I am a German guy married to a Philippine girl in the beginning of my thirties. I have been active on the stock market since 2006 when I invested half of my tiny savings in Hyundai Motor Company. At these times I was still studying in university and trying to find my way in life.
Let me summarize briefly what did I learn in the last decade.
Long-term investing and the compound growth effect
At first I figured out that the stock market always seems to increase in value over time. The reason for that is quite simple in my mind: As long as economy grows and creates value the value of the stocks as share of the economy will correlate long term. Chances are great that you never lose any money if you can stand to hold your assets through a market crash. So I lost my fear of losing all my money by putting it on the market. You need to know that especially in Germany most of the people do still think that the stock market is only about gambling for the rich. "If you really wanna save money you put it in a safe place like government bonds or money market accounts."
After I finished university I did some trades but still did not really have reasonable savings in my brokerage account. Some stocks went up, other went down. So in fact I only made a small amount of profit.
Dividends provide a steady stream of passive income
So i learned that simply holding stocks might work in the long haul. Most of the stock market investores that I have read about were saving for their retirement in the 50s or 60s. But I was in my mid 20s and I could really imagine something better than saving for the next 40 years. There must be a better way to become financially free and independent.
What I was missing was a real investing strategy. Simply buying stocks and hoping for increasing value was not the right answer. The reason is that the value might go up one day, but I wanted to earn some money right now!
That was when I found out about dividend growth investing. If you can find enough companies that can pay you a stable stream of dividends throughout the year you could be able to earn enough passive income become financially free.
After I learned that principle it was the first time when I really managed to earn a consistent income from the stock market. Know there will be a paycheck every quarter was a great feeling. Additionally it really gave me a blowing kick of motivation to fund my investments with as much money as possible to grow my dividend stream.
What gave me headache was the fact that I always had to rely on the policy of the company. Are they willing to raise the payout? Will they keep the dividend although the profit decreased last year? What company pays dividends in May or December?
I got frustrated. Some companies pay high dividends but you have to take the risk of a dividend cut. Some companies pay low but have a high dividend growth rate. Should I wait again and hope to see dividends go up in the long haul?
Earning income on selling options
Finally, after 8 years of investing and 4 years of dividend investing I learned about stock options. What caught me was the fact that you can actually sell options for a premium although you do not own any of them! The only catch was my promise that I would potentially buy or sell a specific stock for a predefined price in the future.
The world of options allowed me to earn income on the stock market no matter what company politics will say! How cool is that?
After i played around with options for the last year I figured out that I finally need to focus on a strategy to really earn money from selling options. It was time to treat my investment like a real business.
The Butterfly Strategy
Butterfly is one of the many option strategies. Set up as an income trade it generally consists of a short call option and a short put option at the same strike price that provide the premium received to keep income. As hedge or protection there are usually bought further out of the money put and call options that cost less than the premium received.
Because of the nature of that trade that we will earn our premium upfront, the short butterfly strategy is also called a credit trade. The job of the option seller is now to manage the risk of the underlying value.
But don't worry, all elements will be explained in further detail in specific posts on this website.
This website will form the foundation to document my progress of my option strategies.
- I wanna share my experience in option trading.
- I want to discuss with you about my mistakes.
- I wanna describe my strategy and document my trades.
Let's get it started!