Weekly Newsletter   Challenge account


2021 Week 6 results

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

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

 

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

 

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

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

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

Old SPX trades repair

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

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

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

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

Accumulating Speculative Stocks

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

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

Accumulating Dividend Growth Stocks

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

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

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

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

 
Weekly Dividend Income
 

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

Trading options

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

Our fund in charts:

TW Account Net-Liq
 

TW Account holdings
 

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

TW Account holdings Growth YTD
 

TW Options Income week 6
 

TW Options Annual Income week 6
 

TW Received vs Projected Dividends week 6
 

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





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