$4.75 Stock Trades. Visit OptionsHouse.com Today!   



Posted by Martin May 28, 2015
No Comments



 
Get up to $150 when you start trading with Motif

If you sell a put against dividend stock, do you pay a dividend?


Recently, I got this question from a subscriber of mine.

“Do you have to pay a dividend if you sell a put option against the dividend paying stock?”

It is a good question and short answer to that is no, you do not pay the dividend.

You are obliged to pay the dividend (its substitution) only if you sell the stock itself short. A put option is a completely different instrument, which although corresponding to the underlying symbol doesn’t carry any rights or obligations of a stock. Thus only a stock will give you the right to receive the dividend if the company decided to pay one.

With options you only have the right or obligation to either sell or buy the underlying stock at expiration and at a given price.

And of course, it is the same with call option. When you buy a call option, you will not receive the dividend either.

Happy trading and if you have a question, don’t hesitate to ask!




All Dividend Investing,  Options Trading,  Personal Finance
Posted by Martin May 27, 2015
No Comments



 
Get up to $150 when you start trading with Motif

FED Conundrum


Sometimes I like to be wrong in my market move expectations. Like today. I expected the market to move lower yet it moved up. It recovered almost all losses from yesterday.

I have a few long positions so it obvious that I wanted to be wrong in my expectations.

It looks like, we have experienced yet another spooky day yesterday. FED mentions a possible hike rate and investors panic. What is funny on that interest rate hike frenzy is that it didn’t happen yet, no one knows whether it happens at all and yet Wall Street is rushing to the exit. Yellen and her cohorts are just speaking about the possibility of the rate hike and it is not clear whether she will really do it at all.

Spook em
Courtesy: Stefan Cheplick’s Tumblr

So why are Wall Street freaks trembling whenever you just whisper “interest rate” words?

Those freaks out there are scared of money being more expensive would make it harder to borrow for the companies and thus slow down company’s growth.

“Higher interest rates has investors nervous about higher borrowing costs, which are negative for company profits and ultimately stocks. There’s also concern about market liquidity – how easily investors will be able to meet client redemptions if they come suddenly.” John Stoltzfus, Oppenheimer chief investment strategist

If you look at the base of the fear, considering that it really had something to do with the selloff, you must agree that Wall Street is really crazy.

What challenges are in front of FED?

Economic growth

As of now, the US economic growth is sluggish and actually slowing down. The GDP fell in three consecutive quarters and there is no sign of improving. We have seen bad reports across almost all companies out there. The only thing which makes them look good is buybacks. Consumers who were expected to spend their windfall from cheap oil did the right opposite and used the money to either pay off their debt or saved them.

The work force participation is smaller every month, jobs are mostly temporary, part time jobs. Salaries are stagnant and actually lower (inflation adjusted) than they were in 2008.

With the sluggish economic growth would raising the rates help the economy? Yellen is trying to convince us that the slowdown is seasonal and that it was caused by bad weather, too good weather, or who knows what else.

Raising the rates would slow the growth or even kill it whatsoever as the Wall Street freaks are correctly worried about. If they know it, Yellen does know it too. Would she be that stupid and raise the rates to kill the dying patient?

Enormous debt

People seem not to be talking about this item or dismiss it as irrelevant. I cannot help myself but I still am thinking about interest rates from the ordinary Joe perspective. Who typically benefit from low interest rates? Debtors or savers? Just go to the bank and open a savings account. What interest rate would you get? A miniscule 0.80% if you are lucky. Maybe 0.90%. Would you be saving happily in such environment?

And now, go and borrow that money. Unless you go to a credit card predator you may get the rate somewhere at around 15%. I was even able to obtain a personal loan at 7%. Most rates are fixed and consumer debt is expensive, but the government is mostly borrowing for what the rates are through bonds. Now, bonds are bearing some 3% or 2.5% interest. If FED raises the rates, bonds will become cheaper and their rates will go up.

