What are the top 10 Commandments of Options Trading Strategies

Options Trading/Strategies

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This blog is about the top 10 Commandments of Options Trading Strategies.

Options trading is a complex and often risky business. However, by following some simple rules, options traders can increase their chances of success while minimizing their losses.

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Option strategies are the simultaneous, and often mixed, buying or selling of one or more options that differ in one or more of the options’ variables. Call options, simply known as calls, give the buyer a right to buy a particular stock at that option’s strike price. Conversely, put options, simply known as puts, give the buyer the right to sell a particular stock at the option’s strike price. This is often done to gain exposure to a specific type of opportunity or risk while eliminating other risks as part of a trading strategy. A very straightforward strategy might simply be the buying or selling of a single option; however, option strategies often refer to a combination of simultaneous buying and or selling of options.

Options strategies allow traders to profit from movements in the underlying assets based on market sentiment (i.e., bullish, bearish or neutral). In the case of neutral strategies, they can be further classified into those that are bullish on volatility, measured by the lowercase Greek letter sigma (σ), and those that are bearish on volatility. Traders can also profit off time decay, measured by the uppercase Greek letter theta (Θ), when the stock market has low volatility. The option positions used can be long and/or short positions in calls and puts.

Below are the 10 Commandments of Options Trading:

  1. Do your homework. Before entering into any options trade, make sure you understand the underlying security, as well as the risks and rewards associated with the trade.
  2. Have a plan. Options trading is not a get-rich-quick scheme. Carefully craft a plan that takes into account your investment goals, risk tolerance, and time horizon.
  3. Use stop-loss orders. A stop-loss order is an order to sell an asset when it reaches a certain price point—the point at which the loss on the trade would become too great to bear. By using stop-loss orders, options traders can limit their losses on any given trade.
  4. Let winners run. Once an options trade is profitable, resist the urge to take profits too early. Instead, let the trade run its course and reap the full rewards of a successful trade.
  5. Cut losers short. On the other hand, when an options trade is going against you, don’t be afraid to exit the position and take your losses. Trying to “fight” the market will only lead to further losses.
  6. Manage your risk exposure. One of the most important aspects of successful options trading is managing risk exposure. Make sure you don’t have too much of your portfolio invested in any one security or sector. Diversification is key to mitigating risk in options trading (or any kind of investing).
  7. Use limit orders. A limit order is an order to buy or sell an asset at a specific price—the price at which you are willing to enter into the trade. By using limit orders, options traders can better control their risk exposure and avoid getting caught up in volatile markets.

8 . Be patient . Patience is a virtue in all aspects of life, but it’s especially important in options trading . Don’t enter into trades just because you’re feeling antsy—wait for opportunities that meet your investment criteria . And once you’ve entered into a trade , resist the urge to “trade emotionally” and instead let your original analysis play out . Over-trading is one of the biggest mistakes options traders can make .

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9 . Stay disciplined. Like patience, discipline is also key to success in options trading . Once you’ve developed a sound investment strategy , stick to it ! Don’t let emotions influence your trades — if anything , emotion should be kept out of trading altogether . The best way to do this is by developing a clear set of rules that you always follow when making trades . If you can do this , you’ll be well on your way to success as an options trader.

10. Have realistic expectations . Finally, it’s important to have realistic expectations when trading options . Remember : there are no guaranteed winners in options trading ! Every trade involves some degree of risk, so don’t expect to win every single time. If you approach each trade with reasonable expectations and focus on long-term success, however, you’ll be well on your way to becoming a successful options trader

What are the top 10 Commandments of Options Trading Strategies


  • Thou shall always take 100% daily gains or 200% all time gains.
  • Do not fall into temptation and buy during the first 30 minutes of market open. (Selling positions is still permitted)
  • Thou shall not buy calls on green days.
  • Thou shall not buy puts on red days.
  • Avoid greed and do not buy consecutive options on 1 company.
  • Give thyself at least 3 weeks time to play the option.
  • End your suffering and sell if down 50% all time on an option play.
  • Avoid gluttony and do not day trade options. (Swing trades allowed)
  • Be fruitful, multiply earnings and sell covered calls if holding any.
  • Celebrate and binge drink after big gains (or losses)
  • Off topic, but relevant – You absolutely need to be doing a 401k or IRA as well as investing in crypto: 401ks and IRAs offer fantastic tax advantages that straight investing does not. Also if you have an employer who matches you are leaving money on the table by not taking advantage of that. It’s foolish. Crypto is great and should definitely be in your portfolio but it should not be your whole portfolio.
    1- WallStreetBets
    2- Wikipedia

