WHAT WE DO? WE SELL OPTIONS FOR INCOME. WE USE THAT INCOME TO BUY DIVIDEND GROWTH STOCKS!
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Posted by Martin February 27, 2021
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2021 Week 8 investing and trading report


February 2021 is gone and our investing and trading report can be closed in the books. February was a good month despite the market selling off the last few days. Our options income exceeded my expectations. We made more money than in January but due to the market weakness, our net liquidation value didn’t move. That made me wonder why since we made money.

 

But now, let’s jump to our investing and trading report:

 

Account Value: $31,687.63 $47.03 +0.15%
Options trading results
Options Premiums Received: $1,309.00
01 January 2021 Options: $4,209.00 +16.65%
02 February 2021 Options: $4,884.00 +15.41%
03 March 2021 Options: $0.00 0.00%
Options Premiums YTD: $9,093.00 +28.70%
Dividend income results
Dividends Received: $2.08
01 January 2021 Dividends: $53.04
02 February 2021 Dividends: $63.00
03 March 2021 Dividends: $0.00
Dividends YTD: $116.04
Portfolio metrics
Portfolio Yield: 3.48%
Portfolio Dividend Growth: 5.91%
Portfolio Alpha: 22.63%
Portfolio Weighted Beta: 0.56
CAGR: 732.69%
AROC: 25.07%
TROC: 31.10%
Our 2021 Goal
2021 Portfolio Value Goal: $42,344.06 74.83%

 

We received $1,309.00 in premiums trading options against our holdings this week. For the entire February 2021, we received $4,884.00 premiums. That is almost $5,000 for the month. If I received such income, why our net liquidation value has not moved? I looked at the numbers and I saw it. I had more trades open than before this week that required more buying power, and I increased our stock holdings from $18,179.67 to $29,034.92. All our income was reinvested back into stocks. But because the market was weak the last few days, our margin requirements and stocks moving mostly down suppressed the net-liquidation value of our account.
 

Open trades

 

Investing and trading report
 

The table above shows all my open trades and expirations. It is just a simplified tracking and buying power reduction. My goal is to trade a set amount of equity strangles in what I call perpetual strangle trading. It is nothing fancy. I just have a list of equities I like to trade options around them, I like to eventually own and I accumulate these stocks. Once a trade expires (or nears expiration) I re-open the trade or roll it into the next expiration (mostly trades that a stock is near the short strike and there is a risk of getting in the money).

These trades alone block approximately $18,300 of buying power. I have not tracked this metric of our portfolio before but I will start tracking it to see if my trading is scaling up or down and how it impacts the net-liq of our portfolio and eventually, how it may affect our portfolio during the stock market downturn.

 

Investing and trading ROI

 

Our options trading delivered a 15.41% monthly ROI, totaling a 28.70% ROI.

Our account jumped up to 54.03% YTD growth. We are very happy with this result.
 

Our options trading averaged $4,546.50 this year. If this trend continues, we are on track to make $54,558.00 trading options in 2021.
 

We are still on track to complete goals in our portfolio. We made slight adjustments and we are providing our comments to our goals and tasks we set up in the week 6 report:
 

Old SPX trades repair

We are still on track to attempt fixing our SPX trades that still block approximately $12,000 in our buying power. We set a buy-back order for deep OTM put spreads for 0.10 debit. Once these get closed, we will roll the deep ITM higher and sell new OTM put spreads to offset the cost. It will be a slow process but I believe, it will be worth releasing an additional $12,000 in cash. As I said last week, we will be rolling these trades only if it will be resulting in credit rolls or a wash. If rolling for a credit or a small debit (no more than $10 or $15) will not be possible, we will let those trades go.

Accumulating Speculative Stocks

We have sold all speculative “innovative, disruptive” (whatever you call them) stocks. We no longer hold stocks such as ISR, DDD, NIO, NNDM, RESN, XONE, and other similar penny stocks. They do not fit my strategy and I do not believe in them. Overall, I do not feel comfortable with the volatility and risk they provide. One example could be DDD (3D Systems Corporation). That company has been around since 1983 (more than 30 years) yet it has not been able to provide any significant breakthrough that would keep this stock and industry hot for decades in the same manner as Apple (AAPL) or Amazon (AMZN) did in the past and continues to do so today.

Yes, there was a spike of interest in 2012 – 2014 when 3D printing progressed so much that the printers became smaller and capable of printing the entire cars, for example. Even NASA became interested and experimented with 3D printing in space. And people kept rushing into 3D printing companies buying their stocks. After the big fuzz ended in 2014, the stock collapsed and traded in a downwards zig-zag move until today. Now ARK came with an “innovative and disruptive” mantra and people rush into these types of stocks again.

 
3D System 20 year chart
 

Accumulating Growth Stocks

 

I am still interested in some growth stocks that would boost my portfolio in the long run. I have created a screener in Finviz.com to help select stocks that are more solid investments and growth potential rather than the speculative penny stocks in overhyped industries such as “electric vehicles”. The screener returns stocks that are considered by analysts, institutional investors, and insiders as a great investment and that these stocks are accumulated by these investors. The stocks also create revenue and growth and increase that growth.

Stocks from this screener we will be accumulating for the long run are currently Cutera, Inc. (CUTR) and The Blackstone Group Inc. (BX). More stocks like that may be added in the future. As long as these stocks appear in the screener results, I will be accumulating them. Once I reach 100 shares of each, I will start selling covered calls.

