know, "Fool me once, shame on me. Fool me--you can't get fooled again." Everything normalized, and 2024 was a return to normal.
Well, starting in 2025, that return to normal went completely the opposite way. To the point where I know people saying that in 35-40+ years in the industry, they've NEVER seen anything like it. ChatGPT changed everything, and now there's absolutely booming demand for GPU, CPU, DRAM, SSD, HDD, networking, land, electricity, physical hardware like data center racks, etc... The capex being spent on data center buildout is enormous. And the industry was NOT ready and didn't build the supply for it.
So we're in a severe supply shortage across the entire industry. You see this in media if you look at anyone who has tried to build a high performance PC these days... Prices are through the roof. For consumer type equipment, between the 2023 trough and now, prices are at least doubled, but in many cases are 3-4x. The webinar I did a couple weeks back, the company I was doing it with was talking about the prices they'd seen, and 1 year pricing in the enterprise SSD market were up 3x--and prices are still increasing.
Well, that means that all the companies selling these products are posting revenue, gross margin, earnings, etc numbers that are REALLY good. And it's why my two holdings have 52 week lows of $28.83 and $27.89, while trading at 275.51 and 653.79, respectively, right now.
Most of the industry doesn't see supply catching up at least through 2027, and possibly through 2028.
I'm not going to predict the future of these stocks, and nothing I say should be used to do so... I don't know what the future holds. But that's what utee is talking about... Not what the AI stocks themselves are doing, but what's happened to the companies building the stuff they need to continue this massive AI data center buildout.
As Fonzie would say, correctamundo! It's like you know me and my thoughts better than I know myself. :)
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do you have $$$ on this game?
Wrong thread, sorry
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I understand the AI centers need a lot of power and water, so I was looking at some power producers like GE Vernova (which I own a bit of because I used to own GE).
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Perhaps more appropriate for the tech nerd thread, but what is the path to profitability for OpenAI and Anthropic? I'm not more than a casual observer to the investment side of this, but I guess I see four buckets: Supply chain (Brad covered), Major players in model development (OpenAI, Anthropic), minor player in model development and companies trying to build in-house models, companies leveraging major models.
Based on my limited observation:
Supply chain - $$$
Major players - ?
Minor players / in-house investment - ???
Consumers of major models - $$$
Thoughts?
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A one possession game with 2 minutes left is about all you could ask for.
You talking about the market today?
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Ahh, so you were selling puts too, not buying them. The problem with that, for me...
100 shares of stock is worth $63,300 right now. If I sell a put at 570, that means that if the put exercises I need $57,500 liquidity for each block. The premium of a 790 call and a 570 put is only 121.97, so I'd earn $12,197 (less taxes) which is far lower than my current liquidity. If I write a put at 570 and a call at 790 against my entire position in that stock, I'd have to sell a significant portion of other holdings to buy if the put exercises. And it's on a concentrated position in a stock I want to diversify away from, so I don't necessarily want to own more of it right now.
Yeah, I meant that as more of a general comment about options not specific advice to your situation.
I'll build that out a little with my upthread example, here is what I generally would do using the GM at ~$72.50 price.
Say that given my portfolio size and risk tolerance I want to hold stocks in roughly $5-10k amounts. Thus if I want GM, I ultimately want 100 shares of it (100*72.50=$7,250).
My opening position will be to write (the seller of an option "writes" it) a put a little under the current price for 400 shares (4 contracts) three months out. So I'd write a May put on GM at say $70 for 400 shares. Say I get $1.50 for it so that is $600 but now I have to have $28,000 cash available because if the stock gets put to me I need to pay that for it ($70*400=$28,000). However, I got $600 for writing the put so that is part of it, I just need the other $27,400. In the next three months one of two things happens either:
- The stock stays over $70 and I do NOT have to buy 400 shares for $28,000. In this case I pocket the $600 and start over. or
- The stock drops below $70 and I DO have to buy the 400 shares for $28,000. In this case I now own 400 shares of GM but my basis isn't actually $70 it is $68.50 because I got $600 then paid $28,000 for a net of $27,400 and I have 400 shares ($27,400/400=$68.50).
In case #1 I just start over and usually do it again.
In case #2 I now own 400 shares of GM that lets say is trading at $69. The good thing for me is that remember I only paid $68.50 for it so I'm up $0.50/share or $200. Now I do the straddle. Recall that I wanted to own 100 shares so I write a call on 300 shares at $70 and a put on 300 shares at $67. Say I get $1.75 for the call (because it is only $1 over current) and $1.25 for the put (because it is $2 under current). The spread here is intentional because I kinda DO want to sell 300 shares and I'd rather not buy 300 shares. Ok, for those options I get:
- $525 for the call ($1.75*300) and
- $375 for the put ($1.25*300) for a total of $900.
Viewing this holistically I now own 400 shares of GM and in total I have $26,500 in it ($28,000-600-525-375=$26,500) so I now have $66.25 per share in this ($26,500/400=$66.25). Now three things can happen (technically more but the others are more-or-less irrelevant):
- The stock goes above $70 so 300 shares get called away from me at $70. I get $21,000 and I'm left with 100 shares of GM. In this case I now own 100 shares of GM and in total I have $5,500 in it ($26,500-21,000=$5,500) which works out to $55/share.
- The stock stays between $67 and $70. In this case I still own 400 shares of GM which I have $26,500 in and I can do this all over again.
