Weekly Newsletter   Challenge account


Posted by Martin December 07, 2021
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FOMO


What was obvious a week ago that Omicron probably is not as bad as investors perceived (definitely not worse than the Delta variant), and FED tapering no longer matters, everybody started chasing the markets again.

Last two weeks investors were selling everything. Today, they are buying it back at higher prices. Many are screaming “buy! buy!… turn those machines back on!” as they feel the fear of missing out on this rapid recovery.

As I said before, if the support at $4550 holds the trend will resume:
 

SPX support

 
The support held and investors started panic buying:
 

SPX panic FOMO

 
Just Nasdaq jumped up over 3% today! And more investors who were in disbelief today will be rushing in tomorrow.




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Posted by Martin December 05, 2021
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November 2021 $100 Challenge account review


Trading a small account requires a lot of patience and diligence. It is not get-rich-quick trading. When trading a small account, all odds will be against you – the fees, restrictions, regulations, everything will be set to make your journey hard and difficult. But the payoff will be sweet.

When I started trading options I wanted to be rich fast. I saw options as a route for riches bypassing slow stocks. At first, it worked and I believed I found the holy grail. But I only fooled myself when I was actually losing money. In 2019 I finally put a stop to my madness. I learned how to trade options the correct way, but never did it that way. In 2019, it was time to go back to the roots of proper options trading.

I restarted my account with nothing in it and slowly built it up again. The entire year 2019 was still going down. In 2020 my net liq dropped even more as many bad trades were going away. But I was not going astray and traded the way I knew would work no matter what.

This program is to show you the progress step by step from a small account to a large one:

 

Accumulation phase

 
The account is still underperforming our goal but it is on the path to success. We are now trading small trades (strangles) and we will continue accumulating shares for our next options trade. The strangle trades are consuming collateral buying power but as they near towards expiration we will see a jump in BP and net-liq.

We are trading strangles because they are easier to manage compared to Iron Condors, but they are also a bit more expensive as far as capital requirements go. That is why choosing good stocks to trade is crucial. Choose safe, stable stocks, providing enough premium and stability. And that is what we are doing.
 

October 2021 Challenge account review

 

MONTH GOAL $$ ACTUAL $$
June 2021: $203.00 $202.67
July 2021: $306.00 $334.75
August 2021: $409.00 $397.71
September 2021: $512.00 $476.91
October 2021: $615.00 $632.37
November 2021: $718.00 $659.00
December 2021: $821.00  
January 2022: $924.00  
February 2022: $1,027.00  
March 2022: $1,130.00  
April 2022: $1,233.00  
May 2022: $1,336.00  

 

$100 Challenge account review

 
From the chart above, the red dot (line) indicates the current account value, compared to the blue line (plan). Our account is trailing our goal. When trading naked options, expect volatility in your net-liq. That can be seen by some as a disadvantage. When trading spreads, your net-liq will be stabilized by neutralizing delta. With naked options, you would have to choose other instruments to do so, for example owning stocks to neutralize your call side. We do not have this yet as our account is small, but we are building our position.
 

October 2021 Overall Challenge account review

 
The chart below indicates our account value compared to the overall goal and plan to grow $100 investment into a $75,000 portfolio. As of today, we are at the beginning of our journey.

YEAR CONTRIBUTIONS $$ GOAL $$ ACTUAL $$
Year 0: $100.00 $100.00 $100.00
Year 1: $1,300.00 $1,336.00 $659.00
Year 2: $2,500.00 $3,016.96  
Year 3: $3,700.00 $5,303.07  
Year 4: $4,900.00 $8,412.17  
Year 5: $6,100.00 $12,640.55  
Year 6: $7,300.00 $18,391.15  
Year 7: $8,500.00 $26,211.96  
Year 8: $9,700.00 $36,848.27  
Year 9: $10,900.00 $51,313.64  
Year 10: $12,100.00 $70,986.56  

 

$100 Challenge account review goal

 

September 2021 Challenge account Income

 

Total Invested in Stocks $54.60
Total Unrealized Profit -$1.56
Total Realized Profit -$1.17
Strangles Income $224.00
Dividends Income $11.94
Deposits Total $700.00
Cash $1,011.96
Net-Liq $659.00

 

August 2021 Cumulative return Challenge account review

 

As of today, our challenge account provided a -11.02% monthly cumulative return.
 

$100 Challenge account review goal

 
$100 Challenge account review goal

 

If you want to see what investments we take, what trades and strategies we will use to grow this small account join our program today and grow your money too. We engage in safe investments, select strategies to maximize winning trades, and grow our portfolio. And you can do it too, today! We do not provide quick rich promises, gambling, or reckless strategies. We want our portfolio to grow steadily and preserve our capital while maximizing returns.
 