Here is a picture of the screener and all settings if you want to follow it and try it for yourself.

 
Finviz Screener
 

Accumulating Dividend Growth Stocks

Buying high-quality dividend stocks is our core strategy in our fund. And we will continue to do so and at a faster pace. Last week, we started accumulating Aflac (AFL) stock to reach 100 shares. As of today, we own 21 shares

We want to accumulate 100 shares of each stock in our watchlist or list of stocks we want to own. This lot of shares is not, however, the end number. Once we are fully invested (own all stocks we want to own), then we will start adding on top of those 100 shares.

Our goal is to not only reach 100 shares of high-quality dividend stocks but also create a weekly dividend income from these stocks All it takes to create a weekly dividend income is to buy 12 stocks to spread the income for every week. I created this dividend calendar and track the stocks I want to buy to get this goal done fast.
 

Weekly dividends income calendar
 

Trading options

We will continue trading options around the stocks we own or plan to own. I call it monetizing our positions. It has a threefold benefit. It lowers our cost basis (at some point we will own all our shares for free), it covers our call sides of each trade and generates an additional income on top of the dividends. And that income is significant as you can see from our report at the top of this post.

Our fund in charts:

TW Account Net-Liq week 8
 

TW Account holdings week 8
 

The table above shows our current holdings and gains on those holdings. Adjusted columns indicate how options help to boost (or ruin) our stock holdings appreciation, or in other words, lowering the cost basis. Without options, our holdings would be up 4.43% with options, our holdings are up 9.19% (from inception on 4/1/2019). The SPX is up 31.75% since inception. Our stock holdings underperform the overall market. This week, our adjusted stock holdings beat the market. The market gained 1.90% YTD, our portfolio adjusted stock holdings grew by 2.21% (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

TW Options Income week 8
 

TW Options Annual Income week 8
 

TW Received vs Projected Dividends week 8
 

We will continue trading options and accumulating dividend-growth stock next week and report our results on Saturday next week. Until then, good luck and good trading!




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Posted by Martin February 20, 2021
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2021 Week 7 investing and trading report


Another week of February is gone and it is time to provide our investing and trading report again. This week was slow but as the market continued mostly lower, our portfolio held value and grew moderately. We adjusted a few of our positions removing some speculative stocks, adding a few growth stocks, and adjusted a few of the options trades. Overall, this week was a success again.
 

But now, let’s jump to our investing and trading report:

 

Account Value: $31,640.60 $503.9 +1.62%
Options trading results
Options Premiums Received: $673.00
01 January 2021 Options: $4,209.00 +16.65%
02 February 2021 Options: $3,575.00 +11.30%
Options Premiums YTD: $7,784.00 +24.60%
Dividend income results
Dividends Received: $20.47
01 January 2021 Dividends: $53.04
02 February 2021 Dividends: $60.92
Dividends YTD: $113.96
Portfolio metrics
Portfolio Yield: 3.51%
Portfolio Dividend Growth: 5.91%
Portfolio Alpha: 18.86%
Portfolio Weighted Beta: 0.52
CAGR: 750.17%
AROC: 21.13%
TROC: 39.52%
Our 2021 Goal
2021 Portfolio Value Goal: $42,344.06 74.72%

 

We received $673.00 in premiums trading options against our holdings and shares we want to own. Our options trading delivered a 11.30% monthly ROI, totaling a 24.60% ROI. Also, our net-liq increased amid the weak market. The entire week, our net-liq was suppressed by higher volatility and the broker’s higher margin requirements, however, it was slowly trending upwards.

Our account jumped up to 53.80% YTD growth. We are very happy with this result.
 

We are still on track to complete goals in our portfolio. We make slight adjustments and we are providing our comments to our goals and tasks we set up in the week 6 report:
 

Old SPX trades repair

We are still on track to attempt fixing our SPX trades that still block approximately $12,000 in our buying power. We set a buy-back order for deep OTM put spreads for 0.10 debit. Once these get closed, we will roll the deep ITM higher and sell new OTM put spreads to offset the cost. It will be a slow process but I believe, it will be worth releasing an additional $12,000 in cash. As I said last week, we will be rolling these trades only if it will be resulting in credit rolls or a wash. If rolling for a credit or a small debit (no more than $10 or $15) will not be possible, we will let those trades go.

Accumulating Speculative Stocks

There has been a change to my mind trading speculative stocks and I decided not to do that. I do not feel comfortable with it and it is not my money-making strategy. I still may use these stocks for options trading as I feel fit, however.
I decided to sell NIO, ISR, and XONE. I will plan for exposure in these stocks using ETFs instead. As of now, I kept some other stocks such as DDD, RESN, and NNDM but I may unload them in the future too.

Instead, I have created a screener in Finviz.com to help select stocks that are more solid investments and growth potential rather than the speculative penny stocks in overhyped industries such as “electric vehicles”. The screener returns stocks that are considered by analysts, institutional investors, and insiders as a great investment and that these stocks are accumulated by these investors. The stocks also create revenue and growth and increase that growth.

One example was Cutera, Inc. (CUTR) that was on the list for a while and since we purchased the stock last week, it is already showing 7.94% gain.

Here is a picture of the screener and all settings if you want to follow it and try it for yourself.

