November 2022 – Parrott Wealth Management, LLC.

4 Covered Call Ideas

November 30, 2022November 30, 2022Posted in Option TradingTagged Covered Calls, Option Writing, Options, Stock TradingLeave a comment

Writing options on stocks you own, or want to own, is an excellent way to generate income and reduce risk. Below are four stock and options ideas.

Amazon

Symbol: AMZN

Price: $92.44

Strike Price: $105

Expiration: 2/17/2023

Option Premium: $3.60

Option Income (1,000 shares): $3,600

Stock Return: 13.59%

Option Return: 3.89%

Total Return: 17.84%

Annualized Return: 80.77%

Caesars Entertainment

Symbol: CZR

Price: $48.86

Strike Price: $54

Expiration: 12/30/2022

Option Premium: $1.37

Option Income (1,000 shares): $1,370

Stock Return: 10.52%

Option Return: 2.80%

Total Return: 13.32%

Annualized Return: 162.11%

Netflix

Symbol: NFLX

Price: $280.88

Strike Price: $310

Expiration: 03/17/2023

Option Premium: $20.55

Option Income (1,000 shares): $20,550

Stock Return: 10.37%

Option Return: 7.32%

Total Return: 17.68%

Annualized Return: 60.32%

Symbol: RH

Price: $275.90

Strike Price: $305

Expiration: 12/16/2022

Option Premium: $6.40

Option Income (1,000 shares): $6,400

Stock Return: 10.55%

Option Return: 2.32%

Total Return: 12.87%

Annualized Return: 293.53%

Options trading involves risk and is not suitable for every investor. Your returns could differ significantly from those posted in this blog, and you could lose money. Do not use margin or leverage to trade options. Please refer to the Characteristics and Risks of Standardized Options to learn more about options trading and writing – https://www.theocc.com/. We have no affiliation with the OCC or the Options Industry Council.

Price and return data is from November 30, 2022, and is subject to change without notice. Data sources: Value Line, YCharts, and TD Ameritrade.

Bill Parrott is the President and CEO of Parrott Wealth Management – www.parrottwealth.com

5 Covered Call Ideas

November 24, 2022Posted in Option TradingTagged Covered Calls, Option Writing, OptionsLeave a comment

Writing options on stocks you own, or want to own, is an excellent way to generate income and reduce risk. Below are five stock and options ideas.

Boeing

Symbol: BA

Price: $174.92

Strike Price: $185

Expiration: 12/16/2022

Premium: $2.59

Income (1,000 shares): $2,590

Stock Return: 5.76%

Option Return: 1.48%

Total Return: 7.24%

Annualized Return: 120.17%

Dick’s Sporting Goods

Symbol: DKS

Price: $119.10

Strike Price: $125

Expiration: 3/17/2023

Premium: $10.4

Income (1,000 shares): $10,400

Stock Return: 4.95%

Option Return: 8.73%

Total Return: 13.69%

Annualized Return: 44.21%

Nike

Symbol: NKE

Price: $105.97

Strike Price: $115

Expiration: 1/20/2023

Premium: $3.35

Income (1,000 shares): $3,350

Stock Return: 8.52%

Option Return: 3.16%

Total Return: 11.68%

Annualized Return: 74.81%

PayPal

Symbol: PYPL

Price: $81

Strike Price: $85

Expiration: 2/17/2023

Premium: $6.05

Income (1,000 shares): $6,050

Stock Return: 4.94%

Option Return: 7.47%

Total Return: 12.41%

Annualized Return: 53.28%

Williams-Sonoma

Symbol: WSM

Price: $123.72

Strike Price: $130

Expiration: 01/20/2023

Premium: $6.10

Income (1,000 shares): $6,100

Stock Return: 5.08%

Option Return: 4.93%

Total Return: 10.01%

Annualized Return: 64.08%

Price and return data is from November 24, 2022, and is subject to change without notice. Data sources: Value Line, YCharts, and TD Ameritrade.

Bill Parrott is the President and CEO of Parrott Wealth Management – www.parrottwealth.com

Year End Gift Giving Ideas

November 21, 2022Posted in Estate PlanningTagged Charitable Giving, Financial Planning, Gifts, Philanthropy, Wealth ManagementLeave a comment

Are you struggling to find the perfect gift for your loved ones? Are you having trouble buying something for the person who has everything? Do your loved ones need another pair of socks, matching pajamas, or decorative hand towels? It can be challenging to buy gifts for others, so here are a few last-minute ideas.

