Introducing: Algorithmic Dividends
One of the core features of AgentRisk is that we use algorithms to generate additional income from idle assets within a customer’s portfolio. We call this feature Algorithmic Dividends™ and it’s available to all our customers at no extra cost. Here we discuss how we’ve been using machine learning to generate Algorithmic Dividends for our customers for the past three years.
What are dividends?
Before we jump into details about algorithmic dividends, let’s first see how regular dividends work. Wikipedia defines dividends as “payments by a corporation to its shareholders”. Essentially, if you own a stock (let’s say Microsoft), you get paid for owing that stock, usually every three months.
Some stocks issue dividends every month, or every six months. Some may decrease how much they pay you or even stop altogether, depending on how the board of the company decides to allocate their extra cash. Amazon or Tesla, for instance, have decided to reinvest that money back to the company in order to grow more. That means that if you own those stocks, you don’t get paid any dividends.
Let’s change that.
Introducing algorithmic dividends
At AgentRisk, we’ve been generating algorithmic dividends for our customers for the last three years, using Machine Learning. What we do is use options strategies on top of your existing assets (stocks or ETFs), that sit idle in your account, and collect a premium. We call this an algorithmic dividend, as a monthly payment that’s generated by our Machine Learning algorithm and deposited to your account.
Algorithmic dividends use assets that sit idle in your account to unlock potential for additional returns.
There are, however, significant differences with regular dividends.
- Algorithmic dividends are not issued by the company (e.g. Microsoft, Vanguard) and are not guaranteed
- They have irregular price and time of payments (and could even be zero)
- They might lead to having your portfolio lose value
You should definitely read our disclosures as algorithmic dividends are intended for sophisticated investors.
“I‘m a sophisticated investor! Can’t I generate Algorithmic Dividends?”
Of course you can! We will assume that you are more than familiar with options strategies and have the appropriate risk profile.
Warning: This should not be considered financial advice. Using options strategies can lead to heavy losses. Please make sure you are aware of the risk and know what you are doing.
First, you need to own 100 shares of a stock of your choice (a single option contracts covers 100 shares).
The next step, which is the most important, is to calculate the support/resistance (S/R) of the stock/ETF and explore the risk/reward of selling a monthly call and collecting the premium. The premium is high when the markets are volatile but so are the chances that our option will get called and you might end up losing the asset. That will incur a tax event and you might lose the growth potential of the stock.
In case the calculation of the S/R lines is not accurate, the algorithm is re-trained, and does a roll-over if the risk/reward ratio makes sense. And that’s it.
Even though that might seem an easy task for a seasoned trader, the added benefit of using The Machine is that it removes the greed out of trading and calculates the appropriate time to engage with a strategy. And it does this on a monthly basis, while you can look for better opportunities to grow your assets.
If you want to try out Algorithmic Dividends in your portfolio, check us out at AgentRisk.com.
At AgentRisk we are building the most sophisticated data-driven Wealth Management platform, using state of the art Machine Learning algorithms and time-tested investment theories. Come check us out!
