I don't pay any taxes. I am 62 and my wife is 60...Retired. I don't want to take SSI right now. Also I want to earn less than $67,000. a years...Obamacare. If we are below 67K, we qualify and save about $23,000.+ a year with a medical tax subsidy. Still have over $30,000. a year in medical and dental expenses we write off. I also have 2 rentals and a small farm...depreciation. Give to non profits. No taxes...You get the idea. We also have 3 Roth IRAs. Every year for about 5 to 6 years, we converted some of our IRAs to Roths. All taxes have been paid...Well we earned so little we hardly ever paid taxes. As some of you know, we are limited in what options we can write in a Roth IRA. So this can dictate some of what we can and can not do. Have assets, but not great earnings. IRAs grow, house, farm, and rentals appreciate in value. Trust accounts at Schwab and Fidelity grow. Have CDs...We have diversification. Concerning the VZ example...Let's just look where the stock is and how I can make a decent profit from it. Current stock price at $48.04...Dividend is currently 4.89%. Lets round these to $48. and 5% for simple math. I get the 5% given...If they hold their dividend and the stock is not called away early. Even if it is called away early I will usually get one or two dividends. The other side may exercise their option pre ex dividend...But most wait...I usually keep the dividend (very important). I currently could pick up the Jan 2019 $50. for $2.50. If it gets called away, I will get the $2. in profit ($48 to $50, yes minus commissions). So I will pick up (depending on the ex dividend dates)...$2.00+$2.50+$2.00 (last number is guesstimate dividend) over a 11 month period. With compounding of the covered call money and the dividend in the money market fund (about 1.5% by May/June) I am making over 6% return over 11 months. Tax free. If the stock stays down...I'll write another covered call. Even if the stock drops down to $44. in Jan 2019, I still am ahead of a CD when you add the compounding of interest. This is something that makes sense to me. I don't know if you can see this?? Also, I can walk away from the market (for weeks at a time) and still get my return. If my option drops to five cents or below, Schwab will allow me to write a put (commission free) to clear my position...To write another covered call. Yeah, boring. But it's just me and my thought process...
I don't litter. You don't pay taxes. Neither of which have anything to do with with the difference between yield and total return. At this point, I can only conclude that you don't know the difference. Finito...
Good for you. Actually I would be even more impressed if you pay max taxes on your trading gains because that means you are making money hand over fist like the 1%.
You said total return...I showed you total return (tax free). Yes, it was a guesstimate. Agree to disagree...
I have heard (and learned) from long ago, "it's not what you make...It's what you take home". If anyone would like some good reading you might want to consider The Millionaire Next Door 4.4 out of 5 stars 2,729 $10.99 507 used and new from $0.01 New York Times best seller for a long time. It still holds truth even today. If you asked me whether I would like to make $67,000. at the bottom of page #1 of my 1040 Form, or $90,000. I would still take the $67,000. I will make (keep) more money at the end of the day...Less taxes, tax refund. I'm not gaming the system. But our CPA and I work really hard to make the numbers work for us...
First, thanks for sharing all of your personal information. Nice story line but it all has nothing to do with Yield versus Total Return. You still seem to think that the VZ dividend is FREE MONEY. Let's roll back the years. It's late 2007 and VZ is $42 and will pay an annual dividend of $1.75 in 2008. As per you, you "get to keep the very important dividend and the 4.2% is a given". Per your described game plan, you write the Jan 2009 call for $2. Fast forward one year. With some zig zags, VZ has done nothing but drop all year. At 2009 expiration, VZ is $28. So tell me, how much did you earn on this position? What were the break downs of the various components? As for my not seeing that you are ahead of a CD when you add the compounding of interest and that is something that makes sense to you, that's a Captain Obvious statement (which was not previously made) and irrelevant to a discussion of Yield versus Total Return.
Since I retired young, my income is variable and all over the place. I'm just happy to be worth $1 more this year than I was a year ago and anything on top of that is gravy. Had Obamacare been available in 2008, I would have qualified for a nice healthy subsidy of $6-7k a year. Thanks to the almost once in a lifetime GFC opportunity (I'm hoping to live long enough to experience another one), I hit the second highest tax bracket in 2008 and slipped to the 3rd highest in 2009. It was a nasty tax bite and yet I would have been elated to pay even more taxes. It sucks being back in the lower brackets but I take what I can when I can :->)
Yes, you sure showed me what Total Return will be ** IF ** Verizon rises $4.50 But what's your Total Return if it doesn't rise ???
If VZ is at $28...You are right. I have lost money on paper...On paper. I have made more than a buy and hold would have made (widow and orphans). I then can write another call. It needs to be a great, mature company (industry leader/large market share). Write it as a leap...Way out of the money...Say one year at $35. Get some more income (less). It is unlikely to get called away at $35, I'll then write another call when it expires. In about 2009 I bought QQQ. I made 20% by going the cover call route. I have also made very good money on APPL and BABA going this route. I will also admit I have lost money doing this with GM...$44. down to $1. Also Rite Aid...Big mistakes. This strategy works best in a down market...With industry leaders...Think ADM or QQQ. This really works good in a long bear market. What I did many times is double down on years like 2007-2009...Add to positions...More covered calls. While people were crying (price options shooting past their stop loses), I might be adding. Their margin accounts are called due...I have money on the side to add. I use diversification in everything I can. I've even gone into Asia...QQQC, HAO, and FEM. Yeah, my option trades are boring...But I still do better than putting my money in a Vanguard S&P 500 or buying QQQ and walking away. Just my thoughts. I really don't want to grab all my paperwork and see what I have done. Like I said, my money and investments are all over the place. My wife and I own a lot of RVT, RMT, RGT. Boring (closed end funds...No options), but consistent pay outs. Need to move on...Plant a walnut tree, do a bike ride. Enjoy life...