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March 2016 trading, investing, and dividends results


It is difficult to admit that you were wrong when you are the king of the world. But at some point the reality will catch up with you and you will be forced to admit you were wrong.

If your trading pattern looks like a roller coaster or constant losing it is time to stop thinking that you are hurt by the market and that the whole world is against you, Your Majesty.

This was my case.

After I effectively ruined my account from $21,000 down to $1,500 it was that “aha” moment to me. So last month I stopped my madness, stopped trading SPX market, closed the last losing trades and decided to move on.

I returned back to the strategy which worked and I did a good thing by doing so. My March 2016 is again a profitable month. Very profitable.


 


 
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 · March 2016 trading results

In March I was trading options only using dividend growth stocks as underlying. It is a very profitable strategy but that doesn’t mean you can be careless and reckless in trading. The biggest challenge I faced in March was using my limited funds in check with my rules and not over trade.

It was very tempting to take trades when you have so much available margin sitting in your account.

But my rule is to use only 50% of my available buying power and keep the rest sitting in the account in case my positions get assigned. I use margin, not cash secured put trading so it is very important to check your buying power status often so you won’t get caught off guard. I do that check every day. Every evening I look at my available buying power and compare it to my positions to see if I am good to invest more or sit tight.


 


 
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How to Protect Your Retirement Savings By Derek with Money Ahoy

 
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Why You’re Not Picking Winning Trades and 5 Simple Steps to Fix It By Nial Fuller with Learn To Trade The Market

 


 

My March trading was very profitable and hopefully I back on track to make money. In March my account went up by nice 29.55%. I started the year with $1,518.73 and today, at the end of March I am up to $2,292.19. Nice 50% turn around and although my accounts are still down, I am slowly making it up from that hole I dug up for myself last year.

 

Here is my trading result for the month:

 

March 2016 options trading income: $364.00 (14.33%)
2016 portfolio Net-Liq: $2,292.19 (29.55%)
2016 portfolio Cash Value: $3,429.69 (58.28%)
2016 overall trading account result: -9.75%

 

Here are the results of my options trading:

Options Income
(Click to enlarge)

 
Here are the results of my options strategy:

Options Income
(Click to enlarge)

At first I started with cheaper stocks (although riskier than standard stocks) but later as my account grew I could start adding pricier stocks such as ABBV, PPL, LULU, etc.

The trades performed well, some I was able to close early for 50% profit, some are still on waiting for them to either close or expire.

I have a few trades which are in the money and I expect them to be assigned next month. The stocks which I expect to be assigned are ESV, TRGP and KMI. If it happens I will immediately start selling calls against those stocks.

 
Here are results of the individual trades:

 
PSEC

Options Income
(Click to enlarge)

 
ESV

Options Income
(Click to enlarge)

 
ABBV

Options Income
(Click to enlarge)

 
LULU

Options Income
(Click to enlarge)

 
KMI

Options Income
(Click to enlarge)

 
TRGP

Options Income
(Click to enlarge)

 
PPL

Options Income
(Click to enlarge)
 

If you like these trades and want to be informed when I place them and trade them in real time, you can join our closed Facebook Group. The group is a closed group and there are other traders posting their trade ideas too. We learn from each other, eventually ask questions, get answers, but most importantly you can see what we trade and how. You can follow those trades.

 
Here is the entire account value from the beginning of tracking it up to today:

TD Account Value
 

 

 


 
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 · March 2016 dividend investing results

Dividend investing is a steady growing and slow building process. But I have time. I mentioned many times on this blog why I am trading options and invest into dividend stocks. I trade options to create income now, but build my dividend stock portfolio for the future when I will not be able to trade anymore (due to age for example, or death, so my kids will benefit from the portfolio in case they won’t be able or knowledgeable to trade).

Unfortunately, my portfolio is weighted more towards energy stocks as I expected oil recovery to perform better then what we are seeing these days. A few of the stocks recently cut the dividend and I could feel that as my dividend income dropped. Even stocks like COP cut the dividends. But I am optimist here. I have 20 years in front of me. Unless these companies go belly up, I should be OK.

Recent cut hurting my income was by VNR so my income dropped again.

 

Options Income
(Click to enlarge)
 

My annual dividend income is down from $894.81 previous month to $887.98.

Dividend stocks added or removed from portfolio:

 

February 2016 dividend stock buys: none
February 2016 dividend stock sells: none

 

To purchase stocks I use trailing stock order strategy OTO trade order (one triggers other) and I described this strategy in my post about purchasing stocks in falling markets.

I also invest into dividend paying stocks using Motif investing which allows me to buy all 30 stocks I want in one purchase using fractional investing, similar to a mutual fund.

You can actually build your own mutual fund with Motif investing.

Here is my Motif Investing account you can review:
 
 

 

 
 

I continue reinvesting my dividends using DRIP program. I love how my holdings grow when reinvesting the dividends and when the stock prices are going lower. As I believe we are heading into a recession I will be able buying more shares for a lot cheaper.

