Can you help with my dream fundraising? If so, please donate.
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Making 45% Annually Trading Options Against Dividend Growth Stocks
WHAT WE DO? WE SELL OPTIONS FOR INCOME. WE USE THAT INCOME TO BUY DIVIDEND GROWTH STOCKS!
CHECK OUR TRADES ON OUR MeWe PAGE!
My Private Investment Fund Dream
Trade exit – Realty Income (O), Ferrellgas Partners LP (FGP), MBIA Inc (MBI)
Today is expiration Friday and a few of my options trades are closing with full profit:
Realty Income (O) covered call – cash received $32.21 0.77% gain 15.88% annualized
See the original trade here.
Ferrellgas Partners LP (FGP) put selling – cash received $185.00 10.57% gain 22.06% annualized
See the original trade here.
MBIA Inc (FGP) put selling – cash received $118.00 13.11% gain 27.68% annualized
See the original trade here.
And what will follow next? Well, most likely I will open another trade in Realty Income (O) covered call and FGP put selling. I am no longer interested in MBI.
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Help me creating a private investment fund
My dream was to start and manage a private investment fund and potentially, one day, go public and offer investing services to general public. I have been investing for several years and became quite successful in it. So far my investments make in average 13% ROI annually.
I would like to raise money to boost my investment account and create my own mutual fund. I believe that if I can get more cash I will be able to make more money using a power of compounding my gains. Of course, investing may be risky, but I am quite confident in what I am doing and I know I will make money.
I will use raised money invested in Lending Club for 5 years. You can see my results in Lending Club here and see for yourself that I can invest successfully.
And here is a deal
If you help me to start my dream goal and donate even 1 dollar, I will use the raised money for 6 years (5 years investing, 1 year for liquidating the investments).
After this period (6 years) I will keep all proceedings or gains reinvested and donate the principal ($5,000) to other projects and charity via GoFundMe.com or any other charitable project you choose (use the commenting below to recommend a charitable event).
I will continue posting regularly how this fund performs.
So do you think is this a crazy enough idea that you decide to help me and raise the cash? Even Warren Buffett started his investment empire using his own money and money of his friends and colleagues. I would like to do something similar. But after the investment period of time I will return the fundraiser by donating it back to others in need and continue reinvesting my gains.
You may ask a question, what happens if I lose money
Well, it may happen. With investing everything is possible even loses. If I lose money at the end of the 5th year investing period, I will withdraw what’s left and make up the loss from my own cash up to $5,000 and donate the whole $5,000 to charity. Is that fair deal?
I can put down this guarantee, because I am quite confident that I can invest in Lending Club and make money. So, will you help me with this idea?
Then please, go and donate anything you can. You will help me to start my dream fund and also help to charity. Click on the button below and donate. Thank you very much for your participation.
Thank you!
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Great dividend stocks offering a good entry point
As stocks are on the verge of fall there are now stocks which are providing yet another great entry point in my opinion. Since I started investing into dividend growth stocks last year I love to see stocks of my interest falling down. They still pay the same dividend payout or even increased their dividend rate, but some investors dump those stocks because they think that those stocks are doomed just because they missed one quarter or their outlook for next period is weak.
When looking at human life what is 80 or so years compared to eternity? Nothing. A spit into an ocean. I have the same look at Wall Street’s obsession about evaluating stocks based on one quarter. What is one quarter compared to 30 years of your investing time frame? Nothing.
Of course, you shouldn’t ignore those stocks. Our investing strategy isn’t buy and forget. But in our case we will see the troubles coming well before the Wall Street gurus tell us based on their thinking of a missed quarter. We will see a stagnant dividend or even a dividend cut and many times before it really happens. If the company is still doing great, increases the dividend and other metrics point to a fat cash flow, so the dividend remains sustainable, there is no need to panic. There actually is a need for opening our wallets and buying.
I believe, there are now stocks in this category offering nice entry point for your 30 year long dividend accumulation journey. Here they are:
Kinder Morgan Partnership (KMP)
I love KMP. It pays nice dividend. It’s current yield is at 6.40% and the company paid the dividend and increased it in 16 consecutive years. Do you think this long dividend increase history will suddenly stop today? I doubt.
