Posted by Martin May 06, 2020
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New Purchase for dividend income

Bought 5 BIF shares @ 9.24
Bought 5 ETJ shares @ 9.11

We keep ing these CEF funds for income as both pay decent dividend.

Boulder Growth & Income Fund, Inc. (BIF) pays 0.41 annual dividend (4.44% yield). The fund invests in dividend paying equities and fixed income papers (bonds) worldwide and its goal is dividend income. The fund constantly trades below its NAV value (usually -16% discount) so, in my opinion it is a good vehicle to invest for dividend income. However, the fund is non-diversified and highly invested in small number of equities. To some, this may be a problem. I do not mind it. The fund has been around since 1972 and annualized return is about 6%. However, note that the return is not the primary goal of the fund. The primary goal is income. The fund uses no leverage.

Eaton Vance Risk-Managed Diversified Equity Income Fund (ETJ) pays 0.91 annual dividend (10.09% yield). The fund invests in the US equities, majority of them pay dividends. It also buys SPX out of the money puts while selling out of the money calls against it (a collar strategy) which provides a cheap downside protection for the fund (note, the price decline, you may see on the chart, is the investors overreaction and not a NV decline. The NAV is protected by the long SPX puts). The fund is also income oriented and trades at discount -3.21% to NAV. The fund uses no leverage.


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Posted by Martin May 01, 2020
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How much can you make trading options?

That’s a question people ask often. I did ask that question too. Many times. I still do ask that question. I want to know whether my trading is aligned with others, expectations, and goals of mine. The answer is not simple and results really vary based on your account size, trading strategies, and risk you are taking. So, it is not easy to say a number and call it a day.

But there are new traders and investors who want to know whether it makes sense to spend time and learn trading options despite many so called experts telling them that options are risky and that they should stay away.

So what can you expect?

Before I get to my numbers, let me first ponder on the general expectations.

I browsed the Internet to find out what others say and what other traders told people what to expect from options trading. All I could find was that you should be lucky to see 20% annual growth of your portfolio. Yes, 20% was their number, on average. I didn’t find anything better than that. If you could find others telling a better expectation than that, please, let me know in the comments below.

They also say, that anything above it is unrealistic and if you go and aim toa number larger than 20% then you are assuming a large risk and you will probably lose money.

On this website (and my Facebook group) I have a motto “making 45% annually trading options against dividend growth stocks” and people were telling me that this is a ridiculous claim and not achievable unless I am taking a huge risk. Yes, I was taking a huge risk in the past few years but that was trading SPX options, not dividend growth stocks.

So, is 20% a good number and 45% a bullshit?

Let’s take a look at S&P500:

Dec 31, 2019 – 29.44%
Dec 31, 2018 – 20.49%
Dec 31, 2017 – 16.21%
Dec 31, 2016 – 9.27%
Dec 31, 2015 – (15.42%)
Dec 31, 2014 – 2.11%
Dec 31, 2013 – 15.82%
Dec 31, 2012 – (0.51%)
Dec 31, 2011 – 12.41%
Dec 31, 2010 – 51.76%
Dec 31, 2009 – 242.54%
Dec 31, 2008 – (77.52%)
Dec 31, 2007 – (18.81%)
Dec 31, 2006 – 16.73%
Dec 31, 2005 – 19.27%

Can you see the gains of the SPX per year? Yes, there are a few years with some serious declines, but mostly the growth is around 20%. Some years are 29%, 51%, or even 242% after a recession.

So, if you think, 20% gain trading options is reasonable expectation, and everything above it is a gamble, then I have an advice for you. Save yourself all the hassle, buy SPY index and sit on it for years. You will get more than 20% in many years (yes, you will also see some serious loses, but that’s the nature of the game).

Then let’s get to my numbers. I started diligently recording my trades at the beginning of 2018. I know, it is only 2 years of records and it may not be long enough to claim it relevant. But, unfortunately, before I didn’t keep records of trade by trade results. I wish I did record them but I didn’t know how to do it efficiently.