 

Dividend stocks DRIP:

 

February 2016 DRIP: ConocoPhillips (COP)
Archer-Daniels-Midland Company (ADM)
American Capital Agency Corp. (AGNC)
Johnson & Johnson (JNJ)
Realty Income Corporation (O)
Vanguard Natural Resources, LLC (VNR)
Prospect Capital Corporation (PSEC)

 

Here are my ROTH IRA trading/investing results:

 

March 2016 dividend income: $70.46
March 2016 options income: $0.00
2016 portfolio value: $17,745.03 (6.30%)
2016 overall dividend account result: 17.21%

 

The account grew by 6.30% from last month, overall I am up 17.21%. Dividend income was also up from last month. All dividends were reinvested back to the companies which generated them.

 
Here is my dividend income:

ROTH IRA account value
 

 
Annual dividends since the beginning:

ROTH IRA account value
 

Here is the entire account value from the beginning of tracking it up to today:

ROTH IRA account value

 

 


 
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Below is my dividend income review for the entire year:

Dividend Income
My ROTH IRA dividend income breakdown per month and per company.
 
 

 · All accounts

Besides trading and dividend accounts I also have 401k account, emergency savings account, etc., which I do not report in detail. You can review those accounts in my “All Accounts Value” table at the bottom of My Trades & Income page.

My accounts increased from previous month and are making 8.45% (up from previous month) for the year.

Remember, if you like trading options and want to have trade ideas for free, join my Facebook closed group and follow my put selling trade ideas in real time, comment, ask questions, and interact with other members. Other members of the group can also post their trades so you can learn from them too.

 
 

 
 

What do you think?

How about your investing or trading results?

Do you have any question? Need help to start trading or investing? Shoot me an email or let me know below in comments how I can help you.

 
 






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All Dividend Investing,  Options Trading,  Personal Finance
Posted by Jenna March 06, 2016
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Confessing My Money Mistakes


When Martin asked me to guest blog for the site, I had no idea what to write about. Having read quite a few personal finance blogs of his and on other sites, I said ‘I don’t have anything to say!’. What I failed to recognize at the time was that I do have something to say about money… that is, I don’t have a lot of it.

I’m coming to the end of my final year of an undergraduate Liberal Arts degree. I live in the UK and I am lucky enough to be eligible for a tuition fee loan, a maintenance loan, a maintenance grant and a university bursary. This might sound like I’ve got an income that is ‘livable’ but when you start to do the numbers, you wonder how many undergraduates manage in the financial situation they’re in. Spoiler alert – they don’t.

Many of my peers have exhausted themselves working up to forty-hour-weeks alongside their studies, many will do long commutes to save living costs of moving into the city, many live in sub-par accommodation because the rent is cheap… the point I’m trying to make is that there seems to be a mythological idea that student finance in the UK is ‘more than enough’.

Because my student finance wasn’t more than enough (let’s call the actual income a ballpark £7,500 a year) I have done just about every daft and dangerous thing with my personal finances.

Amongst these money mistakes are:

 

 · Getting a store card at eighteen

 

I walked into a clothes store having lived in hand-me-downs and raggedy old items for several months and they told me about this shiny way of purchasing clothes without actually exchanging any money at the time. It sounds so very appealing and you’re sure you’ll pay it all in full at the end of the month but that’s not quite the case. Store cards have hefty interest rates – many over 25%. Some entice you in with introductory offers and membership benefits but the truth is, store cards are quick and easy ways to accumulate nasty debt.

Cutting it up was the best thing I could have done!

 

 · Maxing out my overdraft early (because it was ‘interest-free’!)

 

When I opened my student bank account, I did look around to see who offered what. However having had virtually no financial education and not having sought it out myself, I didn’t really know what I was comparing the accounts for. This meant that I chose the one with the biggest interest-free overdraft because again – ‘free’ money.

I soon maxed the overdraft out because I thought there’d be no repercussions. As I’m approaching the end of the course, I am more than aware that interest rates will start to apply and that the balance is a pretty big figure at the moment. This is one of my priorities in terms of whittling it down once I have a regular monthly income from employment.

 

 · Frivolous spending ‘because I can’

 

I’m not talking a £90 pair of boots or a slap-up meal for me and my partner here. When you’ve got little disposable income, you often tend to ‘treat’ yourself more to the little things because you’re fed up about not being able to put your money towards something more substantial.

I’m sure many students can tell me about nights at the pub, weekend takeaways or that little purchase that you don’t need but you really wanted. While it’s important to recognize that this kind of behaviour isn’t helpful all the time, a budget and some carefully selected small treats will help you not to feel so downtrodden. There’s frugal and then there’s going without.

I had to make myself buy new socks the other day because I was being too frugal – if you need it, you need it!

 

 · Not learning about money and PF sooner

 

This is the killer. A lot of people complain that simple money management isn’t taught in schools but what people fail to realise is that the responsibility ultimately falls down to you. Your parents, friends, financial advisers, accountants, whoever can suggest how you should handle your finances but when it comes down to it, you’re the one in control of your spending, your saving and what you buy or invest in.

