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February 2014 progress, goal changes, and TD portfolio vs S&P500

Up LadderHello fellow investors. Recently I was working hard on my strategy, goals, and reviews. Why? Because I want to show the picture of my investments so all readers can see how well or poor I am in investing, trading and financial independence building effort.

Not everybody who you ask about their investment will tell you the whole truth. It is not comfortable for people to admit losses, so many will tell you just the bright side of their endeavor. I want to be open and show the entire reality. Although showing losses is not a pleasure rather than showing gains, I want to be open with all my investments.

Why? Recently I had two people who asked me if I could manage their portfolios. At first I wasn’t decided whether it is a good thing to do. It is a great responsibility and you risk turning your friends into enemies.

Well, lately, I decided to try with a friend of mine, who is a realty broker and I started managing his account a month ago. I have another person who might be interested in my help, but he is not decided yet.

Before I started, I opened a paper trading account to trade paper money first, so both my friends could see what to expect. The great thing trading the paper money was that I realized what a great potential I had in trading options. After two months of trading I already collected a little less than 20,000 dollars in premiums and realized 5% of returns. The current account value is $107,946.02, which is 7% in two months.

At first I had a few question about such high profits. When I told them that I am actually expecting almost 60% return this year (if nothing changes dramatically), both friends were quite skeptical and refused to believe me.

So I did a little research. I wanted to know how other options traders do; and confirm whether it is possible or it is an illusion which will potentially fail.

I know a few traders, so, let me list their profits:

Teddi Knight, a famous Canadian trader, who has a very nice blog about her trades. On her blog, in the section “Portfolios” you can find the following results:

2014 – 6.6% (and counting)
2013 – 58.8%
2012 – 41.7%
2011 – 26.8%
2010 – 29.86%
2009 – 113.53%

From the numbers above I don’t think I am that off the reality with my profits.

If you learn and know how to trade options, you can reach 40%, 50% or even 60% gains in your account. People are scared of such profits as they have bad experience with high returns investments. To them, these profits are too good to be true.

This experience was my eye opener and I realized that I should probably focus more on option trading as my source of income. Since I have a family, mortgage, debt, and many other obligations. I cannot contribute as much as some of my fellow bloggers such as Dividend Mantra, whose goal is to contribute 50% of his income.

But I can trade to get that income! I just was able to find out myself.

Goal adjustment

That brings me to my goal adjustment. Basically I am cancelling all my goals for 2014 except the debt reduction goal. My new goal and procedures will be as follows:

 

  1. Reduce my debt by 50% (as I said, I still will go for this goal).
  2. Save $160 monthly to TD Ameritrade account
  3. Trade options only – put selling – to generate income in TD account. Have all trades closed by the end of December
  4. Take 10% from the options net profit (if larger than $100) and invest it into a dividend paying stock (if equal or larger than $1000), if lesser, buy a commission free ETF as long as $1000 is saved. Then sell the ETF and buy a dividend stock.
  5. Withdraw 10% from the options net profit (if larger than $100) and contribute it to ROTH IRA
  6. Withdraw 10% from the options net profit (if larger than $100) and reward myself for a great trading. Go for vacation with my family.
  7. Withdraw 30% from the options net profit as a tax reserve (deposit temporarily in a savings account. Return back what is left after paying taxes.
  8. Reinvest the rest.

 

The overall goal would be to aggressively maximize gains so the income can start substituting some of my current expenses, savings to ROTH, and debt reduction payments. It will take time to build a large enough portfolio but I am very confident that I can do it.

My account progress

That brings me to reporting my progress. Currently I have majority of my cash in dividend growth stocks and very little in options. I want to reverse it and use options as a source of income which will be deposited into dividend paying stocks (one day, I won’t be able to actively trade, and dividends will become a main source of income).

January 2014 premiums: $156.10 (1.55%)
February 2014 premiums: $139.26 (1.38%)
January 2014 dividends: $25.87 (0.26%)
February 2014 dividends: $167.02 (1.66%)
Total 2014 income: $488.25 (4.85%)
2014 unrealized premiums: $1,437.00 (14.27%)
Account balance: $11,758.70 (16.74%)

You can check my dividend and option calendar to see when the next paydays will be. I am hoping as more and more money will be available in my account for trading, I will be able to generate more income.

If you want to follow my options trades, you can do so following me on My Trade, where all my trades are posted in real time.

My TD account vs. S&P 500

Recently I worked on benchmarking my results. I can proudly present my TD account tracked against S&P 500. The chart below shows my portfolio adjusted for contributions (contributions excluded) vs. the index. Last year, my goal was to recover my account from reckless trading I did in previous years. This chart proves, that I was successful and now I am beating the index.

I wish you good luck in upcoming months and hopefully your investments are performing well and per you plans.
 





5 Responses to “February 2014 progress, goal changes, and TD portfolio vs S&P500”

  1. Not to be a total contrarian, but until those returns have been tested by a major down market, then they are mostly the product of capitalizing on a bull market. For example, Teddy Knight seems to have been a great investor, while the market’s gone through the roof. Sure, one can appreciate the increased gains over the S&P, but if you’re leveraged and the market dips, rolling those options forward will create a snowball in the wrong direction.

    Either way, best of luck Martin. I hope you have great success with this.

    • Martin says:

      One more thing, I will be here posting my results, so when the major market drop arrives, I will be posting my results. :)

    • Martin says:

      W2R, I am aware of that risk and have a plan for it. First, it is my reserves, second, I do not have a huge concentration of puts in one period, but spread throughout the year (so, I do not have to roll all options at the same time) and third, worse case scenario I will buy dividend paying stocks (be assigned). I went through the January correction (true, it was relatively small, only 5% and short period of time compared to 2008) but I was able to manage it thru my reserves and deep OTM rollovers. (No market drops 20% in a day, right?). However, I am aware of the risk and have plan to manage it.
      Thanks for stopping by!

  2. Good set of new goals. Good luck!

    regards



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