- The stock goes below $67 and I get another $300 shares put to me at $67 so I have to pay $20,100 and I now own 700 shares which I have $46,600 in ($26,500+$20,100=$46,600) which is $66.57/share ($46,600/700=$66.57.
In the case of #1 I'm pretty much done trading GM and I'll just hold the 100 shares that I originally wanted.
In the case of #2 I just rinse and repeat.
In the case of #3 I now have WAY more GM stock than I want to hold. I own 700 shares which I have $66.57 per share in and I ultimately only want to hold 100 shares. At this point I will sell two calls. I will sell a 2 month call that is either "in the money" or barely out of the money. Ie, if GM is trading at $65.25 I'll write a 2 month call on 200 shares at $65. Then I write a three month call on 200 shares at (usually) the next dollar up so my 200 share 3 month call will be at $66.
Then I wait a month and see what happens. If GM continues to fall such that I'm still stuck with it and it looks like neither of my existing options are going to be exercised then I'll write another 200 share in the money call at 3 months so that now I have three overlapping calls out:
- A 200 share 1 month call at $65 - this is the 2 month call that I wrote a month ago but now it is 1 month.
- A 200 share 2 month call at $66 - this is the 3 month call that I wrote a month ago but now it is 2 months.
- A 200 share 3 month call at something less than $65.
I own 700 shares and 600 of them are subject to call. I don't have any naked calls and if they all get exercised I'm back to the 100 shares that I wanted.
Then I'll usually roll the calls as they expire until they get exercised at which point I'll recalibrate.
Using this method essentially I am the house. If you think about the gambling analogy with a slot machine, the gambler loses small almost every time, wins big once in a while, and he loses overall. The house wins small almost every time, loses big once in a while, and wins overall. This is me. I usually win small. Once in a while I get hammered.
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Yeah, I looked at buying OOM puts while selling OOM calls. That limits downside risk because my downside can never be lower than the put, but it's requiring liquidity (eating into the premium I earn on the calls) and that balance against the premium of the call means I'm limiting my upside even further, and not allowing the premium to offset taxes on the upside. And if I sell at the lower price I'm still paying taxes at the sale, which let's say I buy a put at $450 is still roughly $420/share in cap gains, so my effective sale price is actually closer to $345.
I don't want to get into naked calls, shorting stocks, or anything like that--at least as a relative newbie. I own the stock so I'd be selling OTM covered calls. And I'm basically (as far as I understand it) not really "using margin" on that. The only possible risks I see:
- Call expires ITM (or goes ITM during the duration of the contract and is called away). Now I've got the premium plus the gain but if the stock absolutely explodes my "risk" is that I haven't captured the upside above the strike price. Given that I might write a call at 790 I'm effectively betting the stock doesn't go above 790. If it does? Ok. I'm just going to have to live with leaving money on the table. I'm still ahead (even less taxes).
- Stock craters. That's not an options risk... That's a risk of holding any stock. However I don't have to ride it all the way down until the contract expires. As the stock falls, the premium on a 790 call (especially as we're getting closer to expiry) will drop massively as well. So I use some of the premium from the sale to buy out my contract. I give up some premium but I'm now free and clear of the contract so if I decide the stock is going to KEEP falling I can at least exit.
On an OTM covered call written for a 25% upside strike price, I basically only make the premium if the stock goes up 2%. I mean, on paper my stock is worth 2% more, but that's an unrealized gain so it could go down 2% an hour later. So I don't see how covered calls will have *wild* swings or dramatic risk...
You are absolutely correct. The only risk of a covered call is that you lose the upside if it goes up but that is no different than selling it. Either way you don't get the benefit if it suddenly doubles.
The inverse is true with a "covered" put. Here when I say "covered" what I mean is that you HAVE the money. So long as you have the money there is no more risk in a put than there is in just buying the stock. Either way if it goes broke you are out everything but not more than everything.
The REALLY risky options are naked calls. This is because there is no mathematical limit to how much a stock can go UP. A stock can't go below zero so if you write a put the maximum you could possibly lose is a defined quantity. However there is no maximum price so the risk on a naked call is theoretically infinite. If you wrote a call on XYZ Drug Company at $50/share and DID NOT own the stock and they suddenly announced a cure for cancer with successful trials, you'd be in BIG trouble.
As for your specific situation my advice is worth what you are paying for it but here is what I would do:
I would write a three month calls above the current trading price EVERY month. I don't know (and I'm not asking) how much you own so I'll just make it up to fill out an example. Lets say you own 1,000 shares of this company and you said it is trading at $633. Now lets say that your portfolio is worth a total of $2 Million. No sane Financial Planner would advise you to keep 30+% of your portfolio in ONE company especially if you also own other companies in that same sector (which is typical). A typical situation might be that you portfolio consists of $633k of ABC Tech Company, $333k of DEF Tech Company, $334k of GHI Tech Company and $700k spread over 40 other stocks in random sectors from energy to banks to food. You have several issues. For one, you have way too much in tech. You've got $1.3 Million or 65% of your portfolio in tech. The second issue is you have WAY too much in ABC Tech (31.65% of your portfolio) and probably more than you should have in DEF and GHI (~16.7% of your portfolio each).
So you should diversify which you already said is what you are trying to accomplish here.