As a member, you will have access to the following features:
 

 

 




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Posted by Martin December 05, 2021
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2021 Week 48 investing and trading report


November 2021 and the beginning of December 2021 ended up as my worst performance so far. Of course, I can’t expect that our account will go always up only, there will be drawdowns, but as you will see in this investing and trading report, our net-liq lost $8,562 which represents a loss of 8.93% since the account peak. But from then the account balance started losing ground. The net-liq was losing value despite our stock holdings increasing in value (+1.14%), our cash holdings increased in value (+59.24%), our options income increased in November by 5.24% and our dividend income also exceeded our monthly goal.

I tried to find what was causing this slump while all other metrics were actually better than the previous ones and all I could find was volatility and tech stocks selloff. What does it indicate? If the market improves, this drawdown is just a temporary decline that will improve again.
 

Here is our investing and trading report:

 

Account Value: $87,278.33 -$3,870.87 -4.25%
Options trading results
Options Premiums Received: $1,054.00    
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%  
05 May 2021 Options: $6,346.00 +9.22%  
06 June 2021 Options: $4,677.00 +6.37%  
07 July 2021 Options: $3,865.00 +5.14%  
08 August 2021 Options: $6,133.00 +7.40%  
09 September 2021 Options: $2,353.00 +2.97%  
10 October 2021 Options: $8,721.00 +9.27%  
11 November 2021 Options: $4,577.00 5.24%  
Options Premiums YTD: $55,654.00 +63.77%  
Dividend income results
Dividends Received: $114.08    
01 January 2021 Dividends: $53.04    
02 February 2021 Dividends: $63.00    
03 March 2021 Dividends: $30.31    
04 April 2021 Dividends: $139.70    
05 May 2021 Dividends: $167.45    
06 June 2021 Dividends: $168.56    
07 July 2021 Dividends: $228.62    
08 August 2021 Dividends: $780.09    
09 September 2021 Dividends: $176.60    
10 October 2021 Dividends: $256.73    
11 November 2021 Dividends: $463.90    
Dividends YTD: $2,667.85    
Portfolio metrics
Portfolio Yield: 4.46%    
Portfolio Dividend Growth: 8.80%    
Ann. Div Income & YOC in 10 yrs: $21,999.61 18.90%  
Ann. Div Income & YOC in 20 yrs: $216,801.56 186.30%  
Ann. Div Income & YOC in 25 yrs: $1,166,376.41 1002.30%  
Ann. Div Income & YOC in 30 yrs: $10,899,423.40 9,366.14%  
Portfolio Alpha: 57.38%    
Portfolio Weighted Beta: 0.59    
CAGR: 562.01%    
AROC: 48.75%    
TROC: 18.15%    
Our 2021 Goal
2021 Dividend Goal: $1,071.42 249.00% Accomplished
2021 Portfolio Value Goal: $42,344.06 206.12% Accomplished
6-year Portfolio Value Goal: $175,000.00 49.87%  
10-year Portfolio Value Goal: $1,000,000.00 8.73%  

 

Dividend Investing and Trading Report

 
Last week we have received no dividends. Our dividend income is still well in line with our goals and plans. We planned on receiving $472.82 in dividends in November and so far we have received $463.90 income.

Here you can see our dividend income per stock holding:

 
Annual Dividend Payout week 48
 

Options Investing and Trading Report

 
Selloffs in the markets are great for me. I keep saying, when the investors out there panic, I make the most of my income. Last week, we rolled most of our trades to keep them safe and generated income.

We rolled these trades:
 
BAC 42/50 strangle to 41.5/47.5 strangle for 0.05 credit
AES 23/27 strangle to 21/165 strangle for 0.40 credit
multiple adjustments of SNOW spreads
DKNG 30/50 strangle to 25/35 strangle for 0.05 credit
TSN 72.5/85 strangle to 80/90 strangle for 0.40 credit
TSLA 1035/1040 put spread to 1025/1030 put spread for 0.05 credit
SPCE 2x 18p/ 3x 25c uneven strangle to 3x 13p/ 3x 18c strangle for 1.09 credit
OXY 30/40 strangle to 27/32 strangle for 0.04 debit
CROX 145/200 strangle to 140/185 strangle for 1.82 credit
BABA 105/145 strangle to 100/135 strangle for 0.35 credit
PMT 20 put to 20 put for 0.35 credit
KBE 54/60 strangle to 52/58 strangle for 5.14 credit
BA 170/200 strangle to 180/220 strangle for 3.00 credit
WEN 20/24 strangle to 19/23 strangle for 0.20 credit
MU 77.8/95 strangle to 72.5/95 strangle for 0.80 credit
BA 170/200 strangle to 170/225 strangle for 1.47 credit
AAPL 155/185 strangle to 140/175 strangle for 0.90 credit
BA 175/207.5 strangle to 170/200 strangle for 2.13 credit
BA 180/215 strangle to 170/200 strangle for 2.99 credit
TSN 75/90 strangle to 72.5/85 strangle for 0.63 credit
WBA 43/51 strangle to 42.5/47.5 strangle for 0.05 credit
DKNG 30/45 strangle to 25/45 strangle for 0.30 credit
and many other trades.
 