I’ve recently taken up this task and have found loads of great blogs about personal finance, investment, early retirement and peoples’ journeys to becoming debt-free. Whilst their content is inspiring for someone who may have a few money mistakes, it’s also hugely educational and worth reading about if you want to secure a better financial future for yourself.

Remember: no matter what your money mistakes, there are services and methods to help you get back on track. For help in the UK, contact the Stepchange debt charity or the Money Advice service.

 
 






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All Dividend Investing,  Options Trading,  Personal Finance
Posted by Martin March 02, 2016
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My Strategy update


Time to update my strategy. Again. I know it sounds weird but yes, I need to update my strategy, because the one I wanted to use showed up to be a dead end.

I was trading naked puts at some point against dividend stocks but later I turned into spreads. When analyzing why I found out that I started losing money as soon as I deviated from my strategy. The biggest issue was that I started trading stocks I didn’t want to own, so I started defending my trades, rolling them converting them, doing whatever I could to avoid assignment.

So I turned into spreads against SPX hoping that that would be the right strategy to make tons of money and not to worry about being assigned. Of course, SPX cannot be assigned, right?

I was losing money even faster and I couldn’t stop it.

It is time to go back to basics and start with what originally worked well, but this time stick to the plan.

I will be trading options against dividend stocks as of now only putting the SPX spreads aside for the time being.

 

 · Accounts

 

First, let’s review what I am doing and that I am not that crazy as you may think when reading about my gambling with options.
I use several account and my options trading was just a small part of the entire investing empire I have.

 
TD trading account
 

This account is reported on this blog This is my trading account I use primarily for trading options. I will not be buying and holding stocks in this account unless necessary as part of my trading strategy. This account’s purpose will be generating income to be invested in my other accounts and abridge my early retirement income before my 401k and ROTH kicks in.

 
401 k account
 

This account is not reported on this blog I invest in a 401k retirement account. As of today I contribute 7% of my income and every year when I receive an increase I increase my contribution by 1%. I also get 3% employer match. Choosing investment vehicles in this account is limited but I could choose funds which pay large distributions or dividends (as much as I could) which can be reinvested. I rebalance this account every 6 months.

 
ROTH IRA account
 

This account is reported on this blog This is my dividend growth investing account. I primarily invest into dividend growth stocks and reinvest dividends. I will also use options strategy but not as my primary goal.

 
Scottrade account
 

This account is not reported on this blog I opened this account because I loved the FRIP program. It is not my primary investing vehicle, but I really love to play with the FRIP. It is a play money account. I invest into dividend stocks and use FRIP to be buying new shares and new stocks. I am just curious how this account would build up overtime as I am not contributing any money to it. I just deposited $600 dollars starting money in it about two years ago and let’s see how this works out 20 years from now.

 
Motif investing account
 

This account is not reported on this blog This is yet another pet account to me. It is not a primary investing account but I loved the concept of creating my own mutual fund and let that fund play out on its own. It is an excellent idea utilizing fractional investing. There are many stocks I always wanted but couldn’t afford to buy them or didn’t want to spend $50 dollars only in a regular account (like ROTH) due to high commissions and fees. Motif allowed me to buy those stocks and now they are growing and generating income.

 

 · Put selling strategy

 

The strategy is very simple. I am selling naked puts against dividend paying stocks.

 
You must trade this strategy only against stocks you are willing to own.

1) Sell puts against dividend stocks as long as you get assigned.
2) If you get assigned, keep the stock and sell calls against the stock
3) Sell calls against the stock as long as you get assigned
4) While waiting for assignment collect dividends.

 
 
In my TD account when I get assigned to the dividend paying stock, that will be the only time I end up holding that stock in the trading account. I will only hold it as long as I get the stock called away from me when selling calls against that stock.

I will use this strategy in my ROTH IRA account. The only difference is that I will be selling calls only against shares acquired through the put selling strategy.

For example, if I hold 100 shares of an XYZ stock as my core holding and I sell a naked put against that stock and get assigned I will end up holding 200 shares of that stock.

All dividends from that stock will be automatically reinvested into my core holding (increasing my core holding) and I will be selling calls only against the acquired 100 shares, so if I get called away, I still keep my core holding (possibly increased by dividends reinvesting program).

 

 · Dividend Growth Strategy

 

I will search and invest into dividend growth stocks and reinvest dividends primarily in my ROTH IRA account. I will be buying these stocks and hold them forever (if possible).

To purchase new shares I will use an OTO strategy (contingency order or “one triggers other”) which trails the price of the stock. This technique allows me to buy the stock cheaper.

During my accumulation phase when my account is small and generating less than $1,000 dollars per month in dividends I will use DRIP program for reinvesting dividends.

After my account grows larger and I start earning more than $1,000 in dividends I will stop DRIP program and start using dividend for selective re-investing.

The reason for $1,000 limit is commissions and fees. Unless you can buy shares for free, it is better to buy with $1,000 or more. If you use less, it becomes expensive.