How risk tolerant are you and (closely related question) how quickly do you want to diversify?
When the March contracts expire (actually the Monday after), I would write a May call. In this example you own 1,000 shares and you *SHOULD* probably get down to around 300-400 to get it down to ~10% of your portfolio. Thus, you should be thinking of selling about 600 shares so, from your example:
- On Monday, March 23 I would write something like the $790 May call at $56.97 on 200 shares only I'd write it as a June call.
- On Monday, April 20 I would write a similar July call but it depends on what the stock does between now and then (I'll come back to that).
- On Monday, May 18 I would write a similar August call but again it depends on what the stock does between now and then.
Once you do that you'll have 600 of your shares subject to call and based on the price you quoted you'll get a little over $11k for each of these calls. Part of your diversification can be simply buying more stocks with the $11k/mo that you get for writing these options.
Then each month either the call that you have outstanding WILL BE exercised in which case you'll sell 200 shares which you pretty much wanted to do anyway, or the call that you have outstanding WILL NOT be exercised in which case you can just go out another three months and write another one.
Your only real enemy is volatility. If the stock jumps WAY up you would have been better off just keeping the stock and not selling options. If the stock drops WAY down you would have been better off just selling and not getting into options.
Here is the thing though. Had you held or sold you have still had risk of a drop or rise respectively. The overlapping calls allow you to adjust based on what happens. If the stock climbs such that it looks like the 200 share June call is going to be exercised then write the July call (sold in April) even higher. If the stock drops so that it looks like the 200 share June call is going to expire without being exercised then write the July call (sold in April) even lower.
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Writing nekkid calls is ….crazee. Buying calls is just Vegas.
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As for your specific situation my advice is worth what you are paying for it but here is what I would do:
I would write a three month calls above the current trading price EVERY month. I don't know (and I'm not asking) how much you own so I'll just make it up to fill out an example. Lets say you own 1,000 shares of this company and you said it is trading at $633. Now lets say that your portfolio is worth a total of $2 Million. No sane Financial Planner would advise you to keep 30+% of your portfolio in ONE company especially if you also own other companies in that same sector (which is typical). A typical situation might be that you portfolio consists of $633k of ABC Tech Company, $333k of DEF Tech Company, $334k of GHI Tech Company and $700k spread over 40 other stocks in random sectors from energy to banks to food. You have several issues. For one, you have way too much in tech. You've got $1.3 Million or 65% of your portfolio in tech. The second issue is you have WAY too much in ABC Tech (31.65% of your portfolio) and probably more than you should have in DEF and GHI (~16.7% of your portfolio each).
So you should diversify which you already said is what you are trying to accomplish here.
How risk tolerant are you and (closely related question) how quickly do you want to diversify?
At 47, I feel like I can take some risks. I'm far enough from retirement. I just don't want to squander the gains I've been blessed with...
And for that I need diversification. 70% of my portfolio is two highly correlated tech stocks. That have both gained due to the same reason (AI tailwind). They'll both be subject to the same downward pressure if it materializes. The problem is taxes. When you realize my portfolio has gone up an on the two names 5x and 20x compared to cost basis, it's going to be painful.
There's nothing I can do about my employer stock. I can't [due to company policy] trade options on it, so I'm going to have to work through the stuff that's long-term and just start selling. Thankfully(?) the gain on that percentage-wise is lesser. But the position is bigger. So the taxes on that will suck. And I'm stuck with some of it that's still short-term that I can't sell until it hits 1 year.
The non-employer stock therefore is the one that I want to milk the crap out of it for as much as I can. Ultimately I'll be happy when/that it sells, and like I said the good thing potentially about a covered call is that I can set up a scenario where I'm not only forced to sell, but that I am compensated such that it helps me stomach the tax penalty.
When the March contracts expire (actually the Monday after), I would write a May call. In this example you own 1,000 shares and you *SHOULD* probably get down to around 300-400 to get it down to ~10% of your portfolio. Thus, you should be thinking of selling about 600 shares so, from your example:
- On Monday, March 23 I would write something like the $790 May call at $56.97 on 200 shares only I'd write it as a June call.
- On Monday, April 20 I would write a similar July call but it depends on what the stock does between now and then (I'll come back to that).
- On Monday, May 18 I would write a similar August call but again it depends on what the stock does between now and then.
Once you do that you'll have 600 of your shares subject to call and based on the price you quoted you'll get a little over $11k for each of these calls. Part of your diversification can be simply buying more stocks with the $11k/mo that you get for writing these options.
Then each month either the call that you have outstanding WILL BE exercised in which case you'll sell 200 shares which you pretty much wanted to do anyway, or the call that you have outstanding WILL NOT be exercised in which case you can just go out another three months and write another one.
Your only real enemy is volatility. If the stock jumps WAY up you would have been better off just keeping the stock and not selling options. If the stock drops WAY down you would have been better off just selling and not getting into options.
Here is the thing though. Had you held or sold you have still had risk of a drop or rise respectively. The overlapping calls allow you to adjust based on what happens. If the stock climbs such that it looks like the 200 share June call is going to be exercised then write the July call (sold in April) even higher. If the stock drops so that it looks like the 200 share June call is going to expire without being exercised then write the July call (sold in April) even lower.