Options trading can be complex and risky business, but by following some simple rules traders can increase their chances of success while minimizing losses

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  • WSJ Interview 2.0… 2-7-23 SPY/ ES Futures and Tesla Daily Market Analysis
    by /u/DaddyDersch (wallstreetbets) on February 7, 2023 at 11:55 pm

    Looking at this article from Bespoke you can see that incredibly of the last 13 trading days only one of those closed below its open… that means despite how red we opened or how green we opened we closed above our open. IT just shows the incredible strength and memeness of this rally. ​ https://preview.redd.it/cp0lndi4uuga1.png?width=617&format=png&auto=webp&s=c6208287415918ee33efb58500ea86348251b014 I thought I had seen it all and then we have SPY who managed to pump nearly $7… drop $8 and then proceed to repump nearly $9 all within a 4 hour time period. This was the most wild amount of swinging I have seen in a very long time. This was like a FOMC meeting mixed with CPI on steroids. So the question remains… who is in control? Where are we headed next? Unfortunately the answer is not simple and there truthfully is a case for >420 and there is a case for <405. Lets break it down… ​ https://preview.redd.it/1n6xndz4uuga1.png?width=975&format=png&auto=webp&s=76c381f98d853c02de85fbf90f4ed02a98c2be53 Bull case- despite breaking support of the 7 week long bull channel at open we held the daily 8ema and once again as highlighted by the three black arrows bounced off that support and pushed higher. We broke the breakout triangle resistance that was established last week and managed to bullishly engulf yesterdays price action. Despite JPOW re-iterating his hawkishness for the rest of the year we did not see markets digest it even remotely as such. Markets are clearly running rampant and it appears that it is going to take a shock to end this momentum we have currently. Despite the daily bull channel support being broken we did maintain the weekly bull channel support. Bear case- We broke through a 7 week long bull channel support. Despite the EOD pump there was a sliver of hope when we say that $8 dump after jpow stopped talking today. Now we did breakout again to the upside, however, we hard rejected and failed to continue that break out over the key 416.8 resistance area. This is where the TA has to be weighed on what is most significant. While we clearly saw SPY break through the bull channel support and breaking a 7 week long multiple point support line is a very big deal we do have to factor in the algos. Now the fact that we saw algos dump this $8 could lead to some downside to come. The first and most major resistance line comes next at 419.5 if this rally was to continue. If you support the bull case and believe that the bounce off of 408.8 support/ daily 8ema is bullish and that markets will not digest any bearish news right now then we should be looking for a push to 419.5 and eventually 427.5. There is a case to be made for a rally into CPI. CPI very well could cause a final blow off top to the 430-450 area IF it is good. OR it very well could be the top and start a very long retracement back to that 390-400 area. IF you support the bear case and believe that a 7 week long bull channel breaking is highly significant and will significantly outweigh the bull case and shows a clear break in the momentum then we should first look for a retest of that 409 key support area and from there is we lose 405.3 it is back to 390-400 area. There is an equal weighted case to be made that markets with CPI in exactly one week from today will start to go risk off and will fear a miss (hotter than expected) CPI and that could start a very strong leg down on the market. Whats the best case here? Honestly im very indifferent. There was a sliver of hope and sensibility in this market today when we saw the retrace back to 409. However, the fact that JPOW re-iterated his hawkishness (yes I know he said disinflation and I will say this till im blue that word does NOT mean what most people thinks it means and honestly JPOW himself misquoted what disinflation was today when he said that he would stick by his word of disinflation that there is a drop in inflation) and despite all that the markets still rallied almost $9 says a lot. The algos are clearly locked in on this bull run and its really hard to see an end game on that right now. My personal thoughts are that when we look at the WSJ interview back in November and previous FOMCs that they usually signal a local top. With CPI next week and the fact that we already pulled back and broke through the 7 week long bull channel support I do suspect we could see a pullback to test 405.3 support area. IF we break through that then I like 390-400 to be retested. However, if we continue this rally I would bet on 419.5 being the highest probability of a top a good CPI could see a blow off top much like Decembers to touch 427.5 area but the further we get from 409 the less I believe this rally will continue. Historically speaking days like this and FOMC have generally caused massive intraday rallies and then have given it all up immediately afterwards the next day. There is a pretty strong base case and we are seeing it on a small scale right now that we pullback to that 409 to 411 support area tomorrow. Key SPY