Cash. You can give away $16,000 per person without impacting your estate and gift tax exclusion, and it is not limited to family members. If you’re inclined, you can gift $16,000 to friends, neighbors, co-workers, and strangers.

Appreciated Securities. If you still own an appreciated security or two, consider donating it to your favorite charity. The charity receives your stock, and you receive a tax deduction. More importantly, you won’t pay a capital gains tax when you donate your shares, nor does the charity.

Donor Advised Fund (DAF). If you’re unsure where to donate your dollars, consider establishing a donor-advised fund and giving your money away later. You’ll receive a tax deduction when you contribute money to your fund, but you don’t have to distribute the funds immediately. For example, if you contribute $100,000 to a DAF today, you can give away smaller amounts over the coming years to multiple charities. Here is a link to Schwab’s Charitable Fund: https://www.schwabcharitable.org/donor-advised-funds

Qualified Charitable Distribution (QCD). If you’re 70 ½ or older, you can distribute up to $100,000 from your IRA to charitable organizations. In addition to supporting a nonprofit, the distribution fulfills your annual required minimum distribution (RMD). You won’t receive a tax deduction for your gift and won’t pay taxes on the distribution. It’s a win-win.

Charitable Remainder Trust (CRT). A CRT is similar to a donor-advised fund, except you’ll receive income from your gift and the charity receives your remaining assets at your death. For example, if you donate $1 million to a CRT, you may receive annual income in the range of $50,000 to $80,000, and when you pass, the remaining assets are sent to the organization you selected.

529 Education Plan. The gift of education is priceless. If you have grandchildren or great-grandchildren, consider establishing a 529 education plan. The money grows tax-free if you use the funds for education expenses. A 529 plan can pay for tuition at multiple levels, including K through 12, college, trade, graduate, law, or med school.

Fruitcake. It’s an excellent gift, and it will never expire!

It’s the gift-giving season. If you have ample resources, consider helping those in need or supporting the next generation. Your gift will spread joy and cheer for years to come.

Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver. ~ 2 Corinthians 9:7

November 21, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

Corporate Leftovers

November 19, 2022Posted in UncategorizedTagged Benefits, Corporate Benefits, Financial Planning, ThanksgivingLeave a comment

It is the eating season – Thanksgiving, Christmas, and New Year’s, when there will be plenty of food and leftovers. I love the day after Thanksgiving because I can make a huge turkey sandwich on sourdough bread with guacamole. As we approach the end of the year, you might have corporate leftovers that need your attention. It’s essential to check your benefit options so you’re not leaving anything on the table.

Here is a list of popular benefits to check before the end of the year.

Retirement plan. Check your year-to-date contributions to ensure you’re maximizing your retirement plan assets. The government allows you to contribute $20,500 if you’re under 50 and another $6,500 if you’re over. If you are going to fall short of the maximum amount, you can increase your contributions between now and the end of the year.
Match the match. A common benefit that employees and plan participants often miss is the employer retirement match. If your employer offers a 5% match, you should deposit at least 5% of your compensation to the plan – match the match because it is free money.
Flexible Spending Account (FSA). A flexible spending account is a use-it-or-lose-it benefit. If you still have funds in your FSA, you must use them before the end of the year because most of the assets do not roll over to 2023. The current contribution limit is $2,850, and the maximum carryover amount is $570.
Health Savings Account (HSA). You can contribute to a health savings account if your employer offers a high-deductible medical plan. An individual can deposit $3,650 annually, and a family can add $7,300. If you’re 55 or older, you can contribute an extra $1,000. Unlike a flexible spending account, you can roll over and keep your health savings account benefits. An added benefit to a health savings account is that at age 65, you can use it to fund your retirement.
Employee Stock Purchase Plan. If you work for a publicly traded company, they may offer an employee stock purchase plan (ESPP), allowing you to contribute up to $25,000. If you participate in an ESPP, you can purchase your stock at a discount, usually up to 15%.
Vacation Days. Most employees do not take all their vacation days, so check your benefits page to see if you still have any days remaining. Several ski resorts are now open, so take advantage of early powder days and bluebird skies.
Education Benefits. Some companies offer tuition reimbursement or credits for attending school or participating in certificate programs.

It’s worth a few minutes to check your benefits page to ensure you don’t leave any leftovers behind. You can also contact your HR department for further information.

