WHAT WE DO? WE SELL OPTIONS FOR INCOME. WE USE THAT INCOME TO BUY DIVIDEND GROWTH STOCKS!
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Protect Your Nest Eggs With a Bond Ladder


On Wednesday, Federal Reserve Chair Janet Yellen said that interest rates could be raised next month depending on a wide range of factors that can show whether or not the nation’s economy is improving.

In the meantime, investors continue to look for the best ways to spend their money, especially people who are tucking away money for their retirements. While stocks are the most popular investment, especially when it comes to making fast money, if you have patience to watch your nest egg grow, consider bonds.

For this article, I’ll go over bond ladders. I’ll discuss the details of putting them together as an investment strategy. But of course, as with all strategies, check with your financial advisor about whether this is best for you. Stock investments can be tricky, but bond ladders can be particularly tricky, especially for novice investors.
 

 · What’s in a name?

 

Yellen’s announcement gave a better, sooner indication idea of when interest rates may rise, but it is clear that there is a lot of uncertainty surrounding the future of interest rates and the outlook for bonds. That’s one reason to consider a bond ladder.

As noted by Charles Schwab, “investors often build bond ladders to help generate predictable cash flow and help reduce some of the volatility resulting from rising or falling interest rates.”

Bond ladder portfolios contain bonds with different maturities bonds and coupon payments. They can be reinvested according to the “rungs” that make up the ladder. For example, bonds that are reinvested in the longest rung of the ladder offer higher yields than those bonds that are reinvested in the shorter rungs.

For example, if you had $50,000 to invest in bonds, you could use the bond ladder like this: Buy five different bonds each with a face value of $10,000. In the bond ladder approach, each bond would have a different maturity. One bond may mature in five years, and another may mature in 10 years, but each bond would represent a different rung on the ladder.
Here are some tips to build your bond ladder
 

 · Dealing with falling interest rates

 

As you know, when interest rates rise, bond prices fall, and when they fall, bond prices rise. So you may wonder how this could affect a bond ladder. In this case, you wouldn’t make as much income as before with the same amount invested.

A bond ladder gives you a framework in which to balance the reinvestment opportunities of short-term bonds with the potentially higher yields that longer-term bonds typically offer, says Richard Carter, Fidelity vice president of fixed income products and services.

And consider this. By using the bond ladder approach and staggering the maturity dates, you won’t be locked into one particular bond for a long duration. A problem that can arise when you lock yourself into a bond for a long duration you can’t protect yourself from interest rate risk, notes Investopedia.

 

 · Here are some tips to build your bond ladder

 
Try to include only callable bonds
Avoid the highest-yielding bonds; at any given credit rating
Include high credit bonds; avoid junk bonds
Build your ladder with high-credit-quality bonds




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Trade adjustment AT&T (T) – put selling (building my options ladder)

Trade adjustment AT&T (T) - put selling (building my options ladder)

This trade was inspired by my fellow blogger Integrator from the blog Get financially Integrated! and his latest article at Seeking Alpha “My Dividend Portfolio: Evaluating AT&T“. He is evaluating the AT&T (T) stock in his article concluding that the stock didn’t drop low enough for him to be buying this stock although the recent decline in price made this stock interesting already.

 
(MORE: Will the Phone Company Pay Off Your College Loans?)
 

I commented under his post that he can be selling some puts against T to get a better price. And then it hit me, that I can actually do it as well. I have enough reserves to take this trade and collect some put premiums before I get assigned.

 
(MORE: Dividend Update – November 2013)
 

So this trade was inspired by Integrator and this morning I opened a new trade – AT&T put selling. This trade is also a part of my ladder strategy I decided some time ago to create.

Two types of ladder

There are two types of an option ladder an investor can create. One type is a time ladder and the other is a strike ladder.

Options time ladder

A time ladder means creating a ladder of options contract spread in time. You start selling put options with different expirations. It is a strategy I am going for. I try to sell a put contract with expiration every month and as the options expire (or get assigned) I will just roll the option into the next month. For example if my January 2014 contract expires worthless, I will just open another one in the next free month – which is June 2014. See my Calendar below:

 

Calendar

 

As you can see, my next free month is June 2014. If my Safeway (SWY) trade expires worthless (or gets assigned) in January 2014, I will sell another put with June 2014 expiration.

 
(MORE: Extrapolation of the dividend income in 2014)
 

So I am creating a time ladder. And with this type of a ladder I can use any underlying stock I want which sort of reduces the risk.

Options strike ladder

This is more known type of a ladder. You use one underlying stock but you sell several puts with different strike prices. If for example AT&T currently trades at $34.40 a share you can sell 10 contracts at 34, 10 contracts at 33, 10 contracts at 32, and 10 contracts at 31 strikes:

 

Options chain

 

Ideally you want to sell those strikes circa 1 – 3 months expiration, but no longer so you have time available for rolling the ladder. As the underlying stock rises up in price you start buying back the lowest strikes as their price declines to a very minimum. The reason for buying them back is that you want to release the lowest ladder rungs in case the stock drops back down, so you can sell new puts there.

If the stock starts declining you want to be closing the upper rungs and selling the lowest rungs to offset the closing price of the upper rungs (and of course you want to start selling longer expiration time in this case as the lower rungs will be less expensive than the higher rungs.

 
(MORE: $5 Starbucks Gift Card for AT&T and Verizon Wireless Customers)
 

This type of a ladder is financially extensive. You need enough free capital in order to create this ladder. You will be selling multiple contracts and you need enough cash for maintenance. Thus I am not interested in this type of ladder at this time. Maybe in the future when my account grows and I have more available cash.

AT&T new put selling trade

So today I opened a new trade:

12/10/2013 10:31:41 Sold 1 T Apr 19 2014 34.0 Put @ 1.39

With this trade I received a nice premium of $130.21 (after commissions) and my cost basis for AT&T holding dropped to $32.16 a share. That makes my position 6.35% in profit although the stock was declining recently.

If you want to mirror this trade, you still can open it as well. You will probably collect a better premium than mine. You would probably collect $154.00 premium before commissions.

 
(MORE: Stock Bought: ARCP)
 

There are three outcomes with this trade:

 

  1. The underlying stock will end above $34 strike price at expiration. In that case the option expires worthless, I keep the premium and will be free to repeat the trade with the same money.
  2. The underlying stock will end below the $34 strike price at expiration and I decide to get assigned with 100 shares of AT&T at $34 a share (minus the premium). I will be free to repeat the trade and sell another put contract with a new money.
  3. The underlying stock will end below the $34 strike price at expiration but I might decide not to get assigned with 100 shares and roll the contract further in time and lower strike.

 

If you want to play this trade safely, you can open a contract at 33 strike (receiving 4108 premium) or 32 strike (receiving $75 premium) to avoid assignment.

 
(MORE: Early Upgrade Plans – What Your Wireless Company Doesn’t Want You To Know)
 

Or you can just enjoy reading this post and opening no trade.

Do you use options in combination with dividend investing to boost your income and lower your cost basis or you believe this is an extremely dangerous strategy and stay aside? Share your thoughts as I like to learn from it.




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Expiration Friday tomorrow – collecting gains and creating a ladder

Expiration Friday tomorrow - collecting gains and creating a ladder

Tomorrow is expiration Friday. My favorite day.

Tomorrow I will officially collect my gains. Although I collected them physically a few months ago when I opened my options trades, those gains were still in jeopardy of being wiped out.

Tomorrow those gains will be mine forever.
 
 
(MORE: Options Assignment – Southern Company (SO))
 

So what stock option trades I have and what steps do I have to do to close them? Here is a review:

1 DMD Nov 16 2013 10 covered call – this trade will expire worthless and I will keep the entire $120 premium. A 100% gain for this trade, 30.57% overall ROI and $229.69 collected in premiums up to day. On Monday I can repeat the trade and open another covered call.

