It’s already 2022! Time flies…maybe it’s my age? Or my children? Or work keeps me busy all the time, but I feel like time passes more quickly now. Financially, it’s important to have time on our side.
How can we do that?
- I believe that long-term investments put us on the path to making the most of time. It is impossible to predict short-term market movements, and it is very profitable to be in a good business for a long time.
- Any asset that adds to its equity over time is also a good option, and real estate is a great example of this.
- The interest is compounded over time. When we reinvest our profits to generate more profits. There is no doubt that compound interest makes us rich.
- In 2021, I’ve found another way to take advantage of the passage of time. These are put options (contracts). These options are sold for a pre-determined period of time, which is why time is on our side here.
All four of these elements participate and play a role in our future financial freedom.
Well, item 4 is a whole new source of income for me. So I researched it extensively so that I could maximize my profits and use it properly. If you have a stock portfolio of your choice, you know its purpose. Of course you will be happy to get these favorite stocks at a discounted price. Options gives you such a tool. There is a lot of information about options trading YouTube So it is a good idea to get to know them before trading them.
A practical example of time use
Let’s look at an example of taking advantage of time selling options.
Here is the chart Coinbase Global, Inc (COIN) This company makes its money from commissions from users who use the Coinbase platform to buy and sell cryptocurrencies. I don’t have a firm opinion on cryptocurrencies in general, but it’s clear that this new market has strength. Since Coinbase makes profits regardless of cryptocurrency prices, I think it is a good investment opportunity.
Analyst estimates are positive, and revenue and EPS are on an upward trend. So I’m okay with holding the shares of this company If the option is assigned, it means I’ll have to buy 100 shares.
Back to options trading, I sold one PUT COIN 28JAN22 210.0 P contract, and I have a duty to buy 100 shares at the strike price of $210 until January 28, 2022. When I sold this option, I received an option premium of $460.
Looking at the Coinbase price chart, the stock price never closed below $210, and shares were mostly bought at $232. I do not see from technical analysis that the price will reach $210. If the price drops below $210 I am willing to own 100 shares of Coinbase.
How do I benefit from time in this case? Share price Coinbase It can go sideways. It could go up or even go down a little for about three weeks and I still make $460. Out of four price trends in three of them, I make money. The only case I would get the shares is if the price dropped sharply, but in this case I would own 100 shares in a good company.
Next steps
This month I traded C$2,532 worth of options and paid C$4.37 in commissions for all of those trades.
I’m out of this new stream of income. This source of income gives me the option to leverage my existing portfolio and earn money while waiting for attractive prices for companies in which I want to buy shares.