That's good thinking. Staggering could be really smart, especially given that this is a VERY volatile stock--which is part of the reason options premiums are high. That could also allow me to be more tactical about buy-to-close actions if something is close enough to expiry and close enough to strike that I can get out profitably without actually giving up my stock...
Ultimately I think I'm going to do what CD mentioned... Spend a few years working with a financial advisor milking him for as much knowledge as I can, and then eventually get to a point where I feel comfortable doing it myself. He should be mapping out an options strategy in the next week. I'm trying to learn as much as I can (and ask questions from all of you) so I can go into that discussion smartly. I'm already light-years ahead of where I was 2 months ago. But I've got a ways to go.
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Working with a fiduciary advisor is the best thing to do.
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Ed Zachery
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As I opined, an advisor can be of help. My tax situation got complicated for a year or so and they helped a lot. Then there are complications with SS and Medicare, trusts and wills, various and sundry. I think I got that behind me though we are redoing our wills just now.
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Bearish positioning by hedge funds is at extreme levels:
Hedge fund short positions in US-listed ETFs surged +10% on Thursday, the 2nd-largest single-day increase in data going back to 2016.
The only bigger day was April 2nd, 2025, "Liberation Day," when shorts jumped +16%.
As a result, US-listed ETF shorts soared +12% this week alone, following a +8% increase last week.
In total, short positions are up +23% over the last month.
Meanwhile, hedge fund short positions in US macro products, including index futures and ETFs, are up to 11.5% of total US exposure, approaching the 2022 bear market peak of 11.6%.
Over the last 5 years, short exposure has only been higher in 3% of cases.
Hedge fund shorts are at extreme levels. https://search.app/sz438
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Popped the covered call cherry today.
Now we wait and watch. Expiry of Jul 18 and a strike price that's 41% above current share price... Doubt it'll be called away, but if it does, I'll be pretty happy to earn a >50% total return in 108 days while achieving my actual goal of diversification.
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Popped the covered call cherry today.
Now we wait and watch. Expiry of Jul 18 and a strike price that's 41% above current share price... Doubt it'll be called away, but if it does, I'll be pretty happy to earn a >50% total return in 108 days while achieving my actual goal of diversification.
And if it doesn't you pocket the cash you got for writing the call. You can use that to buy something completely unrelated to AI which also accomplishes your diversification goal.
FWIW:
The volatility in your sector is immediately apparent. When I trade options I'm usually something like 5% over (writing a call) or 5% under (writing a put). When you first posted about writing a call at $790 on a stock trading at $633 my immediate thought was "who would pay you for that?"
In typical less volatile sectors with a stock trading at say $63.30 you'd be writing calls at $64 or $65 or MAYBE $66 not $79.
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FWIW:
The volatility in your sector is immediately apparent.
Yep. Stock hit an ATH of 777 two weeks ago, was down into the 560 range last week, and hit about 710 at its high point today...
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Went to go meet a CPA for the first time yesterday to try to establish as a new client. It did not go well.
I swear, she couldn't get over the fact that I have made my peace with the idea that I have high capital gains and I am just going to have to sell and pay taxes. That my stocks are in a VERY cyclical industry and that no, I can't hold these until 2028 or longer in the hopes that I can slowly sell piecemeal and income below certain levels to avoid certain tax levels... If I wait until 2028 or beyond, I don't know how much capital gains I'll still have--that solves my tax problem, but in the worst possible way.
Do you ever go through life wondering how people get into certain professional jobs when spending only a little bit of time with them, you realize they're idiots?
The worst was that this one was a personal recommendation.
You @betarhoalphadelta (https://www.cfb51.com/index.php?action=profile;u=19) should look into this option, as a place to hide money. We use them to hold our California real estate portfolio.
Self Directed IRA in 2026: Benefits, Fees & FAQs | The Entrust Group (https://www.theentrustgroup.com/self-directed-iras)
They always put on stuff like this too.
Alternative Investing Mastery Summit - Passive Investing Mastery (https://passiveinvestingmastery.com/summit/?utm_campaign=Alternative_Investing_Mastery_Summit_2026Q2&utm_medium=Organic&_hsenc=p2ANqtz-8VtykamqpWNoRNWP7wyKeRw9W4SaPWbB88Kf3IBFaOA6xWyGsgg-NxofNDhlQZI7wpteg2Bs8wsX2dilLci58xwfASSQ&_hsmi=415159959&utm_source=Bill_Neville)
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Working with a fiduciary advisor is the best thing to do.
These people scare me and I'll tell you why. It is a long story but, I think, worth the read to understand the industry.
When I was in my final quarter at Ohio State I was getting myself a Real Estate Major to add on to my Accounting and Finance Majors. One of the classes I needed for it was an appraisal class.
Everyone thinks of Ohio State as humongous and it is but the Real Estate major within the Business College is (or at least was 25 years ago) very small, like about a dozen graduates per year, REALLY small. I was in my final quarter at Ohio State so I literally knew EVERYONE in the Real Estate program. The appraisal class was only offered a night because the instructor was a working appraiser who wasn't available during the day and when I showed up there were ~40 people in the class and I only knew a handful. That surprised me because, as I said above, I knew literally everyone in the RE program and I didn't know until then that this class was also offered for an alternative purpose.