1 EGHT Nov 16 2013 7.5 covered call – this option is ITM and will be executed. That means that I will be forced to sell 100 shares of EGHT. This was however my plan from the very beginning. I call this a total return covered call. Unlike with DMD I will collect profit on stock and I keep premiums collected. Profit 32.53% and overall $179.44 profit (on a stock and premiums). I like the stock so far and may use it in the future for more option trades.

1 GLW Nov 16 2013 13 put – this trade will expire worthless and I will keep $100 premium. On Monday I can repeat the trade selling yet another put. Profit 7.69% annualized profit 13.15%

1 GLW Nov 16 2013 15 put – this trade will expire worthless and I will keep $115 premium. On Monday I can repeat the trade selling yet another put. Profit 7.67% annualized profit 19.00%

1 SWY Nov 16 2013 32 put – this trade will also expire worthless tomorrow and I will keep $40 premium. On Monday I will be able to open another put selling trade. Profit 1.25% annualized profit 9.49%

 
(MORE: Options ladder. What ladder?)
 

Remember, all above trades are either covered calls or naked puts (put selling). On Monday my maintenance cash will be released and I can start selling more puts or covered calls.

To do so I will do it in order to create an option ladder as I wrote about it in my previous post.

 
(MORE: Intro to selling put options)
 




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Options ladder. What ladder?


Options ladderA few years ago when banks paid 3, 4, 5 or even more per cent interest on deposits such as CDs (Certificate of Deposit) or some savings accounts people were creating ladders. It was a quite popular method of creating an income stream.

If you had a substantial amount of money, you could spread them among long term CDs and then lived off of it. For example, if you had 100,000 dollars available, you would split them into 5 smaller amounts of $20,000 each and bought one 5 year CD the first year. The next year you would purchase the next 5 year CD and so on. After 5 years you would have your ladder constructed. The sixth year your very first CD would have matured. You could take your principal and reinvested it into the next 5 year CD. You kept the interest and spent it for living. Of course you would have needed a lot more than 100k, but you get the idea. Many people have used this strategy during their retirement.

If you are somewhat advanced in finances, you know what the ladder strategy is and how to construct it. If not, read the article How To Create A Laddered CD Portfolio for more information.

Years of dreaming

Image courtesy of David Castillo Dominici / FreeDigitalPhotos.net
Dreaming boy

It was a strategy I always admired. As a kid I wanted to have a stream of income. I wanted my money working for me and bring me more money. But I didn’t want to invest my allowances and then wait 20 years to enjoy the results of my investments. I wanted to enjoy my investment now! Every month I wanted at least few pennies available in my pocket and spend them whenever I wanted and for whatever reason and yet knowing that the next month I would have another payday of a few pennies available to spend them. It was a great feeling. I didn’t have to ask my parents for more money. They were flowing into my little savings account themselves.

Jesse Livermore, a great investor of the 20th century always said that if you make a profit, withdraw 50% of it and spend it anyway you want. Enjoy the result of your successful business.

I liked that idea a lot. I do not do it yet since I reinvest all my proceedings, but I really look forward the day, when I start withdrawing 50% or more of my proceedings and spend them the way I want.

A little banker growing

I was a special kid in case of finances. As soon as I started receiving allowances I was saving it all. I kept a record book of all my money. I always recorded when and from whom I got the cash, be it my mother or grandparents. I was 10 years old.

A little league workforce

As soon as I could work part time, which was when I turned 16 (and since we lived in a small town I could actually start earlier as the employer pretended I was older), I started working for the postal service during the summer break. Every payday I went to the nearby bank branch and deposited my money to my very first savings account.

I counted every penny I received as an interest and I was watching my little account growing. It was at the times, when saving money in these products such as savings accounts, CDs, or money market accounts made sence. At today’s low interest environment investors have very little opportunities.

Joining the dividend growth club

And that’s why I decided to go for and love dividend investing. The dividend investing strategy accomplishes exactly my childhood dream of everlasting and growing income. The dividend investing fascinated me for this exact reason of passive income. But in my early years I didn’t understand dividends. When I was depositing my hard earned cash to my savings account bearing 10% interest, I considered 3% dividend a losers (suckers) game.

I completely missed the power of dividend growth and compounding. But I learned.

A birth of a ladder

The other day I was reviewing my tracking system and stumbled upon my calendar. Recently, I opened a new trade and I sold a put contract against Taser International and received a nice premium.

This trade made me thinking about my options trading. I was staring at this calendar at the same time:

When thinking about my other recent trade of put selling against Safeway comparing it to TASR trade and comparing it with my decision selling puts every month reaping only 30 – 40 dollars because I didn’t want to wait 5 or 6 months for expiration I got an idea.

Can you see the pattern here? It suddenly struck me. Why I have a few trades expiring at the same time while I can spread them across the whole year and create a ladder?

I liked the idea and decided to try it. I will be now selling my puts so I will have at least one put contract expiring each month. This strategy would also allow me taking a long term expiration and thus bringing in a lot larger premium than just 30 to 40 dollars per contract. Now it can be $100 – $300 premiums. The risk will be the same or maybe smaller since the stock will have more time to act and I also will have more time to react and it will be a nice game for me.

It will keep me busy :)

What is your opinion?

What do you think? Will the options ladder be a good and working strategy? Would you apply it yourself?
 
 




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Posted by Martin May 01, 2021
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2021 Week 17 investing and trading report


April is over and it is time to write our weekly investing and trading report. But before we proceed, let’s mention that today is a day when Berkshire Hathaway and Warren Buffett with Charlie Munger have their annual meeting. I plan to visit the next year’s meeting if it will be opened to the public again (this meeting is still online only).

 

 

April 2021 was a weak month. We only made $84 dollars in premiums last week and the entire month ended with $2,336 options income. But, in the stock market, you cannot force it. You force it, you lose it. We were fully invested, we had to roll some trades and that prevented us from reopening new trades to increase our income. But, a few trades expired this week and next week I expect re-opening new trades.

On the other hand, our dividend income started bringing fruits from our aggressive dividend growth stocks accumulation. Our income jumped from $30 – $60 to $200 of income, so that is a bright spot in the entire April’s trading and investing results.

 

Here is our investing and trading report:

 

Account Value: $54,310.18 +$872.80 +1.63%
Options trading results
Options Premiums Received: $84.00    
01 January 2021 Options: $4,209.00 +16.65%  
02 February 2021 Options: $4,884.00 +15.41%  
03 March 2021 Options: $5,258.00 +12.79%  
04 April 2021 Options: $2,336.00 +4.30%  
Options Premiums YTD: $16,687.00 +30.73%  
Dividend income results
Dividends Received: $119.08    
01 January 2021 Dividends: $53.04    
02 February 2021 Dividends: $63.00    
03 March 2021 Dividends: $30.31    
04 April 2021 Dividends: $179.10    
Dividends YTD: $325.45    
Portfolio metrics
Portfolio Yield: 4.37%    
Portfolio Dividend Growth: 7.47%    
Ann. Div Income & YOC in 10 yrs: $8,569.31 15.72%  
Ann. Div Income & YOC in 20 yrs: $58,366.63 107.10%  
Ann. Div Income & YOC in 25 yrs: $221,874.11 407.13%  
Ann. Div Income & YOC in 30 yrs: $1,220,992.87 2,240.49%  
Portfolio Alpha: 21.14%    
Portfolio Weighted Beta: 0.95    
CAGR: 805.01%    
AROC: 25.23%    
TROC: 19.57%    
Our 2021 Goal
2021 Dividend Goal: $1,071.42 30.38%  
2021 Portfolio Value Goal: $42,344.06 128.26% Accomplished

 

We continued accumulating dividend growth stocks to achieve our dividend weekly dividend income. We accumulated shares of ABBV, OMF, and AAPL. Our non-adjusted stock holdings market value decreased from $68,258.17 to $59,324.59. This was possibly caused by our broker’s weird Buying power manipulation. We had our BP growing and we parked our available cash and BP into the ICSH fund, but apparently, according to Tasty Works, they provided me with a $13,000 cash allowance to maintain a position (I do not know which) and once I closed the position, this allowance was taken away and my account got into a margin call. So I had to adjust my cash holdings to accommodate the call (glad I was creating cash reserves) to do so. This also prevented us from more trading last week.