728x90W Cramer's Top Stocks

Of course, this will not impact existing bonds, but the new ones. And how is the US government managing the debt (forget now for a moment that they manage it so badly that even a total idiot wouldn’t dare doing it the same way)? They refinance the debt. As the old bond coupons are to be paid, the US government uses taxes and new debt to pay the old bonds. So they issue new bonds. That’s a luxury Greece no longer possesses. And if we act irresponsibly, we will follow the suit. Can you imagine FED raising rates to 2% by the end of 2016? Bond rates would simply go higher too and bear 5% in lieu of 3%. With $17 trillion dollars debt the US government would have to refinance at some point (they will never refinance the entire debt at once but in small increments, mostly adding new debt) at a lot higher rates and that would be very costly.

Would Yellen sink the US government into deeper debt hole? I think she won’t dare doing it.

End of recovery, political failure

There will be many people telling me that I do not understand the modern economy and that is true. I don’t. I look at the economy from a simple perspective – accounts payable and receivable. Anything beyond this is just a hocus-pocus juggling.

If we pretend to believe that we have a recovery, raising rates now would end this recovery for sure. Mostly for reasons above – more expensive money would encourage savers rather than spenders. And the US economy is based on consumer spending not saving. If consumers start spending, the inflation starts rising. And it is not happening now and it will not happen after raising the rates for sure.

I think, Yellen sees it although she will not admit it.

You may be interested in:
A Breakout To Nowhere
Price is What Your Pay Value is What You Get
My Stock Watch List For June 2015
Five Financing Options For Your Retirement
Portfolio construction is an underrated skill
To Win You Have to be Willing to Lose

Another issue is political and I believe that is one of her most important items to watch carefully. She will not dare to create collapsing market as it would look bad for the current (and any of the future) government. For six years we have been listening about great recovery from politicians and now boom. A crash. It will happen one day, but now I believe it is not politically sustainable as well as Yellen doesn’t want the market collapse (and take the economy with it) under her watch.

So, she is releasing test balloons into the economic air to see how investors, market, and or economy would react to interest rates hike. She can clearly see, that it will be nasty. Will she dare doing it and raising rates?

We will see. She may do it. I hope, I will be ready by then and not in the long positions as it seems the market will see a storm.

Are low rates good for us?

Now they are not. But I am still convinced that it wouldn’t be good for economy to raise them. Yellen can do it and risk economic turmoil and Wall Street storm. Maybe she will survive it politically, but she will do the right thing and let the economy heal itself. But she is a leftist and that doesn’t go to her agenda.

The best reason why low rates are bad were expressed by Bill Gates in the video below:
 

 

Market expectation for May 28th

The market recovered almost all losses from yesterday. Yet we are not out of the forest and we may see more selling to come tomorrow. However, today’s trading “saved the trend” and I do not expect down trend continuation. However, tomorrow we may see some selling pressure in the morning to compensate today’s bullish pressure, but at the end we will most likely end up higher. I expect the market to go UP
 
 




All Dividend Investing,  Options Trading,  Personal Finance
Posted by Martin May 26, 2015
No Comments



 
Get up to $150 when you start trading with Motif

$SPX market expectation for Wednesday, May 27th


(05/26/2015 HS) – Market took a hit today. Quite large one, compared to the non-moves we have seen in previous days. The S&P 500 lost 1% today. It could have been more, but at the last hour the market rallied and erased some losses. Should we be worried?

Hard to answer that question. The market lost on renewed fear of FED rising interest rates. It all has been here already. We have all seen this. This is nothing new and yet investors are freaking about it.

Does the economy justify interest hike? I do not think so. But I am not an economist and I can’t say. I just use common sense to make this judgement. But common sense is no longer used and desired in today’s Wall Street game or the economic books cooking.