Support- 412.5 -> 411.5 -> 408.8 -> 406.5 -> 405.3 Key SPY Resistance- 415.2 -> 416.9 -> 419.5 ​ https://preview.redd.it/7b79nyn5uuga1.png?width=975&format=png&auto=webp&s=1c4d21615b3745689f94a28c34b033ce66cc2a15 The one thing I love about trading SPY but also watching futures closely is that they can at times paint a slightly different story. Sometimes SPY can give us hints of whats to come and sometimes futures can do that same too and at other times they can give extra confirmation. One thing that is very important to note here is that despite SPY breaking its 7 week long bull channel futus did NOT break its… However, what we have here is a break through of that red resistance line for the breakout triangle however we found ourselves hard rejecting right at the possible double top off 4177. If we were to see futes overnight and into tomorrow hold 4177 as resistance we could be looking to come back down and retest that key 4123 to 4145 support area. There is a true 4123 double bottom on futures though off that daily 8ema much like we see over on spy and have seen the last two times we attempted to breakdown. Futures will be very interesting to watch overnight and into tomorrow. Key Futures Support- 4145 -> 4123 -> 4095 -> 4085 Key Futures Resistance- 4177 -> 4210 -> 4235 ​ https://preview.redd.it/xbp3f066uuga1.png?width=975&format=png&auto=webp&s=b0658dccf0f1e92cfb910210a5a4606c7fc3dae0 And then there was tesla… what can I say about ole girl… So I mentioned on SPY that we broke through that 7 week long bull channel support line and that we had to weigh the overall strength and significance of that against the overall strength of this rally… Well we are seeing here on Tesla that we also have a major support line broken. Not only that we also have closed on the daily a potential reversal hanging man candle resistance perfectly at 197.1. Remember I have been saying this 197.1 level is a MAJOR resistance on tesla and not only that… this is now the 4th day in a row (the other 3 also closed in dojis or reversal down candles) that we have seen Tesla attempt to break through 197.1 resistance and fallen short. By all means from a LOGICAL (and remember I say logical and REALLY emphasize that) standpoint… four rejections at probably one of the biggest resistance levels for Tesla, a hanging man reversal (bearish) candle closure on the daily AND breaking a major 5 week long rising wedge support line SHOULD 100% without a doubt lead to a retrace. Now with that being said… its obvious that this market is anything buy logical and despite how logical a fairly large retrace on Tesla would be for tomorrow… this could very well continue green. Tesla officially closed its 6th green day in a row and has now closed green 12 out of the last 13 trading days. This is a pretty incredible run here. If we get a bigger retrace tomorrow 184 is another major support area I would watch for a bounce at. Key Tesla Support- 190.2 -> 184 -> 181.5 Key Tesla Resistance- 197.1 -> 200.9 -> 204.8 -> 208.7 ​ https://preview.redd.it/59ip3be7uuga1.png?width=621&format=png&auto=webp&s=5d2b775c06e5d0787dde6436691d86caf95c9bbc Now to add to the base case confusion on what comes next lets take the VIX. Today we saw (prior to JPOW) the VIX berak through key 19.9 resistance. Effectively when it did that as you can see if broke through a trend line that dates back to the middle of October. What happened in the middle of October? Oh that’s right.. Spy put in its 52 week low (and potentially its bear market bottom). So we have a 4 month long resistance line that was officially breached today and should 100% open up the upside for the VIX to see a return to trading back in the 20-23 range. However, as you can see as soon as we broke through that level we immediately rejected 19.99 and actually ended up closing back below the daily 8ema. WE now find the VIX trading back near that crucial support range of 18.3. Daily log- I used to find myself enjoying playing days like today where the volatility is stupid high and you can make 50% in 10 seconds when the candle pumps $2 out of no where. However, after getting burnt on so many days like this I decided it was best to sit it out plus we held such a tight high IV range this morning it was not worth playing. ​ https://preview.redd.it/ihykult7uuga1.png?width=950&format=png&auto=webp&s=91f783442bbc4e54935e3d2aa918bf4296045257 When we hard rejected my 414.3 volatility level and lose 413.58 volatility level after that pump I decided it was time to short JPOW… I am happy I did. Not too often you get to score a 25.4% win on a 31dte within 22minutes of opening it. I was planning to keep this till we retested 405/406 area. However as I ALWAYS say… secure profits and mitigate losses! Ever 5% above 20% I hit I set a stop limit sell and eventually was tagged at 25%. And by golly am I glad I have decent risk management skills because if I had held this I would be down about 12%... which honestly in all reality is NOT that bad and I had planned even if we kept pumping to average down every +$5 that would be a nearly 37% swing in P/L had i held instead of closing. The lesson today is this… 1. We do NOT have to trade everyday. And 2. No matter how much we believe in a move or how much we believe our play will continue to gain profits…. NEVER forget to secure profits. submitted by /u/DaddyDersch [link] [comments]