Leftovers make you feel good twice. First, when you put it away, you feel thrifty and intelligent; “I’m saving food!” Then a month later, when blue hair is growing out of the ham, and you throw it away, you feel really intelligent: “I’m saving my life!” ~ George Carlin

November 19, 2022

Conversations With My Wife

November 18, 2022Posted in Estate PlanningTagged Financial Planning, Investment Management, Stock Market, Stock Market CrashLeave a comment

My wife is wicked smart. She earned her Ph.D. in Gerontology and Public Policy from the University of Southern California. She is a ferocious reader who tackles projects passionately and researches them intensely. Each night we take long walks to discuss various topics and try to solve the world’s problems – including the financial markets. About once or twice a year, however, she freaks out about our financial situation, which forces us to sit down to review our investments and financial plan, and when finished, she feels better.

Her concerns range from losing all our money to living too long. Our conversations run deep when we talk about our future. In addition to her fears, we explore charitable giving and retirement planning.

Let’s explore her main issues.

Will we lose all our money?

The stock market is down significantly; will we lose all our money? It’s a valid concern, especially since the Nasdaq is down 28% and long-term bonds have lost 32%. It has been a brutal year for all asset classes. She sees our account values and pays attention to the market, so she’s aware of the pain caused by falling prices. However, I tell her the odds of us losing all our money are less than zero. It’s impossible because we own stocks and bonds scattered worldwide, diversified by size, category, country, etc. On average, I tell her that stocks drop every four years or so, and I let her know I buy the dips and that the best time to buy stocks is when others are selling. And since the beginning of the year, we have continued to increase our allocation to equities because they will eventually recover. We’ve been married for thirty years, and during that time, the stock market has lost 50% of its value twice and suffered several corrections of 20% or more. Despite the downdrafts, stocks have risen more than 780% since our wedding anniversary, and I’m confident that the market will be considerably higher in another thirty years.

Will we run out of money?

My wife studied and taught gerontology, so she’s aware of longevity and aging. Our family tree also has a history of longevity, and she does not want to run out of money in retirement, which is another valid concern. One of the reasons we allocate more than 80% of our assets to stocks is to not run out of money when we are old and frail. Stocks are the best investment to combat inflation and longevity risk. I tell her I’m not worried about today’s stock market losses because we need our money to last another forty or fifty years. I don’t care that the market is down a few points this year because it will recover and eventually trade higher. Also, if we sell stocks today and buy bonds, we’ll lose money to inflation, a greater risk to our financial future than falling stocks.

What if you die early?

She is worried I might die early and leave her financially stranded. A few years ago, I wrote a love letter to my wife and daughter outlining the steps to take if I die early. The instructions are detailed, and I update them often. In addition to the love letter, we have adequate insurance and a family trust. I also have a succession plan for my business, so we’re covered on multiple fronts when I do pass away. More importantly, I’m going to heaven when I die, so she’ll always know where I hang out.

I treasure my wife and our long walks, and it’s an ideal time to connect and decompress while getting in 10,000 steps. I love our walk and talks because they get us out of the house and put us on neutral territory where all topics are fair game. We’ve solved many problems, but not all of them, so we will continue to walk because it is our most productive hour of the day.

Happy walking.

If you tell the truth, you won’t have to remember anything. ~ Mark Twain

November 18, 2022

How Much Can I Spend?

November 12, 2022Posted in UncategorizedTagged Financial Planning, Spending, Wealth ManagementLeave a comment

The market turmoil and volatility are causing heartache for investors, and rightfully so, especially those in retirement. Losing a paycheck after a lifetime of employment is terrifying, but not having a steady paycheck in a down market is even worse. However, we can’t control the market, but we can control our spending, and Americans love to spend money.

Spending is a crucial ingredient for a successful retirement. Once your assets can cover your annual spending, you can retire, regardless of age. Most people rely on Social Security and personal investments to meet their needs, and a few will benefit from a pension plan. Social Security payments and pension benefits offer fixed payouts, unlike variable consumer spending.

We offer financial planning to help individuals better plan for their golden years, and annual spending is a number we need to complete the process. Yet, few can provide an adequate number because they don’t track their expenses, and it is the one variable required to answer the question about retirement. If you tell me how much money you spend, I can tell you if you’re ready to retire.

By now, you have probably heard of the 4% rule. I won’t delve into the research, but the study found that you should not run out of money if you withdraw 4% of your assets each year. The good news is that now you can buy a 30-Year United States Treasury Bond yielding 4%. So, if you retire today, you can guarantee a 30-year fixed payout of 4%! If your account balance is $1 million, you can lock in an annual payment of $40,000. If your annual expenses are $100,000, you need $2.5 million in assets. The math is simple: Multiply your expenses by 25 to arrive at your asset level.