$4.95 Stock Trades at OptionsHouse.com

We are seeing FED applying all sorts of monetary hocus-pocus, kicking the can down the street and yet we see us floating. They do things even a financially irresponsible person wouldn’t dare doing and it flies by. Well, maybe we will see consequences later on.

Is the selling, we experienced, good for the market? Will it continue? No one knows. What troubles me with this market though is the pattern I am seeing. When the market goes higher, it is usually on a low volume, but when it sells off, the volume spikes up. This is troublesome.

Analysts are expecting this market going higher. But who are they? These are people from Goldman Sachs or Merrill Lynch, for example. Is their prediction meant to be good for all or are they just pumping this market up so they can get out?

Today’s selling provided a lot of technical damage. Many of my indicators I watch turned down. But nothing is lost yet. We still may see a bounce and recovery. We may see a bouncy market.

The market is quite oversold now (note, I am looking at a short period of time now at a daily frame) and we may see a bounce. It may not be a big one, however. The good thing was that bulls stepped in at the end of the trading session and pushed the market higher. They may have some more power left and recover this market.

Unfortunately, I do not think this will happen tomorrow. We may see some buying in the morning, but the rest of the day will belong to bears and I expect this market to go DOWN.
 
 




All Dividend Investing,  Options Trading,  Personal Finance
Posted by Martin May 25, 2015
No Comments



 
Get up to $150 when you start trading with Motif

$SPX market expectation for Tuesday, May 26th


(05/25/2015 HS) – On Friday, last week, I expected the market to move higher. I expected FED to be taken positively by investors as they would see that FED will most likely postpone interest rates hike due to slowing economy. I didn’t have time to watch or read what actually Yellen said, but overall results would be that FED is ready to raise the rates, probably in September, this year. I think such step would be bad for the US economy and slow it even further, but I am not here to judge or predict that. It’s just my guts.

$4.95 Stock Trades at OptionsHouse.com

However, the market acted mixed on the news. The investors took it positively at first and the market went up, but it didn’t have enough strength to sustain the move and by the end of the trading session, it fell down.

Such weakness can be detrimental for the recent break out and stop it where it began. Although I do not like it myself, I think this weakness will continue and investors will continue freaking out and selling equities. For tomorrow, I expect the market to go DOWN.
 




All Dividend Investing,  Options Trading,  Personal Finance
Posted by Guest May 20, 2015
No Comments



 
Get up to $150 when you start trading with Motif

OPEC Struggling To Keep Up The Pace In Oil Price War


OilPriceSome market watchers, such as Cornerstone Analytics (CA), have consistently stated that the underestimation of demand, coupled with over-estimation of supply, will mask the growing call on OPEC oil in the second half of this year. CA recently noted that global demand outstripped supply by some 4 million barrels in April . This comes in addition to the mounting evidence that the oil market, via rig count declines, slowing production growth, higher demand and huge API crude inventory declines, is starting to readjust.

Be that as it may, Goldman Sachs (GS) seems to believe oil must fall to $45 by October (like it previously thought $30 oil was a certainty) to clear the market and rebalance, despite signs that a readjustment is already underway. When was the last time fundaments got ignored and prices went in opposite direction? As an aside, take a look at the S&P 500 vs. GDP growth, as one makes new highs while the other falls from 3.0 percent growth to under 1 percent so far this year!

Super 8 Film to DVD
Advertising

In other words, asset prices continue to be set by central bankers, and not free markets, so the GS call does make sense if you believe fundamentals don’t matter at all. Still, they should be discussed either way. Rather than being based on the fundamentals, GS, like others, have consistently been off the mark when it comes to oil prices, but refuse to acknowledge it (the agenda at GS has been exposed via Zerohedge). Multiple calls just this week for $45, on top of other economic research, clearly reveal this.

