Although it is just a snapshot in time (much like a stock chart) my year-end statement of the small IRA, (which is a microcosm of my 4-year-old trading system: Deep-In-The-Money Covered Calls) showed a return of 9.27%. It reflects the purest example of DITM, as there are no MRDs ( minimum required distributions), nor contributions to, this IRA. For more sampling results the reader can click on Older Posts in the DITM blog: http://ditmcalls.blogspot.com .
There is also a book (and eBook) explaining it called Zero (IN)Tolerance - links to them at http://brentleonard.com
9% is not a world beating return, but it is somewhere in between the DJIA and the S&P 500 of 2012, with out much of the whipsaws - due to its "safety net". Several timeframes of DITM have consistently returned around the 9-10% area.
Using the conservative "covered call" option, and selling it below the Buy price of the underlying stock, one avoids most of the sine wave corrections and noise of the volatile market, while receiving (based on 20-25 stocks) a dividend every 3 trading days - Payday! The DITM investor is also receiving decay from the sold call option every day ( called negative theta, to the Greeks), while the market stumbles in a sideways direction, which it basically has since 2000. With DITM as the base for the investment pyramid, one can also play Bull rallies outside of it with SPYs and other sector ETFs, call options, favorite stocks, etc.
After spending 3 1/2 hours last weekend at a lecture by legendary market analyst Martin Pring and his group, the prospect of an extended Bear market ( in Inflation adjusted terms) is corroborated by 18-year cycles - especially after the largest Bull market in present history - 1982-2000. Although extended rallies are probable, the timing of them - especially with current government intervention- is unlikely and unrealistic.
Obviously DITM is not for everyone. Only persons with the consistent interest in the stock market, who would be dedicated to monitor the plan occasionally would be successful at it. An interest in the most basic of option strategies - covered calls - is desired, but can be learned easily. Fine tuning of the system would obviously bring better results, depending on the knowledge and experience one has. The only flaw in the system is the recurrent Bear market of 20% or more, or a meltdown which has happened with electronic trading and institutional quant systems that dominate markets- but DITM, by definition, would likely lose less money and give earlier warning. Studies show that each decade suffers between 1 and 2 such markets since 1900, with the two in the last decade approaching 50% V-spike losses.
The Federal Reserve has stated that it wants to move people into "riskier" assets with its QEs, which seem to have nuclear half-lives- cutting in half the benefit of each iteration. IMO this DITM provides the safest strategy coupled with the best return above Zero interest rates!
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