value of time

Apache is functioning normally

Don’t judge a book by its cover. Most especially, don’t judge a personal finance book by its cover. Books promising quick riches and sure-fire investment schemes are generally filled with impractical gimmicks, or lead the reader into the land of financial risk, where fortunes are lost more often than they’re made.

Sometimes it’s the most unassuming of books that offers the best advice, that can actively help you on your quest to get rich slowly. Miserly Moms: Living on One Income in a Two-Income Economy by Jonni McCoy is one of these books.

Miserly Moms doesn’t offer advice for the Big Picture. Its focus is helping people save money on the little things. The book is ostensibly a guide for stay-at-home mothers, but is actually filled with useful tips for anyone who is concerned with frugality, especially for parents with young children.

Many books have been written on how to be thrifty. Some are theoretical in their approach, filled with interviews with other frugal people and impersonal statistics. Some are focused on a specific way to save, such as reducing credit card debt or using grocery coupons. Others try to be broad but are too extreme, cutting back in every aspect of life whether it is cost effective or not.

There is nothing theoretical in this book. It is a testimony of our journey. We are a two-income yuppie family that chose to make a lifestyle change. We have lived out all of the advice I suggest here.

At the core of McCoy’s philosophy are her Eleven Miserly Guidelines:

  1. Don’t confuse frugality with depriving yourself.
  2. Remove little wasters of money.
  3. Keep track of food prices.
  4. Don’t buy everything at the same store.
  5. Buy in bulk whenever possible.
  6. Make your own whenever possible.
  7. Eliminate convenience foods.
  8. Cut back on meats.
  9. Waste nothing.
  10. Institute a soup and bread night (or baked potato night).
  11. Cook several meals at once and freeze them.

(Several of these topics have been discussed previously at Get Rich Slowly. See Healthy Food on an Unhealthy Budget and Once-a-Month Cooking.)

The first hundred pages of Miserly Moms explores each of these Eleven Miserly Guidelines in detail. The final half of the book offers an array of techniques for saving money. For example, McCoy offers a chapter of cheap and nutritious recipes, a chapter giving hints on how to save on utilities, a chapter on cheap crafts for kids. She discusses clothing, medical expenses, and baby care. At each step she offers practical tips such as this:

Avoid the so-called sales at the big name department stores. The bigger-name stores have inflated prices and then have 40 to 50 percent off “sales” to lure you in. Compare their prices to the discount department stores.

At the end of every chapter, McCoy lists additional books and resources related to the topic. The cumulative list is compiled in an appendix.

McCoy’s style is clear and engaging. She makes her points quickly and offers scores of first-hand anecdotes as examples of how she has implemented her ideas into her own frugal household.

Though Miserly Moms is a good book, I don’t agree with all of its advice. For example, McCoy recommends that you shop for groceries at several stores to find the best deals. Yet she also argues that one shouldn’t forget the value of time. These ideas seem contradictory. I believe that one should learn one store well, and then shop its bargains. Shopping at multiple stores is a waste of time and gas. (See The True Cost of Car Ownership.)

I also suspect that McCoy exaggerates when she tabulates the cost of having a job. There’s plenty of overhead to maintaining a career, but if it were really as expensive as she claims, there would be more stay-at-home parents.

These complaints are minor, though, and don’t detract from the crux of the book: saving money by being thrifty. Like many personal finance books, Miserly Moms is written from a Christian perspective. Despite this, it would make a fine resource for parents of any faith. Stay-at-home moms (or dads) may want to own this book. Other thrifty folks will probably glean plenty by simply borrowing it from the library, as I did.

Author Jonni McCoy has a website entitled miserlymoms.com which features reader-submitted tips, a question-and-answer section, and more.

(If you find Miserly Moms interesting, you may also want to check out Living Simply with Children, which was recommended by a Get Rich Slowly reader. I have it on hold at the library — I will read it and review it soon.)

Source: getrichslowly.org

Apache is functioning normally

A diagonal spread is an options trading strategy that involves taking a long and short position on the same stock with different strike prices and different expiration dates. It’s a combination of a vertical spread and calendar spread.

Using this strategy can allow the trader to get an early payday if the stock moves in a direction that’s in their favor. The way it works is the trader makes two options trades — either call options or put options simultaneously, with different strike prices and expiration takes.

Diagonal Spreads Defined

Diagonal spreads combine a two-step options trading strategy and are considered an advanced trading tactic. It’s a combination of a calendar spread and a short call or put spread. These positions have different expirations and different strikes which spread off diagonally, hence the name of the strategy.

A calendar spread is when a trader buys a contract with a longer expiration date while going short on an option with a near-term expiration date with the same strike price. But if two different strike prices are used, this is a diagonal spread.

A diagonal spread includes a calendar spread, also referred to as a horizontal spread or a time spread, combined with a vertical spread, because different strike prices are involved.