To choose a dividend stock I want to invest in I created a screener which selects the most undervalued stocks for me.

 

Of course, this screener is not necessarily a buy list I will be blindly investing into stocks which are listed as “buy”. I will use those stocks for further evaluation.

 

 · Money distribution

 

After I grow my accounts enough to start distributing money I will use the following rules for money withdrawal or reinvestment.

 
In my TD account:
 

For every $1,000 monthly income I withdraw $200 for my own use and spending (paying bills, debt, vacation, but also buying dividend stocks for example in Scottrade account, or saving to my ROTH IRA account). After I reach $10,000 monthly income, I will take out 50% for my own use. The rest will be left for taxes and account growth.
Still long way to go!

 
In my ROTH IRA:
 

After I reach $2,000 monthly income I invest 50% of that income into dividend growth stocks. The rest will be used to grow my options trading portion of the account.

 

 · Conclusion

 

I have a lot of work in front of me to reach my goals and I hope this strategy of put selling against dividend stocks will help me to reach those goals and I finally will use it right. If I will manage to make it right this time, I should soon recover my account, preserve my money, and grow them enough to reach a comfortable retirement.

Bear with me, follow me and see how good or bad I will be in my effort. If I am successful in this, you will have an example to follow.

 
 






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All Dividend Investing,  Options Trading,  Personal Finance

February 2016 trading, investing, and dividends results


February 2016 is over. To me it marks a new milestone in my trading career. In my past posts I mentioned that if I will not be able to make profit trading options against SPX, I stop trading this strategy.

This time has arrived. I tried hard. I tried everything I could to make my trading profitable. But I wasn’t able to make it. So I am abandoning this strategy for the time being. In the future I may return to this strategy, but not until I will recover my account and will have enough money to trade this strategy.

My dividend investing continued performing well in February. I purchased new stocks and I can see results of DRIP investing. I also decided to apply my put selling trading in ROTH account too. But, again, no SPX trading.


 


 
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 · February 2016 trading results

For the time being I am abandoning SPX options trading strategy and going back to put selling strategy. In my post I wrote early this morning about opening a new trade against Ensco (ESV) that I was going back trading options against dividend paying stocks.

It is a win-win strategy and used to trade this strategy in the past. I multiplied my account using this strategy.

The reason why this strategy is great is that you are OK to get assigned to the stock if the put option gets in the money.

If that happens, you will buy a stock which will pay you dividends in the meantime while you continue selling calls.

With the SPX strategy, I couldn’t afford to get assigned because my account had not enough money for a cash settlement. So I needed to defend my trades. And defending my trades was the moment which was losing me money heavily.


 


 
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I started trading the put selling strategy at the end of February, so the results were not yet visible but I was able to recover majority of losses from SPX trading strategy. In the next coming months this strategy should start paying off.

However, the progress will be slow as of now. Because my account is small (since I destroyed it in the past), so I will not be able to trade this strategy monthly yet, but as the account will be growing I believe, I will be able to speed my trading up again.

 

Here is my trading result for the month:

 

February 2016 options trading income: -$72.00 (-0.62%)
2016 portfolio Net-Liq: $1,769.29 (16.50%)
2016 portfolio Cash Value: $2,166.79 (20.96%)
2016 overall trading account result: -30.34%

 

Here are the results of my options trading:

Options Income
(Click to enlarge)

 
Here are the results of my options strategy:

Options Income
(Click to enlarge)

As I mentioned above, I am not going to trade this strategy for time being. So this will be my last report on trading SPX spreads such as Iron Condors, or vertical spreads.

Instead, I will be posting my individual trades against dividend paying stocks.

Since my account is small, I am starting with cheap dividend stocks such as PSEC or ESV, but as my account continues going up, I will start trading more expensive and stable dividend stocks to generate income.

 
Here are the results of my PSEC put selling strategy:

The first stock I decided to start selling puts against was PSEC. It is a BDC company, it pays dividend monthly and I own this stock in my ROTH account. I do not mind buying more shares of this stock if I get assigned. I have owned this stock since 2010 and although it lost some value and many consider it a dead stock I believe this stock will perform great in the future.

With the put selling strategy I am lowering my cost basis so even if I get assigned to the stock at the current strikes, my real cost will be a lot lower because of premiums received.

My latest trade, as you can see below, had strike 7 dollars, I collected 2.60 premiums. Even if I get assigned at 7 dollars a share, my cost basis will only be 5.10 a share. I can immediately start selling 6 dollars calls (which will be deep in the money) and get out of the stock fairly quickly and still make another 0.90 or $90 dollars profit. And in the meantime I can collect dividends (it will be $8 dollars for 100 shares owned).

I think this is not a bad prospect, isn’t it?

 
Options Income
(Click to enlarge)
 

Here are the results of my ESV put selling strategy:
 

Similarly, in my trading account I can open a bit more trades than in my ROTH account thanks to margin trading. So I decided to add Ensco (ESV) put selling strategy. Ensco is involved in offshore drilling so it is heavily dependent on oil price. As of today, the stock may be risky, riskier than PSEC, but I am OK to take that risk and I am OK to own the stock should I get assigned.

