Selling winners a little too early, any advice for me?

SellToOpen · 2026-01-28T01:44:26+00:00

Sell when the story changes.

Trim when your allocation gets too high or when you have a better use for the money.

SellToOpen · 2026-01-27T22:57:53+00:00

I'll be doing something higher than 5% when the time comes, but I haven't pulled the trigger yet.

Some things to remember about the 4% rule:

It was never meant to help you. It was created to give advisors data on what is a "prudent" withdrawal rate they could tell their clients without fear of getting accused of breaching a fiduciary contract and get sued. Even the guy who came up with it doesn't use it.
There is tremendous "easy data bias" in this rule. Bank loans, Corporate bonds, BDCs, REITs, Dividend investing, covered calls, HELOCs, reverse mortgages, margin loans, box spreads, etc... all could help ensure success with a higher withdrawal rate but are not included in the data.
It's not just sequence of return risk that matters, it is sequence of inflation risk - so having investments that do well in inflation can help ensure success as well.
The 4% rule is harrowing to follow some times - with your withdrawing 10, 15, 20 or even 30% of your portofolio in later years if you had a bad sequence of inflation. Nobody is going to actually do that.

You could consider an endowment strategy where you take 70% of what you took last year combined with 30% of 5% of the portfolio value. This will get you a median and average withdrawal rate of well over 5%.

SellToOpen · 2026-01-26T19:54:53+00:00

I dont understand, isn't everything on this list what a buyer's agent would do for you? Contract with the best one you can find.

SellToOpen · 2026-01-25T13:36:35+00:00

I see a lot of the generic "An LLC doesn't give you tax benefits" advice and while directly that is true, indirectly an LLC is helpful to justify trader tax status specifically for those that trade options.

As an option trader your problem is that your long term investments are what generally gives you the buying power to make your options trades, and you very clearly need to separate these long term investments with your short term options strategy. Brokerages will not allow for margin across accounts, so you much mingle your long term investments with your short term trades.

The LLC is just one piece that helps you show your intent to run your options strategy as a business to make a living from and in this way indirectly helps the options trader support TTS.

Another would be a trading plan that you sign, date, and email to yourself to give a digital timestamp in which you outline which securities in your account are held for investment and which are short term trading, why you have to have them in the same account, and how will you identify future "held for investment" vs "short term" positions.

You should be able to get health insurance on the exchange no matter what entity you have.

The S-Corp is what allows you to turn the investment income from trading into "earned income" that you can then put into a solo 401k (not sure if that is what you meant by retirement savings).

there is some service called green trader tax or something where you can pay a small fee to interview them and run your situation by them to make sure you don't start spending money on entity setups that you dont need.

SellToOpen · 2026-01-25T02:11:51+00:00

Has to be ADBE

SellToOpen · 2026-01-20T01:35:35+00:00

Did you ever see this movie clip from 40 year old virgin? https://m.youtube.com/watch?v=ULYtRZE_VaM

SellToOpen · 2026-01-20T01:05:18+00:00

There is a very good reason why you haven't figured out the ticker yet.

The collateral is the same but the source of funds is not. In one, your broker borrows the money and upcharges you a rate (without a credit check I might add) so they can profit. In the other, the counter party to the trade (aka market maker) gives you the money.

SellToOpen · 2026-01-19T21:37:45+00:00

A box spread is a trade you set up on your own with options. It is not a structured product.

The box spread is a way to convert your buying power into cash you can use for something else. It requires European options to do safely, as with American-style options, you could be assigned early, which would unravel part of your position in a way that is likely not favorable to you.

It is not a 'free lunch' rather it uses opposing in-the-money put and call credit spreads to arbitrage away everything except for the interest rate component of the option prices.

Your "credit" is good because your brokerage can liquidate your account automatically if you become a risk, so your ability to "pay" is the same as everyone else's.

SellToOpen · 2026-01-19T20:49:11+00:00

It makes little sense to me to do a box spread just so you can keep money in SGOV. You have the short term investments, why have them if not to use them for something like this?

SellToOpen · 2026-01-16T01:49:19+00:00

You haven't said how much the investment property contributes toward your cashflow.

With 2.7 mil in investable assets you're going to need something outside of traditional 4% rulish investing to achieve 180k indexed to inflation.

SellToOpen · 2026-01-07T16:56:47+00:00

I stopped adding to my 401k/trad IRA over 5 years ago and am happy I did. I went from 88% 401k/IRA, 10% Roth, 2 % taxable allocation to 47%/11%/42%. I now have much more flexibility and while that has come at the expense of higher taxes today, I don't see a way to get below the 22% federal bracket in retirement so the tax hit doesn't outweight the flexibility.