The professor was one of those guys who has everyone introduce themselves on the first day and as we went around the small number of people that I knew were, of course, Real Estate majors. The rest were all in the Arts College majoring in something called "Personal Finance". We (the small group of Business College Real Estate Majors) couldn't understand why the Arts College would offer a "Personal Finance" Major and why anyone would pursue it when you could get a lot more financial knowledge in ANY major in the Business College. One of my group finally asked: "What the heck is a Personal Finance Major?" One of them answered that it was "A business major for people who weren't smart enough to get into the Business College." Several of his colleagues vociferously objected to that characterization but over the course of the class we (business majors) learned that it was very much true.
Some of the appraisals were of income property (rentals) so we had to do the calculations to discount future cash flows. For those of us from the Business College this was standard stuff and the problems presented in the class were ludicrously easy. I kid you not, none of the Arts College "Personal Finance" Majors could grasp the concept. To them it might as well have been presented in Greek. We (Business Majors) tried to explain it to them but to no avail. They just couldn't understand it.
The reason I shared this whole long story is that at some point during the class one of us (Business Majors) asked what the Arts College people planned to do with their Bachelor of Arts in Personal Finance Degrees and they all said that they would be stock brokers and financial planners. We were aghast. These people couldn't comprehend simple cash flow valuation concepts and THEY were going to advise others about finances.
The above is @medinabuckeye1 (https://www.cfb51.com/index.php?action=profile;u=1547) 's warning to be VERY careful about trusting stockbrokers and financial planners because they might not know or even have any clue of WTF they are talking about.
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The good news on mine is when he doesn't have an answer he a) tells me he will find or b) refers me to an expert on the topic at hand.
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The good news on mine is when he doesn't have an answer he a) tells me he will find or b) refers me to an expert on the topic at hand.
That is frequently the hardest thing to find in any field.
I don't want an attorney or engineer who pretends to know the answer to my question. I want one who tells me when they know and if they don't know either tells me that they'll look into it or refers me to a specialist who will know.
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Yep. Stock hit an ATH of 777 two weeks ago, was down into the 560 range last week, and hit about 710 at its high point today...
Up in the 970s today.
Talk about a roller coaster!
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Buy low sell high
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Up in the 970s today.
Talk about a roller coaster!
You are in a really unique situation in that, as I understand it:
- You own a substantial amount of shares, and
- This makes up a VERY high percentage of your portfolio.
The vast majority of people are in neither or only one of those groups.
If you are in #1 but not #2 the dollar-value change is still just as large but since you are NOT in #2 this is only a small percentage of your overall portfolio so your overall net worth isn't impacted much (in a percentage sense). Ie, if you are worth $2M and it goes up by $800k because this stock goes up that is a big deal but if you are worth $200M and it goes up by $800k because this stock goes up that isn't really a big deal.
In your case, being in both of those groups, your overall total net worth is jumping all over the freaking place with THIS stock. That is nuts.
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In your case, being in both of those groups, your overall total net worth is jumping all over the freaking place with THIS stock. That is nuts.
Yeah, the swings are neckbreaking...
3 years ago, we were talking about the fact that we were in a terrible market that hadn't been seen in our industry in decades. Right now, we're in a good market at a level that hasn't been seen... Ever.
I feel very, very lucky.
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I feel blessed to have an education, and experience here.
I let professionals manage my retirement money but I watch closely.
Best advice I can give anyone is cliche it so simple:
1: diversify
2: play the long game.
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I feel blessed to have an education, and experience here.
I let professionals manage my retirement money but I watch closely.
Best advice I can give anyone is cliche it so simple:
1: diversify
2: play the long game.
Yep. You aren't in it to make a few hundred thousand today you are in it to make a few million over a few decades.
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don't trade. just don't.
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I feel blessed to have an education, and experience here.
I let professionals manage my retirement money but I watch closely.
Best advice I can give anyone is cliche it so simple:
1: diversify
2: play the long game.
Words to live by.
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My company has an option for an ESPP With a look back provision and buying at a discount. I’m Very much aware that I will pay less than taxes if I hold onto that stock for a year. But I also know that I can only sell the stock four weeks a year and have seen it swing absolutely wildly.
So we will be taking the short-term growth and any of the little extra boosts it provides and calling it a day from there.
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My company has an option for an ESPP With a look back provision and buying at a discount. I’m Very much aware that I will pay less than taxes if I hold onto that stock for a year. But I also know that I can only sell the stock four weeks a year and have seen it swing absolutely wildly.
So we will be taking the short-term growth and any of the little extra boosts it provides and calling it a day from there.
That's a good way to do things, if it works.
Mrs. 847 used to get her BAX stocks at a 25% discount, up to 20% of her pay.
We did that for 20 years.
BAX didn't start to get wild until after we unloaded (major tax event!), thankfully.
She knows a lot of people who have lost their ass.
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I feel blessed to have an education, and experience here.
I let professionals manage my retirement money but I watch closely.
Best advice I can give anyone is cliche it so simple:
1: diversify
2: play the long game.
this has worked very well for me, so far
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this has worked very well for me, so far
Indeed. Well enough to put a poor dirt farmer into a fancy Corvette!
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and more importantly, given me the freedom to retire comfortably and early
I guess a low budget Vette is part of the comfortably
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It was easier for me to marry my money manager.
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It was easier for me to marry my money manager.
Now that's love.
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I tried to help my Ex manage money - didn't work, she wouldn't allow it.
