Happy Holidays, traders! Get ready for the last couple of weeks of the year.
Gautam here with this week’s tips to close out the year strong.
Let’s kick things off with some holiday cheer:
Why did the options trader get coal in their stocking?
Because they kept selling naked puts on volatile stocks! 🎅😄
Alright, now that we’ve got you smiling, let’s dive into this week’s topics:
Making the most of market pullbacks with CSPs and using smart tax strategies to reduce your AGI before year-end.
1. Using Market Pullbacks to Your Advantage with CSPs
Market pullbacks aren’t a reason to panic—they’re an opportunity to level up your strategy. Here’s how:
Sell Cash-Secured Puts (CSPs) on Market Pullbacks
When a stock you love takes a dip, CSPs become even more attractive. Why? Because a lower stock price = higher premiums. It’s the perfect time to sell puts on stocks you’re comfortable owning at a discount.
Example: If NVDA pulls back to $128 and you’re happy to own it at $125, sell a CSP at the $125 strike. The premium will be juicy thanks to the pullback, and you’re positioned to potentially buy the stock at a discount if assigned.
Rolling Down Existing CSPs
Already have a CSP on a stock that’s dropped? Roll it down to a lower strike price to take advantage of the new levels and reduce your capital risk.
Example: Suppose you sold a $69 CSP on PLTR, but it’s now trading at $71. Roll your CSP down to a $65 strike and extend the expiration. This locks in some of the loss, but you get a lower strike and fresh premium to balance your trade.
Key Tip:
Don’t chase volatile stocks just because the premium looks enticing. Stick to high-quality companies you’re happy to own in the long run.
2. Year-End Tax Strategies to Lower Your AGI
It’s the season of giving and… saving on taxes! Here are some actionable strategies to reduce your Adjusted Gross Income (AGI)before the end of the year.
The Tax Code Favors Business Owners and Asset Holders
Let’s face it: no one pays more taxes than W-2 employees. If you’re making good money but aren’t leveraging tax strategies, you’re leaving money on the table.
Here’s how to optimize:
Tax Tip 1: Max Out Your Retirement Accounts
401(k): Contribute up to $23,000 if you’re under 50, plus company matching if available.
Mega Backdoor Roth: If your employer allows it, you can contribute up to $69,000/year to supercharge your Roth IRA.
HSA: Triple tax-advantaged and perfect for compounding over time.
Tax Tip 2: Charitable Giving with a Donor-Advised Fund
Donate appreciated assets instead of cash to maximize deductions and avoid capital gains taxes.
Use a Donor-Advised Fund to bunch contributions into one year, unlocking a bigger deduction now.
Tax Tip 3: Start a Business on the Side
Business owners have access to deductions and benefits that regular employees don’t. Expenses like home office space, software, and travel can all be written off. Plus, it sets the stage for more income-generating opportunities.
Get in touch with me to find out how to do this effectively while still having a W2 job.
Tax Tip 4: Direct Indexing
Instead of buying ETFs, consider direct indexing, where you buy the individual stocks in an index. This allows for tax-loss harvesting, offsetting other capital gains.
Tax Tip 5: Real Estate & Opportunity Zones
If your spouse is a real estate professional, depreciation from properties can offset your W-2 income.
Invest in Qualified Opportunity Zones (QOZ) to defer capital gains taxes and even eliminate taxes on new gains after 10 years.
Key Takeaway:
Taxes are your single largest lifetime expense. Incorporating businesses, owning assets, and maximizing tax-advantaged accounts can dramatically reduce your AGI and grow your wealth.
Holiday Market Outlook
With Trump back in the White House and Elon Musk taking an active role in the administration, the market is buzzing with speculation. Tech, clean energy, and space sectors may see renewed interest, while new policies could create volatility in other industries.
For options traders, volatility = opportunity. Keep an eye on your favorite stocks and sectors, and be ready to sell CSPs or Covered Calls when the setup is right. As always, patience and discipline win the day.
Wishing you all a joyful holiday season filled with family, fun, and of course, successful trades! Until next time—happy trading!
Gautam Godse
Appmosis Investing – Options Trading for Regular Income
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