Motivated to be independent from financial advisors, many years ago Alan Ellman started studying the stock market to find a way how to invest his own money successfully. He wanted to find a conservative investment strategy that works for him as a private. Formerly dentist and now after years of learning and practical experience established as „The Blue Collar Investor“ Alan teaches small private investors how they can invest their hard earned money at the stock market. Alan is also an author of various investment books. Further insights in our interview with Alan Ellman – The Blue Collar Investor.
(baestard) Please describe in 3 sentences your project. What is the aim of your project?
(Alan Ellman) Covered call writing is a low-risk investment strategy that uses stocks and stock options to generate monthly cash flow. A stock is purchased and then an option is sold, lowering the cost-basis of the stock thereby increasing the chance of a successful trade. This strategy has been generating cash flow for me for over two decades. I provide education and learning tools to retail investors like you. Unfortunately, this investment strategy is not known to private individuals in Germany. Most brokerages will allow international investors trade this strategy on US Stock Exchanges.
Which one word should be associated with your project?
Dream big and start small. A pioneer’s classic. Every personality behind an idea is different. What does you characterize?
Becoming CEO of your own money will lead to financial independence. Education and practice trading will result in non-emotional investing based on sound fundamental, technical and common-sense principles. This, in turn, will result in financial independence.
What are your three basic rules for the success of your project and why?
2- Paper-trade (practice trading with a hypothetical portfolio)
3- Generate monthly cash flow
1 and 2 must be accomplished before risking even 1 penny of your hard-earned money. The 3-required skills are:
- Which stock to select
- Which option to select
- How to manage your positions once the trades are entered
This learning process will take the average beginner 3-4 months.
In which time of the past would you like to live? And what would you do different at that time as it happened / which advice would you give to the world?
If I could go back in time (with the caveat of returning to my current friends and family) I would leverage my medical background (former dentist) to warn the world of the pitfalls of drugs, alcohol, smoking, high-impact sports and weapons of mass destruction. Why do we worsen our lives without necessity? Perhaps this would bring me back to the early 1950s and I would be more pro-active speaking with our youth regarding these issues.
Which question do you miss? How would you answer to it?
Can you give an example as to how this strategy works?
Buy 100 shares of stock XYZ for $48.00
- Sell the $50.00 option, giving the right to the option buyer to purchase our shares for $50.00 over the next 1-month
- We receive an option premium of (about) $150.00
- At the end of the contract month, if the price is under $50.00 the option expires worthless and we keep the $150.00 and still own the shares
- If the price is over $50.00, the stock is sold for $50.00 and we now have a profit of $150.00 (from the option sale) + $200.00 (from the stock sale)
- The risk is in the stock price dropping below the breakeven ($46.50, in this case)
The Blue Collar Investor → https://www.thebluecollarinvestor.com/