Your Expenses: $_________________
Multiply your expenses by 25 to arrive at your required asset level.
Assets Needed: $_________________

If your assets are sufficient to cover your expenses, you can retire. Congratulations! If not, you need to reduce your spending or increase your assets.

How long will your assets last? Another beneficial calculation is to divide your assets by your expenses to see how long your money will last. For example, if your assets are $1 million, and you spend $100,000 per year, your money will last ten years. If you reduce your spending to $50,000, it can last for twenty years. This practical calculation will shine a light on your financial situation.

Your Assets: $___________________
Your Expenses: $________________
Divide your assets by your expenses.
Asset longevity (Years): __________

Spending is the primary level, but what if you don’t want to reduce your expenses? What if you love your lifestyle and don’t want to cut anything from your budget? You need to increase your revenue if you don’t want to reduce your spending. Can you work part-time, drive an Uber, teach a class, or turn a hobby into a career? Another strategy is to turn non-income-producing assets like commodities or cryptocurrencies into cash-flow-generating investments.

The stock market will recover, the economy will rebound, and geo-political tension will ease, but your expenses will last forever.

Too many people spend money they haven’t earned to buy things they don’t want, to impress people they don’t like. ~ Will Rogers

November 12, 2022

Risk Off

November 10, 2022Posted in InvestmentsTagged Cryptocurrency, Investment Management, Wealth ManagementLeave a comment

Cryptocurrency exchange FTX is imploding and needs to raise money, and it has halted customer withdrawals as it explores its options.[1] FTX sponsors the Miami Heat Arena and Major League Baseball, endorsed by Tom Brady, Gisele Bundchen, Steph Curry, and Shohei Ohtani. Its bright light attracted speculators like moths to a flame.

It appears that FTX commingled client funds with their trading firm, Alameda Research – a major no-no for US-regulated firms.[2] FTX is Bahamas based, out of reach of US regulators, and it’s unclear how investors will get their money back since most cryptocurrencies are not regulated.

The concern over FTX has dealt a blow to cryptocurrencies, exchanges, and institutional investors. Coinbase is down 82% this year, Bitcoin and Ethereum have fallen 58%r, the ProShares Bitcoin Strategy ETF has dropped 67%, and the Grayscale Bitcoin Trust has lost 74%. Sequoia Capital is writing down their investment in FTX to zero, a loss of $150 million, and Binance, another crypto exchange, will not rescue FTX and has backed away from discussions.

I don’t want to solely pick on cryptocurrencies because traditional assets like stocks and bonds are down significantly this year. The Nasdaq is down 31%, long-term bonds have dropped 34%, and all asset classes are struggling.

Risk arrives quickly and without warning, quickly wiping out years of gains. You can’t avoid danger if you own growth assets like stocks, real estate, or digital assets. To obtain higher returns, you need to risk capital. However, you can do some things to minimize your losses.

The first rule of risk management is not to invest more money than you can afford to lose. Do not speculate with safe funds.
If it is too good to be true, it probably is. Do not chase shiny objects with promises of oversized returns hyped by celebrities.
Do not borrow money for speculation. Leverage is the best way to lose more than you intended when your investment goes south. The bank must get paid on time, regardless of how your investment is performing.
Do not speculate on the money you need in one year or less. Today, you can buy US T-Bills with a guaranteed rate of 4%.
Do not speculate with money earmarked for large purchases like a home, wedding, or college tuition.
Take calculated risks. Do your homework, read the small print, and decide. Do not let friends, influencers, or actors pressure you to invest.
If you want to speculate, limit your exposure to 3% to 5% of your investable assets. If you own $1 million in assets, your speculation budget is $30,000 to $50,000.
If you plan to invest in private placements or illiquid investments, ensure your liquid assets can cover at least five years of your living expenses.

We crave instant gratification, and few people want to grow rich slowly. We are a culture of impatience, and the thought of waiting for anything is unacceptable, but if we move too quickly, we risk missing the details. Haste makes waste.

Fortune favors the brave. ~ Matt Damon, Crytpo.com commercial

November 10, 2022

[1] https://www.wsj.com/articles/ftx-tapped-into-customer-accounts-to-fund-risky-bets-setting-up-its-downfall-11668093732?mod=hp_lead_pos2

[2] Ibid

Month: November 2022

4 Covered Call Ideas

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5 Covered Call Ideas

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Year End Gift Giving Ideas

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Corporate Leftovers

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Conversations With My Wife

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How Much Can I Spend?

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Risk Off

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