 
Stock holdings week 17
 

Last week, we adjusted a few options trades and opened a few new trades against AES, and OMF. We started creating a ladder in these tickers opening strangles against those stocks. We picked these stocks because the capital requirements for these trades are very low (about $300 per strangle) and I want to see how these trades would work in case the position would go completely against me. Will I be able to manage them all? Or will I get busted? If I get busted, it will not be very costly. Once I gain some confidence, I can keep creating ladders against other positions too. For the entire April 2021, we received $2,336.00 premiums only. I hope, May will be a better month.
 

Open trades

 
Investing and trading report
 

The table above shows all our open trades and expirations. It is just a simplified tracking and buying power reduction. Our goal is to trade a set amount of equity strangles in what I call perpetual strangle trading. It is nothing fancy. I just have a list of equities I like to trade options around them, I like to eventually own and I accumulate these stocks. Once a trade expires (or nears expiration) I re-open the trade or roll it into the next expiration (mostly trades that a stock is near the short strike and there is a risk of getting in the money).

We did open a few new trades last week and some trades expired this week. The BP reduction decreased from $44,388.11 to $43,474.75, a decrease by -$913.36 (-2.06%). This represents 157.80% of margin usage.

 

Investing and trading ROI

 

Our options trading delivered a 4.30% monthly ROI, totaling a 30.73% ROI.

Our account grew by 159.75% this year.
 

Our options trading averaged $4,171.75 per month this year. If this trend continues, we are on track to make $50,061.00 trading options in 2021.
 

We are still on track to complete goals in our portfolio. We made slight adjustments and we are providing our comments to our goals and tasks we set up in the week 6 report:
 

Old SPX trades repair

 

This week we have not done any adjustments to our old SPX trades. We are still sitting on those trades and waiting for the untouched side to close so we can roll the trades again. The goal will be to roll the trades until we will be able to close them for at least break even and release the buying power. We will keep doing this only if the resulting trade will be a credit trade or a very small debit. If adjusting these trades would require adding more new money, we would rather close these trades and move on.

 

Accumulating Growth Stocks

 

Last week, we added SNOW to our positions. We still want to accumulate 100 shares of this stock and start selling covered calls. As of now, we trade Iron Condors against this stock, but once we accumulate shares, we will switch to a CC.

We also plan on accumulating Tesla (TSLA) and do the same as with SNOW.

 

Accumulating Dividend Growth Stocks

 

Our primary goal, and strategy, is to accumulate high-quality dividend growth stocks. We continued accumulating the following dividend stocks and as of today hold the following shares:
 

AAPL (20), ABBV (40), and OMF (70).
 

Our goal is to not only reach 100 shares of high-quality dividend stocks. We also want to build a weekly dividend income as per this calendar:
 

Weekly dividends income calendar
 

We are reaching our weekly dividend income goal as almost all weeks are filled with dividend income.

 

Market Outlook

 

The market is still in its consolidation pattern. It tried to continue higher but retreated at the end of the last week. It continues in an indecisive pattern and we have to wait for the market to tell us what to do next. If we break up, expect a more bullish run. If we reverse and go down, expect the bearish move to $4,000 level or around it.

nbsp;
SPX April 31 2021 outlook

 

Trading options

 

We continue trading options around the stocks we own or plan to own in the future. I call it monetizing our positions. If you look at our holdings table below, there are two column sections. The right section is “Options adjusted”. That section applies options premiums to the cost basis of our stocks. And there you can see how beneficial it is. It will make a significant difference when the market is falling yet our stocks will still be in green.

 

Investing and trading in charts

 

TW Account Net-Liq week 17

 
TW Account holdings week 17
 

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 8.86%. With options, our holdings are up 16.11% (from inception on 4/1/2019). The SPX is up 44.54% since inception. Since the inception of our portfolio, our stock holdings underperform the overall market (up only 16.11% on a cumulative basis). This week, our adjusted stock holdings underperformed the market. The market gained 14.70% YTD, our portfolio options-adjusted stock holdings grew by 9.13% YTD. This includes stock holdings adjusted by options trading, not the entire account. If we include the entire portfolio and options trading, we beat the market significantly (up 164.00%).
 

TW Account holdings Growth YTD
 

The stock holdings growth slowed down because we added many new stock positions and these positions didn’t have time to grow yet, so I expect the growth trend to improve over time and beat the market.

 
TW Options Income week 17
 

TW Options Annual Income week 17
 

 

Our dividend goal and future dividends

 

TW Received vs Projected Dividends week 17
 

Our portfolio still doesn’t represent the true dividend income potential, but this last week we started seeing the results of our accumulation effort kicking in. Our dividend income jumped up by 33%. We are on track to accomplish our dividend income goal, currently, we are at 30% of the goal. The $1,071 of dividend income is our goal based on the expected stock accumulation we set at the beginning of the year. It is our goal we want to achieve.

The chart below, on the other hand, indicates the dividend income of stocks we already accumulated. That means, that if we do nothing and everything stays the same for the rest of the year, we should receive $2,747.27 in dividends.
 

TW Received vs Future Dividends week 17

 

Our account cumulative return

 

This is another metric I started tracking (since March 13, 2021) recently.
 

TW cumulative return wk 17
 

As of today, our account cumulative return is 25.56% (since March 13, 2021).

 

Conclusion of our investing and trading report

 

This week our options trading was great and we created a lot of income making March our best month so far.

We will continue accumulating the dividend growth stocks in our portfolio to reach 100 shares. We will also replenish our cash reserves to bring them back to 25% of our current net-liq value.

We will report our next week’s results next Saturday. Until then, good luck and good trading!




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Posted by Martin April 10, 2021
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2021 Week 14 investing and trading report


The first week of April is over and it is time to provide our weekly investing and trading report again. Our portfolio growth seems to be gaining steam and growing faster than before. We continued the aggressive accumulation of stocks that we like because they pay us dividends while we wait for them to appreciate in their value. We also continued aggressive options trading bringing in more income that can be reinvested.

This week, we doubled our account and met our annual portfolio net-liquidating value goal!

 

Here is our investing and trading report:

 

Account Value: $42,606.35 +$1,492.13 +3.63%
Options trading results
Options Premiums Received: $885.00    
01 January 2021 Options: $4,209.00 +16.65%  
02 February 2021 Options: $4,884.00 +15.41%  
03 March 2021 Options: $5,258.00 +12.79%  
04 April 2021 Options: $878.00 +2.06%  
Options Premiums YTD: $15,229.00 +35.74%  
Dividend income results
Dividends Received: $0.71    
01 January 2021 Dividends: $53.04    
02 February 2021 Dividends: $63.00    
03 March 2021 Dividends: $30.31    
04 April 2021 Dividends: $42.21    
Dividends YTD: $188.56    
Portfolio metrics
Portfolio Yield: 4.04%    
Portfolio Dividend Growth: 7.47%    
Ann. Div Income & YOC in 10 yrs: $6,050.48 13.84%  
Ann. Div Income & YOC in 20 yrs: $37,610.31 86.02%  
Ann. Div Income & YOC in 25 yrs: $133,036.96 304.28%  
Ann. Div Income & YOC in 30 yrs: $665,041.94 1,521.06%  
Portfolio Alpha: 26.78%    
Portfolio Weighted Beta: 0.88    
CAGR: 756.99%    
AROC: 35.98%    
TROC: 23.62%    
Our 2021 Goal
2021 Dividend Goal: $1,071.42 17.60%  
2021 Portfolio Value Goal: $42,344.06 100.62% Accomplished

 

We continued accumulating our stocks to achieve our dividend weekly dividend income. We accumulated shares in Realty Income (O), ABBV, AAPL, and we finished accumulating (we reached 100 shares) AES according to our plan. I also decided to start increasing holdings in AT&T (T) stock. Our non-adjusted stock holdings market value increased from $44,923.51 to $47,486.85.