However, I will not be as aggressive selling too many puts against this stock as with PSEC. I will be selling new puts against Ensco only when the old one expire or I get assigned (in which case I start selling calls instead).

 
Options Income
(Click to enlarge)
 

 
Here is the entire account value from the beginning of tracking it up to today:

TD Account Value
 

 

 


 
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 · February 2016 dividend investing results

My dividend investing continues being a boring and same routine month to month. Great strategy, however. Every month I collect my dividends, use DRIP to reinvest them into the stocks that generated them and if I happen to save more money ($1,000 limit for an individual trade) I purchase a new stock (or existing if it offers a great purchase opportunity.

I have big plans and dreams what stocks to add into my portfolio and I am slowly getting there. Well, very slowly right now. This is why I will be applying my put selling strategy in my ROTH account too to generate more income which I can reinvest.

There will be one difference to the put selling strategy. I will not be selling calls against my core holdings, only stocks I acquire thru put selling.

For example, I currently hold 100 shares of PSEC. I sold a new put contract against PSEC. If I get assigned, I will start selling calls only against the acquired 100 shares of PSEC and not the entire 200 shares holding. In the meantime I will be collecting dividends which will be automatically reinvested to increase my core holding. In case my calls get assigned, I will get rid of the new 100 shares only and not the entire core holdings.

 
Here are the results of my PSEC put selling strategy:
 

Options Income
(Click to enlarge)
 

This time I do not have to be worried about unwanted assignments or trade repairs which end up a huge loss. If I get assigned, I get to be buying a stock I want anyway.

 

Options Income
(Click to enlarge)
 

Dividend stocks added or removed from portfolio:

 

February 2016 dividend stock buys: 17 shares
Valero (VLO)
@ $57.84
February 2016 dividend stock sells: none

 

To purchase stocks I use trailing stock order strategy OTO trade order (one triggers other) and I described this strategy in my post about purchasing stocks in falling markets.

I also invest into dividend paying stocks using Motif investing which allows me to buy all 30 stocks I want in one purchase using fractional investing, similar to a mutual fund.

You can actually build your own mutual fund with Motif investing.

Here is my Motif Investing account you can review:
 
 

 

 
 

I continue reinvesting my dividends using DRIP program. I love how my holdings grow when reinvesting the dividends and when the stock prices are going lower. As I believe we are heading into a recession I will be able buying more shares for a lot cheaper.

 

Dividend stocks DRIP:

 

February 2016 DRIP: American Capital Agency Corp. (AGNC)
Master Card (MA)
Realty Income Corporation (O)
Prospect Capital Corporation (PSEC)
Vanguard Natural Resources, LLC (VNR)
Kinder Morgan (KMI)

 

Here are my ROTH IRA trading/investing results:

 

February 2016 dividend income: $57.42
February 2016 options income: $55.00
2016 portfolio value: $16,678.80 (8.95%)
2016 overall dividend account result: 10.26%

 

It is nice to see that my account jumped up 10% in February. But my dividend income got hit by another dividend cut, this time by ConocoPhillips (COP), so there is still a lot of work to do and buy better stocks which will not be cutting dividends. But that was the price I paid when playing the oil game investing into energy stocks hoping we would recover faster than this.

 
Here my dividend income:

ROTH IRA account value
 

Here is the entire account value from the beginning of tracking it up to today:

ROTH IRA account value

 

 


 
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7 Money Moves You MUST Make Before You’re 30 By PFG with Personal Finance Genius

 


 

Below is my dividend income review for the entire year:

Dividend Income
My ROTH IRA dividend income breakdown per month and per company.
 
 

 · All accounts

Besides trading and dividend accounts I also have 401k account, emergency savings account, etc., which I do not report in detail. You can review those accounts in my “All Accounts Value” table at the bottom of My Trades & Income page.

My accounts increased from previous month and are making 2.09% (up from previous month) for the year.

Remember, if you like trading options and want to have trade ideas for free, join my Facebook closed group and follow my put selling trade ideas in real time, comment, ask questions, and interact with other members. other members of the group can also post their trades so you can learn from them too.

 
 

 
 

What do you think?

How about your investing or trading results?
 
 






We all want to hear your opinion on the article above:
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All Dividend Investing,  Options Trading,  Personal Finance
Posted by Martin February 29, 2016
3 Comments



 




Put selling against dividend paying stocks strategy: sold (ESV) April puts


Taking on the damage control from trading SPX spreads. I tried hard to get into SPX trading but I wasn’t able to make any profit.

I actually lost everything I ever made selling puts against dividend stocks.

I am not saying that I will never trade SPX again. Never say never. I might go back one day, but currently I am so under-capitalized for trading this instrument, that I cannot trade it successfully anymore.

You really need at least $50,000 dollars to trade spreads against SPX successfully. If you trade smaller account, you are undertaking bigger risk than necessary and most likely lose money.