In the 2 years of options trading, I averaged 8% gain in 15 day long trade (average days in trade). That translates into 16.20% monthly return, and 197.05% annualized return. You can go to check my spreadsheet and see all recorded trades and averages. Check my math, maybe I made some algebraic mistakes. But, if I didn’t make mistakes, you can expect definitely more than 20% annual gains. My 45% annual gains are definitely achievable.


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Posted by Martin April 28, 2020


What would you invest in 2020, growth stocks or dividend stocks?

It all depends on many things – your age, money available, goal or why are you investing, time horizon you want to invest, and so on.

If you are young and want to create a portfolio for your retirement, then I definitely vote for dividend stocks. Why?

If you want to invest for the next 20, 30, or 40 years and build a portfolio for your retirement, how would you cash out your investments once you retire?

If you invest in growth stocks, the only way to cash out is to sell some of your investments (4% rule).

If you invest in dividend stocks, you will be cashing out dividends only and not selling your assets.

Then what happens if a market goes into a bear market selloff or recession and you have to cash out?

If you create $1,000,000 worth portfolio then growth stocks will pay you (usually) nothing in dividends. Dividend stocks will pay you $150,000 annually in dividends (15% YOC after 25 years of dividend growth). If the stock market crashes 68% (like it did in 2008) than your portfolio will shrink to $320,000.

If you have to sell 4% of your portfolio to cash money for living, with growth stocks (now valued at $320,000) you will sell 0.04 and receive $12,800 instead of $40,000 (4% rule). Will you be able to live on $12,800 that year? Probably not. I suppose, you will have to go back to work. Or you will sell out $40,000 and hope, your even more shrank portfolio (now $280,000) recovers. And fast! If however the recession takes 3 years (like the one in 2008), you will be doomed. The second year, you take our $40k (down to $240,000) and third year another $40,000 (down to $200,000). And even if the market starts recovering at the same rate as 2009 to 2020 (399%) your account will be up to only $799,000 in 10 years (2019 – 2009) and that is if you do not take any money out of it for the next 10 years. And that is a very bleak outlook I personally do not like much. What can you do? Well, save even more than $1,000,000 account. Maybe $3 million account will do the trick. But, that means, you will have to be saving a lot, every year! For the next 25 years or more. Or?

Or, invest in dividend stocks. Because, even if the market slumps and crashes 68% like it did in 2008, and it will be $320,000 value only, it still will pay you $150,000 annual dividends. If you think it’s not true, go and check how the high quality dividend stocks behaved during 2007, 2008, and 2009 years. ALL of them not only paid their dividend, but also INCREASED the dividend. And those are the companies you want in your portfolio.

If you want some excitement and rapid growth, you may use, let’s say 20% of your capital and put it into growth technology stocks. The rest should go to dividend stocks.


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Posted by Martin April 25, 2020


Creating passive and semi-passive income

This week, I continued building my passive income (accumulating dividend stocks) and a semi-passive income (trading options). But, when reviewing my portfolios I realized one thing – I had my positions all over the place dispersed among many shares. There was nothing wrong with it, those are all stocks I want to hold. But, in order to monetize those positions, I need to be more concentrated than having a few shares here and there. I know, I can hear all diversification gurus yelling now. But, I take investing probably quite differently than many investors. If you pick good stocks, you do not have to be diversified. And that is something even Warren Buffett would agree with me… and William O’Neil too.

So, this week, I decided to focus on concentrating my holdings. Here is a brief view.

I have 92 shares of HP (Helmerich and Payne). Can I monetize this position (selling covered calls)? No, I cannot. I do not have enough shares. I can trade naked, but that would require margin I currently do not have. So, the only thing, instead of investing into other positions (which I was doing) is to put all my effort and raise this holding to 100 shares. But, there is a problem.

Helmerich and Payne is a company involved in oil. It manufactures rigs and oil drilling equipment, so not involved directly in drilling, though. Well, they do the drilling but they do it on contractual basis, they do not drill for the oil itself but for a company who buys their drilling service. But if all the drilling companies stop drilling and extracting oil because of the oil slump, they will also stop buying the equipment or companies hiring them for drilling would stop. And that would impact HP.

