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Kevin Taylor

How to execute a covered call strategy

If you’re interested in investing in the stock market, you might have heard about a covered call strategy. It’s a popular method that can help you generate income while holding onto your stocks. Here’s a simple guide on how to execute a covered call strategy. First, let’s understand what a covered call is. A covered call is an options trading strategy where an investor sells a call option on a stock they already own. When you sell a call option, you’re agreeing to sell your stock at a specific price (known as the strike price) to the buyer of the option if they choose to exercise it. Now, let’s get to the steps of executing a covered call strategy: Step 1: Choose a stock to invest in You’ll need to pick a stock that you’re comfortable holding for the long term. This is because when you sell a call option, you’re agreeing to sell your shares if the option is exercised, and you don’t want to be forced to sell a stock you’re not comfortable holding. Step 2: Determine the strike price and expiration date of the call option You’ll need to decide at what price you’re willing to sell your shares if the call option is exercised. This is known as the strike price. You’ll also need to choose an expiration date for the option. This is the date by which the buyer of the option must decide whether to exercise it or not. Working with a financial advisor can be essential for determining the right strike price for a stock when executing a covered call strategy. Financial advisors have the knowledge and experience to analyze market trends, evaluate the risk-reward potential of different stocks, and help you make informed decisions about your investments.  Step 3: Sell the call option Once you’ve chosen the stock, strike price, and expiration date, you’ll need to sell the call option. You can do this through a broker or trading platform. The buyer of the option pays you a premium for the right to buy your stock at the strike price before the expiration date. The result of the premium that you are paid is yours, it can be transferred and used elsewhere, or reinvested to continue your other investment efforts.  Step 4: Wait and see what happens Now you wait and see if the buyer of the option decides to exercise it or not. If the stock price stays below the strike price, the option will expire worthless, and you’ll keep the premium you received for selling the option. If the stock price rises above the strike price, the buyer of the option will likely exercise it, and you’ll sell your shares at the strike price. Step 5: Repeat the process If the option is not exercised, you can repeat the process and sell another call option on the same stock. You can continue to generate income from selling call options on the same stock as long as you’re comfortable holding onto it. To sum it up, executing a covered call strategy involves selling a call option on a stock you already own. By doing so, you receive a premium and generate income while holding onto your shares. Just remember to choose a stock you’re comfortable holding for the long term and to pick a strike price and expiration date that makes sense for your investment goals. Covered call options are one of the many risk management strategies we at InSight develop with clients to help them achieve their financial and risk targets. Contact us today if you have concentrated positions and excess risk from a single stock position.  

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March 6, 2023 No Comments
Articles
Kevin Taylor

Real Estate Investing and More in your Retirement Accounts

Yes, you read that correctly, you can own real estate, land, private businesses, notes, precious metals, livestock, crypto currencies, equipment and more in your retirement accounts. We love telling clients of InSight that there is an investing world beyond what CNBC & Jim Cramer. Your retirement nest egg can be invested in more than stocks and bonds and you don’t have to be uber rich to do it. Anyone and everyone can. Our clients at InSight want to Invest in what they know, are passionate about, and understand, not just what the news or latest article or podcast tells them they should invest in. For many, yesterday, today, and tomorrow’s stock market can be intimidating, frustrating, and quite frankly annoying. By Peter Locke CFP® and Kevin T. Taylor AIF® Now, while doing this on your own is possible, there are a lot of ways to screw up and disqualify an investment opportunity by not knowing the rules so we recommend you use a third party professional before you do this. Let’s shed some light on what the clients at InSight are talking about and investing in. Over the past decade, I worked for a large brokerage firm. I wasn’t given the tools to help clients with self-directed IRAs. Unfortunately, I couldn’t even refer them to a third party that could. Advisors at these large firms like the one I used to work at aren’t given the opportunity or even allowed to refer clients to do something they want to do because it wasn’t in the best interest of the firm. What I mean by this is that if your expertise is in residential real estate and your financial advisor is only pitching you to sell your properties and invest in their diversified stock and bond portfolio then are they acting in your best interest? Sure, maybe all your net worth is in real estate and diversifying into non-correlated assets is a good idea. In that case, yes. However, this is not the case I am referring to. I am referring to the case where you know real estate and you want to use the funds you’ve saved in your retirement accounts to buy an investment property or a business that you heard about (key word here is investment not personal). Your advisor will most likely sell you on why you shouldn’t and that you should invest in stocks and bonds instead. Or they will tell you that you can’t depreciate an asset that’s in an IRA and therefore not great for tax incentives, or that it’s too expensive. And they’re right about depreciation but wrong about the tax incentives. If you buy a property in an IRA and the rent pays for your mortgage, the income just like a dividend isn’t taxable when it’s inside the IRA, and neither is the sale when you want to get into something else. When you turn 59.5 you can take that rental income which would be ordinary income inside an IRA or 401(k) but if you bought it in a Roth, then it’s tax free. That advisor doesn’t want you to invest in a property because that means no compensation for them. At InSight, a core part of our business is enabling our clients to use the tools at their disposal to get to where they want to go. We help our clients make these types of investments a reality. We’re only fiduciaries when we’re using everything that is available to us and is in the best interest of the client. If a client has a high required rate of return, but hates the day to day fluctuations in the stock market, then riskier investing isn’t appropriate. This would be a case where we’d look at alternative investments and find another way to capture that rate of return required to get them to that goal. A client’s home and 401k are typically their two largest investments. But if your 401k is 4x your home value, then spreading your investments out into things you feel more comfortable with and gives you capital appreciation and income then real estate may be an option for you. If interest rates are low, then real estate is probably an even better option. As I stated before, you can easily mess this up and therefore you need to make sure you surround yourself like we always do with the right People, Processes, and Policies to hold you accountable. Be sure to read the Rules of Self-Directed IRAs and make sure it fits in your InSight-Full® plan.