Why? Because of your emotions. I could see my emotions getting me into a huge pressure over possibly losing $100 dollars! Yes, just $100 dollars loss became a burden to me.

Then I knew, that was my end of trading this instrument until I rebuild my account (again, yes I must admit I wiped out my account).

Is it possible to recover an account and grow it from $1,500 or so back to $50,000 dollars?

I believe it is possible. It will not happen overnight, but over the course of a few years yes, it is possible.

I have enough data to show my trading career looking for the right strategy which works for me:

 
Account Value Comments
 

As you can see, at first I was a bit successful trading whatever I could. Yet I lost money and had to start again. I found, learned, studied, and adopted put selling strategy. I increased my account from about $1,900 to $21,000 account in a year. I was so full of myself and I wanted more. I started trading (selling OTM) naked puts and naked calls at the same time (short strangles).

I overdone it (traded more than I could afford in case I got assigned) and the tide started turning against me.

Then I blamed the stocks (assignment risk, earnings risk, etc.) and continued trading SPX only.

But my strategy for trading spreads against SPX was bad (actually non-existent). You can see how quickly I lost my money.

The lesson is – stay with what works for you.

This is why I am returning back to trading options against dividend paying stocks.

 

 · Here is my strategy:

 

You must trade this strategy only against stocks you are willing to own.

1) Sell puts against dividend stocks as long as you get assigned.
2) If you get assigned, keep the stock and sell calls against the stock
3) Sell calls against the stock as long as you get assigned
4) While waiting for assignment collect dividends.

 

 · Put selling against Ensco (ESV)

 

For the reasons above I am selling puts against Ensco (ESV) which pays dividends. It is a risky stock. The company is involved in offshore contract drilling services to the oil and gas industry worldwide. Thus it is tied to oil price and if the oil stays this low, who knows what can happen. Yet, I am willing to take this risk and I am willing to own this stock should I get assigned.

In my previous post I wrote about selling puts against PSEC. The difference with ESV is that the volatility of this stock is a lot higher and I could afford to sell shorter term – April and collect nice premium 0.63 or $63 dollars.

If by April the option becomes worthless, I will be able to sell another put option. If the stock gets to 0.05 before expiration I will buy it back to release money and sell a new option.

If I get assigned (either early or at expiration) I will start selling calls (covered call strategy).

 
ESV
 

I now will be trading both stocks – PSEC and ESV as long as I grow my account enough to switch into more expensive and somewhat better, less risky, dividend stocks such as ABT, CO, O, ADM, VLO, etc.

As of now I need to stay with the cheap stocks and work it up. I did it once. I am positive I can do it again.

 

 · Don’t go anywhere! Subscribe!

 

Yes, stay with me and follow my trades to see how they work and how you can make money following the same strategy.

I created a Facebook group where I post my put selling strategy. Join me and see for yourself!

 
 






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New dividend stock purchase – Valero (VLO)


I was trailing this stock down since I put it on my radar to purchase. In this post you can review the entire process of using this trailing strategy.

And on February 22nd I purchased 17 shares of Valero (VLO) stock. I like the stock and its data.

 
Valero
 

Two days ago, my price target was hit and I purchased 17 shares. It could have been a better result if the stock showed some more weakness, but I am satisfied with the purchase. I did all I could do to maximize my purchase power although it didn’t play better than I expected.

 
Valero
 

Now, I put my dividend reinvest to autopilot (DRIP) and continue reinvest dividends for the next 25 years or until all my dividend income reaches $1,000 per month. Then I will stop using DRIP and switch to selective dividend reinvestment program.
 
 






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Posted by Martin February 18, 2016
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Going back to selling puts against dividend paying stocks strategy: sold (PSEC) Aug put

Going back to selling puts against dividend paying stocks strategy: sold (PSEC) Aug put

Correction: I collected $89 dollars and not $75 premium as mistakenly shown in this post.
 
 

I must admit that I am getting frustrated trading spreads against SPX (S&P500). It is extremely hard trading that damn index. The market is volatile and whenever I sell calls, the market follows for a few days, then reverses and goes against me hard. So I sell puts and the saga continues. So far, I wasn’t successful trading spreads against the index. It makes me mad as a hell, really mad, but I need to stop bleeding my account.

Some time ago I wrote a post about trading options against dividend paying stocks.

In that post I wrote that it was a win-win situation trading options against dividend paying stocks. The strategy is simple and it goes like this:

 

 · Selling puts against dividend stocks

 


1) You sell puts against the dividend paying stock as long as you get assigned.
2) Once you get assigned to the stock, you start selling calls as long as you get assigned.
3) In the meantime, while waiting for the call assignment you keep collecting dividends.
4) Rinse and repeat.

What can go wrong here, right?

Honestly, I do not see many wrong goings here. If the dividend stock is a good one, the worst case scenario is that you get assigned and the stock goes lower, so you end up sitting at a losing stocks. But, your cost basis is lower than if you bought outright and you keep collecting dividends. So, who cares?