 
Finviz Screener
 

Accumulating Dividend Growth Stocks

Buying high-quality dividend stocks is our core strategy in our fund. And we will continue to do so and at a faster pace. Last week we finished accumulating our position in Altria (MO) and now we hold 100 shares of this stock. We can now proceed to sell more covered calls or have the existing strangles partially covered. Now, we will start accumulating Aflac (AFL) stock to reach 100 shares.

We want to accumulate 100 shares of each stock in our watchlist or list of stocks we want to own. This lot of shares is not, however, the end number. Once we are fully invested (own all stocks we want to own), then we will start adding on top of those 100 shares.

Trading options

We will continue trading options around the stocks we own or plan to own. I call it monetizing our positions. It has a threefold benefit. It lowers our cost basis (at some point we will own all our shares for free), it covers our call sides of each trade and generates an additional income on top of the dividends. And that income is significant as you can see from our report at the top of this post.

Our fund in charts:

TW Account Net-Liq
 

TW Account holdings
 

The table above shows our current holdings and gains on those holdings. Adjusted columns indicate how options help to boost (or ruin) our stock holdings appreciation, or in other words, lowering the cost basis. Without options, our holdings would be up 6.79% with options, our holdings are up 12.11% (from inception on 4/1/2019). The SPX is up 35.05% since inception. Our stock holdings track the market. This week, our adjusted stock holdings didn’t beat the market either. The market gained 5.21% YTD, our portfolio adjusted stock holdings grew by 5.13% (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

TW Options Income week 7
 

TW Options Annual Income week 7
 

TW Received vs Projected Dividends week 7
 

We will continue trading options and accumulating dividend-growth stock next week and report our results on Saturday next week. Until then, good luck and good trading!




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Posted by Martin February 15, 2021
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Thoughts on investing, options, and yields


I read a few posts on social media about dividend investing and criticism from investors. I decided to write my thoughts about investing, options, and yields and how they can help you to significantly boost your path to financial freedom.

In the past, I was not trading stocks, I was trading options only, and I was trading options using SPX as underlying. I was making money but I was also losing them as fast as I made them (sometimes faster).

 
Investing, options, and yields learning
Photo by Julia M Cameron from Pexels
 

But I learned a lesson on how to do it and build a portfolio for a living (well, at least, I hope I had).

My Original Investing Strategy

My strategy is to be buying high-quality dividend stocks (dividend aristocrats) and accumulate enough that I will have enough income from dividends no matter what a stock is doing. A great example was JNJ in the 2008 crisis. The stock lost 50% of its value yet they continued paying their dividends and even increased them. And there were many other stocks in the same category. So, my theory is, if I accumulate enough stocks in this category to pay me for example $90,000 a year when the market is high as well as when it loses 50% of its value and I still receive my dividends, then I really do not care what is going on out there.

Trading Options Help

On top of that, since I have substantial knowledge of trading options, I decided to trade options against these stocks using a wheel strategy. In my opinion, the wheel strategy is pretty much a win-win strategy (of course if done correctly). So I started selling puts against these stocks (later on I started trading strangles) and have enough cash or shares for assignments. I have peace of mind now not worrying about the stock volatility. I roll the options as much as possible up or down as needed and if I cannot roll for a credit I let it assign. And I have enough cash (or shares) to let the assignment go without ruining my account. And I reinvest all proceeds to buy more shares. I keep reinvesting the dividends and premiums. It is not a quick-rich scheme (as many people believe or hope for) but still substantial growth compared to just passive investing (like what you would normally do in your 401k account).

Strategy Results

Thanks to this strategy, I feel relaxed, I was able to navigate through the market 40% crash in March 2020 without losing anything, and in fact, I was buying more shares when they were on sale, my account is up 50% for 2021, and my options premiums average $3,000 a month in 2021.

And What’s Next?

I plan on accumulating until I have enough to have a sustainable income from dividends and options. I will accumulate a 1-year salary saved in a money market account as reserves and then I will be ready to “retire” and trade for a living. And if something bad happens, I will have a 1-year salary saved to eventually sustain any losses and find a job, but I do not expect that. I feel quite confident that with this strategy I will be able to navigate through good and bad. The goal is not to overdo the trading and not to over-extend the trades beyond cash security or shares coverage because if you trade more than what your cash or shares allow you, you are forced to close the positions due to margin calls and for a loss. Many times, a substantial loss. I learned that the hard way.

Dividend Investing Misconceptions

There are misconceptions and misunderstandings about the dividends I have seen in the past from people. Many investors do not want to buy dividend stocks and prefer growth stocks because they consider a 3% yield and sacrificing the stock growth not enough to bother to invest in these stocks.

Another claim is that in order to achieve let’s say $90,000 annual dividend income, an investor would have to accumulate a $2.5 million account at current yields, and that is not realistic in today’s world since it would take a person over 30 or more years to do.

Both claims are only partially valid. None take into account dividend growth.

Yield On Cost (YOC)

If you take into account the dividend growth, the time and amount needed to accumulate shrinks significantly. For example, my current portfolio has a current dividend yield of 3.52% and dividend growth of 5.91%. With these numbers, the future yield on cost will be:
 

  • 8.75% yield in 10 years shrinking the capital requirements to $1,028,571 portfolio value
  • 31.26% yield in 20 years shrinking the capital requirements to $287,907 portfolio value

 

and so on (This is when you are reinvesting all dividends and not adding new money. If you start adding more of the new money, it will grow even faster). And, I speed up this process with options income. That was always my dream and goal in investing and trading – generate enough income that can be invested to buy more shares that would generate even more income. At some point in the future, I should accumulate enough income to start paying my bills on top of the accumulating of more stocks.