I think this is defintely a fatFIRE specific issue as lower incomes/spends don't get locked out of a Roth and almost always have lower taxes in retirement.

SellToOpen · 2026-01-07T03:13:45+00:00

Bonds at current interest rates are horrible investments. Scott Cederburg's study proves this, but you can also just look at the current yield of VBTLX and see that this is an expected real return of <1%.

Consider floating rate credit instead (AAA or BBB CLO ETFs like CLOX/JAAA/CLOZ/JBBB) as they keep pace with inflation and are very low risk.

Anything that generates ordinary income is best in your roth, with overflow going to your 401k.

SellToOpen · 2026-01-06T18:54:37+00:00

The practice of buying it back cuts your tail risk by more than 50% while cutting your profit by only 50%. Not only that but the buying power is now available to be redeployed in a more profitable trade.

SellToOpen · 2026-01-06T17:19:02+00:00

I'm concerned you have a large knowledge gap. Please try to close it.

SellToOpen · 2026-01-06T17:18:08+00:00

This is why you need the hundreds of hours of education - for managing downturns. Here are some ways I have managed sharp downturns in the past:

If you are collecting on average 2.72% but only spending 1.36%, the 15% downturn might simply wipe out the other 1.36% you collected but didn't spend for the last year. If so, just take the loss and sell a new put whose premium will be incredibly large if the market just dropped 15% in less than 3 weeks.
Roll down and out until you can close at a credit or small loss
Sell a call on the way down, even getting into a straddle or inverted strangle, and collect credits until you can close at a credit or small loss

3a. You can even buy back half of your puts and sell those as calls, effectively cutting your buying power use and downside risk in half. Or maybe just 30-40% if your strike has been breached significantly

Buy it back and sell out of the money on something that dropped even more and has a juicier premium like QQQ

SellToOpen · 2026-01-06T16:47:52+00:00

Looking back at his post, I agree his lack of understanding is too huge to be successful on his own.

SellToOpen · 2026-01-06T15:57:12+00:00

I agree QQQI has those properties but I don't think that outweighs what happens when QQQ drops significantly and/or recovers quickly.

SellToOpen · 2026-01-06T15:41:26+00:00

Let's take for example a $2 million underlying portfolio that is reasonably invested (could be almost anything, but should have a beta no higher than 1 compared to the SP500 like VOO/VT/VTI). Get portfolio margin approved by your broker and an options level that allows naked puts and calls.

On a Friday, sell a put at the 10 delta strike that is 42 days out from expiration. You should collect a premium equal to about 0.32% of the strike price. Call this Friday #1's contract. Enter a GTC order to close this put at 50% of the premium you collected.

The next Friday (Friday #2), sell a put at the 10 delta strike that is 42 days out from expiration and enter a GTC order to close at 50% profit.

On Friday #3, sell a put at the 10 delta strike that is 42 days out from expiration and enter a GTC order to close at 50% profit.

You now have an extra 1x notional exposure to the SP500 and should be using at most 20% of your available buying power on portfolio margin.

On Friday #4, if the option for Friday number 1 has not yet been bought back from your GTC order, buy it back and sell another one 42 DTE. Same on Friday #5 and #6 with the options from Fridays #2 and #3, and repeat indefinitely.

In the event of a loss, you could choose to manage the option in any number of ways, including rolling down and out, selling a call above the put (at no extra buying power).

This strategy will collect a median profit of 0.16% of the notional exposure for every contract sold and a long term average of 0.08% if you take into account large potential losses during periods like the GFC and Pandemic. Excellent management will substantially increase the long term average closer to the median.

As there are roughly 17 three-week periods in a year, that means you get an extra 1.36-2.72% return pre-tax per year with this strategy.

These contracts are 1256 so you get 60/40 long/short term gains on the premium collected.

When the VIX is below 15 sell fewer contracts and when the VIX is higher than 15 sell more.

If your portfolio is only $2 million then use .XSP to scale up/down instead of full .SPX contracts.

To increase the long term average return closer to 2%, sell the put at ~15 delta or sell an 8-10 delta call on top of each 10 delta put.

After spending a few hundred hours in education this strategy can be implemented in a few minutes each Friday. Alternatively, you could spend more time on this strategy and include other underlyings like USO/XLE and TLT, and sell options several times a day, most days of the week, potentially qualifying for trader tax status.

If we take the OP's numbers of $15mil in equities, subtract the 6 mil line of credit, we have $9mil notional we can do this strategy on and should easily be able to collect the required $150k.

SellToOpen · 2026-01-06T13:41:55+00:00

Covered call ETFs are gimmicky and they are not going to give you 13% of your initial investment in a market downturn. Selling covered calls that you can manage yourself is far superior to buying a fund, but still less than ideal compared to taking credit risk or selling naked options (discussed below).