I asked myself why I even stopped doing this. Then I realized, that I was trading options against stocks which I never wanted to be assigned.

And the rule #1 here is – sell puts only against stocks you are OK to own.

I didn’t want to own those stocks, or I was trading options against stocks using margin thus I could not afford to be assigned. And when the option got exercised early, I had a margin call problem.

Then the early assignment was a problem to me. Then trading options that way became dangerous. I started losing money. And I decided to abandon that strategy.

So, I decided to resurrect this strategy and trade options against dividend paying stocks. But, this time I am really OK if I get assigned. This is a big relief. You do not have to worry about the stock price or assignment. You just sell the put option and then wait. It either expires worthless, so you are free to sell it again, or you will be required to buy 100 shares (or more if you sell more contracts) of the stock and start collecting dividends.

Since I trashed my account recently, I am at the beginning of my journey again. I have to start small and work my way up again.

So here is my strategy to start with a small account. I can only dedicate $600 dollars to this strategy. Not ideal, but I have no choice. I will sell my first contract and in the meantime while waiting for its expiration/assignment I will be saving money to be able to sell more contracts. Working it slowly back up.

If I get assigned I will not be able to start selling calls right away. Only one contract on the stock such as PSEC is close to worthless and it will make no sense due to fees and commissions. So I will keep the assignment in my portfolio collecting dividends and waiting until I save more money to sell a new contract. Once I have at least 400 shares (4 call contracts) I will start selling calls as long as I get assigned and sell the shares.

 

 · Trade detail

 

I decided to start this strategy with Prospect Capital Corporation (PSEC).

It is an affordable stock for me and my strategy and I think it is an OK stock to start with. I own this stock, I have owned it for years and I am OK to add to my position should I get assigned.

I sold 1 naked put contract last Tuesday against PSEC:

 
Sell to open 1 PSEC August 19th ’16 6.00 put @ 0.75
 

 

 · What’s next?

 

I collected $75 dollars premium. I also put aside $600 dollars in case I get assigned.

Now the trade outcomes are:


1) The option gets to 0.05 price two or three weeks before expiration – I buy it back to release money.
2) The option will have value all the way until expiration (if the stock will be trading at $6.00 a share “dancing at the floor” or around, but expires worthless – I keep the premium, release cash and repeat the trade.
3) The option gets ITM (in the money) and I get assigned – I keep the stock, start collecting the dividends and continue saving money for the next trade.

 
Here is a current record of the trade I opened last Tuesday:

 
VLO
(Click to enlarge)
 






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Posted by Martin February 16, 2016
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Dividend Investor: Buying Valero (VLO) using OTO order in ROTH IRA account


UPDATE 02/19/2016
Today, the stock went up +2.68%. Our new OCO limit order price increased as is shownb in our spreadsheet calculating our entry price:
 
VLO
(Click to enlarge)
 
Since our previous limit price is lower than today’s one ($57.84 previous day limit) we will keep our previous limit in place. We will not be moving it higher as that would cause us paying more for our shares.

If the stock moves higher on Monday, we will probably get executed and buy the stock. If it moves lower, we will continue trailing the price down with the stock.
 
 
 

UPDATE 02/18/2016
Valero sold off today quite a lot. It is now down -3.84%. If I have bought this stock the first day when I posted this article, showing my strategy of buying a stock in a down market, I would be already sitting on a significant loss.

This strategy is now helping me buying cheaper and even more shares than before! Before I could afford buying 16 shares, now I will be able to buy 17 shares of this stock!

I updated my OCO order in my TOS platform. Now it looks like this:
If the last price of VLO is equal or higher than 57.84 then buy 17 shares of VLO at 57.84 limit.

 
VLO
(Click to enlarge)
 

VLO
(Click to enlarge)
 
 
 

UPDATE 02/17/2016
The stock moved down slightly and the new buy limit could be moved lower from $59.28 tp $59.17. The new order will be:

If the last price of VLO is equal or higher than 59.17 then buy 16 shares of VLO at 59.17 limit.

 
VLO
(Click to enlarge)
 

VLO
(Click to enlarge)
 
 
 
 
 

In my last post about how to buy stocks in a falling market I described a strategy how to be buying dividend stocks and squeeze as much money as possible out of the trade and take advantage of a falling price.

Some dividend investors do not care and buy stocks right away when they can, but I like to play with it and wait for the stock price to get to the level I want.

Sometimes you buy a stock and as soon as you buy the stock starts falling. Many times it goes so low that you start questioning yourself why you didn’t wait a few days and buy the stock cheaper.

Sometimes it is greed which makes you to buy a stock too early.

For example, I was greedy to buy Archer-Daniels-Midland Company (ADM) so much that I forget my strategy and bought the stock as soon as I saved my minimum amount for purchasing the stock.

I bought ADM at $37.09 a share. Soon after the stock dropped below $30 a share.

