No he has not really explained his rationale well. He clearly doesn't understand the investments he's holding. I mentioned earlier in the thread, but I think he thinks covered calls are a super secret magic money printing market instrument. He did it with TSLA and it worked well for him since it let him make some passive income while the stock stalled until it became a long term capital gain instead of a short term. That's actually one of the circumstances where selling calls makes sense (though it would have made more sense with a put option to create a collar and eliminate his downside risk, but he was lucky enough with that investment to not end up needing one).HootingSloth wrote: ↑Wed Sep 04, 2024 12:13 pmI may have missed out on earlier discussion in the thread, but has the OP explained the rationale for simultaneously selling covered calls and holding a 2x daily-leveraged ETF in the same underlying? Doesn't selling covered calls gamble on the price staying relatively flat, which suggests the 2x fund likely would get whacked by volatility drag? What is he even gambling on?cvoege wrote: ↑Wed Sep 04, 2024 11:14 amMaybe you already know all this, but here's why he's in the casino still. He said in his original coming back post that his expenses had increased and this he was forced to play the slots to get to a higher balance and thus a lower withdrawal rate.devillif311 wrote: ↑Wed Sep 04, 2024 9:53 am OP, why are you still in the Casino when you have enough? Very risky to assume NVDA will just go up forever. Hasnt hit its high in months now.
Naturally people responded telling him about lifestyle inflation and how he couldn't rely on lucky stock picks forever, he's need to rein in spending at around 240k per year.
OP then responded that, no no, he hadn't had runaway lifestyle inflation, he just was putting his kids through college and that increased his withdrawal rate to 3.75%, so dangerous and risky that he needed to solve it by making a big leveraged stock play.
Naturally people pointed out that those college expenses were temporary and his current withdrawal rate was perfectly safe with a normal index fund portfolio. Heck, it was even safe if his kids stayed in college forever! And OP agreed! He respected those words of advice and agreed he'd unwind the position via covered calls.
Naturally, people pointed out that that left him exposed to huge downside risk for little gain, and he could close and go back to his normal life, even though he had lost some, his withdrawal rate was safe. It was around then that OP just stopped responding to anything critical and just provided updates on his positions.
So, as a final answer to your question of why he's still in the casino, the reason is there is no logical reason. He just wants to gamble. Though I'm guessing now his reasoning is that he needs to get back what he lost and the only way to do that is to keep gambling. I wonder if there's a term for that... Oh yeah, https://en.m.wikipedia.org/wiki/Gambler%27s_fallacy
The combination of one early win followed by a series of apparent net losses, a seemingly inconsistent strategy based entirely on positions in "meme" stocks, and not understanding what benchmark should be used to compare performance seems like a grim (but familiar) story.
Based on that he seems to think you can sell covered calls and if the stock drops you offset it with the premium. If the stock goes up your position gets closed and you're out of the game. Win-win right? What he missed was the obvious question that people in this thread repeatedly asked him: what happens if the stock goes down more than your premium can offset? What if it just keeps going down? Crickets. People have also pointed out that 2X leveraged ETFs do not work the way he thinks they work, and he's just ignored them.