HP was a dividend aristocrat increasing dividends for 47 years. It is amazing how this company could sustain all oil crisis in the past, until this one. After 47 years of consecutive dividend increases, HP cut the dividend. And I have 92 shares.

I was accumulating this stock way before this self imposed, hysteria driven crisis. Maybe I could have foreseen this coming but I am not that smart to foresee everything. As a dividend investor, I should close this position and move on. But, I decided not to. I decided to increase the position to 100 shares and start selling covered calls to lower my cost basis and then eventually sell. Not exactly what a dividend growth investor would do, but I was accumulating this stock when it was trading at $40 – $45 a share. Today, it trades in a $15 – $19 a share range. The price drop from $45 a share happened way before they announced the dividend cut.

HP dividend cut

The market actually looked at the cut positively and I agree. The company decided to protect its cash flow until the economy stabilizes. Although, this was good for the company, it is not good for me as an investor. Not only I am under water now, but also, my passive income has been compromised.

I am not also much eager to close the position at a loss (at my current cost basis of $40.96 a share, I would be closing with 56.61% loss). This is a reason for me to hold the position, increase shares to 100, and start selling covered calls, lowering my cost basis. Although, this feature is more psychological, than real, but, at least, you have a good feeling that the position didn’t come in vain.

Of course, I would use this income to start increasing my positions in other stocks I own so I can also use them to sell covered calls. My next holdings will be:

PPL – currently holding 72 shares
O – currently holding 53 shares
ADM – currently holding 28 shares
KMI – currently holding 46 shares
VLO – currently holding 18 shares

All dividends and income from options will be used to purchase those shares so I can start selling covered calls.


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Posted by Martin April 24, 2020
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How much should I invest in the stock market as a teenager?

As much as you can. Every penny you get and can call “yours” should be invested in the stock market – 100% or more in stocks. Forget any defensive safe investing. You are young, you have time on your side so you can go aggressive as you will be able to fix any mistake. Leverage your investments. If you want to know more of what I am taking about, read a book “Lifecycle Investing

Learn as much about investing as possible, set a goal which will tell you how you want to invest, what stocks, how much money, for how long, when you will be buying, when selling, etc. and then stick to the plan for decades. 20 or 30 years later, you will retire financially free.

Learn to use options to boost your returns. For example, if you buy 100 shares of a stock and it appreciates a lot, you can convert your stock holdings into a long call option which will allow you to keep profits and release cash for more purchases (safe leveraging, read the book above). Sell cash secured puts to buy shares, sell covered calls to monetize your holdings. Be aggressive.

Study the market, ignore suckers who are scared to death whenever the market goes up (claiming it is overvalued) and scared anytime it goes down a bit (claiming end of the world and a crash), they have no clue. If you study the market, you will be able to identify when the market is in corrective or bearish mode (which should be respected) and when it is just a dip (to be ignored and bought more). No crisis takes longer than about 3 years (usually 1 to 3 years) so you can be buying more during recessions when you are young and in accumulation phase and be defensive when you are older and closer to retirement. You will hear people claiming that “if you bought on top of 1930 it would take you 25 years to get even”. That is a nonsense, ignoring that the market wasn’t down all the time for 25 years. It went up and down in waves. So, yes in that period it went nowhere but, if you started investing, buying high quality dividends stocks (for example), reinvesting dividends, you would be buying more and more cheaper shares anytime the market would go lower, and anytime it would be going higher, the recovery would be faster and cumulative. In your 20s, this wouldn’t matter at all and if you were in your 50s, it wouldn’t matter either as you would be living off your dividends, options premiums, and maybe some selling. The market (stocks) prices will eventually go to a price which will be beyond any crash level (unrepeatable price) so you can ignore any gloomers and doomers scared of any decline or recession. What do I mean by “unrepeatable price? It is a price the stock or market will probably never revisit. Example: JNJ stock. I bought it at $38 a share. Today, it trades at $140 a share. If the stock market loses 70%. The price would be $42 a share. It is still above my cost basis, so even if everyone panicked all around and kept selling and screaming, I still would be in green and buying more shares. And even if that happens, how long would it take before the market recovers? 2008 took 2.5 years to get back to pre-crash level. And imagine, that you would be buying more at $42 level. so when the stock goes back up you will be riding great recovery even if the market recovers partially only.

