Introduction To Coltech Investment's and Selling (Writing) Options

I am going to talk about options on stocks and ETF's we learned a long time ago about writing options or selling options, both terms are correct. The IRS allows you to write options in your IRA account they do not allow you to buy options in your IRA account except for puts and they are considered insurance protection. Buying options is considered more of a risk than writing them, usually you own the underlying stock or have the funds available to purchase the stock. When you purchase options, the stock must move in a particular direction in a certain amount of time. When you purchase options, time is against you (premium decay).

Cash is king!!! How would you like to learn to consistently put cash in your portfolio? We have been doing that for years and we have a system. We use ETF’s to sell options on in this way We sell the options six months to a year out and basically forget about it. We always want to set up a trade as a win win!!!

Writing options gives you cash up front, and it really doesn't matter which direction the underlying stock goes, we set our exit price and forget about it. If you write a put option that means you have the cash available to purchase the stock, by writing a put option you say that you want the stock for a certain price and are willing to pay that price no matter how low the stock goes. This is no different than buying stock outright in the open market.

The difference is that you want a specific price.

Example if you wanted XYZ company stock and it is currently trading now for $20 a share you could buy it at the market price. Or you can write a put option to buy it at $17.00 a share a month from now. So if you wrote a put option it would look like this April 17th XYZ $17.00 a share. The amount of premium may vary but let's say for example it was a dollar. One option equal 100 shares so if you wrote that option you would collect $100 cash and the option expires in one month. The person that has purchased the put option is doing one or two things, either protecting their portfolio from a downward move in the market or speculating on the price on the stock to move down significantly in one month's time.

So you receive $100 cash to wait and see if XYZ moves down to your price, if it goes down to $16 the option buyer would exercise the option and you would purchase the stock for $17.00 a share now remember you got a dollar up front so that makes your buy price $16.00 a share.

Now let's look at if you bought that stock outright in the open market. You would have paid $20 a share and currently you would have a paper loss of $4.00 a share. Because you waited and wrote an option to purchase the stock you are currently even and now you have the stock that you wanted at a lower price. What if the stock went the other way and went up then if the stock was still up past $17.00 a share on April 17th then the option expires worthless and your money is freed (your collateral to purchase the shares) up so you can write another put option and you keep the $100 premium. WIN WIN!!!

Writing options has been around for a long time and the big brokerage houses and banks are the ones writing the options AKA selling options, the average person (retail investor) is the one buying them we are the suckers.

Option Facts

The options market is incredibly large and has experienced significant growth. In 2022, U.S. options volume reached 10.32 billion contracts. This includes options on stocks, non-equity instruments, and futures. The market is also growing due to increased retail investor participation.  The retail investor is you and I the average person and most of us, we buy options. How would you like to be a part of something that has daily sales of $32 million dollars a day!!!. As a retail investor and purchaser of options you are at a disadvantage. Time is against you when you purchase an option on a stock or ETF the price must move in a certain direction in a certain amount of time for you to profit. And your biggest disadvantage is time, it eats away at the value of the option. Owning an option, in and of itself, does not impart ownership in the underlying security, nor does it entitle the holder to any dividend payments.

According to CBOE 4/17/2025

Taking Advantage of a Opportunity

How would you like to be a part of a $32 million a day market where the product you sell is guaranteed to sell. ETF’s or Exchange Traded Funds are group of stocks traded as one share of stock, they're similar to mutual funds but are traded on a daily basis in the open market. Unlike mutual funds which are settled at the end of the trading day. If you wanted to sell a mutual fund, the price that you thought you were going to get may not be what you expected. It could be more, or it could be less. There is where the advantages in ETF’s are. ETF’s can be bought and sold immediately in the open market.

How would you like to change time decay to your advantage? You are probably asking yourself how do you do that? Sell options on your portfolio That way the time decay is on your side. There are two terms that are used in selling options, one is sell the other is writing both are correct and are used interchangeably. You may see myself use both terms. When you sell options the money goes directly into your account!!!

All this may seem intimidating, once you learn it's actually pretty easy.

Let us show you how, remember this is just for learning purposes and these are not recommendations to buy or sell anything. Premium starts to decay rapidly six months before expiration the maximum amount of premium you can receive is two years out. That has been the longest time period I have seen. If you're going to buy a stock, why not write a put option if you're going to sell a stock why not write a call option; in this way you can sit and wait to get your price, and you get paid to wait.

OUR SYSTEM

There is always a down market or sector in the markets those are markets we want to focus on using ETF's and the options. We want to lower our risk of our stock being taken or even being put to us (Assigned). The way we do this is we look for ETF's that were down in certain sectors that are moving off their 52 week lows usually 10 - 20% off their lows.