But yes, you have to give your portfolio time to work it out. If you are looking for a faster way to get rich, then this probably is not for you.




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Posted by Martin February 13, 2021
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2021 Week 6 results


The second week of February is over and it was a very successful week again. We collected $2,435 credits trading options this week and we kept purchasing stocks of our interest. We are currently averaging a $3,555.50 monthly income and if this trend continues we will make $42,666 this year trading options. Of course, I must make no mistakes and costly reckless errors.
 

But now, let’s jump to our trading results:

 

Account Value: $31,136.70 $668.05 +2.19%
Options Premiums Received: $2,435.00
January 2021 Options: $4,209.00 +16.65%
February 2021 Options: $2,902.00 +9.32%
Options Premiums YTD: $7,111.00 +22.84%
Dividends Received: $3.66
January 2021 Dividends: $53.04
February 2021 Dividends: $40.45
Dividends YTD: $93.49
Portfolio Yield: 3.52%
Portfolio Dividend Growth: 5.91%
Portfolio Alpha: 17.34%
Portfolio Weighted Beta: 0.49
2021 Portfolio Value Goal: $42,344.06 73.53%

 

Last week we received $2,435 in premiums trading options against our holdings and shares we want to own. Our options trading delivered a 9.32% monthly ROI, totaling a 22.84% ROI. Also, our net-liq increased amid the weak market. The entire week, our net-liq was suppressed by higher volatility and the broker’s higher margin requirements. But on Friday, the market jumped up and that helped our net-liq to jump up as well.

Last week, our account jumped up to 51.35% YTD growth. We are very happy with this result.
 

I have reviewed our portfolio and our trading/investing strategy and decided to make slight adjustments to it. Here are the goals and tasks for the next week or more:
 

Old SPX trades repair

Before 2019 we traded SPX Iron Condors heavily. We traded 0-DTE trades. We traded multiple trades a week. And we were making money in our fund. But, one day, when the volatility hit the markets (it all started with the trade tariffs) I was not suddenly able to manage the trades and it all crashed. The account went from 20 thousand dollars to $1,600 in a month. It was a fall with a big bang.

I rolled the bad trades away hoping that I would be able to somehow manage them and release the cash trapped in those trades. But in a volatile market, it was not possible. As soon as I managed to adjust the trade ready for a worthless expiration, the market violently turned around and all adjustments I have done went down the toilet. The problem was that these adjustments were costly. Very costly. At some point, I decided to stop repairing those trades and let them go.

But today, the markets seem to calm down a bit. I think it is a great opportunity to try again and repair these trades. I still have over $12,000 trapped in those bad SPX trades and it would be great to release the cash.

I tried to play with those trades and see what adjustments I can do and I could make adjustments for credits. If I could roll and adjust those trades for credits, I am going to try repairing these trades. If repairing the trades can’t be done for a credit, I will let them go.

Accumulating Speculative Stocks

In my previous post I wrote that I wanted to be buying certain speculative stocks such as NIO, SNOW, DDD, XONE, and many others. Over many years of investing I developed a sense to invest in high-quality stocks that can be evaluated and I can calculate their intrinsic value. I could only find blue chips and high-quality dividend-growth stocks. But, I cannot be closing my eyes to other opportunities out there. With my approach, I would never invest in stocks like Amazon (AMZN), Apple (AAPL), or Tesla (TSLA). And I missed those stocks. In the past, none of these stocks made money. Amazon started making money just recently, and Tesla is still not making any revenue. It may change (it probably will) but I will be sitting out or buying these stocks expensive. In 2014 I had an opportunity to buy Amazon for $350 a share. I thought it was too expensive and the company made no revenue, thus going bankrupt soon. Today, Amazon trades over $3,000 a share.

I do not want to make the same mistake again. I am open to picking some speculative growth stocks from the “innovative and disruptive” category of stocks. But, I will limit holdings in these stocks to 10% of my portfolio. As of today, I hold 12.51% in these stocks so, I will not be buying more until our portfolio goes higher and we can add more shares.

Accumulating Dividend Growth Stocks

Buying high-quality dividend stocks is our core strategy in our fund. And we will continue to do so and at a faster pace. Last week we increased our position in Altria (MO) to 75 shares and our goal is to reach 100 shares; that way, we will have our strangles partially covered, or we can be selling more covered calls. After accumulating MO, our next goal will be to accumulate Aflac (AFL) stock and also reach 100 shares.

We want to accumulate 100 shares of each stock in our watchlist or list of stocks we want to own. This lot of shares is not, however, the end number. Once we are fully invested (own all stocks we want to own), then we will start adding on top of those 100 shares. But that is a faraway future.

First, we want to buy the initial 12 stocks to achieve a weekly dividend income.
 

Here is an example of our current dividend calendar and stocks we picked to accumulate:

 
Weekly Dividend Income
 

Of course, there is more to the chart and stock selection. In order to buy these stocks, they must be “undervalued”. I use Fastgraphs to help me with stock valuations. Prior to accumulating a stock, I want to check the valuation first. For example, right now, I keep accumulating Altria (MO), and my next target is Aflac (AFL). But before I start buying Aflac, I will check the Fastgraphs to make sure Aflac is still undervalued. If it is not, I will proceed to accumulate another stock that is still undervalued.