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My company has an option for an ESPP With a look back provision and buying at a discount. I’m Very much aware that I will pay less than taxes if I hold onto that stock for a year. But I also know that I can only sell the stock four weeks a year and have seen it swing absolutely wildly.
So we will be taking the short-term growth and any of the little extra boosts it provides and calling it a day from there.
Yeah, this can be a good thing. We have this where it's 5% below close on the ESPP buy date--and it's up to a 2-year lookback. So it's a minimum 5% immediate bump, but a lot more if the stock has moved. We don't have limits on when we can sell.
I'll have two more purchases this year that are based on a lookback to last May's stock price. Yesterday's close was just a hair over 10x what my purchase price is the next two rounds.
I max my 401K, just started the IRA last year, but the constant is that I put away the max (10%) of my income into the ESPP. I was largely looking at this money over the last decade as my emergency fund. But this year, if stock prices hold, buying stock using 10% of my income that's worth 10x my buy price is pretty much the equivalent of doubling my income.
Badge gets mad every time I talk about how the divorce wrecked my finances and pushed me into renting. Well, Badge doesn't need to cry for me any more :72:
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I'd like to think some of us around here were of some value.
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That's a good way to do things, if it works.
Mrs. 847 used to get her BAX stocks at a 25% discount, up to 20% of her pay.
We did that for 20 years.
BAX didn't start to get wild until after we unloaded (major tax event!), thankfully.
She knows a lot of people who have lost their ass.
In my first few years of the company, the stock dropped like 90% at one point.
And this mostly reflected that it had just been pretty overheated when I got there. That’s fine. But it also means the chances are it’s not gonna grow in line with a safer index fund and the inability to sell on demand leave me a little too antsy.
and considering I can get a 15% discount twice a year plus look back, that ain’t bad.
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But it also means the chances are it’s not gonna grow in line with a safer index fund and the inability to sell on demand leave me a little too antsy.
and considering I can get a 15% discount twice a year plus look back, that ain’t bad.
Immediate 15% return beats the S&P 500 annual return on average. And if you're buying based on a lower lookback price, it's even higher.
So selling it ASAP and then turning around and throwing that in an index fund is still worth maxing out your ESPP contributions. Only problem is that you pay STCG on that 15%, but it's still more than if you were just throwing it in the index from your paycheck.
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After we went private, and then back public, we no longer have an ESPP. I made a decent chunk on the first go-round but I'd only been working for the company for a couple of years when we went private.
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One of my good friends I used to talk about a lot here in my Austin days was fully vested in his company several years ago, which included a big chunk of company stock. Shortly after that they went public and the company's worth exponentially accelerated rather quickly. Then they laid him off. He wound up selling his stock, which had, in a matter of weeks, become worth a couple million. He took a nice tax hit for it, but overall he didn't regret it. And a piece of it helped float him along, as he wound up being out of work for well over half a year.
I guess if you get laid off, it's nice for them to hyper-inflate your net worth on your way out the door.
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This could go in the grumpy thread, but it's more related to this discussion...
What makes me grumpy--on the behalf of others, not me--is all the people I know who have either regularly sold their ESPP shares immediately as normal practice, or sold out of our spun-off company stock they got in the split really cheap over the last year before [or at an earlier stage of] the run up.
I mean, I just feel bad for them. The lotto numbers hit, and they missed it.
This run was probably a once-in-a-lifetime opportunity. I can't imagine how much they're probably kicking themselves right now. It makes me sad.
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My retirement was nearly all in an employee stock plan. The good news is the company put the money into it for us, and over the years that share went from 5% to 25% of our salary (not a deduction). The bad news is initially it was all in their stock, they allowed some diversification later but the options were not good. When I retired, I got it all out (from JP Morgan) into my IRA where I could self manage, but as I've said, I had pros do it for three years until I felt I could handle it. I got pretty lucky with 4-5 picks over the years, one was Costco which the pros said was too expensive, ha. Another was Apple.
I had THOUGHT a retiree should invest only in "safe" dividend paying securities and bonds, but I learned differently from the pros. That opened my eyes. Of course I still have ten years in "safer" investments, but the monies I might need further out are in some riskier investments, nothing crazy.
The other key is when a stock goes way up, you can find suddenly you have 25% or more of your portfolio in one stock, which isn't desirable, so rebalancing is key also.
I look at the basket almost daily and trade a few times a week, often selling something over the past couple of years, and buying bonds or less risky stocks.
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I kind of forgot about my IRA from the first company I worked for post-undergrad. When I was laid off from that company back in 1998, I rolled it out of the company's 401K and into an IRA. I'd only been there for 4 years, salaries were pretty depressed at the time, and there really wasn't that much money.
So fast forward to this year when I'm doing my taxes, and I finally decide to take a look at that fund. Last time I looked closely, it was maybe around $70K or $80K. It had been appreciating ok over the decades but like I said, the initial investments were pretty low. I obviously hadn't been managing it closely at all, I had originally put the money into some moderately aggressive funds plus I left some of it in the company stock and none of those returns were all that great, but since the investment was low, I'd never bothered to rebalance or diversify. Basically I thought of it as "just not that much money" and not worth my time.
So imagine my surprise when I finally looked closely at it a few weeks back, and saw that it was now up to about $250K. Apparently my aggressive funds had done pretty well sinve COVID, and also my old company had spun off my old division, given me shares of that stock when it split off, and that particular new stock had done pretty well over that span.