It is one of the largest master limited partnerships with a very large economic moat. It’s recent acquisitions and portfolio cultivation poised this stock to a steady growth and there is no sign of troubles in the horizon (correct me if I am wrong).
Let’s take a look at the chart:
The chart shows 6 months time frame. The white lower line indicates a 5 year long support trend. the stock broke below this support time several times in 2009, 2011, 2012 and twice this year (both shown on the chart). It always recovered and continued higher. The entire stock history since 1992 is even better and I wish I could buy this stock back then.
Anytime KMP falls below a certain level when the yield gets close to 6.5% or above it more buyers chasing nice YOC step in and start buying. With current yield we are close to this point.
Stock details
| Consecutive Dividend Increase: | 16 years |
| Dividend yield today: | 6.40% |
| Dividend 5yr Growth: | 6.68% |
| Dividend paid since: | 1992 |
Morningstar provides a fair value of this stock at $98 a share, so if that is something we can rely on, the stock is trading at a discount. An estimated growth rate is at 31.20%
Continue reading…
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My inspiration in the last week #32
I often browse the internet to find ideas about investing, trading stocks, options, investing opportunities and strategies. I like to read about investors and what their investing/trading approach to create income you can live on is.
- Should Your Job Dictate Your Emergency Fund? – Making Sense of Cents – by Jordann
- Learn to build wealth in 15 minutes per day – Barbara Friedberg Personal Finance – by Barbara
- Playing Catch-Up on Retirement Savings – Couple Money – by Elle
- How I am Getting a Free Master’s Degree – The College Investor – by DJ Wetzel
- Coca-Cola Dividend Stock Analysis – Dividend Growth Stock Investing – by Dan Mac
- Creative Ways To Get Financing For Your Start-Up – Entrepreneurship Life – by Robert Farrington
- Now You Can Do Algorithmic Trading From Your Couch – Business Insider – by Steven Perlberg
- Diversifying My Savings – Debt RoundUp – by Grayson
- Is Housing’s Hiccup Good for Landlords? – Motif Investing
– by Motif Investing
My Dad was trying to explain to him the monetary value in the free benefits that he received at his current job,[…] but I do know how important it is to factor the value of your employee benefits into your total compensation package.
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How to Build your Ideal Retirement Plan
In past times, people used to work for all their lives long and they preferred to retire only after accumulating sufficient amount of wealth which they could utilize for their retirement period. But in today’s time, people who have retired still need to remain active during their retirement period as high cost of living may vanish their savings in quick time. There are many strategies available today with the help of which you can build your ideal retirement plan so that you don’t have to face any trouble after retirement. Go through following list of strategies which will help you to build a successful retirement plan –
Recognize your Retirement Needs
Retirement is one of the expensive things you may have to deal with in your life time. Financial experts recommend that you will need more than seventy-five percent of your retirement income to maintain same standard of living when you get retire. So it is always advisable to recognize your retirement needs in prior time and start accumulating money according to your requirement.
Stick to basic investment principles
In which products you are investing your money is as important as how much money you are saving. Invest your savings in diverse kind of investment products. By diversifying your portfolio, you can manage investment risk and earn stable returns in long term. You must upgrade your portfolio over the time considering various factors such as your goals, age and monthly income.
Don’t withdraw your retirement savings
If you withdraw your entire or partial retirement savings prior to your retirement period then you may lose interest earned on your savings. Besides this, you can’t avail any tax benefits and you may have to bear significant amount of withdrawal penalties. In case, you are planning to switch your job, keep your entire savings invested in your existing retirement plan. You can also think of rolling your investment to your retirement plan of your new employer or to an IRA.
Know more about your employer’s retirement plan
If your employer wishes to cover you under traditional retirement pension plan then understand how the plan exactly works and what benefits are offered under plan. You can ask for individual benefit statement to check whether benefits you are going to avail are worth paying high amount of premium. In case, you are planning to switch your job, check out how it will impact your retirement plan. If your spouse is working as well, then analyze whether you are entitled to receive any retirement benefits under the spouse’s plan.