Trading options

We will continue trading options around the stocks we own or plan to own. I call it monetizing our positions. It has a threefold benefit. It lowers our cost basis (at some point we will own all our shares for free), it covers our call sides of each trade, and it generates an additional income on top of the dividends. And that income is significant as you can see from our report at the top of this post.

Our fund in charts:

TW Account Net-Liq
 

TW Account holdings
 

The table above shows our current holdings and gains on those holdings. Adjusted columns indicate how options help to boost (or ruin) our stock holdings appreciation, or in other words, lowering the cost basis. Without options, our holdings would be up 6.88% with options, our holdings are up 11.81% (from inception on 4/1/2019). The SPX is up 36.02% since inception. Our stock holdings do not beat the market. This week, we were not able to beat the market trading options either. The market gained 6.18% YTD, our portfolio stock holdings grew by 4.83% (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

TW Options Income week 6
 

TW Options Annual Income week 6
 

TW Received vs Projected Dividends week 6
 

We will continue trading options and accumulating dividend-growth stock next week and report our results on Saturday next week. Until then, good luck and good trading!




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Posted by Martin February 10, 2021
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How to buy great companies that are expensive: Valuation still matter


Many investors these days forgot valuations and started chasing companies that have no revenue, no income, and that are burning cash every quarter. Yet they are hot and their prices are skyrocketing.

There are plenty of companies that are great and valuable but they trade at a premium to their intrinsic value. For many years I argued that if you look for valuations and buy only undervalued companies then there will be certain stocks that you would never be able to buy or you would have to wait for 10 or more years for a major market crash that would make these companies valued properly.

One example can be Coca Cola (KO). A great business. I love the stock and I want it in my portfolio. But that company is terribly overvalued. Since the 2008 crash, it always traded at a premium to its value:
 

Coca Cola
 

Another example in this category of great but overvalued companies is Apple (AAPL). For many years, AAPL traded near its intrinsic value, tracking it closely. Until September 2019. That month, the stock skyrocketed and continued rallying since then. Even a 40% crash of the market in March 2020 didn’t correct the stock valuation.
 

Apple
 

And it may take years for this stock to drop. And it may never drop. It may start trading sideways for many years until the valuation catches up with the price of the stock. And you (and I) will be sitting on the sidelines for years.

If you are like me, you want these companies. I want them. I want to own AAPL and AMZN, or SNOW. But how do you buy them so you don’t burn your cash that may be lost in the future if the market finally corrects?

The secret is in the cost basis. If I can lower the cost basis of the stock, it is like buying it cheaper.

There are a few investors I have seen who do not believe in cost basis and its lowering. They say it is an artificial maneuver and in reality, you do not lower your cost basis at all. But that is a way of the view you are looking at income and cost basis of a stock.

Some people view dividends and other income generated by the stock or your trading as an income that is added on top of your capital gains. Others use the income and subtract it from a purchase price, refer to a book “Generate Thousands in Cash on your Stocks Before Buying or Selling Them” by Samir Elias. I am in that category. I believe, that if you can manage that the stock returns all your invested dollars back to you (as Warren Buffett also looks for in his investments), you end up owning the stock for free.

What income can help you to lower the cost basis?

  1. dividends
  2. options premiums

And so, I started to track my desired cost basis and adjusted my prices to take into account options premiums to lower my cost basis.
 

Stock cost basis
 

Now I can see my income adjusted cost basis of a stock and compare it to my intrinsic value of a stock. My goal is now to keep reducing the cost basis until I reach the minimum (or go significantly below it). For example, AAPL is trading for $135.39 a share. My unadjusted cost basis is $130.95 per share but my income adjusted cost basis is $122.49 a share. However, I need to lower it to $60.14 a share.

For that reason, I will keep selling options and collect premiums to further lower my cost basis. Then, when my cost basis will be below the intrinsic value of a stock, I can be buying expensive stocks and not worry about valuations.




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Posted by Martin February 06, 2021
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2021 Week 5 results


The first week of February was slow in trading. I didn’t have much time to trade and thus it was mostly maintaining the existing trades. However, some of our holdings (those speculative ones) jumped up significantly and boosted our net liquidating value beyond my expectations. I think I sorted out better, what I want to do next with our fund.

I still will be accumulating dividend aristocrats according to our plan but I will be also adding some of the innovative and disruptive stocks from industries such as renewable energy, biochemical industry, electric vehicles, 5G research and innovations, 3D printing, and cannabis. But I will also do some speculative trading on a small scale using momentum trading.

I created a Finviz screener that searches for stocks with unusual volume activity (plus some other technical indicators) that helps me to find stocks that may spike up significantly on a new buying interest. I will buy such stock (and if a stock is optionable and offers good premiums and strikes to trade, I will also sell puts against the stock) and ride the momentum. I will also use stop loss to protect the trade from losses.

Currently, the screener selected the following tickers: NESR and CSWC. We purchased a few shares of NESR and we bought a call option on CSWC that we could offset by selling a naked put against it. Both trades are profitable so far.

For the next week our screener chose the following symbols that we may (or may not) trade next week: CUTR, NOG, PRCH, NBLX, FLNT, and REKR. Some stocks are on our watch list already, such as CUTR, others we need to wait for a breakout to invest. Lets see what the next week brings.