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  • Made over $20,000 with $MSFT Calls. Posted a DD yesterday when I bought on WSB and WSB voted to take it down because it was "low effort DD"
    by /u/kk7766 (wallstreetbets) on February 7, 2023 at 4:55 pm

    Over $20,000 Gain: ​ https://preview.redd.it/vvk7cd83rsga1.png?width=2498&format=png&auto=webp&s=96f2df32a8f673a66aceb216e68602878ef8ede9 My DD post yesterday: ​ https://preview.redd.it/pot1rs48rsga1.png?width=1476&format=png&auto=webp&s=e8e1b4fd88f0382a5e879ff026c2850ffc0cccdf ​ https://preview.redd.it/rhibdp0drsga1.png?width=1494&format=png&auto=webp&s=f0985836b0ac8433be44a5806b30a77161c81962 Good job WSB ! Keep listening to the crap DD that gets posted submitted by /u/kk7766 [link] [comments]

  • Maybe you regards can help?
    by /u/seaspirit331 (wallstreetbets) on February 7, 2023 at 2:40 pm

    submitted by /u/seaspirit331 [link] [comments]

  • TSLA Crash is Imminent 📉
    by /u/Beneficial_Foot5353 (wallstreetbets) on February 7, 2023 at 2:22 pm

    submitted by /u/Beneficial_Foot5353 [link] [comments]

  • Fed getting desperate
    by /u/IncomingAxofKindness (wallstreetbets) on February 7, 2023 at 1:52 pm

    submitted by /u/IncomingAxofKindness [link] [comments]

  • Anyone FIREd through online businesses?
    by /u/timblodoapp (Financial Independence / Retire Early) on February 7, 2023 at 1:25 pm

    Hi, I've been lurking around this sub for a while and I noticed, in many posts, that OP is usually an high earner who saved and invested over the years, to then FIRE relatively young. I wonder if there are stories of people starting from scratch and manage to FIRE though online businesses (digital assets, saas, youtube, whatever). submitted by /u/timblodoapp [link] [comments]

  • Daily FI discussion thread - Tuesday, February 07, 2023
    by /u/AutoModerator (Financial Independence / Retire Early) on February 7, 2023 at 10:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • First Time Poster - Hypothetical FIRE
    by /u/smwitz23 (Financial Independence / Retire Early) on February 7, 2023 at 2:32 am

    Brand new to posting on reddit and just discovered this channel recently. I played around with a few FIRE calculators and think I'm doing it wrong because it's telling me I can retire in 2 years... My wife and I have good jobs, I (39M) am in a sales role and earn around $300-$400K yearly and she (36F) earns around $150K. I will hopefully go through a level up this year increasing my total comp to $350-$450K. We max out our 401K (~$40K total) and HSA ($~3.5K total). We almost never eat out (I do take out once or twice a month) and are quite frugal. Our internet and phones are expensed through work and while we have a honeymoon planned for this year, we are doing this all on points. Overall, our expenses are consistent with mortgage, taxes, bills etc coming to around $7-8K/month. We just had a baby and I'm factoring his care into that total. We bought our house last year ~$1M and are pretty aggressive in paying down our mortgage with the market in such flux. We currently are paying at least an extra $20-$30K / year towards the principal. We are also making double payments right now towards our car loan $17K remaining. We each have ~$400K in savings/retirement and have about $300K in home equity. Just trying to get an idea of how we are doing and if there is something we should be more/less aggressive with. We'd like to get into some more "exciting" investments IE real estate or buying into a business etc. this year but that's undecided. submitted by /u/smwitz23 [link] [comments]