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November 26, 2020 No Comments
Boulder Financial Advisors
Articles
Kevin Taylor

The AI Showdown: Unveiling the Global Race for Technological Supremacy

The global AI race between the United States and China has been a prominent topic in recent years, as both countries strive to establish themselves as leaders in artificial intelligence. This competition has spurred significant investments in AI research, development, and infrastructure, with particular emphasis on chips and AI technologies. The United States, with its long-standing tradition of technological innovation, has been at the forefront of AI advancements. American tech giants such as Google, Microsoft, and IBM have heavily invested in AI research and development, establishing themselves as key players in the industry. The U.S. government has also recognized the strategic importance of AI and has taken steps to support its growth through funding initiatives, regulatory frameworks, and collaborations between academia and industry. On the other hand, China has rapidly emerged as a formidable competitor in the AI race. The Chinese government has set ambitious goals to become the global leader in AI by 2030, outlining plans to invest heavily in research and development, talent acquisition, and infrastructure. China’s large population and vast consumer market provide a fertile ground for AI implementation, leading to the proliferation of AI-powered applications in various sectors such as e-commerce, finance, and healthcare. Chinese companies like Baidu, Alibaba, and Tencent have made significant advancements in AI technologies and have been actively expanding their influence both domestically and globally. Chips play a critical role in AI development, as they form the foundation for powering AI algorithms and applications. The United States and China have recognized the strategic importance of chip manufacturing and have made substantial investments in this area. The U.S. semiconductor industry has long been a global leader, with companies like Intel, Nvidia, and Qualcomm driving innovation. However, China has been making significant efforts to reduce its reliance on foreign chip technology and establish its domestic semiconductor industry. The Chinese government has invested billions of dollars in supporting local chip manufacturers and fostering collaborations with international semiconductor companies. Both the United States and China understand that AI has far-reaching implications, not only in terms of economic growth but also for national security and military applications. AI technologies have the potential to enhance military capabilities, automate warfare systems, and drive advancements in autonomous weapons. As a result, there is a growing concern about an arms race in AI between these two superpowers. To support their respective AI ambitions, both countries have also been investing in military-related AI research and development. The United States has established the Joint Artificial Intelligence Center (JAIC) and is actively exploring the integration of AI into defense systems. Similarly, China has made significant investments in military AI applications, with the People’s Liberation Army (PLA) focusing on areas such as autonomous vehicles, intelligent surveillance, and battlefield decision-making systems. It is important to note that while the United States and China are at the forefront of the global AI race, other countries and regions are also making significant strides in AI research and development. Countries like Canada, the United Kingdom, and Germany, among others, have their own AI initiatives and are fostering innovation in this field. As the competition intensifies, the United States and China must balance their pursuit of technological dominance with ethical considerations, transparency, and international collaboration. The development and deployment of AI technologies should be guided by principles that prioritize human rights, privacy, and accountability. By fostering a cooperative approach, global collaboration can drive the responsible and beneficial use of AI, benefiting society as a whole. The global AI race between the United States and China presents various investment opportunities and potential conflicts. Let’s explore them further: Investment Opportunities: AI Research and Development: Both the United States and China are investing heavily in AI research and development. This creates opportunities for companies and startups specializing in AI technologies, algorithms, and applications. Funding and partnerships from government agencies, venture capital firms, and tech giants can fuel innovation and growth in this sector. Semiconductor Industry: The development of AI requires high-performance chips, and investment in the semiconductor industry is crucial. Companies involved in chip manufacturing, design, and fabrication, as well as those focused on AI-specific chips, can benefit from the increased demand for advanced semiconductor technology. AI Infrastructure: The race to develop robust AI infrastructure, including cloud computing, data centers, and network capabilities, offers investment opportunities. Building scalable and secure infrastructure to handle the vast amounts of data and computational requirements of AI applications is a key focus area. AI Startups and Incubators: The growing interest in AI creates a fertile ground for startups and incubators specializing in AI technologies. Investors can identify promising startups and provide funding, mentoring, and resources to help them flourish. These startups can offer disruptive AI solutions in various sectors, presenting attractive investment opportunities. Conflicts and Challenges: Intellectual Property and Technology Transfer: The competition between the United States and China can lead to intellectual property disputes, as both countries strive to protect their AI advancements. Issues related to technology transfer, trade secrets, and patent infringements may arise, potentially leading to conflicts and legal battles. Talent Acquisition and Retention: Both countries face challenges in attracting and retaining top AI talent. The demand for skilled AI professionals exceeds the current supply, creating a talent shortage. This talent competition can result in wage inflation, poaching of experts, and brain drain from certain regions, leading to conflicts and talent imbalances. Ethical Considerations: As AI technology advances, ethical considerations become increasingly important. Conflicts may arise when different countries or organizations have divergent views on the ethical use of AI, particularly in areas such as privacy, bias, algorithmic transparency, and autonomous weapons. Establishing international standards and regulations to address these concerns can be a complex and contentious process. National Security and Military Applications: The militarization of AI can heighten conflicts between nations. Developing AI for military applications, such as autonomous weapons and cyber warfare, raises concerns about arms races and the potential for escalating tensions. Striking a balance between innovation and ensuring responsible use of AI in the military domain is crucial to

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June 28, 2023 No Comments

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