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*Fundamental Options Dividend Strategy

Why the F.O.D. Strategy?
  • I wanted a way to generate monthly income from my portfolio while being very conservative

  • I understood the power of dividend compounding but I didn’t want to be exposed to +20% drawdowns while being 100% invested in dividend stocks

  • I knew that the best investors of all time used fundamental analysis and value investing principles to beat the market over the long run

  • I wanted to benefit from high interest rates on cash deposits while also extracting monthly income from markets

  • I knew that financial markets provided the quickest path to a new income stream. Without having to sell products or have customers. 

  • I wanted to be as conservative as possible and protect my hard-earned money, while still putting it to work for me. 

How Does The F.O.D. Strategy Work?
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1) Sit 100% in cash and earn interest

I want to start by sitting 100% in cash and start earning interest on my cash balance. Short-term interest rates have risen substantially over the last 12 months, now there are plenty of brokers and accounts that offer +4% yield on cash. 

2) Create a watchlist of dividend stocks

Then I want to create a watchlist of dividend-paying stocks (between 30 and 50 names). I want to filter for companies with a strong dividend track record and sustainable payout ratios. I want to include in my watchlist only companies that I understand and I would be comfortable owning for the long term

3) Perform fundamental analysis + estimate the intrinsic value

Now that I have my watchlist, I perform fundamental analysis on each name to see if there are any red flags. Then I proceed to use a version of the discounted cash flow model to estimate the intrinsic value of each company.

4) Sell cash secured puts at or below the intrinsic value

Once I estimated the intrinsic value for each company in my watchlist, I wait until at least a company is trading near its intrinsic value. Then I proceed to sell a cash-secured put with a strike price at or below my intrinsic value estimate. After selling the put option, two things can happen: 

1) The option expires worthless: So I just repeat step 4 for the following month and continue collecting premium while sitting 100% in cash

2) The option expires in the money: I get assigned the stock and proceed to step 5

5) Get assigned the stock and start collecting dividends

If I get assigned the stock, I am happy because I know I bought it at or below my intrinsic value estimate. Additionally, now that I own the stock, I will start collecting dividends every quarter.

6) Sell covered calls on the dividend stocks

As soon as I get assigned the stock, I will sell a covered call with strike price at or above my break-even price. This way, I collect instant premium and lower my cost basis. After I sell a covered call two things can happen: 

1) The option expires in the money: I bank the profits and start again from step 4

2) The option expires worthless: I repeat step 6 and sell another covered call for the following month. This way, I continue to collect premium and lower my cost basis, and at the same time I continue collecting dividends.

You only have 2 options:
Option 1: The hard way
  • You could try the strategy on your own

  • You would need to build the watchlist 

  • You would need to learn how to do fundamental analysis 

  • You would need to find the best formula to estimate the intrinsic value 

  • Understand option contracts and the best ways to diversify between several positions to avoid getting assigned your entire portfolio at once 

  • You would need to understand how to roll options if you want to avoid assignment.

  • You can do it. It is going to take time and cost you money to learn from mistakes along the way

Option 2: Joining the F.O.D. Course
  • Full online video lessons

    • MODULE 1: Why dividend investing is a superior strategy

    • MODULE 2: The 10 golden metrics for dividend stocks + intrinsic value estimate

    • MODULE 3: Portfolio and watchlist creation 

    • MODULE 4: The power of options 

    • MODULE 5: F.O.D. in action 

  • My personal watchlist of dividend stocks

  • My spreadsheets (intrinsic value estimate & cagr) 

  • Final checklist for the whole strategy

©2021 by AVANGUARDIA SAGL - Via Pelli 12, Lugano, CH

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*DISCLAIMER: The information and opinions offered in this website by are for educational purposes ONLY and should NOT be construed as personal financial advice. We strongly recommend that any potential decisions and actions you may take in your investment portfolio be conducted under the guidance and supervision of a quality professional financial advisor in good standing with the securities industry. When it comes to investing, past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All investments involve risk and may result in partial or total loss. By visiting this website and its contents you accept ALL the above. 

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