So, do not be afraid and look for long term perspective, long term investing. Many people are long term only until the next correction, don’t be like them. Have 20 or 30 year time frame in mind (even if you trade short term products such as options, you still must be aware of the long term results). Believe, me, you will reach great results.


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Posted by Martin April 24, 2020


Realty Income: The Top Monthly Dividend Stock For Income Investors

Dividend growth stocks have a number of buying opportunities to consider right now, thanks to the significant drop in the stock market to begin 2020. Even with the recent rebound, the S&P 500 remains down 13% per year. Certain sectors such as real estate have been hit even harder, due to the widespread store closures across the country.

This makes certain high-yield Real Estate Investment Trusts highly attractive for income investors. We believe Realty Income (O) is a high-quality monthly dividend stock with a high yield of 5.6% and a secure monthly payout. The company is an appealing stock for income investors looking for a high yield, and a reliable monthly dividend.


 · Business Overview


Realty Income is a Real Estate Investment Trust, also known as a REIT, which means it owns real estate properties that are rented out to tenants. As a landlord, Realty Income collects rental revenue, while avoiding much of the operating expenses such as insurance and taxes, which the tenant pays. Realty Income’s property portfolio is focused on retail.

Realty Income has a diversified real estate portfolio of over 6,400 commercial properties under long-term leases. The properties are leased to over 300 commercial tenants, spanning 50 industry groups. Properties are located in 47 states as well as Puerto Rico, and the United Kingdom. Realty Income owns retail properties that are standalone properties. This means that the properties are used by a wide range of tenants, including government services, healthcare services, and entertainment.

The current occupancy rate exceeds 98%, and has never fallen below 96%. Convenience stores represent the largest individual industry group, at over 11% of Realty Income’s rental revenue. The top tenants include Walgreens, 7-Eleven, Dollar General, FedEx, and Dollar Tree.

The company’s strong property portfolio has led to steady growth for many years. In the 2019 fourth quarter, revenue $398 million increased 16% from the same quarter the previous year. Contributors to revenue growth included rental increases at existing properties, as well as rental increases from investments in new properties made in the past year.

Funds from operation, or FFO, were flat in the 2019 fourth quarter from the same quarter the previous year. While total FFO continued to rise due to rental increases, on a per-share basis the FFO figure was partially offset due to equity issuances over the past year. Still, Realty Income’s funds-from-operations increased by 9% year-over-year, as its funds-from-operations-per-share came in at $0.86 during the fourth quarter.

For the full year, adjusted FFO-per-share increased 4% to $3.32 per share. It is likely Realty Income will continue to generate growth in the years ahead, even with a highly challenging environment for 2020. While FFO will likely decline in 2020, over the long-term, we expect continued growth once the coronavirus crisis is over. Realty Income’s future growth will be fueled by its investments in new properties. For example, in 2019 Realty Income invested $3.7 billion in 789 properties and properties under development or expansion, including $797.8 million in 18 properties in the United Kingdom.


 · Dividend Analysis


We currently hold Realty Income as our top-ranked monthly dividend stock. There are many reasons for this, including its top-tier property portfolio, but also due to its impressive dividend history. Realty Income has declared 597 consecutive monthly dividend payments, which goes back nearly 50 years. It has also increased its dividend 106 times since its initial public offering in 1994. With at least 25 consecutive years of annual dividend increases, Realty Income is a member of the Dividend Aristocrats.

Realty Income Dividends

Realty Income currently pays a monthly dividend of $0.233 per share, which equates to an annualized payout of $2.80 per share. With a recent share price of approximately $50 per share, Realty Income has a current dividend yield of 5.6%. This is a highly attractive yield for income investors, especially due to the low interest rate environment. Stocks do not widely offer high yields either, as the S&P 500 Index on average has a 2.1% dividend yield right now.