 
Stock holdings week 14
 

Last week, we received $885.00 in premiums trading options against our holdings. For the entire April 2021, we received $878.00 premiums, and all our income was reinvested.
 

Open trades

 
Investing and trading report
 

The table above shows all our open trades and expirations. It is just a simplified tracking and buying power reduction. Our goal is to trade a set amount of equity strangles in what I call perpetual strangle trading. It is nothing fancy. I just have a list of equities I like to trade options around them, I like to eventually own and I accumulate these stocks. Once a trade expires (or nears expiration) I re-open the trade or roll it into the next expiration (mostly trades that a stock is near the short strike and there is a risk of getting in the money).

We opened new trades last week. The BP reduction increased from $37,123.70 to $39,451.90, a reduction of +$2,328.20 or +6.27%.

 

Investing and trading ROI

 

Our options trading delivered a 2.06% monthly ROI, totaling a 35.74% ROI.

Our account increased to 107.10% YTD growth. This means, we just doubled our account.
 

Our options trading averaged $3,807.25 per month this year. If this trend continues, we are on track to make $45,687.00 trading options in 2021.
 

We are still on track to complete goals in our portfolio. We made slight adjustments and we are providing our comments to our goals and tasks we set up in the week 6 report:
 

Old SPX trades repair

 

This week we have not done any adjustments to our old SPX trades. We are still sitting on those trades and waiting for the untouched side to close so we can roll the trades again. The goal will be to roll the trades until we will be able to close them for at least break even and release the buying power. We will keep doing this only if the resulting trade will be a credit trade or a very small debit. If adjusting these trades would require adding more new money, we would rather close these trades and move on.

 

Accumulating Growth Stocks

 

In the last few weeks, I was accumulating Tesla (TSLA) stock. This week we have not bought any new shares. We started trading Iron Condors against Tesla to start lowering our cost basis.

We are also accumulating g Apple (AAPL) stock although last week we have not purchased any new shares.

 

Accumulating Dividend Growth Stocks

 

Buying high-quality dividend stocks is our core strategy. And we will continue to do so and at a faster pace. I continued accumulating Realty Income (O) this week and as of today, we hold 60 shares.

We also accumulated ABBV and AES stocks. We increased our position in ABBV to 17 shares, and we reached 100 shares in AES company.

We started accumulating PMX shares (a tax-free municipal bond fund). We currently hold 40 shares and plan to reach 100.

Our goal is to not only reach 100 shares of high-quality dividend stocks but also create a weekly dividend income from these stocks All it takes to create a weekly dividend income is to buy 12 stocks to spread the income for every week. I created this dividend calendar and track the stocks I want to buy to get this goal done fast.
 

Weekly dividends income calendar
 

As you can see in the table above, we are reaching our weekly dividend income goal as almost all weeks are filled with dividend income. All that is missing is February and March first week “slot” (and subsequent months) but others are already filled. April should deliver an income every week. After we add all weeks, we will start increasing shares so the income is larger and larger every week. Also, note that I have included holdings of 100 shares in this table only. So, for example, we own 17 shares of AAPL and therefore it is not yet included in this table although we will receive income next month.

 

Market Outlook

 

The market continues playing according to the expected price move. I still expect this market to hit the $4,200 mark in the near future. I expected this moe, but I have not expected this “straight-up” move. But I am happy with it, too.

 
SPX April 02 2021 outlook
 

 

Trading options

 

We 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), covers our call sides of each trade, and 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.

We added a few new trades to our portfolio and we are close to having our trading “full”, or be fully invested. Once that happens, we will start trading multiple contracts. As of now, we mostly trade one contract of strangles. I am still thinking about building a ladder using LEAPS against SPY and AAPL as of now but not yet decided.

 

Investing and trading report in charts

 

TW Account Net-Liq week 13
 

Our aggressive accumulation of dividend stocks, using proceeds from aggressive options trading (by “aggressive” I do not mean reckless, but using all available funds and be fully invested at all times), is delivering fruits. Our net liquidation value increased significantly this year. I expect this trend to continue. I am also preparing our account for portfolio margin and once we achieve the required net-liq value, I will add this feature to our account. I hope to be able to trade a bit more aggressively. And yes, I am aware of potential risks.

 
TW Account holdings week 14
 

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 8.61%. With options, our holdings are up 14.93% (from inception on 4/1/2019). The SPX is up 42.73% since inception. Since the inception of the fund, our stock holdings underperform the overall market (up only 14.93% on a cumulative basis). This week, our adjusted stock holdings underperformed the market. The market gained 12.89% YTD, our portfolio options-adjusted stock holdings grew by 7.95% YTD. This includes stock holdings adjusted by options trading, not the entire portfolio. If we include the entire portfolio and options trading, we beat the market significantly.
 

TW Account holdings Growth YTD
 

The stock holdings growth slowed down because we added many new positions and these positions didn’t have time to grow yet, so I expect the growth trend to improve over time and beat the market.

 
TW Options Income week 14
 

TW Options Annual Income week 14
 

 

Our dividend goal and future dividends

 

TW Received vs Projected Dividends week 14
 

I have added another view into our holdings and their expected performance. Below is a chart of all future expected dividends on our holdings. The chart above indicates our dividend goal rather than expected dividends, the new chart below indicates our holdings and their dividend payouts vs. received payouts. In other words, these are the dividends we should receive if we held these positions at the current level since January 1st. But because we have not held those positions since January, we will not be able to receive those dividends. We added new positions just recently so all dividends that are included in the “projected” value were not paid to us. But, if we stop investing now, the “projected” dividend value (currently $1,866.22) is the annual dividend rate we should be receiving as passive income every year without touching anything in our portfolio.
 

TW Received vs Future Dividends week 14

 

Our account cumulative return

 

This is another metric I started tracking (since March 13, 2021) recently.
 

TW cumulative return wk 14
 

As of today, our account cumulative return is 17.45% (since March 13, 2021).

 

Conclusion of our investing and trading report

 

This week our options trading was great and we created a lot of income making March our best month so far.

We will continue accumulating the dividend growth stocks in our portfolio to reach 100 shares. We will also replenish our cash reserves to bring them back to 25% of our current net-liq value.

We will report our next week’s results next Saturday. Until then, good luck and good trading!




TastyWorks

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Posted by Martin April 03, 2021
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2021 Week 13 investing and trading report


March 2021 is in the books! And as you would be able to see in this investing and trading report, it was our best month this year generating a nice income for our partnership members. The month of March started slow and I thought it would stay like this. But as the market started going up again and some of our options trades expired and we re-opened them, it picked up and our account ended to be the best month. The generated income from options premiums was reinvested into dividend growth stocks holdings. I hope, the next month will be even better!

 

Here is our investing and trading report:

 

Account Value: $41,114.22 +$1,400.24 +3.53%
Options trading results
Options Premiums Received: $93.00    
01 January 2021 Options: $4,209.00 +16.65%  
02 February 2021 Options: $4,884.00 +15.41%  
03 March 2021 Options: $5,258.00 +12.79%  
04 April 2021 Options: -$7.00 -0.02%  
Options Premiums YTD: $14,344.00 +34.89%  
Dividend income results
Dividends Received: $9.92    
01 January 2021 Dividends: $53.04    
02 February 2021 Dividends: $63.00    
03 March 2021 Dividends: $30.31    
04 April 2021 Dividends: $41.50    
Dividends YTD: $187.85    
Portfolio metrics
Portfolio Yield: 4.19%    
Portfolio Dividend Growth: 8.10%    
Ann. Div Income & YOC in 10 yrs: $6,548.14 15.74%  
Ann. Div Income & YOC in 20 yrs: $49,403.49 118.76%  
Ann. Div Income & YOC in 25 yrs: $207,923.34 499.80%  
Ann. Div Income & YOC in 30 yrs: $1,345,568.52 3,234.47%  
Portfolio Alpha: 26.02%    
Portfolio Weighted Beta: 0.87    
CAGR: 759.37%    
AROC: 27.82%    
TROC: 22.78%    
Our 2021 Goal
2021 Dividend Goal: $1,071.42 17.53%  
2021 Portfolio Value Goal: $42,344.06 97.10%  

 

The dividend growth and yield on cost growth are impressive over time. The numbers in the table above indicate how great passive income this portfolio will deliver in the next 20 years. And in the next 30 years, this portfolio will deliver over a million dollars annually in dividend income. That is a state of this portfolio as of today, given that we will do nothing from now on. But we will keep investing, accumulating, and monetizing our portfolio.

