CSP VI: How Hard Do We Want to Work for This?

Not many good things in life are free, right? Want a well-paying job? Probably need to pay for college, study hard, etc. Want to do well in that job, get promoted faster than others, make more money? Probably need to work harder than everyone else. Got a business idea you think you can monetize? You’re definitely going to have to hustle.

Want to make 7 to 8% on your money for the next few decades? Buy index funds and wait; you’d never have to look at the stock market again. Want a 12% return? Put your money in dividend-paying funds like QYLD, RYLD, and/or XYLD; check on them every month or two, move your money around if any under-perform. Want 2% per month, 24% per year? You’re definitely going to have to learn or develop some technique that works for you, then spend at least a few hours a week “in the market” implementing it. Want 1% per week, 4% per month, 50% per year? Yeah, you’re definitely going to spend a lot of time working toward that.

Me, I love the markets. For some reason I always have. I can’t say that I’ve been especially successful over the years, but the journey described in this blog is my focused attempt to change that. I’m working hard at it. But I innately love numbers. I love sums, differences, multipliers, linear and exponential growth, and especially percentages. That’s why I quote percentages all the time. And I’m fluent with numbers; much of this math I can do in my head. That helps I think, and I know that not everyone is like that.

But here’s the thing: IF this strategy works long-term (not proven to myself yet, though others claim to be doing The Wheel (CSPs and CCS) for at least a decade), how hard do we want to work at it? I sit and look at the markets for hours a day, daydreaming, planning, scheming, learning, absorbing. I’ve laid out here a system that anyone could follow, and it’ll probably evolve and change, but even with “A System” we have to decide how much effort we’re willing to put into it. Right now I’m just playing with paper money and about 10k of real dollars in two IRAs, but I’m trying to codify this, really lock it in, see what works and what doesn’t, so that when I retire in a couple years with maybe 700k to invest, I have a system with a proven track record and the gained experience running it to know that I could live on it if I had to. Or grow that capital just because, maybe so I can give money to my parents or grown kids, or whatever your own personal motivations may be.

So in the last post where I documented that some of my trades for this week had closed after just one day, I instinctively did what I do: put that money back to work. But then I realized that maybe not everyone has the desire to or luxury of being able to monitor and respond to the market most days during the day. And that made me realize that there are at least a few different ways to implement a system like this. And different levels of effort to keep more or less of your capital at work at any given time.

Easiest: spend an hour or two on the weekend setting up your trades to automatically execute at Monday’s open. Don’t look at the account again until next weekend. Not advisable, but you could do that. Most of the trades will have filled (opened) on Monday, and of those, most of the sold puts will have expired worthless and you’ll have kept all the premium. But one might have expired ITM and you’ll find yourself holding 100 shares of TQQQ or something. Next weekend you set up your new trades, and maybe put in a sell order for those shares you bought.

A little harder: same as above, but Monday after the open you check that all your trades went in. If any didn’t (2 of my original 14 didn’t), evaluate those; maybe you can lower your Offer price a little and still collect 1%, or maybe you have to go up a strike for more premium. Whatever it takes, you either get those trades to go through, or substitute others, to keep your capital at work. With all the trades active, set up the GTC BTC orders. Once you’ve done a few it doesn’t take long, maybe 20 seconds each. This is the minimum level of effort I’d recommend.

Medium: same as above, but check your positions before the close on Friday. If any are still open and ITM and you don’t want to buy the shares, then buy-to-close for a loss, or roll the position out in time.

Harder yet: same as above, but check the account every day after the market closes, and if any positions closed, put that pile of collateral cash back to work. Usually I’ll just sell another put on the same symbol, using the same criteria, but you may have to find a more suitable candidate from your watchlist.

Hardest: do all the above, but monitor your positions throughout the trading day. You don’t have to watch each stock and each short put all the time, but I always have ToS running, and when a trade closes it makes a notification sound. I go check what just sold, then go through the process above to put that capital back to work. But I’m doing that through the day, not just at the end of the day, or the end of the week. It’s fun for me, but might not be for you, and honestly, might not earn appreciably more.

But that’s the thing: we get out of something what we put into it. If you want more out of it, you have to put more into it. I’ll go ahead and guarantee right now that you won’t make 1% per week, 4% per month, 50% per year using the “Easiest” method above. Some of your trades won’t fill, and you won’t know till next weekend, so that money has sat there unused. Some opened trades will close Monday or Tuesday and that collateral will sit there doing nothing. Even if every trade closed Thursday, by not trading Friday you’re giving up 20% of the trading week. And something I haven’t talked much about yet, but trades that aren’t going well won’t be exited early or modified, and that’ll be a drag on performance.

Bottom line: none of this is get-rich-quick stuff. That can’t be done, and if anybody ever tells you that, they’re either lying or trying to sell you something. Or both. Usually both.

But I firmly believe that with some kind of disciplined approach (whether this one or anything else), good risk management, and an appropriate amount of good old-fashioned work, we can expect to do better, even much better, than any form of passive investing.

Let’s check in on our trades after Wednesday’s close.

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