Last week, we continued accumulating our dividend aristocrats Altria (MO) and saving cash in the ICSH fund to have our savings up to date in case of a serious market correction. We increased our MO holdings to 45 shares and our goal is to reach 100 shares. After we reach the goal, our next accumulation goal will be Aflac (AFL).

In our “innovative and disruptive” category, we will be accumulating RESN, this company develops 5G network components and radio/cell phone filters and some other stuff; I expect this company to be a significant player once the US wireless carriers kick in their 5G networks in 2022; DDD, and XONE, both companies are involved in 3D printing and they have a good potential of large returns in the next 3 years; PACB in biochemical industry, developing genetic sequencing systems; and ISR a company researching cancer treatments, technologies and medical equipment.
 

We are also interested in the following stocks:
 

Virgin Galactic Holdings, Inc. (SPCE)
Social Capital Hedosophia Holdings Corp. V (IPOE)
Canadian Solar Inc. (CSIQ)
Plug Power Inc. (PLUG)
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)
iShares Self-Driving EV and Tech ETF (IDRV)
The AES Corporation (AES)
Omnicom Group Inc. (OMC)
 

It will take us some time before we will be able to accumulate these stocks as our cash is limited. That is also one reason for aggressive options trading to generate enough cash that can be used to buy these stocks of our interest.

We post our trades and more details in our MeWe group. I strongly recommend you to join the group if you are interested in following our trades more in detail. We also post trades on a MeWe page as I do not like Facebook anymore and I participate on Facebook very sporadically.

 

But now, let’s jump to our trading results:

 

Account Value: $30,468.65 $5,190.52 +20.53%
Options Premiums Received: $467.00
January 2021 Options: $4,209.00 +16.65%
February 2021 Options: $467.00 +1.53%
Options Premiums YTD: $4,676.00 +15.35%
Dividends Received: $36.79
January 2021 Dividends: $53.04
February 2021 Dividends: $36.79
Dividends YTD: $89.83
Portfolio Yield: 3.57%
Portfolio Dividend Growth: 5.91%
Portfolio Alpha: 8.88%
Portfolio Weighted Beta: 0.60
2021 Portfolio Value Goal: $42,344.06 71.95%

 

Last week we received $467.00 in premiums trading options against our holdings and shares we want to own. Our options trading delivered a 1.53% monthly ROI, totaling a 15.35% ROI. Also, our net-liq increased significantly as the volatility dropped after the GME frenzy saga faded away and the stock market recovered all last week’s losses.

With this recovery, our account jumped up to 48.10% YTD growth. We are very happy with this result.

Last week we had to sell some shares in ICSH, VGSH, GBIL, and MO to release some buying power (BP) as we were getting hit by margin calls. This week, we bought all these shares back and added more. I see this as a good achievement as well.
 

TW Account Net-Liq
 

TW Account holdings
 

The table above shows our current holdings and gains on those holdings. Adjusted columns indicate how options help to boost (or ruin) our stock holdings appreciation, or in other words, lowering the cost basis. Without options, our holdings would be up 7.32% with options, our holdings are up 12.06% (from inception on 4/1/2019). The SPX is up 34.36% since inception. Our stock holdings do not beat the market. We beat the market because of trading options and generating additional income. The market gained 4.52% YTD, our portfolio stock holdings grew by 5.08% (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

TW Options Income week 5
 

TW Options Annual Income week 5
 

TW Received vs Projected Dividends week 5
 

We are still in an accumulation mode accumulating Altria (MO). Our next target will be accumulating Aflac (AFL), and Abbvie (ABBV). After that I will proceed to other stocks as per the chart I posted in my previous article.
 

We also want to expose our portfolio to some growth stocks in the new technologies and industries such as electric vehicles, nanotechnologies, fintech industry, cannabis, and renewable and clean energy. I will be purchasing individual stocks as well as ETFs investing in these industries. That’s why you may see me buying stocks like NIO, NNDM, SNOW, CUTR, CSIQ, ISR, DDD, XONE, IPOE, PACB, SPCE, RESN, or ETFs such as MSOS, RNRG, or IDRV.




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Posted by Martin January 30, 2021
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2021 Week 4 results


The last week of January 2021 is over and it was a hectic week. It was a week that woke up many investors from the lethargy of easy gains. As Danny DeVito says in Other Peoples money: “Easy come, easy go”. The previous three weeks were the “easy come”, the last week was “easy go”.

A lot has happened last week. Some online brokers halted GME trading, and the most exposed broker, Robinhood, made the uneducated bunch of 17 years old WSB boys mad, and they decided to sue Robinhood because their friend’s uncle said that they may have a good chance. No one bothered to see why Robinhood, Interactive Brokers, TD Ameritrade, or Tasty Works actually did it. A reason no longer applies in the stock market. One may ask when it ever had?

Besides the daily GME broadcasting from new millionaires the markets started being nervous. Was it a Robinhood trading halt that spilled over into the regular markets? Were other greedy investors wanting to jump on the late bandwagon and started selling everything to make their own millions too? One can only speculate. The reality is that the markets went to a selling pressured spree. Monday and Tuesday of the last week were good. Wednesday… all went nuts.
 

S&P 500 chart
 

On Thursday it all looked like a dip but dip buyers failed to step in and buy the dip. They probably went to buy GME which skyrocketed another 150% as soon as Robinhood secured the funds to meet the required cash deposits with their clearinghouse and renewed GME trading. The angry mob at WSB calmed down and resumed their HOLD or buy more cheering. It will be interesting to see how many end up holding the bag cheering themselves into more holding.