 
ADM
(Click to enlarge)
 

You may say that it doesn’t matter. From 25 year investing horizon time we invest for it doesn’t matter if you buy the stock for $37 a share or $31 a share. In the long term it doesn’t make any difference and in 25 years this stock will be way up from today.

Well, maybe. Maybe it doesn’t matter to you, but it does matter to me. Why?

It’s because of the dividends and limited amount of money available to invest.

See, I bought 27 shares of ADM only when I was buying at $37.09 with my $1,000 saved amount money. If I wasn’t greedy and tracked the price down, I could buy 32 shares at $31 a share. That is 5 shares difference and those 5 shares could bring in $1.5 dollars more in dividends.

Instead of receiving $8.10 dollars in dividends every quarter, I could have $9.6 dollars in dividends. And that is a significant difference to me. Since I am reinvesting dividends using DRIP, I could buy more shares too. My investment could be growing faster! Do you see my point?

I am not going to make the same mistake with my new purchase – Valero (VLO).

Although this strategy is not bullet proof, it still can help you to buy the stock cheaper. Of course, you can get filled into the stock on a reversal and yet later the on the stock may reverse and continue down again. If that happens, I am still OK with this strategy knowing I have done all I could do to buy as cheap as possible.

And here is a reason why I am now going to use this strategy to buy into VLO.

 

 · How is Valero making money

 

Valero is a dividend growth company. It is refining conventional gasolines, distillates, jet fuel, asphalt, petrochemicals, lubricants, and other refined products as well as a slate of premium products including CBOB and RBOB, gasoline meeting the specifications of the California Air Resources Board (CARB), CARB diesel fuel, and low-sulfur and ultra-low-sulfur diesel fuel.

 

 · Why I like Valero

 

As I said, Valero (VLO) is a dividend growth company. It has been growing dividends for 5 consecutive years.

 
VLO
(Click to enlarge)
 
 

VLO
 

VLO
 

VLO
 

The dividend yield, growth, payout ratio, and YOC5 are great. There is only one issue that in 2010 the company seems to cut the dividend. But since then it is recovering and increasing the dividend every year. Recently VLO increased the dividend by 7%, which is impressive.

The stock is now dragged down by market panic and selloff, also oil glut has impact on the stock price as it recently sold of too along with the oil price.

As usually, the stock is going down with oil because of lame investors misunderstanding the stock and its business. Valero is a refinery company and it benefits from low oil prices and per Carl Larry, head of oil and gas for Frost & Sullivan LP in Houston, it is a best bet to be in refinery stocks these days. “They have the luxury of low crude feedstock prices and high demand for their products,” he added.

The longer the prices of oil stay at the lows, the more the refinery companies will benefit from it.

 
VLO
 

There is one more thing I like about Valero: its P/E and PEG. The P/E today is at 7.25 which compared to 8.80 P/E of the industry indicates a good growth potential.

The PEG is at 0.19 which is excellent (0.88 industry PEG).

 

 · Conditional OTO buy order

 

If you read my previous post about OTO order you know that I created a spreadsheet which helps me to calculate the entry price for the stock and then trace the pride down with the stock.

Here is my initial calculation:

 
VLO
(Click to enlarge)
 

Note the order wording at the bottom of the picture above (If the stock price is at or above $59.28 then buy 16 shares of VLO at 59.28 limit price).

And here is how that order looks like when entered in TOS:

 
VLO
 

VLO
(Click to enlarge)
 

Let’s see what happens tomorrow. If the stock continues lower tomorrow and in the following days, I will be tracking my buy order lower and lower as long as the price reverses, the price hits my buy limits and I buy the stock.

I will be updating this post with the new orders until the stock is purchased. Once the stock is purchased, I will use DRIP to reinvest dividends.
 






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Posted by Martin February 11, 2016
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Markets still flashing a recession


CNBC has it sometimes right, be it Rick Santelli or Carter Worth. Although many technical analysts saw this way before Carter, it holds water. Watch and judge for yourself:

 

 






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Posted by Martin February 09, 2016
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Is Yellen going to sway the markets tomorrow? Probably not.


But some of those FED addicts may hope for it.

All of us others let’s be prepared for any outcome and make our trades accordingly.

Those who hope for Yellen saving the trend will be probably disappointed tomorrow and even if the market shows us some push, I believe, we are way beyond any trend repair. It would take an enormous push or a constant growth to reverse this trend.

And unfortunately, there is no catalyst out there for a push or a constant growth. So even if we jump higher, such bounce will be sold off. And I will do the same if that happens.

Here is a reason for my bearish stance:

SPX trend

This is a chart from the beginning of the month (February). The magenta lines indicate a regression channel. The small dashed lines are my own projections. At the beginning of each month I align them with the magenta regression channel lines. This was January alignment.

As you can see, over the January course, the regression channel sloped further down, away from my dashed lines clearly indicating that the bear market is deepening. To repair this market, we would have to rally above 2050 and stay there for a prolonged time to start reversing the channel into upward sloping one.

But there is no strength in the market to do that. As of now, our best shot would be a relief rally to 1940 before we sell off again.






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