So, yeah. What I'd considered to be an insignificant part of my retirement portfolio has become something more important, and now that I'm finally paying attention, I'm in the process of rebalancing and diversifying it a bit.
This could probably go in the Happy thread although it didn't happen today....
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Immediate 15% return beats the S&P 500 annual return on average. And if you're buying based on a lower lookback price, it's even higher.
So selling it ASAP and then turning around and throwing that in an index fund is still worth maxing out your ESPP contributions. Only problem is that you pay STCG on that 15%, but it's still more than if you were just throwing it in the index from your paycheck.
It also hits twice a year, so it’s 15% on income between 6 and 0 months old. We’re a fan of that.
It’s been maxed. There’s a slight gap where we either get growth or a few losses to harvest, so that’s nice too.
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I kind of forgot about my IRA from the first company I worked for post-undergrad. When I was laid off from that company back in 1998, I rolled it out of the company's 401K and into an IRA. I'd only been there for 4 years, salaries were pretty depressed at the time, and there really wasn't that much money.
So fast forward to this year when I'm doing my taxes, and I finally decide to take a look at that fund. Last time I looked closely, it was maybe around $70K or $80K. It had been appreciating ok over the decades but like I said, the initial investments were pretty low. I obviously hadn't been managing it closely at all, I had originally put the money into some moderately aggressive funds plus I left some of it in the company stock and none of those returns were all that great, but since the investment was low, I'd never bothered to rebalance or diversify. Basically I thought of it as "just not that much money" and not worth my time.
So imagine my surprise when I finally looked closely at it a few weeks back, and saw that it was now up to about $250K. Apparently my aggressive funds had done pretty well sinve COVID, and also my old company had spun off my old division, given me shares of that stock when it split off, and that particular new stock had done pretty well over that span.
So, yeah. What I'd considered to be an insignificant part of my retirement portfolio has become something more important, and now that I'm finally paying attention, I'm in the process of rebalancing and diversifying it a bit.
This could probably go in the Happy thread although it didn't happen today....
The long game!👍
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one was Costco which the pros said was too expensive, ha.
I find COST fairly intriguing. I don't understand how a boring stock like that, with no explosive growth opportunities on the horizon, can trade at 40-50 forward PE.
I feel it's a VERY solid company, well managed, beloved by its members--myself included.
The stock just seems really expensive. It's not a meme stock like TSLA, so it's not like the fundamentals are completely divorced from performance. But it's not a growth stock, so trading at that high of a multiple is weird. It's trading at about 2x the forward PE multiple of NVDA, a company projected for 35% earnings and 30% revenue growth from FY27 to FY28.
How does COST stay so high?
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members keep buying stock
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Consistent earnings growth ... but other stocks have done about as well in the sector.
COST: 1,009.99 -4.39 (-0.43%) (https://www.cnbc.com/quotes/COST?tab=earnings)
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Annuities?
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Market performance is making me happy.
I generally agree...
But looking back, what seemed like a great decision (covered call) is something I'm now regretting... Considering the stock closed at $1562 today. The stock is in a MASSIVE run, and I capped my upside. Can't complain that much, given I'm locked into 3350% gain on that stock if I get assigned on the call. But I'm kicking myself more than a little bit. It's an expensive lesson.
In unrelated [I think] news, I'm stepping back from the financial advisor I started working with when I moved my funds from E*Trade to MSSB, and moving everything back to E*Trade. We'd done nothing together except the covered call, so it's pretty easy to unwind.
I just don't trust he's going to outperform boring ETFs. And that he's trying to steer me to products that might offer other advantages in the short term (tax loss harvesting) but then I'm fighting the fees--for the fund and his fees--long term.
So for the stock that's not in the covered call, I sold a chunk (~10%) today. The market forecast is good, so I'm fine letting it run somewhat, but I want to slowly start chipping away and locking in gains. Threw 35% of the capital gains into SGOV since I might have to pay estimated in July, and threw everything else into VTI. Let's hear it for boring index funds, amiright?
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Boring ETFs? Yeah, there are some out there that are boring (*no names from me), but we now have over 5,000 ETFs, 8 out of every 10 new one is 'active' and there sure are some not-boring ETF issues out there.
just wait, we're merely days away from Prediction Market ETFs being declared effective.:sign0065:
*i can't and won't name securities as an associated person of a BD.
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(https://i.imgur.com/FMSmXep.png)
How much your heirs inherit depends on where you lived. Here’s a state-by-state guide to estate and inheritance taxes and onerous probate fees.
Americans spend a lot of time thinking about where to live for tax purposes. States like Florida and Texas lure both billionaires and ordinary workers by touting their lack of a state income tax. Other states lure seniors with generous exemptions for retirement income. But another question gets less attention: Where is the most expensive place in the U.S. to die?
With the federal estate exemption for 2026 set at a generous $15 million per person ($30 million for a married couple), little more than one in a thousand estates is hit with the federal levy. In contrast, states’ estate and inheritance taxes, as well mandatory estate administration costs, can hit families with more modest wealth surprisingly hard. And since each state tax operates under its own often arcane rules, those costs can come as an unpleasant surprise. But with some advance knowledge and planning, they often can be minimized.
https://www.forb2026/05/15/state-estate-inheritance-taxes- (https://www.forbes.com/sites/kellyphillipserb/2026/05/15/state-estate-inheritance-taxes-probate-costs-2026/?utm_campaign=ForbesMainTwitter&utm_source=ForbesMainTwitter&utm_medium=social)
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One thing that "amuses" me is how one can read five stories that are major gloom and doom, and five more that are skies the limit.