The future and the prospect of future dividend income are bright. Yet building such a portfolio is a slow and somewhat painful process. It takes time. If you look at the current dividend income, it looks pitiful and laughable. And many people will tell you that it makes no sense to invest in dividend growth stocks. The income is not worth it. We have over $40,000 invested in dividend stocks and we only received $30 in dividend income.

Unfortunately for the naysayers, this is an incredibly simplified and incorrect view. The invested amount is an amount as of today, invested in these stocks just last week and it had not yet time to transform into the dividend income. It will come later as the next quarterly dividends kick in. But people fail to see it.

Last week we continued accumulating our stocks to achieve our dividend weekly dividend income. We accumulated shares in Realty Income (O), ABBV, AAPL, and AES according to our plan. I also decided to start increasing holdings in AT&T (T) stock. I also got rid of a few stocks that no longer meet our original criteria for investing in them. We sold out Helmerich & Payne (HP) and Oxydental Petroleum (OXY). The companies stopped growing their dividends and cut them significantly. We just held them in our portfolio for a better exit time. As oil rallied, these stocks increased in price and we could sell them break even. We kept all the dividends we ever received, though. Our non-adjusted stock holdings market value increased from $41,602.80 to $44,923.51.

 
Stock holdings week 13
 

Last week, we received $93.00 in premiums trading options against our holdings. It was low as we traded for only two days in the last week of March. We just adjusted a few trades only. Also, on the first day of April (Thursday only, as on Friday, April 2nd, the markets were closed for Good Friday) we generated a small loss. In fact, it was not a loss but closing some positions (we closed a call spread against BABA and TSLA), so our credit premium was in March but closing debit already got in April (as I keep this track based on CASH accounting standard). For the entire March 2021, we received $5,258.00 premiums, and all our income was reinvested.
 

Open trades

 
Investing and trading report
 

The table above shows all our open trades and expirations. It is just a simplified tracking and buying power reduction. Our goal is to trade a set amount of equity strangles in what I call perpetual strangle trading. It is nothing fancy. I just have a list of equities I like to trade options around them, I like to eventually own and I accumulate these stocks. Once a trade expires (or nears expiration) I re-open the trade or roll it into the next expiration (mostly trades that a stock is near the short strike and there is a risk of getting in the money).

We only adjusted a few new trades last week. The BP reduction increased from $36,124.40 to $37,123.70, a reduction of +$999.30 or +2.77%. This increase was just a volatility fluctuation.

 

Investing and trading ROI

 

Our options trading delivered a 12.79% monthly ROI, totaling a 34.89% ROI.

Our account increased to 99.85% YTD growth. We are about to double our money in the next month if this trend continues.
 

Our options trading averaged $3,586.00 per month this year. If this trend continues, we are on track to make $43,032.00 trading options in 2021.
 

We are still on track to complete goals in our portfolio. We made slight adjustments and we are providing our comments to our goals and tasks we set up in the week 6 report:
 

Old SPX trades repair

 

This week we have not done any adjustments to our old SPX trades. We are still sitting on those trades and waiting for the untouched side to close so we can roll the trades again. The goal will be to roll the trades until we will be able to close them for at least break even and release the buying power. We will keep doing this only if the resulting trade will be a credit trade or a very small debit. If adjusting these trades would require adding more new money, we would rather close these trades and move on.

 

Accumulating Growth Stocks

 

Last week I kept accumulating TSLA stock right before it started moving up again. Now we are sitting on a nice gain just a few days after our investment. We however limit our growth stocks holdings to 10% of our portfolio. Currently, we are at 15% and that means that next week or in the upcoming weeks, I will not be adding more shares (unless Tesla tanks so much that it would be a steal to invest).

I also kept accumulating Apple (AAPL) as the stock was displaying weakness. However, it looks like that the weakness in the tech stocks ended last week and these companies are in favor again and rallying. If so, it will be difficult to buy cheap (although, AAPL is not cheap even at this “cheap” level). AAPL is a dividend stock and part of my dividend growth investing strategy and I will keep accumulating this stock.

 

Accumulating Dividend Growth Stocks

 

Buying high-quality dividend stocks is our core strategy. And we will continue to do so and at a faster pace. I continued accumulating Realty Income (O) this week and as of today, we hold 55 shares.

We also accumulated ABBV and AES stocks and we hold 13 and 70 shares respectively.

We also plan on adding Eaton Vance Municipal Income Trust (EVN), PIMCO Municipal Income Fund III (PMX), and Eaton Vance Municipal Bond Fund (EIM) stocks. The reason for that is that although not dividend growth stocks, they pay a relatively good dividend, they pay consistently, and that are tax free.

Our goal is to not only reach 100 shares of high-quality dividend stocks but also create a weekly dividend income from these stocks All it takes to create a weekly dividend income is to buy 12 stocks to spread the income for every week. I created this dividend calendar and track the stocks I want to buy to get this goal done fast.
 

Weekly dividends income calendar
 

As you can see in the table above, we are reaching our weekly dividend income goal as almost all weeks are filled with dividend income. All that is missing is February and March first week “slot” (and subsequent months) but others are already filled. April should deliver an income every week. After we add all weeks, we will start increasing shares so the income is larger and larger every week. Also, note that I have included holdings of 100 shares in this table only. So, for example, we own 17 shares of AAPL and therefore it is not yet included in this table although we will receive income next month.

 

Market Outlook

 

Last week, I mentioned that the market was creating two significant patterns pointing to a potential rally up if these patterns play out. At first, the market had some struggle to break up and fulfill the patterns but then it spiked up on a strong note. Now we have the pattern completed and I expect it to continue.

 
SPX April 02 2021 outlook
 

Our expected price target is now at $4,200 for SPX. It is a measured move from the bottom of a cup (see the lower arrow) projected to the top of the breakout (see the second higher located arrow). I can’t predict whether this happens and if it happens, how long will it take to get there. It may be a strong narrow rally or a choppy painful move. We have to wait to see.

 

Trading options

 

We continue trading options around the stocks we own or plan to own (stock we do not yet own but we started trading options against them, see a book “Generate Thousands in Cash on your Stocks Before Buying or Selling Them“). 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), covers our call sides of each trade, and 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.

We added a few new trades to our portfolio and we are close to having our trading “full”, or be fully invested. Once that happens, we will start trading multiple contracts. As of now, we mostly trade one contract of strangles. I am still thinking about building a ladder using LEAPS against SPY and AAPL as of now but not yet decided.

 

Investing and trading report in charts

 

TW Account Net-Liq week 13
 

Our aggressive accumulation of dividend stocks, using proceeds from aggressive options trading (by “aggressive” I do not mean reckless, but using all available funds and be fully invested at all times), is delivering fruits. Our net liquidation value increased significantly this year. I expect this trend to continue. I am also preparing our account for portfolio margin and once we achieve the required net-liq value, I will add this feature to our account. I hope to be able to trade a bit more aggressively. And yes, I am aware of potential risks.

TW Account holdings week 13
 

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 7.99%. With options, our holdings are up 14.05% (from inception on 4/1/2019). The SPX is up 38.96% since inception. Since the inception of the fund, our stock holdings underperform the overall market (up only 14.05% on a cumulative basis). This week, our adjusted stock holdings underperformed the market. The market gained 9.12% YTD, our portfolio options-adjusted stock holdings grew by 7.07% YTD (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

The stock holdings growth dropped because we added many new positions and these positions didn’t have time to grow yet, so I expect the growth trend to improve over time and beat the market.

