This is not financial advice. Do your own research. Invest what you can afford to lose.

Our Strategy: We operate an insurance business that sells put options to stock investors. We help investors limit their losses if their stock falls below a certain price. In return for our protection, investors pay us a premium/upfront fee. Read Letter 2 and Letter 3 to understand more of the mechanics.

Please note: We use 1 policy to represent our deals because we want everyone to be on the same page. In practice, we might sell or buy multiple policies at a time.

When we issued the Intel $INTC ( ▼ 3.72% ) policy on March 2, we received a premium payment of $60.68 (Click here to read about this deal).

Our goal is to exit this policy once we earn 50% of the premium, or when 14 days are left on the policy.

To profitably exit this policy, we need to buy it back for LESS than $60.68. In other words, the market value of our policy needs to decline, so we can buy it back at a cheaper price.

Our policy loses value (which is good for us) in 3 ways:

When we sold the policy on Intel, the stock was at ~$45. We promised the buyer that we would cover their losses below $39 (blue line).

We received $60.68 as payment for this protection.

On Monday, March 16, Intel’s price rose above $49. This made our policy less valuable in the market and we had an opportunity to buy it back for $30.82 (transaction fees included). This would’ve left us with a profit of $29.86.

$60.68 premium received - $30.82 cost to close policy = $29.86 net profit

$29.86 is 49.2% of the premium.

Our goal is to collect 50% of the premium, which means we need to close at $30.34 instead of $30.82. We can keep 100% of the premium if we let the policy expire in 31 days, but the policy becomes more unpredictable as we get closer to expiration.

After waiting a few minutes, Intel’s stock price fell to $45.77 and the opportunity to exit with 49.2% of the premium vanished.

If we wanted to close the policy on Tuesday, March 17, it would cost us $56.16 instead of $30.82 because Intel’s stock price fell further toward our coverage price.

We must wait for the policy to reach $30.34 so we can buy it back and keep 50% of our premium.

How much longer? We don’t know.

There is a popular saying in investing, “No one ever went broke taking a profit.” Although we might sell too early and miss out on bigger gains, a profit is a profit, just like Bam Adebayo’s 83 is 83.

If we closed the deal yesterday, the return on our money would have been 12.48% in 14 days.

The return we want is 12.68%. 20 basis points higher.

Why didn’t we pull the trigger?

We are practicing self-control. We don’t want to make decisions based on the fear of missing out (FOMO) or greed. These emotions breed impatience and erratic behavior. Yes, we want to make money, but more important, we want to use investing as a tool that helps us develop patience and self-control, the fruits of the Spirit.

The best way to minimize regrets when investing is to set up rules and adhere to them. Over time, the rules might change as we fine-tune our process, but the rules should be established before the transaction is made. Without rules, our emotions will control us.

Do you have an investment plan in place? What rules do you adhere to when investing?

Let’s continue building our own little insurance company. The goal is to make more than we pay out.

Stay strong, stay blessed, and God willing, we’ll see each other next week.

If you have any questions, don’t hesitate to email me at [email protected]

Genesis 12: A Faithful Wife: Watch Abram’s faithful journey into the Promised Land and see the unwavering devotion of Sarai, his wife, to her husband.

Visit www.makingitstraight.com to watch short films based on the Bible and to purchase tools to help evangelize.