Keep saving regularly
If you are saving already, whether for the purpose of retirement or some different goal, keep continuing. Saving is highly rewarding habit, which every individual must imbed in himself at right time. You can begin with very small amount and increase some percentage amount every month. The earlier you start saving, more time your money gets to grow. No matter in which stage of life you are, it’s never too late to start contributing for your retirement. If your retirement is far near then there are several tactics you can follow to enhance your retirement savings.
Look for what your employer is trying to match
If you are participating in employer sponsored retirement plan like 403(b) or 401(k) then find out whether your employer is providing you matching contributions. You can increase your contribution to avail complete benefits of employer match. If you are not participating in the plan in which your employer is providing matching contributions then it means that you are not taking complete advantage of your retirement benefits. Generally, employers try to match up six percent of an income of employee.
Consider Roth IRA
If you have availed tax benefits of every option your employer is offering but you have still significant amount of money left in your pocket then invest it in Roth IRA. It is similar to other IRA account in which an individual can add regular amount into the account and divert that amount in mutual fund, bonds or variety of stocks. However, one important thing to note is that all the contributions made to Roth IRA are done after your income is taxed. The money invested in the account appreciates tax free and you don’t have to pay any taxes when you apply for withdrawal of funds.
Map your future
Make a retirement plan considering your financial goals and capabilities to invest. A comprehensive retirement plan can assist you in addressing several issues such as estate planning, succession planning, profit sharing, pension, employee benefits, insurance planning, risk and investments. A nicely designed retirement plan helps an individual to understand how much he has to save outside his employer’s plan in order to enjoy secure retirement life.
Important questions to consider
- Do you need to make any mortgage payments?
- Are you planning to work on part time basis to earn an additional income?
- Will you need more income during retirement than you are earning currently?
- Would you prefer to opt for travel or vacation? If yes, what are the overall expenses involved?
Get rid of all debt
Control your unnecessary expenses by living frugally. Stick to your ‘needs’ rather than your ‘desires’. Try to pay off your high interest rate credit cards by contributing some amount from your existing savings. You can also reduce your large part of debt by getting in touch with debt relief companies. Don’t put yourself into the situation when you have to utilize your retirement savings in order to clear your debts.
Conclusion
As soon as you enter into your golden age, you can’t wait to achieve things you have always dreamed of. So don’t jump into the dreams without making a proper retirement planning. Try to differentiate the definition of retirement today as compared to decades ago. The downsizing and challenging economic situation of today’s time force many seniors to do part time job or start new business which can help them to meet their daily needs and achieve financial stability. Above discussed strategies will not only act as your retirement planning guide but those will also act as road map to your long term financial success.
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New trade – Legacy Reserves Lp (LGCY)
Are you looking for a stock to buy? I am too! I had cash available in my TD account to invest and I wanted a stock which has a solid dividend growth and nice yield.
Since I started my portfolio accumulation unlike some of my fellow investors (for example Dividend Mantra, who started very early and is accumulating like crazy) quite late, I tend to be looking for a higher yield and higher growth investment. I need to catch up with my late start.
For that reason I am even willing taking in more risk in exchange of higher yield. I still plan on 20 years of intensive saving and investing, but if I am able to shorten this period I will go for it.
REITs and MLPs can offer such opportunity of higher yield. I thing that MLPs offer safer yield and growth than REITs. Although I still invest in REITs, I am fully invested in this industry, so I needed to look for an alternative, which MLPs could offer. This was the case for my last week search. What stock can offer higher yield, higher growth and be safer than REITs?
I believe that that stock was Legacy Reserves (LGCY). It offers nice 8.40% yield at 12.1% 5yr annual avg. growth. It has risen the dividend for 2 consecutive years and although it is not a dividend champion I think it is an acceptable trade for me.
Legacy Reserves, LP, is engaged in the acquisition and development of oil and natural gas properties mainly located in the Permian Basin, Mid-continent and Rocky Mountain regions of the United States.
Today I bought 36 shares of this stock which added $83.52 annual dividend to my portfolio. My projected annual dividend payout is now $897.12 or $74.76 monthly dividend (getting close to my $100 monthly dividend goal!).