  • How to get over feeling guilty about spending money on yourself?
    by /u/space_cake_ (Financial Independence / Retire Early) on February 7, 2023 at 2:19 am

    Up until last year, I (34F) was working really long hours and making an insulting salary. I was poached and finally landed a job where I’ve been saving substantially every month and even hit my first goal after 6 months. I didn’t quite grow up poor but I did grow up with parents that didn’t always buy me the things I’d wanted and was told no a lot. Now that I finally have some disposable income I find it really hard to spend money on non necessities. I have bought some clothes here and there, some perfume and other Knick knacks that I normally wouldn’t have even considered buying previously. But today I went out and spent $500 on a Nintendo switch, something I’d be wanting to buy for over 2 years. Was I able to afford it? Yes. Did it affect my savings? No. Will it take away from me paying my bills? No. Will it make me happy? Yes. So why do I feel so incredibly guilty for making such a big purchase and like I should return it? (Sorry if this is not the right place for this) submitted by /u/space_cake_ [link] [comments]

  • Moronic Monday - February 07, 2023 - Your Weekly Questions Thread
    by /u/AutoModerator (Financial news and views) on February 7, 2023 at 2:00 am

    This is your safe place for questions on financial careers, homework problems and finance in general. No question in the finance domain is unwelcome. Replies are expected to be constructive and civil. Any questions about your personal finances belong in r/PersonalFinance, and career-seekers are encouraged to also visit r/FinancialCareers. submitted by /u/AutoModerator [link] [comments]

  • Revisiting the Summer of Stagflation
    by /u/psychothumbs (Financial news and views) on February 7, 2023 at 12:43 am

    submitted by /u/psychothumbs [link] [comments]

  • When You Buy After 100% Run
    by /u/btoned (wallstreetbets) on February 6, 2023 at 10:10 pm

    submitted by /u/btoned [link] [comments]

  • Modern Capitalism Is Weirder Than You Think
    by /u/psychothumbs (Financial news and views) on February 6, 2023 at 3:57 pm

    submitted by /u/psychothumbs [link] [comments]

  • Weekly FI Monday Milestone thread - February 6, 2023
    by /u/Zphr (Financial Independence / Retire Early) on February 6, 2023 at 2:41 pm

    Please use this thread to post your milestones, humblebrags and status updates which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/Zphr [link] [comments]

  • Daily FI discussion thread - Monday, February 06, 2023
    by /u/AutoModerator (Financial Independence / Retire Early) on February 6, 2023 at 10:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice - February 06, 2023
    by /u/AutoModerator (Financial Independence / Retire Early) on February 6, 2023 at 10:01 am

    Need help applying broader FIRE principles to your own situation? We’re here for you! Post your detailed personal “case study” and ask as many questions as you like, or help others who’ve done the same. Not sure if your questions pertain? Post them anyway…you might be surprised. It’ll be helpful to use our suggested format. Simply copy/paste/fill in/etc. But since everybody’s situation is different, feel free to tailor your layout to your needs. -Introduce yourself -Age / Industry / Location -General goals -Target FIRE Age / Amount / Withdrawal Rate / Location -Educational background and plans -Career situation and plans -Current and future income breakdown, including one-time events -Budget breakdown -Asset breakdown, including home, cars, etc. -Debt breakdown -Health concerns -Family: current situation / future plans / special needs / elderly parents -Other info -Questions? submitted by /u/AutoModerator [link] [comments]

  • Do You Spend More or Less Than Average?
    by /u/aristotelian74 (Financial Independence / Retire Early) on February 5, 2023 at 11:05 pm

    FIRE depends on saving a lot more than you earn while working, then investing the difference. It can be achieved either by having a high income, or by low spending, or a combination of the two. Most of us view ourselves as frugal, but I am curious how much is that really the case. Best I can determine, here is the annual spending for various household sizes: 1: $49,944 2: $76,320 3: $87,079 4:$102,287 5: $97,676 (yes, average family of 5 has lower spending than family of 4, go figure). I am curious, is your spending higher or lower than average? Of course these are general numbers so feel free to explain and make your own adjustment for cost of living etc. Source: https://www.nerdwallet.com/article/finance/monthly-expenses-single-person-family (Article is based on 2021 dollars. I have added 10% to adjust for 2022 inflation). submitted by /u/aristotelian74 [link] [comments]