Our goal is to make money off the premium, more volatility the stock or ETF the higher the premiums are on the options, we want to use time decay to our advantage. Six months out is when the time decay starts to speed up, that will be our target in the beginning. We sell options out further (Time) as the market becomes less volatile. We really don't care if the stock goes up or down we want premium dollars. That’s cash in our pocket!!!

What is an option?

A promissory note to do something in the future at a specific time and price it gives you the right but not the obligation. That is why a premium is paid.

WHY SOMEONE WOULD PURCHASE OPTIONS

There are many reasons why someone would purchase stock options, let's do an example say you had bought a stock a few years ago. Let's say you bought it for $20 a share now it's at $60 and the company is having minor trouble but you still have faith in the company to turn it around. You could do three things;

1) sell the stock and try to buy it back in the open market at a lower price.

2) Write (Sell) a call option for $60.00 or higher at a year or more expiration. This would give you maximum amount of premium, but you would be locking in the price of the stock for a year or more at $60.00 a share or more. (Whatever you wrote it for $65-$70 ...)

3) You could buy a put option for $60.00 a share (Gives you the right to sell for $60 a share) with the year or more expiration this would give you the most protection that would be a lot of out of pocket expense ($3.00 -$10.00 a share....); but this would give you the most protection. Because no matter how low the stock would go, you could exercise that option and collect $60.00 a share even if the stock was at a dollar or less near expiration.

OUR GOAL

We like to write call options on stocks or ETF's we own. We want to earn 20% every year on our money we write (Sell) options 90% of the time on ETF's. This way we can sleep knowing our stock will still be there in the morning we don't have to worry about bankruptcy disasters takeovers.

We will purchase ETF's that are down and are on the way back up. The more volatile the ETF is, the more premium is received. We look for volatile ETF's that are paying a dividend and an option premium that will give us 20% return.

It is not always available but most of the time we have found that ETF's fits our criteria or very close to it! What's wrong with making 15% instead of 20% Nothing!!! 20% is merely a target all we must to do is get close to become rich.

Double our money every five years!

SELLING OPTIONS

In order to sell options you must wait until you have accumulated 100 shares And the way we usually do it is we will purchase the first 100 shares at market price. When we want to add to our portfolio we will sell a put option to purchase more of the same. If you can get 20% return on your money you will double your money every five years if you start early and make deposits consistently you will become a millionaire. Warren Buffett became a billionaire!!!

Warren Buffett has made 20% on his money since 1960.

The trick here is to get your money working for you and you and not working for the money. We put away 20% of everything we earn in investments and eventually we won't have to put any money away. Once you get to a certain amount it should go grow quickly remember we're making the time decay on the options our friend we're making it work for us. We have found over the years that stocks move down faster than stocks move up. Only time you buy options is to protect the stock.

LONG TERM INVESTING

Long term is the best way to invest never buy a stock that is going down in price too new lows, because it can go lower take for example. Kmart, GM and a lot of other famous names they all went bankrupt. A company that you think cannot go out of business has and will and it will continue to happen. The best thing I've found is ETF's they are basket of stocks and they are managed, if any in the group goes bankrupt it is simply replaced in the ETF and the ETF keeps going. So you can sleep at night, ETF's are the only thing we buy that are making new lows in price.

Paper profit is nothing until you sell your stock. You can beat Wall Street by taking a long-term view out 5 to 10 years out one of the richest man in the world has proven that. Warren Buffett is without a doubt the greatest investor in the world. He has made 20% on his money since 1960 his approach is 10-20 even 30 and 50 years out.

I feel so blessed for my financial success and my wonderful wife!

THE STOCK MARKET AND OPTIONS CAN BE SCARY IT DOES NOT HAVE TO BE!!!

Let us help you learn.

We like to be proactive, we don't wish hope or pray that our stock hopefully goes up. We set our price and we get paid to sit and wait, cash money up front to either sell our stock or to buy the stock at our price. There is nothing better in the world than that, remember the trick is to get your money working for you, so you don't have to work for the money.

Never buy your options back (Unless you can buy them back pennies on the dollar), it does not pay!!! Be satisfied that your stock hit your numbers, and you got paid up front for the option.

This is not a get rich quick scheme it takes time and patience if you want to become wealthy you must be consistent with your deposits and your effort. Always live below your means and stay away from credit debt, with credit cards all you are doing is selling your future remember you can become rich making 20% every year on your money, think about the credit card companies making 24 to 30% on their money.

But we also believe if you have $10,000 in your savings and you owe $10,000 you are debt free.

It is so important to save money on a regular basis