How Diagonal Spreads Work

A long put diagonal spread involves purchasing a put for some time in the future while selling a put in the short-term. Purchasing an option in the later term tends to be more expensive due to the embedded value of time. On the other hand, the trader sells the nearer term option to lower the cost of the other option. Traders usually use diagonal spreads when they have conviction on a stock’s movement while minimizing the effects of time.

A diagonal bull spread becomes a valuable trade when the price of the stock increases, while a diagonal bear spread increases in value when the stock price decreases.

Diagonal spreads require experience because traders have to account for volatility and have a good sense of timing.

Setting Up a Diagonal Spread

When traders are bullish on a stock, they generally use call options vs. using put options when they’re bearish on a stock.

The most common way to set up a diagonal spread is to buy a back month option that is in the money, which is a futures contract whose delivery dates are further into the future. Then, you sell a front month option with a strike price that is out of the money, which is a contract that has a near-term expiration date.

Setting up a diagonal spread in this manner would constitute a debit spread, though credit spread structures can also be used.

Maximum Loss

When a stock’s price rises, the maximum loss is equal to the premium paid when buying a call. If the stock falls, the maximum loss is the difference between the strike prices plus or minus the option premium paid or received.

Maximum Profit

It can be difficult to anticipate what the maximum gain may be since traders can’t know what the back-month option will be trading at when the front-month option expires as a result of shifting volatility expectations. In a long diagonal spread, the stock price must be near the short strike for a trade to go in the market participant’s favor.

The max profit potential for a short diagonal call spread is the net credit received minus commissions. If the strike price plummets below the short call, the value of the spread will be close to zero and the credit received is profit.

On the other hand, the max profit scenario of a short diagonal put spread is when the stock price soars above the strike price of the sold higher strike put option, as the value of the spread nears zero and the credit received is profit.

Breakeven Point

The breakeven point cannot be calculated, rather it can be estimated. The breakeven price at expiration for a long call is below the strike price of the short call. During expiration of a long call, the breakeven point is the stock price at which the price of the short call is the net credit received for the spread.

Traders are not able to predict what the breakeven stock price will be because it depends on market volatility, which can impact the price of the short call.

Diagonal Spread Examples

In one example, a trader is bullish on ABC stock, currently priced at $300. If the front month is January and the back month is February, the trader may want to purchase a $298 strike call with February expiry, which is in the money. Then the trader sells a $302 strike call with January expiry, which would be out of the money. This would give the trader a four-dollar wide diagonal spread.

In another scenario, a trader is bearish on XYZ stock at a current market price of $129. To set up a diagonal spread, the trader could buy a $132 February put, which would be several dollars in the money. Next, the trader could sell a $126 January put, which would be a few dollars out of the money. This trade would be a six-dollar wide diagonal spread.

Types of Diagonal Spreads

There are different types of diagonal spread strategies traders can use to get their desired outcome. Here are several diagonal spreads traders can try:

1. Long Call Diagonal Spreads

To execute on a long call diagonal spread, traders must buy an in the money call option with a longer term expiration date and then sell an out of the money call option with a nearer term expiration date. Traders can use this advanced options strategy if they are mildly bullish on a stock in the near term and very bullish in the longer term. An ideal set up for a long call diagonal spread is during times of low volatility as you do not want your trade to be disrupted by sharp price swings.

2. Long Put Diagonal Spreads

To execute on a long put diagonal spread, traders must buy an in the money put option with a longer term expiration date and then sell an out of the money put option with a nearer term expiration date that has an out the money strike. Traders typically use long put diagonal spreads to mimic a covered put position.

3. Short Call Diagonal Spreads

A short call diagonal spread is when traders sell a long-term call with a lower strike price and buy a shorter-term call with a higher strike price. A trader benefits from a short call option when the price of the underlying asset falls, thus making this a bearish strategy.

4. Short Put Diagonal Spreads

A short put diagonal spread involves selling a longer-term put with a higher strike price and buying a shorter-term put with a lower strike price. This is a bullish strategy, as the trader benefits if the underlying asset goes up in price, making both options expire worthless and netting the investor the net credit earned at the beginning of the trade.

5. Double Diagonal Spread

A double diagonal spread is when a trader buys a longer-term straddle and sells a shorter-term strangle, a trade that benefits from time decay and an increase in volatility. Traders setting up a double diagonal are long the middle strike calls and puts, which expire further in the future, and short out of the money call and put options with sooner expiries. The ideal outcome for double diagonals is to stay between the two OTM strike prices as they approach expiration.

Risks of Diagonal Spreads

The biggest risk traders have in diagonal spreads is overpaying for the diagonal spread. That said, the maximum risk is the debt a trader incurred to enter the position. If traders pay too much for their diagonal spreads they can remain unprofitable.

Market volatility can be used to the trader’s advantage when using diagonal spreads, although it can also pose a risk to such trades. Depending on the level of volatility, it can substantially change the price of the option and impact the trader’s profit potential. Diagonal spreads are an advanced trading strategy so traders who are experienced in dealing with volatility are best suited to incorporating diagonal spreads in their investment strategy.