I will be first to admit that I thought oil prices short term would peak in $60s and $70s, but I never thought they would retest the lows. Why should they, if all the trends point to markets slowly rebalancing? In fact, there is growing evidence that not only are we slowly rebalancing but the world may actually be running short of oil. According to Reuters, Saudi Arabia has turned down requests from China for more oil, as they are using it for their own domestic refining needs. It goes on to quote: “[a]nother source with a Chinese refinery that takes Saudi oil said Saudi heavy crude was ‘a bit tight’ in May and June.” China was forced to turn to Russia, Oman, and other non-OPEC nations for their needed supply. Why would Saudi Arabia refuse to supply China unless oil was, in fact, tight?

This provides the strongest indication yet that the world is not facing a 2 million barrel-per-day surplus in supply, as many allege, and instead the call on OPEC crude is most likely growing. The latest EIA weekly inventory data showing a drawdown of 2.7 million barrels reaffirms that the US is no longer oversupplied either.

Finally, just to reinforce the point, oil companies indicated during some of their first quarter 2015 earnings calls that rigs could begin to be added back into operation when prices reach somewhere in the neighborhood of $70 per barrel. Quite frankly, producers shoot themselves in the foot by providing a set price, which, I believe, affects how oil is traded. GS and everyone else are using that guidance on trading oil. But to be clear, we know for sure rigs won’t be added at $50, never mind $45. Once you factor in the natural depletion of existing wells, production will have to eventually go down – another reason why the GS call will be wrong.

By Leonard Brecken of Oilprice.com




All Dividend Investing,  Options Trading,  Personal Finance

My Cheat On Commissions At Work Again


I was able to save a few bucks again ($100) and deposit to my ROTH IRA account. Yes, my ability to save is limited therefore I depend on increasing my income and thus I trade options to make more money. But if you are just starting the investing journey and you only have a few dollars to invest, I hope this will be a good inspiration for you how you can start with small money.

There are other strategies out there, but this one works best for me.

I invest a few dollars into commission free ETF which pays dividends and save money this way. Once I save enough (I have a minimum limit of $1,000 per stock purchase), I sell the ETF and buy a dividend growth stock.

I use RWX ETF for this purpose which pays around 3% dividend and so far I was able to make money with this ETF, unlike the others where I mostly lost money.

Tomorrow, I will be adding 2 shares for free to my RWX holding. That means I will have saved $765.17 dollars. I will need to save another $234.83 dollars to have $1,000. After that, I will be able to sell RWX and buy another stock in my ROTH IRA.

Which of the following stocks would you buy if it were you?
 

Which stock would you buy with $1000 now?


View Results

Loading ... Loading ...

Thanks for voting! And if you have any other stock idea, use comments below to share your tip!
 




All Dividend Investing,  Options Trading,  Personal Finance
Posted by Martin May 18, 2015
No Comments



 
Get up to $150 when you start trading with Motif

My stock market prediction for tomorrow


When I say “stock market prediction” I do not necessarily mean predicting where it ends up. Just trying to assess the direction of the market. Yesterday, I called the market to go up based on all of my technical indicators pointing up.

Today the picture is not as clear as it was yesterday. I see a weakness in the trend. Well, the whole market is still weak. People refuse to believe in this market and yes, we still may see a return back down into the range or stay range bound in this new level.

SPX move

The picture above says it all. We had a nice move, but the indicators are weakening. The trend shows a sell signal and it is turning down. MACD is also weakening and turning down. However, this chart indicates more intraday trend and not a day trend on 1 year basis.

SPX move daily

The longer based chart shows a different picture though. We are still in nice uptrend and all technical indicators are still bullish. No reversal whatsoever.

Based on that I think the market will show some weakness, maybe in the morning, but at the end it will end up.

If weakness, what to expect?

SPX intraday

If we go down, it may happen in the morning to continue a trend from the end of today’s session and we may go down to 2128 level or a bit below it to 2126 level. Then we may reverse back up and go higher. In the worst case scenario, we may re-test 2124 level.

Although in this market, everything can happen, I expect weakness, but move higher at the end.
 




All Dividend Investing,  Options Trading,  Personal Finance

Dividend yield or rate?