By comparison, Realty Income stock is very attractive for income investors such as retirees. Not only does Realty Income provide a much higher level of income than the average dividend stock in the S&P 500, it also pays its dividend each month. Most other publicly-traded stocks pay dividends quarterly, semi-annually or once per year. This means Realty Income shareholders receive 12 dividend payments per year, which could be more useful for investors who utilize dividend income to pay for monthly expenses.

In addition, the dividend appears secure. Consensus estimates call for FFO-per-share expectations of $3.42 for 2020. Based on current analyst estimates, Realty Income’s dividend payout of $2.80 per share represents an implied dividend payout ratio of approximately 82% for 2020. This is a relatively high dividend payout ratio, but it is not uncommon for REITs to distribute the vast majority of per-share FFO to shareholders.

The company also has a strong financial position which will help it navigate a potential recession in 2020. Realty Income has a long-term credit rating of A3 from Moody’s and A- from Standard & Poor’s. According to the company, it is one of only 8 REITs with at least two A3 or A- credit ratings. Having a strong balance sheet and property portfolio helped the company survive the previous recession of 2008-2009. Realty Income was one of only two REITs in the S&P 500 with positive earnings growth, dividend growth, and total shareholder return during the Great Recession.

While no two recessions are identical, Realty Income’s track record of successfully navigating the previous recession to hit the U.S. recession at least bodes well for the company’s performance if another recession occurs.


 · Final Thoughts


The stock market decline to begin 2020 has presented multiple buying opportunities for investors with a long-term view. But investors should focus on quality, as many hard-hit sectors will continue to struggle in this environment. Investors should assess the underlying company fundamentals to ensure the stocks they are buying have sustainable dividends. We believe Realty Income is among the highest-quality REITs in the entire market, as it has a long history of navigating recessions and paying dividends.


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Posted by Martin April 22, 2020
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What is the best money investment at medium risk in 1 year?

If you must be in a stock market, buy the entire index (SPY). Yet, it will diversify you but if we get a selloff, you may not be able to get out. I expect at least 18 additional years of a bull market but that doesn’t mean we will have no corrections on the way up. We will have them. We will have 3%, 4%, 5%, 10%, or even 20% corrections, pullbacks, or bear markets in this secular bull market (most common are 4% corrections), so, expect them and navigate your investment accordingly (e.g. when your withdrawal time nears, start trimming your positions at every market new high, etc.).


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Posted by Martin April 22, 2020


People chasing oil buying USO long term are poised for a rude awakening.

People are jumping in oil (USO) futures these days. Data shows that these buy orders are coming from retail investors (from Fidelity, TD Ameritrade, and similar accounts). People, who are jumping in USO now think that with futures at 2.50 per contract they will become rich long term when oil recovers.

But they have it wrong. Just by a nature of the USO ETF, they will lose money due to Contango effect.

What does it mean?

Let’s take a brief look how USO operates. USO buys oil futures contracts. But they do not buy them to buy physical oil. They do not want to have barrels of oil stored at their backyard. So what USO does when the contracts are nearing to expiration?

They sell the current contracts and buy next month contracts. And when next month contracts near to expiration, they sell those contracts and roll into the next month, and so on.

And now look at the current quotes of crude oil futures with different expirations.


CL May contract is at $2.87
CL June contact is at $15.13
CL July contract is at $23.17

As those contracts near to expiration, USO has to sell its May contracts at $2.87 and buy June contracts at $15.13. And as June contracts near expiration, they will sell at $15.14 and buy July contracts at $23.17, and so on. This is a constant erosion of the ETF’s price. Buying USO and staying in it waiting for oil to recover and thus becoming rich is a path to destruction.


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Posted by Martin April 21, 2020


How to protect myself when trading on margin

This is my sin I commit in trading and investing all the time – over trading. I trade and invest using margin. You may argue, that it may be dangerous and you should trade and invest cash. I disagree.