The Takeaway

Setting up a diagonal spread correctly is an important part of the profit potential of the strategy, otherwise traders are at risk of losing money. This advanced options trading strategy requires traders to make both long and short trades, either with calls or puts, that have different expiration dates and strike prices. Traders should know these option trades are lined up diagonally from one another.

Qualified investors who are ready to try their hand at options trading, despite the risks involved, might consider checking out SoFi’s options trading platform. The platform’s user-friendly design allows investors to trade through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.

Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors.

With SoFi, user-friendly options trading is finally here.

Photo credit: iStock/percds

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
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For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
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Source: sofi.com

Apache is functioning normally

Apache is functioning normally

Ever since I cleaned out my closet, I’ve gotten more and more ruthless, editing more and adding less.

The result of deleting items from drawers and hangers is two large brown boxes taking up floor space in the closet, overflowing with castaways. The boxes have grown into mountains, and I can’t walk to the back of my closet anymore.

My intention was to sell these items, which are the nicer things that I actually like, but don’t work for one reason or another. I didn’t want to drop them off at the consignment shop because the shop keeps 60% of the profit and only accepts in-season clothing, meaning I’d have to keep some of this Stuff in my closet for almost a year. So I planned to sell it on eBay, thinking I could make some of my money back and maybe sell the out-of-season items.

Procrastination or Lack of Motivation?

Month after month passed, and I never got around to selling a single article of clothing. I even bought a cheap postage scale, convinced that the lack of a scale was what was holding me back from listing my Stuff.

But last week I finally realized that there are about a hundred things I’d rather be doing than messing with this pile of Stuff. I didn’t want to wash, iron, dry-clean, photograph, upload, list, weigh, package, or mail it. In fact, I’m awful at getting anything in the mail on time, which is why online shopping is my saving grace! I know many people who are eBay aficionados and could blaze through listing my Stuff in no time, but I’m not one of them. I’ve never even bought anything off eBay. I just lack the interest, and I can’t really tell you why.

Anyway, those are my excuses reasons, and so the Stuff continued to clutter my closet floor.

A New Home for Stuff

Whenever I pull clothes for the discard pile, I call my mom so she can decide if there’s anything she can use. Mom is a talented seamstress who re-purposes clothing into new things. Once she took a tank top that she bought me 10 years ago for $2 and sewed it into several pairs of doll tights that sold for $5 a pair. (Mom always gets a great ROI.)

She mentioned that there was a dress and shirt she thought were too nice to cut up after all, so she gave them to a teenage mother she knew who was on her own and trying to work and finish school.

The girl liked both items, and we are the same size. You can probably guess where this is going.

I’ve decided to finally banish my Stuff from my closet, sorting through it and giving her anything I think she’d like. If there’s anything left after that, the in-season clothes will go to the resale shop and the out-of-season clothes will probably end up at Goodwill.

It’s become obvious that I’m just not going to eBay it, and it’s time to let go. Again. And that’s the thing of it. Keeping that Stuff in a box is no different than keeping it on hangers. I’m still attached to it. It still takes up space and occupies my thoughts (I can’t believe I still haven’t listed it, I really hate looking at it every day, I can’t remember what the closet floor looks like anymore…)

I felt like I needed to sell to make money back on past purchases, but I soon realized that not only do I not want to bother with it, but it doesn’t make sense for me to spend my time this way. My time would probably be better spent working on my business, especially when I consider my hourly rate. Trent at The Simple Dollar said it well when he discussed the value of time, writing “…money is not the only criterion that should be considered in a financial transaction in our lives. Time is often a major concern — and I see it overlooked time and time again.”

Maybe it’s not best financial decision. Who knows how much I could have made by selling it? But after considering the time cost, I’ve elected to be free of the clutter now. And I’m really looking forward to walking into my walk-in closet next week.

Source: getrichslowly.org

Overwork and the illusion of a “high-paying” job

I recently read a short article in The New Yorker titled “The Cult of Overwork.” In it, James Surowiecki writes:

“For decades, junior bankers and Wall Street firms had an unspoken pact: in exchange for reasonably high-paying jobs and a shot at obscene wealth, young analysts agreed to work fifteen hours a day, and forgo anything resembling a normal life.”

Reading that, I had a thought. If you’re working 75 hours a week, is your job really “high-paying”?

2018 Top 10 Award Winner: Steve Streit

2018 Top 10 Award Winner: Steve Streit! This is episode #435, and my guest today is Steve Streit. Steve operates out of the Detroit market, and has seen his business thrive after undergoing a mindset shift that changed everything. Many of us are conservative in our approach to business, but that can often hold us back…and our discussion today will likely hit home with a lot of folks listening to this episode.

How Much Is Your Time Worth?

Each hour you work takes away from your free time. How do we change the value of our time as we use more and more of it?