As my dividend account is small my goal is to maximize income to get as much money out of my invested dollar as possible. Then the question comes, how to achieve it? I know I need to invest in companies providing higher yield to get more money in and reinvest them.

I also understand that by investing into higher yield stocks I am taking bigger risk. A true dividend growth investor would prefer investing into lesser yielding stocks but he wants to have a maximum possible security as far as income from the dividends goes.

Chasing yield can be dangerous, but there are stocks out there which offer security and high yield. There are stocks which are still acceptable such as some REITs (Realty Income O), MLPS (a former KMP now KMI), then stocks such AT&T (T), or now my favorite energy, oil involved stocks such as ConocoPhillips (COP) or Chevron (CVX).

The latter two companies were heavily sold off lately due to investors’ panic and them freaking that oil price war may hurt them if not liquidate them whatsoever. And if you look at the price of Conoco, it is still declining:

COP

Or look at Chevron (CVX) and its decline as investors are dumping the stock:

CVX

If investors are dumb enough to sell stocks which pay dividends, both provide great yield (CVX yields 3.90% and COP 4.50%) both have great dividend history and their decline is just temporary. Over the course of 5 or 10 years the stocks will be higher and paying a great dividend as they have been paying for the last 20 years.

So, if you want to dump the stock, go ahead. I will gladly buy it.

Why COP or CVX?

As you may remember, I created a proprietary screener which calculates value for every stock. COP and CVX are now ranking as the most undervalued stocks. See a screenshot of my screener:

Stock Picker

As you can see in the table above COP ranks as the most undervalued stock as the screener evaluated my entire watch list and calculated the rank for each stock. I decided to publish the result of the screener every month and invest into those stocks. How?

My stock pick investing strategy

I use two ways to invest into those stocks. My first way is to invest into those stocks by buying them all at once. How can you buy them all? It would be difficult to buy them all if you only have, let’s say. $20,000 dollars to start with. Fortunately, there is Motif investing (which by the way offers $150 promotion if you open an account, but the offer will end soon)which offers an opportunity to build a motif with your favorite stocks and invest in them all at once.

You can invest as little as $250 and buy the entire motif (portfolio), and you can purchase partial shares of each company. It works exactly like investing into a mutual fund. The good thing here is, that you can create your own mutual fund and start investing. That’s what I did here, created a motif “Undervalued Stocks” and invested my own money in it.

Turn Ideas Into an Investment. Customize or Build Your Own Motif.

My second way, or strategy, is buying high ranking individual stocks from the screener. Every time, I have money available in my ROTH IRA account, I check the screener and buy the highest ranking stock with the highest yield.

Dividend yield or rate?

I recently invested into COP as it is high ranking, high yield stock. I am saving more cash for my next purchase and I was thinking what would be my next purchase? Should I invest again into COP or should I pick the next high yielding and high ranking stock?

Then I saw CVX and what caught my eye was its dividend rate. I noticed CVX is paying $4.28 a share, while COP just $2.92 a share.

Wow, that’s almost twice as much as COP! And I want my portfolio to grow faster so investing into CVX would pay me more money, right? Well, it depends. Sometimes just looking at the numbers only without putting them into perspective can be deceiving.

I was completely decided to make my next purchase into CVX because of the higher rate I can get. But then I used a simple math.

If I invest $1,000 dollars (as is my minimum limit) I would be able to buy 15 shares of COP (at current price of $65.76), but only 9 shares of CVX (at $108.03 a share).

COP then would pay me $43.8 annual dividend, but CVX only $38.52 annual dividend.

I get more money investing into COP with a lower rate for invested dollar. That means, that I will continue investing into COP as long as it stays in my screener as “BUY”.

Well, this small exercise may seem obvious, but the point is that the numbers can be misleading and before investing, always look at them from a different perspective. Don’t invest into any stock just because one number looks better than the other one. It actually may not be.