S&P 500 lost -4.6% this week and VIX jumped to 37.5 which was last seen in September 2020 (as a reminder, the market sold off by 10.6% that month).
 

This craziness had an impact on our trading. As the markets got into a frenzy and later this week into a selloff, brokers raised the margin requirements, and I got into a “cash squeeze.” I had saved cash in my ICSHsavings account” ETF but it showed up as not enough to meet all my collateral obligations.

A great example was a strangle against BB (the infamous Blackberry). When I opened the trade the margin requirements were only $150 per contract. Piece of cake. Well, when this frenzy with GME, AMC, NOK, and BB started the brokers (TW as well) suspended margins for these stocks so suddenly, out of blue, I had to come up with an additional $2,500 in collateral. With other options contracts and their inflated volatility (vega), I had more margin obligations to come up with. And I suddenly was short on cash. Another example was my very recent Boeing (BA) strangle. When I opened the trade, I needed a $2.4k margin, later, I need $3.9k…

So I had to liquidate my ICSH fund to raise capital but I also had to sell some shares in MO. That infuriated me a lot. Fortunately, some of my options contracts expired worthless today so, on Monday, I will start re-establishing my MO and ICSH positions.

Lesson: I need to hold more money in cash for situations like this. My goal was to have 20% in cash reserves. I was under-capitalized on this goal, I only had 7% saved. I might increase the reserves to 25% and make sure to be always fully capitalized (save the required cash) when the markets are at ATH.
 

This had an impact on our Net-Liq which went down. It didn’t go down because we lost money, not at all. We made more money than before, but it went down due to increased volatility, larger margin requirements, and lower stock holdings valuation when the markets sold off. Since I expect selling to continue next week, the Net-liq may go lower.

 

But now, let’s jump to our trading results:

 

Account Value: $25,278.13 – $789.07 – 3.03%
Options Premiums Received: $1,994.00
January 2021 Options: $4,209.00 +16.65%
Options Premiums YTD: $4,209.00 +16.65%
Dividends Received: $11.46
January 2021 Dividends: $53.04
Dividends YTD: $53.04
Portfolio Yield: 3.70%
Portfolio Dividend Growth: 5.91%
2021 Portfolio Value Goal: $42,344.06 59.70%

 

Last week we received $additional $1,994.00 in premiums trading options against our holdings and shares we want to own making January 2021 a good month on options income, closing with a good $4,209.00 options income. That is 16.65% monthly ROI. Most of that income was however swallowed by increased margin requirements and it didn’t get reflected in our net-liq. I assume, when the market craziness ends, not only our Net-Liq will increase, but also our buying power (BP) will go up significantly.

Even with this market frenzy, our account is up by 22.87% YTD.

I only regret selling Altria (MO) shares to release margin (not all of them though). But as I mentioned above, some of my options expired this Friday, which has released additional buying power, and on Monday, I will buy MO back. And since I expect more selling, I might even buy cheaper. Long live the wash sale rule!
 

TW Account Net-Liq
 

TW Account holdings
 

The table above shows our current holdings and gains on those holdings. Adjusted columns indicate how options help to boost (or ruin) our stock holdings appreciation, or in other words, lowering the cost basis. Without options, our holdings would be up 6.01% with options, our holdings are up 10.36% (from inception on 4/1/2019). The SPX is up 28.40% since inception. Our stock holdings do not beat the market. We beat the market because of trading options and generating additional income. The market lost -1.45% YTD, our portfolio stock holdings grew by 3.38% (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

TW Options Income week 4
 

TW Options Annual Income week 4
 

TW Received vs Projected Dividends week 4
 

January 2021 went well. Even though the end of the month sold off, our portfolio is still up nicely and I expect it to grow further. I still will strive to be purchasing dividend aristocrats as our main goal in 2021. I will be purchasing them in a manner to create a weekly dividend income. And I will keep trading options around these positions as well as around the stocks I want to own in the future.
 

As of today, I am in an accumulation mode accumulating Altria (MO). My next target will be accumulating Aflac (AFL), and Abbvie (ABBV). After that I will proceed to other stocks as per the chart I posted in my previous article.
 

I also want to expose our portfolio to some growth stocks in the new technologies and industries such as electric vehicles, nanotechnologies, fintech industry, cannabis, and renewable and clean energy. I will be purchasing individual stocks as well as ETFs investing in these industries. That’s why you may see me buying stocks like NIO, NNDM, SNOW, or ETFs such as MSOS, YLCO, or IDRV.




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Posted by Martin January 23, 2021
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2021 Week 3 results


Another week of 2021 is over and it is time to post the results of our trading. But before I proceed to list my achievements of this past week, I want to share an idea of creating a weekly dividend income.

A fellow investor on social media, where I posted my weekly dividend calendar asked me why I decided to do a weekly payout calendar and not just a monthly one because the weekly calendar seems too complicated to track. I disagree with this conclusion. I am accumulating our portfolios one stock at a time and it was easy to create the calendar and keep track of each stock being accumulated.