Trade detail
08/09/2013 15:37:10 Bought 36 LGCY @ 27.1
Stock detail
| Total shares held as of today: | 36 |
| Estimated annual dividend: | $83.52 |
| Consecutive Dividend Increase: | 2 years |
| Dividend yield today: | 8.55% |
| Dividend 5yr Growth: | 12.10% |
| Dividend paid since: | 2007 |
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Update to closed ARR put trade -10.56% loss
I was so excited writing about my reasons why I no longer wanted to invest in ARR or trade its options that I forgot to mention how my trade went wrong. So this is an update to my previous post.
I closed this trade with -10.56% (loss) or -46.55% annual loss. On this trade I lost $158.33 total amount. It is not that bad when you compare it to my options income tracking chart on which it looks horrible, see below:
I track income or expenses as it arrives in the account. Today’s ARR put option buy back was a single expense of $729 to buy the puts back. This is not the loss! From this money an income of 571.22 dollars which I have received when I sold the puts must be deducted.
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Trade exit – Armour Residential (ARR) put selling
I decided to take a loss at my Armour residential put selling trade. Originally I believed in this stock, but lately I consider Armour residential a junk every dividend investor should avoid.
There is plenty of investor out there I could see who think this stock is a great value because of its book value (BV) is at around 5.43, it pays dividends (currently $0.07 a share) and who knows what else.
In the past I was buying this stock (you can see my trades in the ARR archive) and enjoyed dividends this stock was paying.
I even started selling puts to generate more income because I was OK to buy more shares in case of assignment.
But then situation changed.
ARR started cutting its dividends. In 2011 the company paid 0.11 a share monthly dividend. It kept on that level for some time, but then started cutting it. For a dividend investor this should be a reason to sell the stock. No exceptions, no reasoning, no discussion. Yet I was ignoring it and continued buying. I too was excusing myself, that mREIT is a different beast and all this can be temporary.
Then the management issued an SPO (secondary public offerings) to further damage investors. People out there will tell you that that is how mREITs work, how they get their money. Well, I would agree on that if the management wouldn’t wait for the stock price to climb from $6.5 a share up to $7 a share to issue SPO. Once SPO was out the stock plummeted back to $6.5 and never recovered.
Many out there were saying that this was ruthless step from the management ignoring shareholder and that they did this just to collect nice fees, which were tied to how much cash they were able to raise. Why would a management not care? It’s because ARR is managed externally by a private company Armour Residential LLC. Thus they are milking Armour Residential fund as much as they can. Their primary interest is their own company and their own beings. The fund is just a cow to them and they do not care that there were investors giving them money.
I still was OK with that. I still thought, that this was overreaction from the market and tough times in real estate and mortgage markets and this will be overcome over long period of time.
And then, short after SPO another dividend cut came. This time from 0.09 to 0.08 a share. I suffered one cuts from 0.12 down to 0.10, 0.09, and 0.08 during my holding period since March 2011 when I first bought this stock. that was enough even to my excuses and I sold.
Lucky enough, because then the stock plummeted after yet another dividend cut from 0.08 to 0.07. I sold at $6.5 a share and thanks to collected dividends I got out break even. Since then the stock trades at $4.45 a share as of this writing. A 50% loss!
I still got stuck with a short put in my account
To protect myself I decided to roll the put far away in time to avoid potential assignment into stock I no longer wanted. You can see my put trades in this archive.
I sold two puts as far in January 2014. My plan was to let time decay erode the puts as much as possible so I can buy puts back and get break even (at least) or smaller loss.
So why I decided to close this trade prematurely and take large loss?
ARR seems to be doomed and problems are piling. I was watching this stock briefly just to make sure everything went so-so that I could keep puts open. But today I saw that the CEO Jordan Zimmerman stepped down. That can be a good sign when you could see so many bad results this stock was presenting to investors. You could say that a new CEO would do a better job. But the following event convinced me that I didn’t want to have anything in common with this stock.
Arr received a delisting notice from NYSE. If the company doesn’t fix what NYSE has to say by August 12, 2013 (next Monday), it will become delinquent in compliance or to use the notice language “will be deemed non-compliant” or “below compliance” and can be delisted.
