After being beaten up on several fronts, once wonders what to do if the job situation sucks & if the investment environment is messed up. Add to that, the money offered in the bank CDs, which are now supposedly safe upto 250K, is not much. Bank CDs now give anywhere from 2.5 to 4% maximum. Majority of the so called investment analysts & advisors got us nowhere anyways, so let us fire them & take charge of our portfolios.
So how do we generate income. Introducing the UYG virtual bank.
So how about analyzing UYG as if you are putting money in the bank as a CD. Analyze the scenario that if someone takes 100K & invests in UYG & sets up a revolving covered call selling approach.
UYG is an ETF, beaten down, & with the money being pumped into the system & by the government, the lower side potential is marginal, though it may stay flat between 4 to 7 dollars.
Refer to the screen capture for reference, it give a better idea. This is from a spreadsheet that analyses several scenarios.
One can either invest into only one position or a few or all.
The nice thing is that it shows the return based on per month & using other approaches for 3 months versus upto a year. One can choose a strategy that is suitable to make choices based on the average maximum return based on a monthly basis if a strike price is not reached, versus if it is reached.
What is the worst case scenario? Will UYG ETF go to zero ? I hope you respond No! ; Then the worst case scenario is that UYG goes nowhere or goes down. Okay, in that case wait & then invest into selling covered calls at a future date once again. In the meantime, the cost of stocks one invested into went down already (refer to the extreme right side column).
If one invests 100K or so in a bank CD, the money we get here upfront is equivalent of renewing that CD for several additional years.
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