 
TW Options Income week 13
 

TW Options Annual Income week 13
 

 

Our dividend goal and future dividends

 

TW Received vs Projected Dividends week 12
 

I have added another view into our holdings and their expected performance. Below is a chart of all future expected dividends on our holdings. The chart above indicates our dividend goal rather than expected dividends, the new chart below indicates our holdings and their dividend payouts vs. received payouts. In other words, these are the dividends we should receive if we held these positions at the current level since January 1st. But because we have not held those positions since January, we will not be able to receive those dividends. We added new positions just recently so all dividends that are included in the “projected” value were not paid to us. But, if we stop investing now, the “projected” dividend value (currently $1,866.22) is the annual dividend rate we should be receiving as passive income every year without touching anything in our portfolio.
 

TW Received vs Future Dividends week 13

 

Our account cumulative return

 

This is another metric I started tracking (since March 13, 2021) recently. I subscribed to Wingman tracking software (I am on a trial now and not yet fully decided whether to keep it or not). And that helps to track the open positions and account balances without the hassle of doing it manually. I will see if I am happy with the result of the subscription or not.
 

TW cumulative return wk 13
 

As of today, our account cumulative return is 13.33% (since March 13, 2021).

 

Conclusion of our investing and trading report

 

This week our options trading was great and we created a lot of income making March our best month so far.

We will continue accumulating the dividend growth stocks in our portfolio to reach 100 shares. We will also replenish our cash reserves to bring them back to 25% of our current net-liq value.

We will report our next week’s results next Saturday. Until then, good luck and good trading!




TastyWorks

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Posted by Martin March 27, 2021
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2021 Week 12 investing and trading report


March 2021 is almost over, we have three trading days left and the month can be closed in the books. It is Saturday, and time to provide our weekly investing and trading report. This week was slow and I thought it would end the entire month weak and with very little income compared to January and February. Yet, this month is about to end as one of the best. Our income exceeded $5,000 and we reinvested the income for future growth. And I am optimistic about the future growth despite the weak market and a lot of pessimism and crash expectations. If the market keeps being weak or even crashes, I have enough cash in reserves to be buying cheap stocks.

 

Here is our investing and trading report:

 

Account Value: $39,713.98 +$5,685.13 +16.71%
Options trading results
Options Premiums Received: $2,707.00    
01 January 2021 Options: $4,209.00 +16.65%  
02 February 2021 Options: $4,884.00 +15.41%  
03 March 2021 Options: $5,165.00 +13.01%  
Options Premiums YTD: $14,258.00 +35.90%  
Dividend income results
Dividends Received: $5.84    
01 January 2021 Dividends: $53.04    
02 February 2021 Dividends: $63.00    
03 March 2021 Dividends: $20.39    
Dividends YTD: $136.43    
Portfolio metrics
Portfolio Yield: 4.03%    
Portfolio Dividend Growth: 8.10%    
Ann. Div Income & YOC in 10 yrs: $5,771.29 14.88%  
Ann. Div Income & YOC in 20 yrs: $41,732.60 107.59%  
Ann. Div Income & YOC in 25 yrs: $169,690.73 437.47%  
Ann. Div Income & YOC in 30 yrs: $1,048,060.01 2,701.97%  
Portfolio Alpha: 28.43%    
Portfolio Weighted Beta: 0.72    
CAGR: 759.68%    
AROC: 28.61%    
TROC: 27.60%    
Our 2021 Goal
2021 Dividend Goal: $1,071.42 12.73%  
2021 Portfolio Value Goal: $42,344.06 93.79%  

 

The dividend growth and yield on cost growth are impressive over time. The numbers in the table above indicate how great passive income this portfolio will deliver in the next 20 years. And in the next 30 years, this portfolio will deliver over a million dollars annually in dividend income. That is a state of this portfolio as of today, given that we will do nothing from now on. But we will keep investing, accumulating, and monetizing our portfolio.

The future and the prospect of future dividend income are bright. Yet building such a portfolio is a slow and somewhat painful process. It takes time. If you look at the current dividend income, it looks pitiful and laughable. I just accumulated several positions such as AFL, QYLD, ASG, CHI and reached 100 shares in each of the companies; I also raised positions in Realty Income (O) and ABBV and all I have received is $20 bucks in dividends? What a joke!

Yes, it looks pitiful but the benefit of accumulating these great stocks didn’t yet come to fruition. All we need is to wait for the next dividend cycle to reap the juicy dividends. Dividend growth investing needs and takes time. It is not a quick-rich scheme. And many people these days are not willing to give their investments time. They want 1000% in a week returns. That’s why they invest in scams like bitcoin, or high-flying SPACs many of which will go belly up at some point in the future. Just look at NNDM. People were in frenzy buying the stock because ARKinvest was buying. The stock traded at almost $20 a share. Today, it is back down at $8.75 a share.

Last week, we received $2,707.00 in premiums trading options against our holdings. We opened new trades and accumulated new stock holdings to reach 100 shares of each. I am happy with our achievements this week. For the entire March 2021, we received $5,165.00 premiums. Our non-adjusted stock holdings market value increased from $33,327.00 to $41,602.80. All our income was reinvested.
 

Open trades

 
Investing and trading report
 

The table above shows all our open trades and expirations. It is just a simplified tracking and buying power reduction. Our goal is to trade a set amount of equity strangles in what I call perpetual strangle trading. It is nothing fancy. I just have a list of equities I like to trade options around them, I like to eventually own and I accumulate these stocks. Once a trade expires (or nears expiration) I re-open the trade or roll it into the next expiration (mostly trades that a stock is near the short strike and there is a risk of getting in the money).

We opened a few new trades that helped us to boost March 2021 premium income but it also significantly increased our buying power (BP) reduction. The BP reduction decreased from $27,393.00 to $36,124.40, a reduction of +$8,731.40 adding new trades. That represents an increase of 31.87%. This also helped to increase our net-liquidating value last week.

 

Investing and trading ROI

 

Our options trading delivered a 13.01% monthly ROI, totaling a 35.90% ROI.

Our account increased to 93.05% YTD growth. We are happy with this result because that means we are on the path of doubling our account in three months. Something nice to brag about on social media.
 

Our options trading averaged $4,752.67 per month this year. If this trend continues, we are on track to make $57,032.00 trading options in 2021.
 

We are still on track to complete goals in our portfolio. We made slight adjustments and we are providing our comments to our goals and tasks we set up in the week 6 report:
 

Old SPX trades repair

 

This week we have not done any adjustments to our old SPX trades. We are still sitting on those trades and waiting for the untouched side to close so we can roll the trades again. The goal will be to roll the trades until we will be able to close them for at least break even and release the buying power. We will keep doing this only if the resulting trade will be a credit trade or a very small debit. If adjusting these trades would require adding more new money, we would rather close these trades and move on.

 

Accumulating Growth Stocks

 

This week I took advantage of the weak stock market and selloff of the tech stocks. Many people panic and see the end of the world but I welcome this weakness. Last week, I twisted my arm and started buying Tesla (TSLA) and the more this stock shows weakness, the more I accumulate. I still feel a bit nervous about this stock but I also do a lot of reading about the company and I am more and more convinced that this stock is the sustainable long run. It resembles Amazon (AMZN) that was unprofitable for years because it was reinvesting all its revenue back to the company’s growth. TSLA seems to be doing the same and reinvesting their revenues to the new venues and new industries development. It will pay off one day.

I also kept accumulating Apple (AAPL) as the stock is displaying weakness. I despise this selling based on short-sighted predictions of the market participants who believe that the company will suffer next month. But I do not buy these companies for the next month’s time horizon. I buy because I want to hold that company for years to come. So when these predictors are in a heart attack-like panic and sell, I buy.