  • 4% Rule or similar - withdrawing during FIRE
    by /u/byb747 (Financial Independence / Retire Early) on February 5, 2023 at 9:57 pm

    For those who FIRE'd already...are you withdrawing SOLELY from retirement accounts or are you withdrawing some or all from regular taxable accounts? If so, how do you manage taxes for capital gains, etc.? submitted by /u/byb747 [link] [comments]

  • Is the Dollar’s Dominance Under Threat?
    by /u/newzee1 (Financial news and views) on February 5, 2023 at 7:53 pm

    submitted by /u/newzee1 [link] [comments]

  • Looking for advice. Are we on track?
    by /u/undefined_variable_0 (Financial Independence / Retire Early) on February 5, 2023 at 7:02 pm

    Hey everyone - I’m looking for some advice from others who are pursuing financial independence. Specifically, I’m trying to get an idea of how my fiancée and I are doing and what our next steps should be. I’ve been passively pursing FIRE as a goal for maybe four years now but I’ve gotten to the point where I kinda feel a bit lost as to where I should invest my time and money next. I also sometimes worry that we’re not very “on-track” with regards to our FIRE journey since we started saving later. I’ve been investing pretty consistently (albeit with pretty inconsistent monthly amounts) since I started but if I’m being honest with myself, I don’t have a real strategy or proper allocations. I’ve been considering a financial advisor but I’ve also seen compelling arguments saying that it isn’t worth it due to fees. For context, I’m a 32m living with my 31f fiancée in a MCOL midwestern suburb. We are both Software Engineers working remotely and have a household income of $315k (she makes $135k and I make $180k). Here’s an outline of just my current financial situation: ~$65k in cash (currently in a standard bank savings account - working on moving over to a high-yield savings account) ~$62k between two brokerage accounts ~$12k in a Roth IRA ~$40k between a few 401k accounts ~$100k in home equity ~$25k in car equity ~$16k in student loan debt (which I’ll probably pay off in lump sum once it begins accruing interest again) My fiancée doesn’t really have any net worth yet due to some previous debt she’s been paying off (started a small business but it didn’t work out). However she’s been paying it off aggressively and will have all high-interest debt paid off in about three months. She only recently changed careers and started making a lot more money so despite not having anything saved yet, she’ll be able to save quickly after payoff. She’s never really been in the FIRE mindset before recently. Mostly due to her having debt but that’s quickly changing as she approaches being free of that debt. She’s been working really hard to get there and I’m really proud of her. In terms of the investments that I currently have, they’re mostly in well-known ETFs like VOO, VGT, VYM, VNQ and a few similar ones. I’m able to save probably 60% of my income easily but I don’t have a specified amount that I invest per month. It’s usually like $2-$5k per month but sometimes I invest less than that if the market is daunting (like during this past year). I’m not currently contributing to my company 401k because they don’t offer a match. In general, I’m kind of averse to investing too much into 401k due to all the limitations for people intending to retire before 65. I know there are some caveats to this but 401k accounts make me nervous due to feeling like my money is really “locked up”. I’m curious as to what others think about this. All in all, I’m very interested in what this community thinks about our current situation and FIRE potential. What are we doing wrong and what should we be doing instead? Our early retirement goal is far from set in stone but we’ve discussed that it would be great and possibly feasible to retire at 45-50 with $2-$4m. It’s also likely that we wouldn’t completely retire and do nothing (at least until a later age). We’d likely still do some part time work or contracting. My fiancée is ridiculously crafty and I could see a possibility of her starting a small creative business. I’ve also thought about starting a small business myself one day but who knows. submitted by /u/undefined_variable_0 [link] [comments]

  • PSA: You might be paying more in 401k fees than you think
    by /u/Fortypercentt (Financial Independence / Retire Early) on February 5, 2023 at 5:01 pm

    Your expense ratio on funds you buy may be close to zero but please check your program fees: On Fidelity: Go to plan information and documents --> required disclosure information --> then scroll to program fee and you may have a program fee and/or an "Advisor/ Consultant fee." Companies like Fidelity have caught on to everyone looking at expense ratios and hide their fees. I just found out at my new job I am paying close to 1.5% of my total account value per year even though my index funds have an expense ratio of 0. If someone has similar fees they should take 401k company match then max IRA before maxing 401k. submitted by /u/Fortypercentt [link] [comments]