This is how I see it:

If I want to buy 100 shares of a stock, let’s say Archer Daniels (ADM) which currently trades at $35.00 a share, in a cash account I would have to come up with $3,500 to be able to do it. In a margin account, I only need an initial buying power of $1,500.00.

I like to be buying using this leverage. You may not, but I do.

I also trade options. I sell puts to buy stocks and once I buy a stock (100 shares) or in other words I get assigned, I start selling covered calls and do that as long as I get assigned again and sell the stock.

And here is my problem I have. Or had. When you sell a put in a margin account, only about a quarter of the needed buying power is needed compared to the cash secured puts. In the ADM example, to sell a 32 strike put, I would need only $405.15 of buying power.

options BP

But I need to keep remaining $1,100 +/- somewhere to have cash available in case of assignment. If I open an additional trade later on and do not keep a proper track of my available buying power (BP), and get assigned, I am in trouble. I do not have enough cash to buy shares.

And I also do not want to keep to much unused cash sitting in my account and doing nothing. So I want to use as much cash as possible and still stay safe.

And I was thinking on ways how to do it as spreadsheets and bookkeeping hasn’t protected me or prevented me from using more cash (BP) than I had available. And sometimes, I must admit, I get excited and open more trades than I can afford. In a bullish market is not easy, it is just a small trade, it will expire soon and I can afford this one breach or rules, and there is still plenty of BP to sustain this trade which I can eventually roll… yeah, sure.

So, I was thinking what to do and how to make sure I still have enough BP for assignment how to force myself to the rules.

And I came with an idea.

If I sell a put, I will need $400 of BP, if I get assigned, I will need additional $1,100 BP.

I then want to block $1,500.00 for assignment (a slightly more for a buffer). how can I do it so my trading app will show me less BP so I cannot use it as long as the open put trade if live?

I decided to place a buy order for enough ADM shares at some ridiculously low price, like $1 limit buy price, GTC order, which will most likely never executes but will block my buying power:

BP block trade

This trade will then be safe for its life and if I get assigned, I just cancel the shares purchase order to release my BP for the assignment. And, If I cannot do this trade and place the “blocking trade” then I cannot sell the put in the first place.

so, again, why all this and not just using cash account? Because, I still can buy 100 shares at 50% of needed cash, collect dividends, and sell covered calls and use only 50% of the cash.

And what about margin interest?

First, the margin interest is relatively low compared to the income I can generate monetizing my position by selling puts and collecting premiums, collecting dividends, and then selling covered calls and collecting additional premiums. It is still lower than losses you have to take when you are forced to close a position for which I didn’t have enough cash in the first place. And that is a price I am willing to pay.


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Posted by Martin April 17, 2020
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Is it a good idea to always buy low if you are investing in small stocks, especially if you are a beginner?

If you can correctly identify “low” and a type of a “low” then of course it is a good idea to always buy a low. But how do you know that a “low” in a certain stock is due to bad performance of a company going bankrupt or due to overall market conditions? And how do you know when a “low” is truly a “low” and that the stock will not go even lower?

Investing in stocks is not about chasing lows. Choose high quality stocks and invest in them regularly regardless of the price being low or lower. For example, you can pick a stock and keep buying every time the stock goes below your original purchase price or cost basis. Although even this strategy may not be a good one either as you can buy a stock which will rally and never visits your original purchase price ever. By waiting for a “low” you will miss a great stock going up entirely. Check JNJ stock for example. When I bought it in 2009 it was at $38 a share. The stock never visited this price ever and probably never will. Today, it trades for $150 a share. Or Mastercard (MA), I bought for $78 a share, today it is at $300 a share and that price will never be reached again.

You can also calculate intrinsic values and all sorts of valuation calculations to determine when the stock is “undervalued” and vice versa. But, in my opinion, it is too much work with too much subjective estimates and guesses. So, I do not do it.

So, pick a few stocks and start accumulating no matter what the price is doing. Over time of 20 years, the stock will be up (unless you pick some high flying questionable and speculative company.


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