 

Accumulating Dividend Growth Stocks

 

Buying high-quality dividend stocks is our core strategy. And we will continue to do so and at a faster pace. A week ago, we started accumulating Aflac (AFL) stock to reach 100 shares. As of today, we finished that goal and own 100 shares.

We also added 100 shares of Calamos Convertible Opportunities and Income Fund (CHI) to our portfolio. This stock is not necessarily a dividend growth stock. It is a high-yield dividend closed-end fund that pays dividends monthly. We may remove the stock from our portfolio if it no longer follows our criteria.

We finished accumulating 100 shares of Global X NASDAQ 100 Covered Call ETF (QYLD) last week. This also is not a dividend growth stock. It is a high-yield dividend closed-end fund that pays dividends monthly. We may also remove the stock from our portfolio if it no longer follows our criteria.

We proceeded to accumulate Realty Income (O), Abbvie (ABBV), and AES Corporation (AES). We started accumulating AES earlier but reached only about 10 shares. We will now proceed to reach 100 shares.

Our goal is to not only reach 100 shares of high-quality dividend stocks but also create a weekly dividend income from these stocks All it takes to create a weekly dividend income is to buy 12 stocks to spread the income for every week. I created this dividend calendar and track the stocks I want to buy to get this goal done fast.
 

Weekly dividends income calendar
 

As you can see in the table above, we are reaching our goal of weekly dividend income as almost all weeks are filled with dividend income. All that is missing is February and March first week “slot” (and subsequent months) but others are already filled. April should deliver an income every week. After we add all weeks, we will start increasing shares so the income is larger and larger every week. Also, note that I have included holdings of 100 shares in this table only. So, for example, we own 15 shares of AAPL and therefore it is not yet included in this table although we will receive income next month.

 

Market Outlook

 

As I mentioned above, the stock market displays weakness. We reached ATH (all-time high) and then sold off more than 5%. We recovered that correction, reach the previous ATH, and sold off again although not that deep as before. Last Friday made the market a strong rally (which I believe will continue into the next week). But this behavior started to picturing nice, bullish patterns:

 
SPX March 27 2021 outlook
 

The market attempted to break the resistance three times. Normally, that is a good sign. The more often the market tries to break, the more likely it WILL break it. Despite people saying that we are on top and the market is about to crash, this is not the case. Reversals, do not work this way. There is a high chance now that the market breaks this resistance and moves higher. Will it happen next week? Possibly. If not, it still will be good for this market. Why?

The longer the market goes sideways, the better. In the last few years, we had a nice bullish run but no consolidation. We need to consolidate gains in order to call this bull market healthy. So in fact, I would prefer Friday’s rally to fail, turn down again, and drop back to $3720-ish level. The longer the market consolidates, the stronger the subsequent rally will be. We are in about a month-long consolidation now. That is good. If we break the resistance and confirm the breakout, expect a strong, month-long rally. Or similar. This is not an exact science.

We also formed a picture-perfect cup and handle pattern. Some say, this no longer works. Maybe. But there are still a lot of people who preach and trade CANSLIM strategy. This may spark their interest (unless they are all on Reddit chasing stocks like GME.

 

Trading options

 

We 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), covers our call sides of each trade, and 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.

We added a few new trades to our portfolio and we are close to having our trading “full”, or be fully invested. Once that happens, we will start adding multiple positions. As of now, we mostly trade one contract of strangles. We may start scaling up and start adding two contracts. I was also thinking of creating a put ladder. I tried to build the ladder a few times in the past, but mostly failed. One reason was that back then I didn’t have enough capital to do a ladder and also enough cash in reserves for adjustments or purchases of the underlying stock should the puts get assigned (if you do not have enough money, the losses can be catastrophic). We are in a very different situation today and we may start building a ladder.

One idea of a ladder can be using SPY LEAPS and selling in the money puts. This can be extremely profitable trading but also heavy in capital requirements:

 
SPY LEAPS ladder
 

As you can see, this trade would require $8,139.81 buying power. With approximately 30 expiration periods for SPY, this would require a free capital of $244,170 for buying power reduction (unless we reach the level when we can apply for portfolio margin and drop the capital requirements to approximately $40,695 and that is a lot more favorable. It is very intriguing.

 

Investing and trading report in charts

 

TW Account Net-Liq week 12
 

Our aggressive accumulation of dividend stocks, using proceeds from aggressive options trading (by “aggressive” I do not mean reckless, but using all available funds and be fully invested at all times), is delivering fruits. Our net liquidation value increased significantly this year. I expect this trend to continue.

TW Account holdings week 12
 

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 7.25%. With options, our holdings are up 13.23% (from inception on 4/1/2019). The SPX is up 37.40% since inception. Our stock holdings underperform the overall market since the inception of the fund (up only 13.23% on a cumulative basis). This week, our adjusted stock holdings underperformed the market. The market gained 7.55% YTD, our portfolio options-adjusted stock holdings grew by 6.25% YTD (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

The stock holdings growth dropped because we added many new positions and these positions didn’t have time to grow yet, so I expect the growth trend to improve over time and beat the market.

 
TW Options Income week 12
 

TW Options Annual Income week 12
 

TW Received vs Projected Dividends week 12

 

Conclusion of our investing and trading report

 

This week our options trading was great and we created a lot of income making March our best month so far. I expect some consolidation next week and light trading. I might be adjusting open trades only.

We will continue accumulating the dividend growth stocks in our portfolio to reach 100 shares. We will also replenish our cash reserves to bring them back to 25% of our current net-liq value.

We will report our next week’s results next Saturday. Until then, good luck and good trading!




TastyWorks

We all want to hear your opinion on the article above:
1 Comment



Posted by Martin January 27, 2019
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December 2018 and end of year trading and investing results


S&P 500  2,506.85 -253.32(-9.18)  Dow 30  23,327.46 -2,211(-8.66%)  Nasdaq  6,635.28 -695.26(-9.48%)
 

September results

December 2018 passed and it is time to once again provide a report on our trading and investing. The month turned to be the worst month ever. Historically, December was a good month with modest gains but this year, the markets lost almost 10% and that is unseen since 1930’s (correct me if I am wrong).

Of course these losses had impact on our accounts and our net liquidation values.

However, none of this draw-down translate into physical losses (sort of). As we rolled all trades down and away.

But to make sure we are all on the same page – rolling a trade means closing the old one at a loss and opening a new one which collects enough premium to pay for the loss. So, technically, we took losses in but offset them by new trades.

That’s why the net liquidation values of our accounts went down. as the new trades mature, though, the net-liq values will start rising again (which will be seen in January 2019, unless the markets crash again, as is widely expected these days).

However, all the 2018 mess in Wall Street had impact on our trading and we needed to adjust it slightly to reduce exposure of our capital.

 

What I will be doing from now on?
 

Overall, we will continue reducing our capital exposure and trading less throughout 2019 or until the market tells us where it wants to go. As of now, it looks like that we want to go up and that everything is rosy again. But historically, this can be deceiving. In all historical bear markets, this V shape recovery we are currently witnessing spelled out trouble without a low retest.
 

If that is the case today, we have the following possible outcomes:
 

1) V recovery will continue without retest nor consolidation – bearish.
2) V recovery will stall at or above 200 day moving average and then the market will consolidate – bullish.
3) We bounce down from 200 day moving average (or even above it), go down and retest December lows – bullish.
 

Without knowing what is going to happen I do not want to have overly large exposure in the market. Not that I am scared trading any outcome, I was able to navigate through both corrections in 2018 without losing my shirt, but I want to have my accounts manageable and too many open trades can make it difficult to adjust them should the market slump down fast.
 

So what are we going to do until the situation in the markets change?
 

In the IRA account:
 

1) We open only one weekly trade at a time with Friday expiration. A new trade can be opened only when the old trade closes. If the old trade is rolled into the next expiration and not closed a new trade will not be opened. You can follow the trades in our Facebook page.

2) We open up to two 45 DTE trades but with different time to expiration. We will be creating a ladder. This was our old theory we started doing a few years ago but abandoned and never finished. This means, we will open a 45 DTE expiration trade one week and then a second 45 DTE next week.