  • Am I the asshole?
    by /u/rmak321 (Financial Independence / Retire Early) on February 5, 2023 at 3:40 pm

    The company I work for decided to change 401k providers. We were asked to liquidate our 401k positions to cash on Jan 5th so the accounts could be transferred to the new provider. The final date that funds are scheduled to be fully vested under the new provider is Monday Feb 6th. In the month that our accounts sat in cash, the SP500 gained 8.62%. An 8.62% gain in the market represents about $28,000 of gains that I missed out on for reasons that had nothing to do with my investment strategy. I am a buy-and-hold index investor. I held through the brutal year of 2022, knowing that if I held onto my positions through the down market, I would be rewarded when the market rebounded. Well... The market rebounded, and I missed it anyway. Changing 401k plans has no benefit to the employees that I can discern. The new provider has a UI that is more difficult to use and a much more limited selection of investments to choose from. The new plan also doesn't allow for after-tax non-roth contributions or in-service transfers, making mega backdoor Roth conversions out of the question. The decision to change providers was made by the company, for the company's benefit. Shouldn't the costs and risks involved be shouldered by the company? Why are employees being forced to time the market with their retirements savings? This isn't some abstract expected value calculation - I can tell you exactly how much this transition cost me, and that figure is $28,000. I've lost my temper during a few conversations with upper managers on this subject and I'm admittedly having a difficult time maintaining my professionalism. Coworkers are telling me I should calm down and saying things like "It could have gone the other way"; "the market could have gone down"; "you shouldn't be too results oriented, we just got unlucky, the expected value of being out of the market for a month is much less". None of this makes me feel any better! The fact of the matter is that my 401k balance would be $28k higher today if this transition was never forced on us. Am I the asshole in this situation? There's nothing that can be done about it at this point, so there's probably nothing to gain by complaining to everyone about it. I feel sick over it though and I can't stop thinking about it. One last comment to help put this into perspective - The IRS employee contribution limit for a 401k is $22,500 in 2023. I will have to max out contributions for more than an entire year to make up for this loss! Also, the SP500 has a historic nominal annual gain of 11% if you include dividend reinvestment. My retirement account will be $640k lighter than it should have been in 30 years. This has a huge impact on my FIRE plans. EDIT: Thanks for the responses. There's nothing productive that can come from me steaming about this. Hopefully this serves as a lesson for others - ask the tough questions beforehand! submitted by /u/rmak321 [link] [comments]

  • Rat race: another way to visualize investing early
    by /u/Tresmont (Financial Independence / Retire Early) on February 5, 2023 at 2:58 pm

    If you’re not a competitive person, disregard this post. With that out of the way, let’s say you’re someone who likes to compare your net worth with others. How much net worth would it take to almost always be richer than a HENRY saving 70-100k a year starting from zero? The answer is around 1 million dollars. This is because on average the market returns 7% after inflation and 10% nominally. So after one year, you’ll have 1.1 million without investing another cent, while the HENRY will have 100k. The difference remains the same forever assuming constant returns. It’s even worse for the HENRY during a bull market when annual returns exceed 10%. The only time they can catch up is during bear markets. To save 100k a year, you’ll need an income of at least 200k a year if you live very frugally (like a college student), or around 300k a year if you have a 50% savings rate after tax. So if you think in CoastFIRE terms, 1 million dollars invested is the equivalent of earning 300k a year with 50% savings rate. 400k net worth is the equivalent of earning 100k a year with 50% savings rate. To almost always be richer than the average household earning 60k a year with a 50% savings rate, you’ll need 250k invested. To beat the average responsible household with 20% savings rate, you’ll need 100k invested. To summarize, here are approximate CoastFIRE levels at age 25-30: 100k net worth: not save another cent and be richer than the average American at retirement 250k net worth: not save another cent and be richer than the average American with 50% savings rate. 400k net worth: not save another cent and be richer than someone earning 100k a year with 50% savings rate. 1 million net worth: not save another cent and be richer than someone earning 300k a year with 50% savings rate. 5 million net worth: almost no one working a regular job will ever catch up to your net worth. submitted by /u/Tresmont [link] [comments]

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