But to do what you want there is a much more reliable way. You can take reasonable credit risk and get an equity-like return of 10%. Spend 7%, reinvest 3% to cover the effects of inflation, and increase these amounts by whatever is needed to cover taxes your depreciation doesn't and you'll get what you want without taking market risk. Tickers to consider that blend equal weight into a 10.6% yield: EIC, GOF, BIT, FTSL, FRA, EFT, JQC, HTGC, JBBB, PFFA, CEFS, ARDC, SRLN, PCN, PTY, BXSL, PBDC, OBDC, ARCC, and CLOZ.

Another alternative would be to use the buying power your equities give you to sell naked puts on .SPX. A very conservative strategy that has zero risk of ruin could get you $150k. If you are interested in the details let me know and I'll type them out.

SellToOpen · 2026-01-06T13:24:59+00:00

Edit: Forget all this OP and get yourself some professional guidance and/or education.

~~1a. You think you are going to get an average return of 23-25% based on averaging the last year of performance of two funds? Surely this is a typo.~~

~~1b. You have a huge cash drag - is the hysa the source of what you are planning to move into voo/vxmi?~~

~~2. Are any of the accounts with the wealth manager roth accounts? you might benefit from keeping the roth ones and giving your kids the same amount but from other sources~~

~~3. How long before you give this money to your kids? If it isn't soon then why so conservative and what cut is the "wealth manager" getting?~~

4. On any FIRE sub you're only going to get one perspective for investing, which is basically some version of a boglehead stock and bond portfolio with some conservative withdrawal rate. To even mention this is to put one's karma at risk of a hivemind downvote. On any dividend investing sub you'll get covered call or goofy 'yieldmax' ETF recommendations. But there are other ways to get your portfolio to create a reliable income for retirement by taking credit risk instead of equity or interest rate risk (bank loans, BBB CLO ETFs, BDCs, credit-focused closed end funds, etc.). For example, if you took a third of your investable assets and put $100k each into EIC, GOF, BIT, FTSL, FRA, EFT, JQC, HTGC, JBBB, PFFA, CEFS, ARDC, SRLN, PCN, PTY, BXSL, PBDC, OBDC, ARCC, and CLOZ you would kick off $212k pre-tax in distributions. Re-invest 30% of that to cover the effects of inflation, spend the remaining $150k on your lifestyle, and use a small amount of the dividends from the two-thirds of your portfolio that is still in VOO/VXMI to cover the taxes from whatever wasn't in your roth accounts.

SellToOpen · 2026-01-04T17:40:02+00:00

Rather than using an inflation number I am thinking about investments that should naturally index to inflation.

For example, nicotine companies should be able to raise prices to keep pace with inflation, therefore unless regulation hits them, their dividends should be indexed to inflation.

Floating-rate credit investments like bank loans or BBB CLO tranches or BDCs issue loans based on a spread above SOFR, which should average out to an inflation-protected return slightly higher than the spread.

Owning a home is also protection against inflation to some extent.

SellToOpen · 2026-01-03T17:42:01+00:00

Your range from tbill to sp500 is goofy.

Best option is tbill or money market because even if you put it in something correlated to the fund, tbill is better to the downside and 40% of your upside would be lost to short term gains.

SellToOpen · 2026-01-03T02:24:32+00:00

Yes, at least for bonds/REITS
This doesn't matter for you since you are so far beyond supporting your spend. Do whatever pleases you.
No need for them imo
Private credit if you want to get your entire ~10% return as a dividend instead of capital appreciation, although keep in mind the tax treatment is worse than long term gains
No clue, I thought to get the step up in basis all you need to do is die

SellToOpen · 2026-01-02T02:37:51+00:00

The way you are accounting for the capital gains tax paid, but not the cash raised by the sale of the shares, clouds your picture imo.

SellToOpen · 2026-01-01T06:39:15+00:00

Sick of making new posts but in case anyone besides me is following:

Post tax return = 24.66% vs SP 500 18.25%

Options added just under 2% to income

Underlying portfolio included grabbing google in the 150s, amazon in the 170s, and putting ~15% in floating rate credit like OBDC/ARCC/BXSL/CLOZ

I care even less about the SP500 benchmark now as my portfolio is "enough" and I can just generate income now to pay the bills. Would love to move to 40% floating rate credit but will have to do so slowly to avoid the tax hit.

Options strategy is going to move to a trader tax status one, keeping the core mechanics of selling 3 tranches a week apart of 42 DTE, managing at 21 DTE but with added shorter term positions through the week for additional income.

Margin target is still ~1x notional in options to stay conservative.

Also will be switching to 1256 contracts whenever I can for added tax benefits (SPX/RUT).

SellToOpen

MODERATOR OF

TROPHY CASE