A strategy with one stone for two birds

In the stock market, there are basically two types of strategies: long-term value investment vs short-term trading strategy. While many people will only go with one of them,  I personally I think these two can be beautifully mixed and applied simultaneously. I have been doing this for a few years now and it is working really well for me. I call it a strategy as one stone for two birds. Take some recent examples. You may have heard me talking about several blue chip stocks with long-term track records of paying dividends but experienced some short-term problems that caused panic selling. I like this kind of moment and are really happy to buy when everyone dumping the stocks. For example, I bought TGT when it got killed to around $55 and now it is over $80; WBA around $60 and now over $80; ABBV around $55 and now close to $70; MCD around $90 and now close to $100. These are all the great dividend stocks that I will be salivating when they are cheap and I cannot help but buy as much as I can. So how do I hit two birds with one stone? Well, when I buy these stocks at very depressing prices, I don’t simply buy the amount for long-term holding; rather I buy them with more shares than I’m thinking to hold for long-term. Say if I’m thinking to hold 200 shares of TGT, I will buy 1000 shares instead. I will hold the 200 for long term with dividend reinvestment but at the same time I will do option trading for the other 800 shares. This option trading can bring me very rewarding short-term income that I can repeatedly do so until the shares are gone at some point of time during the trading. You see, I’m creating a situation where I’m not only enjoying the long-term value investment but also being rewarded with short-term income that will allow me to expand my cash pool for pursing more of such kind of long/short strategy for the same stocks. The key is of course to know what stocks are great for long-term and at what prices they are good enough. More importantly you got to be really of contrarian and have the nerve to buy when there is panic and blood in the streets. Honestly it is easy said than done and you need to practice. Sometimes you just need to pinch your nose, close your eyes and buy buy buy while you are sweating! It could be scary but often very much rewarding!!