But I got into this idea when evaluating my account #3. I wanted to grow this account faster and reinvest the dividends but when I finally decided on the plan there were no dividends coming in. In November 2020, I have received tons of dividends that allowed me to finish accumulating AT&T in that account and since then I was painstakingly waiting for the next payout. And I only received a few dollars here and there. It was frustrating, given that in this account, I had approx. 40 different companies. So I checked their payout days and found out that the majority of them pay dividends in February and most of them in the second week of February (and subsequent months). So, I receive dividends in February, May, August, and November. In other months I get just a few pennies or a few dollars only. I wait dry with nothing to do. And that was an eye-opener that I have decided to select stocks I like to own in a manner to create more even dividend distribution across all months and weeks. And, since I try to trade weekly options, I decided to accumulate my stocks to get weekly dividends too.
 

But now, let’s jump to our trading results:

 

Account Value: $26,067.20 +$3,420.71 +15.10%
Options Premiums Received: $305.00
January 2021 Options: $2,215.00 +9.78%
Options Premiums YTD: $2,215.00
Dividends Received: $0.00
January 2021 Dividends: $41.58
Dividends YTD: $41.58
Portfolio Yield: 3.59%
Portfolio Dividend Growth: 5.91%
2021 Portfolio Value Goal: $42,344.06

 

This week we received $305.00 in premiums, a total of $2,215.00 for the entire month so far. That is a 9.78% return on investment for January 2021.
I also started depositing $1,000 a month to our portfolio. That was also my goal to grow the portfolio faster. The goal value of $42,344.06 above includes the deposits of $12,000 per year. I am still paying off my personal debt and once that is paid off, I will be depositing another $1,000 per month. But, that is the future.
 

TW Account Net-Liq
 

TW Account holdings
 

The table above shows our current holdings and gains on those holdings. Adjusted columns indicate how options help to boost (or ruining) our stock holdings appreciation, or in other words, lowering the cost basis. Without options, our holdings would be up 7.60% with options, our holdings are up 10.65% (from inception on 4/1/2019). The SPX is up 32.80% since inception. So our stock holdings do not beat the market. We still beat the market thanks to trading options and generating additional income as you can see below. The market grew 2.95% YTD, our portfolio stock holdings grew by 3.67% (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

TW Options Income week 3
 

TW Options Annual Income week 3
 

TW Received vs Projected Dividends week 3
 

January 2021 started well so far and we are on track to meet and exceed our goal. My anxiety over this market is growing, however. I am happy with the market’s growth and our stocks going higher, but I can also see a lot of irrational behavior from investors out there. I stopped understanding these investors, mostly young guys, and sorry to say, mostly completely ignorant about what they are doing. Just go to YouTube or other social media channels and you will see tons of your guys boasting about their investments chasing pretty much worthless stocks or companies that make absolutely no money, no revenue, no product. They just buy these companies out of their pure existence. That’s it. Traditional values of investing, buying high-quality companies that create something and generate value are gone. Nowadays, chasing bankrupted companies such as Hertz (HTZ), Chesapeake Energy (CHK), or penny stocks that serious investors wouldn’t touch with a ten-foot-long pole are in. The funny part of all this is that many of these gamblers became rich overnight chasing these strategies and many of them became extremely cocky trying to arrogantly explain to you that your approach is stupid and that you should invest in bitcoin, or some unheard of penny stock and become rich overnight too. That is why I stepped down from social media lately (I am still present in there but very little compared to what I used to de before). I can’t stand these gamblers and their ramblings.

It will come to an end one day.

There are a few exceptions though. One of them is Daniel Pronk. I think, his insights make sense and he is looking at investing from traditional, rational evaluation of investments before deploying money. His recent video about the irrational behavior of this market and the market’s participants is exactly what I tried to describe above. We do not know whether the market would crash in 2021, no one knows, even Daniel acknowledges it, but his reasons for this bubble-like market are extremely valid.

 

 

That is the reason why I am still raising cash (investing it into the ICSH fund) for rainy days in the stock market and a potential bubble burst. That is why most of my premiums and dividends will be parked in the ICSH fund to sustain the crash should it happen. The market shows weakness and I want to have enough cash to cover naked trades (making them cash-secured). We are still seeing a Christmas rally momentum but it is weakening and if we look back in history, we may expect up to four corrections a year. I want to be able to survive that correction without forced losses.




TastyWorks

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Posted by Martin January 22, 2021
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Why am I rolling options and not letting them assign?


A primary goal in my wheel strategy is to generate income, not to get assigned. So, simply, if I can roll the option trade away and adjust my strikes for credit, I roll. Of course, I still have to account for the eventuality that I get assigned. A stock may drop suddenly, I get an early assignment, or I won’t be nearby my computer to be able to adjust a trade that in the morning looked great but in the afternoon went south, for example.

That’s why I am creating my cash reserves to handle any assignments should they occur but I try to avoid them.

I have two main approaches to my portfolio wealth-building – one approach is to accumulate shares of the dividend growth stocks and then, the second approach is to trade the strangles around those positions. The shares generate income from dividends and on top of that, I receive premiums. And if the trade goes against me on the call side, my 100 shares cover it. If the put side goes against me, I have cash reserves to eventually buy another 100 shares of the stock. But if I can roll such strangle away in time and adjust the strikes up or down as needed and all that for a credit, I go for it and roll.




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Posted by Martin January 22, 2021
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Creating passive income with weekly dividends


Besides trading options against my positions, I am also interested in weekly dividend payments, so I added all stocks I like to own into a calendar per week, and now I am accumulating these stocks to achieve weekly dividends. I only enter stocks where I own 100 shares in this calendar (I own many other shares but not all of them are in 100 shares lots yet)…
 

Weekly Dividends
 




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