SCHD - 3 for 1 STOCK SPLIT COMING! Time for the WHEEL STRATEGY! (MORE INCOME)

Summary

The video discusses an upcoming stock split for Schwab's SCD ETF on October 24, 2024, with a 3:1 ratio. This move is part of Schwab's broader strategy to reduce the price of their ETFs to around $20-$25 per share, making them more affordable. The stock split is expected to increase liquidity, especially in the options market, and enhance the ETF's appeal for strategies like the wheel strategy. The split will lower transaction fees and make options trading more accessible to a wider audience. The video also highlights SCD's strong performance and potential for generating income through options trading.

Takeaways

• 📅 Schwab Asset Management is conducting stock splits, including a 3:1 split for SCD, on October 24th, 2024.
• 🔄 This is the first time Schwab has performed stock splits on their ETFs, aiming to standardize the average price around $20-$25 per share.
• 📈 Stock splits increase the number of shares available, enhancing liquidity and making it easier for investors to trade.
• 💡 The split is particularly beneficial for SCD's options market, which previously lacked liquidity.
• 💼 The wheel strategy, involving selling cash-secured put options and then selling call options, becomes more accessible post-split.
• 📉 A reverse stock split is mentioned as a tactic that might hide poor performance, contrasting with the forward split's positive implications.
• 💰 The stock split makes SCD more affordable, potentially attracting new investors and increasing the ETF's performance.
• 📊 SCD has shown strong performance, making it a good candidate for the wheel strategy which requires steady and consistent growth.
• 💬 The script discusses how to calculate premium income from options trading, emphasizing the strategy's potential for income generation.
• 📈 The stock split is timed well with SCD's recent strong performance, potentially adding further upward momentum.
• 💲 Post-split, the dividends per share will decrease, but the overall strategy for income generation through options like the wheel remains attractive.

Q & A

What is a stock split, and how does it work?

A stock split divides existing shares of a company into multiple new shares, increasing the number of shares while keeping the overall market value of the company unchanged. For example, in a 3:1 stock split, an investor with 100 shares would now have 300 shares, but the total value remains the same.

Why is Schwab Asset Management performing stock splits on its ETFs, including SCD?

Schwab Asset Management is performing stock splits to make its ETFs more affordable, targeting an average price of $20 to $25 per share. This also increases liquidity and accessibility for investors, allowing more people to trade shares and options on these ETFs.

How will SCD's 3:1 stock split impact investors?

After the 3:1 stock split, investors will own three times the number of shares, but the total dollar value will remain the same. The price per share will decrease from around $83 to $27, making the ETF more affordable and increasing liquidity for both stock and option trading.

What are the benefits of a stock split for investors in SCD?

The benefits of a stock split for SCD investors include increased liquidity, making it easier to trade shares and options. It also makes the ETF more affordable, potentially attracting new investors and allowing more people to use strategies like the wheel strategy in options trading.

How will the stock split affect the liquidity of SCD’s options market?

The stock split will increase liquidity in SCD's options market, reducing the wide spreads between bid and ask prices. This will lower transaction fees and allow investors to implement more options strategies, such as the wheel strategy, with greater ease.

What is the wheel strategy, and why is SCD suitable for it?

The wheel strategy involves selling cash-secured put options to collect premium income and then selling call options on the assigned shares. SCD is suitable for the strategy due to its consistent performance and steady chart patterns, which are ideal for options trading.

How does the stock split make options trading on SCD more accessible?

After the stock split, options trading will become more accessible as the price per share will drop from $83 to $27. This means that investors will need only $2,700 to sell a put or call option instead of $8,300, making the strategy available to a wider group of investors.

Will the stock split affect SCD’s dividend payments?

Yes, the stock split will reduce SCD’s dividends per share in proportion to the split. Currently, investors receive around $3 per share annually, but after the split, this will drop to about $1 per share. However, the overall dividend yield remains unchanged.

What is the potential psychological impact of the stock split on SCD’s performance?

The psychological effect of the stock split is expected to boost SCD’s performance. The lower price per share may attract new investors, increasing liquidity and possibly driving the ETF’s price higher, especially as the ETF has been performing well in recent months.

What is the importance of the timing of this stock split for SCD?

The timing of the stock split is strategic, as SCD has been gaining momentum and performing well in recent months. The split could add further upward momentum, improve liquidity in the options market, and make the ETF more attractive to investors during economic uncertainty.