What do you think? Would you invest into COP or CVX?
 
 




All Dividend Investing,  Options Trading,  Personal Finance
Posted by Martin May 17, 2015
No Comments



 
Get up to $150 when you start trading with Motif

Is the stock market poised to break its bad luck?


Not that I believe in good or bad luck of the stock market as it is purely driven by participant state of mind and mostly their irrational behavior. By “its bad luck” I refer to already infamous “iron ceiling” as some people called it. We are once again dwelling near the all-time highs and investors and traders are now in eager expectations of what’s coming next week.

Will we break the resistance or will we bounce back down? We saw all this for more than 6 months again and again when the $SPX went literally nowhere. And it is very frustrating.

From the hind side view, it may seem easy trading such market. Trade Iron Condors and you will be fine. Unfortunately, it is not that easy. The swings of the market were so wide, that it was difficult to stay on a safe side of the trend. The swings from bearish to bullish side were so violent that it was very difficult to stay calm and ride thru them. The market played investors nerves and mine very well. One misstep and you are chasing the price tape like a fox chasing a rabbit.

$4.95 Stock Trades at OptionsHouse.com

I know what I am talking about as this happened to me again a few weeks ago. And that mistake is still chasing me. Although the trade looks OK now, it still can turn into a nightmare.

An original bearish trade suddenly turned bullish. I had a bear call spread with the lower strike at 2115. One hour before the close the market was attacking 2114 price and I panicked. It looked like that at that time it would be different and the market would go higher. End of choppiness, new all-time highs. I already raised my spread higher once and I couldn’t do it again.

So I reversed the trade into a bull put spread.

Then 15 minutes before close the market tanked and closed at 2108. It fell 6 points in 15 minutes.

I still have modifications of that trade alive trying to navigate it thru this market managing it to expiration trying to let it expire worthless. Have I stayed the course of the original trade, I would be out of the trade that day and enjoyed nice profits. But who could tell the market would crash 15 minutes before the close?

Turn Ideas Into an Investment. Customize or Build Your Own Motif.

Last Thursday and Friday price action of the market was promising. Without any catalyst or good news, the market moved up by about a 1% leap. On Friday a morning selling was quickly offset and the market ended in green. Not too much, but green anyway. Some investors see this as a good sign.

We are again near the all time highs. Will the market have the strength this time? Or will it repeat the same trap which happened a few weeks ago to me?

Market expectation for May 18

All technical indicators I watch are pointing up. MACD is rising in all time frames I watch. Heiken Ashi chart is green, positive, pointing up, and above 21 day MA. Also a parabolic SAR turned positive, see two charts below indicating those changes.

SPX move

The chart above indicates the market wants to get higher. It shows a buy signal. It turned up after a small pullback and MACD is also pointing up.

SPX expected move

Because of the technicals I expect the market to continue higher on Monday. As there is still a battle between bulls and bears we may see bears taking action on Monday, but it looks like they may lose the power and the market may actually move higher.
 
 




All Dividend Investing,  Options Trading,  Personal Finance

New buy in my ROTH IRA – RWX addition for free


Today, I could once again add one share of RWX to my holdings for free. Yes, saving money for my next dividend purchase could be commission free with a non-transaction fee ETF. I can buy even only one share and it will cost me a zero.

Dividends received

This week, I received a few more dividends from the following stocks:

VNR Vanguard Natural Resources, LLC $4.00
LGCY Legacy Reserves LP $28.00
KMI Kinder Morgan, Inc. $11.52
O Realty Income Corporation $9.29

Addition of these dividends to my account increased my available cash so I could buy a new share of RWX. I am saving $1,000 in RWX so I can buy a new stock. I already have saved $635.46 at 2.39% profit and while waiting I am collecting 2.95% in dividends.

Happy trading & investing!
 
 




All Dividend Investing,  Options Trading,  Personal Finance


This site has been fine-tuned by 14 WordPress Tweaks