What can happen if the stock gets delisted? The stock will move to OTC market and I can get assigned prematurely. And that would be a step I definitely don’t want.
I wasn’t expecting being right all the time, and sometimes I will be taking a loss. This one was one of those trades.
Trade detail
I bought back ARR puts to close the trade:
08/08/2013 11:59:59 Bought 2 ARR Jan 18 2014 7.5 Put @ 3.6
At this point I hold no ARR trade and the ARR file is closed.
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Trade adjustment – Kinder Morgan Partnership (KMP) addition
Recently I was piling cash in my TD account waiting for an opportunity to buy dividend paying stocks. It wasn’t and it still isn’t easy to find a good dividend stock which would be priced at a value I would be willing to pay.
I saw many great stocks seeing running up and I was telling myself “Why I didn’t have more cash available when those stocks were lower and didn’t buy them?”
Kinder Morgan Partnership was one of the stocks which early this year got overly overpriced by investors rushing into nice yield paying stocks. Later the stock lost the momentum and started drifting lower. Currently the stock is showing loss, but it seems finding a support at the short term (1 year) trend line.
The picture below shows this price action. In January 2013 the stock sky rocketed and somewhat continued climbing higher just to peak at the end of April. Since then it continued downward.
See the green line indicating the short term support I spoke above. Two months ago the stock created the short term low and offered an entry opportunity. These days the stock re-tested this support and it seems the stock will bounce and continue higher.
Of course the trend continuation reversal may fail and the stock may continue drifting down. I do not think this will happen. So far the stock found its buyers at these levels and as the stock would drift lower the rising yield would attract more income seeking investors.
I don’t think the stock is in trouble. It recently increased increased its distribution rate or yield and it currently pays $1.32 per share quarterly, which translates to 6.38% yield. The company continues in acquisitions (recent Copano Energy transaction) and plans on increasing its exposure in Canadian market. As the US and Canadian energy production continues rising, Kinder Morgan will have great opportunities for further growth.
Contingency order to increase profit potential
From the long term perspective I consider this decline temporary and providing a great chance to add to my portfolio. To get into this stock I used my contingency order strategy.
I entered my first contingency order to buy 11 shares of KMP if the stock rises at 87.64 per share on June 22, 2013. As the stock continued drifting lower I was lowering my price entry target:
- 07/25/2013 If the last of KMP is greater or equal to 87.26 Buy 10 KMP at limit $87.26
- 07/26/2013 If the last of KMP is greater or equal to 86.77 Buy 11 KMP at limit $86.77
- 07/29/2013 If the last of KMP is greater or equal to 86.77 Buy 11 KMP at limit $86.77
- 07/30/2013 If the last of KMP is greater or equal to 84.93 Buy 11 KMP at limit $84.93
- 07/31/2013 If the last of KMP is greater or equal to 83.96 Buy 11 KMP at limit $83.96
- 08/02/2013 If the last of KMP is greater or equal to 83.66 Buy 11 KMP at limit $83.66
- 08/06/2013 If the last of KMP is greater or equal to 83.00 Buy 11 KMP at limit $83.00
As you can see, lowering my entry target paid big time as I was able to enter into another position pretty cheap. This method of waiting for a good price AND a trend reversal at the same time is not 100% bulletproof. But as a long term investor I am not that much concerned if the stock fails continuing higher.
If this reversal is false and the stock turns lower, I would expect it to go as low as the long term trend (see the red trend line almost parallel to the green one representing 13 years long trend). If that happens I will be adding more shares of this stock into my portfolio.
Trade details
Today the order fired and I bought 11 shares of KMP:
08/06/2013 09:40:12 Bought 11 KMP @ 82.999
Stock details
| Total shares held as of today: | 33 |
| Estimated annual dividend: | $174.24 |
| Consecutive Dividend Increase: | 16 years |
| Dividend yield today: | 6.38% |
| Dividend 5yr Growth: | 7.43% |
| Dividend paid since: | 1992 |
This trade increases my overall dividend income in TD Ameritrade account to $813.60 annually.
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