I'm trimming some today mostly to rebalance. My "tech" stocks keep outrunning the rest and getting me over loaded.
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Yeah I'm definitely overloaded on Tech, but I always have been given my occupation and specializations. In general it's been very good for me, although I have taken a couple beatings at various points in time when Tech across the board has faltered.
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Choppy market.
It will settle when people stop reacting to some guy in Iran passing gas.
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Ironically, passing their gas (and oil) is precisely what we need everyone to do.
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Someone is awake.
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I think if you're under 50 or so, being tech heavy is "OK". I'm not, obviously. I try and maintain some balance, but it requires more attention than I often have.
That has been fine for me up until now.
The funds I expect to tap in ten plus years is more aggressively invested.
TFLO is an interesting kind of ETF investing in Treasuries with a decent return, meaning 4%.
If you are 2-3-4-5 years from expected retirement, I'd go hard conservative now, especially if you are under 60. You'll need to cover health insurance until you're 65. My cost for that went WAY down with Medicare. WAY. We're amidst our prime travel years now, I appreciate in a few more we physically won't feel like long trips.
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I'm probably 10 years away from retirement, I'll be working up until 65. Kids should be out of college (undergrad) in 6-7 years.
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I've always been pretty conservative so if I retire in 2 years, I'm in a good spot today and hopefully will be then
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If you are 2-3-4-5 years from expected retirement, I'd go hard conservative now, especially if you are under 60. You'll need to cover health insurance until you're 65. My cost for that went WAY down with Medicare. WAY. We're amidst our prime travel years now, I appreciate in a few more we physically won't feel like long trips.
That reminds me....PSA: everybody remember to switch to Medicare as soon as you turn 65. There can be major penalties that are permanent for waiting. I know seniors who have been slow about it and it puts them in a pickle.
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oh, I'm ready!
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Yes, signing up for Medicare is VERY important. You can of course delay SS longer, but not Medicare.
I keep seeing these social media sites claiming somee magic pill for converting to a Roth nearly tax free, but I am pretty sure they are scams to collect your personal information.
Doctor gave me a pll and I grew a new kidney!!!!
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One thing that "amuses" me is how one can read five stories that are major gloom and doom, and five more that are skies the limit.
I'm trimming some today mostly to rebalance. My "tech" stocks keep outrunning the rest and getting me over loaded.
I understand trimming to rebalance, given how much of my net worth is in two stocks.
However I'm not being rash and doing it quickly. If I'd started trimming a few months ago when I first started talking about it, I'd have missed some pretty big continued gains as these stocks continue to run.
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Yeah, I think you are too young to worry about it that much. I'm not.
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Yeah, I think you are too young to worry about it that much. I'm not.
Nah, I still need to rebalance/diversify. I'm WAY too concentrated.
My point was if you've got strong runners, and they're hitting higher concentration because of share price appreciation, it's a good problem to have lol. If you're thinking they will continue to run you can build in rebalancing to limit risk with things like stop losses or defined trailing stop losses rather than just selling. That way you can still participate if the upside keeps going up.
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I'm probably 10 years away from retirement, I'll be working up until 65. Kids should be out of college (undergrad) in 6-7 years.
My target right now is age 56, or 2035. That will be when the youngest should be done with college.
That assumes--which is probably a bad assumption, returns somewhere in the range of market average (~10%) over that time. With that, my portfolio value would double within 9 years. That would be within range of the right number considering a 4% or lower annual withdrawal rate.
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Doctor gave me a pll and I grew a new kidney!!!!
How silly. Everybody knows a pill can't make you grow a kidney.
Only Essential Oils can do that, and it needs to be one of the right brands. See your local Essential Oil dealer/cultist.
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In my experience, stocks that run up to the point of being "over valued" continue to run up longer than I had expected.
If you can stop loss and/or buy puts on runners, and let them run, it can work out for you, obviously.
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Rebalancing quickly out of tech is something that might be worth doing more slowly after NVDA's earnings report today...
Runners gon' run.
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Did a little stock market activity with my 3rd graders - had each group in each class pick a stock and 'buy' a share. We checked the price at the same time each day, graphed it for a week, and IDed which group in each class made the most money and which class did so altogether.
Probably not super meaningful to them, but it's the end of the school year and we were talking about different kinds of markets and ways to grow money.
Altogether, they 'made' around $25 for the week. They chose Youtube, McDonalds, etc....my homeroom was a little buji, picking Louis Vuitton and Rolls Royce, among others.
The best stocks for the week were Five Below and Minecraft (Microsoft). It was a good chance to show them how the companies they know are sometimes owned by bigger companies (Youtube > Google > Alphabet).
We also did an activity before that where we simulated 18 days of starting your own company. The focus was that spending money early on to hire workers and train them (and themselves) was worth it to make more money later on (a dollar to hire, a dollar to train, up to 3x, yielded $3/day for 3 workers for the length of the activity).
They had fun with it and loved having a fat stack of realistic learning money towards the end. The ones who just wanted to hold on to the money they made wound up with much less than the others. So that may have opened some of their eyes.