3) After a trade is open we immediately place a closing GTC (good till cancelled) trade for 50% profit.

4) We open a new 45 DTE trade only when the old trade is closed. If an old trade is rolled or otherwise kept open no new trade can be opened.

5) A new additional 45 DTE (above 2 contracts mentioned above) trade can be added only when BP is higher than the cash management limit allowed.

6) We will keep managing old open trades already in the account to close them successfully as winners.

 

In the ROTH account:
 

1) There will be no new trading in this account. Only managing old open trades. And saving more cash for trading.

 

In the TD account:
 

1) There will be no new trading in this account. Only managing old open trades. And saving more cash for trading.
 

It is really time to stop the madness and reckless trading I did sometimes in my accounts and bring it back to boring strategy and discipline.
 

We are now publishing our tracking of our accounts for the entire year. If you are interested, you can review it here:

  • Review our IRA account 2018 trading and investing data.

IRA Equity:
IRA account equity
 

  • Review our ROTH IRA 2018 trading and investing data.

ROTH Equity:
ROTH account equity
 

  • Review our TD Account 2018 trading and investing data.

TD Equity:
TD account equity

 

We post our trades on our Facebook page.

 
 

Here are the entire 2018 year trading results:

 
Trading Results
 

 

 · Dividend stock investing

 

Dividend investing is doing great on both accounts – ROTH and IRA. We keep using 50% of all options income and buy dividend stocks. IRA account keeps growing fast with new stocks being purchased every month. ROTH is more or less stagnant.

 

Here is a review of our accounts stock holdings:

 
Traditional IRA
Trading Results
 

ROTH IRA
Trading Results
 

TD account
Trading Results
 

In August we purchased the following shares:

 
IRA purchases:
Dividend growth stocks
 

We haven’t purchased any shares in ROTH or TD this month.
 

We keep spending 50% of our options trading proceeds to buy good dividend growth stocks using our screener to get a better entry into the stocks. Although capital appreciation is not our goal but a secondary target, timing the entry creates good results as our positions are mostly up. However, do not be too excited, any large selloff can temporarily send those stocks down again. It is a dividend income what matters to our portfolios, not the portfolio value and capital appreciation. It seems to be evident that using options to grow the portfolio is the right way to do.

 

 · Dividend Income

 

IRA dividend income
Trading Results
 

ROTH IRA dividend income
Trading Results

 




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Posted by Martin December 01, 2018
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November 2018 trading and investing results


S&P 500  2,760.17 +22.41(+0.82%)  Dow 30  25,538.46 +199.62(+0.79%)  Nasdaq  7,330.54 +7.88(+0.52%)
 

September results

2018 is going to an end and it is turning out to be a bad year for us. the entire year was volatile and we saw two wild corrections, one in January and the second in October. Both had a significant impact on our accounts.

And both corrections once again proved the significance of “staying small”. And I violated that rule again. In all accounts.

Too much optimism on the bullish side and believe the US economy is doing so well that nothing bad can happen and that I can overcome any pullbacks. I kept opening more and more trades. And now I am in trouble.

I am not losing money extremely (not yet, but it still may happen) as I am still able to manage the trades, roll them, and adjust them. But I can see a danger of being overextended. My smaller accounts such as trading account and ROTH are showing a distress. I have trades deep in the money but no means to roll them as I am overextended. And that forces me to close the trades for a loss.

So, it is time to adjust my strategy on money management. I pretty much stopped trading these two accounts and will be saving more money until I reach a level when trading is easy and comfortable. On the IRA account I need to stick to my rules harder and keep eliminating over trading.
 

What I will be doing from now on?
 

In the IRA account:
 

1) We open only one weekly trade at a time with Friday expiration. A new trade can be opened only when the old trade closes. If the old trade is rolled into the next expiration and not closed a new trade will not be opened. You can follow the trades in our Facebook page.

2) We open up to two 45 DTE trades but with different time to expiration. We will be creating a ladder. This was our old theory we started doing a few years ago but abandoned and never finished. This means, we will open a 45 DTE expiration trade one week and then a second 45 DTE next week.

3) After a trade is open we immediately place a closing GTC (good till cancelled) trade for 50% profit.

4) We open a new 45 DTE trade only when the old trade is closed. If an old trade is rolled or otherwise kept open no new trade can be opened.

5) A new additional 45 DTE (above 2 contracts mentioned above) trade can be added only when BP is higher than the cash management limit allowed.

6) We will keep managing old open trades already in the account to close them successfully as winners.

 

In the ROTH account:
 

1) There will be no new trading in this account. Only managing old open trades. and saving more cash for trading.

 

In the TD account:
 

1) There will be no new trading in this account. Only managing old open trades. and saving more cash for trading.
 

It is really time to stop the madness and reckless trading I did sometimes in my accounts and bring it back to boring strategy and discipline.
 

The stock market has been volatile as it was sending a message to FED to ease the rates amid global economy (and the US among it) slowdown. and Powell seemed to deliver that message last week. The market rallied and broke the downtrend.

It created a double bottom also. That provided the needed boost to break the pessimism:

 
Trading Results
 

But we are heading toward a strong resistance at 2800 – 2820 level. We are not there yet so we may see some more buying conviction pushing this market up – unless Trump destroys it all at the G20 meeting with the Chinese President. If Trump escalates his trade war which is already damaging the US economy – farmers, automakers and others as exports to China dropped significantly when Chinese decided to stop buying from the US and looking at another sources such as Canada, India, Russia, or South American countries.
 

There is more to all this mess Trump has created and many decided to either ignore it or even foolishly defend it. But let’s see how all this ends.

A positive note can be that history shows that whenever FED stopped raising interest rates, the market rallied. Let’s hope it will play that way too this time despite a lot of damage from Trump.
 

In November, we were mostly adjusting our trades to make sure majority of them would be positioned well for their upcoming expiration. We had many Iron Condors on SPX with puts deep in the money. Thus we rolled those Condors lower to be not too deep in the money. We are still bullish, so we didn’t want to roll those Condors too low to avoid calls being in trouble once the market really rebounds and start rallying.

We also had many spreads and Iron Condors using stocks as underlying but in this volatile market with a lot of whipsaw price action we needed to avoid getting our stock positions in the money and have them early assigned. We had SPY early assigned last week and lost money. We didn’t want that to happen to all of our stock options trades.

In November our income was however small, smaller than expected, as we mostly waited and didn’t trade too much. We expect this trend to continue in December trading only a few trades and managing the old ones. a large portion of income was also consumed by closing the old trades earlier than what we normally do.

 
Trading Results
 

in November 2018 we lost $502.89 and our Net-liq of all accounts dropped by $2,044.05.

We post our trades on our Facebook page.

 
 

Here are the entire 2018 year trading results:

 
Trading Results
 

 

 · Dividend stock investing

 

Dividend investing is doing great on both accounts – ROTH and IRA. We keep using 50% of all options income and buy dividend stocks. IRA account keeps growing fast with new stocks being purchased every month. ROTH is more or less stagnant.

 

Here is a review of our accounts stock holdings:

 
Traditional IRA
Trading Results
 

ROTH IRA
Trading Results
 

TD account
Trading Results
 

In August we purchased the following shares:

 
IRA purchases:
Dividend growth stocks
 

We haven’t purchase any shares in ROTH or TD this month.
 

We keep spending 50% of our options trading proceeds to buy good dividend growth stocks using our screener to get a better entry into the stocks. Although capital appreciation is not our goal but a secondary target, timing the entry creates good results as our positions are mostly up. However, do not be too excited, any large selloff can temporarily send those stocks down again. It is a dividend income what matters to our portfolios, not the portfolio value and capital appreciation. It seems to be evident that using options to grow the portfolio is the right way to do.

 

 · Dividend Income

 

IRA dividend income
Trading Results
 

ROTH IRA dividend income
Trading Results

 




TastyWorks

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