What is the Fourth Goal for 2023? Weekly Options Focus
As I said in the previous installment of this series, the first goal for 2023 was to focus on the glory and wisdom of God. Every other goal will flow from that perspective, and that includes this one. If giving is a goal, and it is, then generating income is a way to add to the giving efforts. One very effective way to increase income is to trade options.
Options Trading Goal 2021-2022
The first year I traded options my primary goal was to experiment with covered call trades to see what was most effective. For the first half of 2021, my total trades generated $18.1K in extra income. Those trades taught me some things, and during the second half of the year I added another $72.5K in income, bringing the 2021 total to $90.6K. However to get to that total for the year, I had to do 1,094 trades. The average per trade, therefore, was about $83.
That certainly was a good addition to our income, but I felt I could do better in 2022. Therefore, I decided to do fewer trades for a higher average income per trade. The total options income for last year was about $103.5K, but I only did 563 trades to achieve that income. Therefore, my average income per trade last year was $184.
Options Trading Goal 2023
Last year’s approach was focused on covered calls. There were only 36 cash covered put options. Part of the reason for this is that I did not want to have too much cash sitting idle or locked up in this type of option for a full month or more. The 36 puts, however, did generate $5,000 of income in 2022, or about $139 per trade on average. Now I believe the wheel option strategy of selling puts and then switching to covered calls is worth more of my time and our dollars during 2023.
The goal, then, will be to triple the number of cash covered puts on stocks that trade weekly options. The weekly part of this equation is important. I don’t want too much cash locked up for more than two weeks at a time. I think, using this strategy, that I can easily reach a total of $105K in options income in 2023. However, the goal isn’t so much a dollar amount, but a more disciplined approach to trading weekly options.
In addition, this likely means that I will sell some of my existing monthly options positions, using covered calls, to free up cash for positions that trade weekly options.
Wheel Strategy Explained
If you are interested in learning more about the wheel strategy, see my post on January 14, 2023, where I explain the first part of this strategy with an example: HPQ. HPQ is a weekly option stock.
The goal for 2023 is more of a type of diversification and focus rather than a search for ever-increasing income. We can afford to take this approach, as our estimated annual income from dividends this year should be in excess of $160K. Even if we only receive $40K in options income, our income will far exceed the median income for taxpayers in Wisconsin.
As always, I am interested in hearing from my readers. What goals have you set for 2023?