We closed a PPL strangle for 0.50 debit, the entire trade closed for 0.45 credit.
We also closed a CSCO strangle for 0.15 debit, the entire trade closed for 1.69 credit.
We closed BEPC strangle for 2.77 debit. The entire trade closed for 0.47 debit (a losing trade).
 

These adjustments delivered $1,054.00 of additional options income topping November at $4,577.00. Not the best month but not the worst one either. I expected November to be choppy but unfortunately, I was not very well prepared for it.
 

You can watch all our trades in this spreadsheet. You can watch the spreadsheet and look for a “NEW” indication next to the trading date. When the indicator shows up, it is typically good for up to 3 days to follow that trade.
 

Expected Future Dividend Income

 
We have received $114.08 in dividends last week. Our portfolio currently yields 4.46% at $87,278.33 market value.

 
Our projected annual dividend income in 10 years is $21,999.61 but that projection is if we do absolutely nothing and let our positions grow on their own without adding new positions or reinvesting the dividends.

We are also set to receive a $4,320.18 annual dividend income. We are 19.64% of our 10 year goal of $21,999.61 dividend income.

 
Future Divi on YOC week 48
 

The chart above shows how our future dividend income is based on the future yield on cost and what dividend income we may expect in the future. The expected dividend growth depends on what stocks we are adding to our portfolio and the stocks’ 3 years average dividend growth rate. It is interesting to see what passive income we may enjoy 10, 20, 25, or 30 years from now.

 

Market value of our holdings

 
Our non-adjusted stock holdings market value decreased from $126,058.32 to $122,486.39 last week. But on month to month our stock holding value increased from $121,107.63 to $122,486.39 value.

 
Stock holdings week 48
 

Our goal is to accumulate 100 shares of each stock of our interest and we are getting to that goal.
 

Investing and trading ROI

 

Our options trading delivered a 5.24% monthly ROI in November 2021, totaling a 63.77% ROI YTD. We again exceeded our 45% annual revenue selling options against dividend stocks target!

Our account grew by 324.25% beating our projections and the market.
 

Our options trading averaged $4,637.83 per month this year. If this trend continues, we are on track to make $55,654.00 trading options in 2021. As of today, we have made $55,654.00 trading options.
 

Old SPX trades repair

 

This week, we didn’t adjust any SPX trades. Our goal is to reach a level that we will be eligible for portfolio margin (PM). Once that happens, we plan on converting the existing SPX Iron Condors to strangles and trade these positions as strangles.

With RegT margin, the capital requirements would be approx. $66,586.06 and that is beyond our means. With PM the requirement for margin would drop to around $10k. That is doable in our account. Once we reach this level, we will start adjusting our SPX trades accordingly. Until then, we will just roll these trades around.

 

Accumulating Growth Stocks

 

Last week we liquidated our RIFN position (for a loss) and used cash to accumulate our HFEA holdings (purchasing SPXL and TMF).

Here is a quick review of our HFEA strategy.

 

Accumulating Rules

 

Despite the rule below, I was still running low on buying power and I was wondering why. Then I saw it. Although I am limiting my options trading, I go on a shopping spree and use a lot of free BP buying stocks. That is not necessarily bad, but these purchases reduce my BP and when the market drops, my BP is depressed even more. I am buying more shares than what my options are generating. When I sell options and generate for example $100 dollars, I go and buy shares worth $200 (thank you margin!). That depletes my reserves. And this also was not my plan at the beginning!

Originally, my goal was to use options income only, so it is time to return to the roots.

Our rule is to buy shares of growth stocks using options income only and only when the BP is above the $4,000 November limit. In December 2021, we plan on increasing the limit to the $5,000 level.

Why such a rule? Up to today, I was scaling up my trades and portfolio. That resulted in rapid growth but also all our proceeds were constantly locked in the trades. If we want to live off of our dividends and options income, we cannot have them locked by new trades. We need to start accumulating “cash available to withdraw”. Therefore, I am shifting my trading to trade the same amount of contracts and invest only a certain excess of the accumulated cash.

Another reason, of course, is to have enough cash to buy opportunities when the market crashes or corrects. As is typical, Wall Street usually overreacts (stupidly) and I want to buy shares when the market is in panic. Like last week. the almost 3% sell-off provided a good opportunity but I have no available buying power!

 

Accumulating Dividend Growth Stocks

 

Last week, we also added FLMN shares to our portfolio.

Our goal is to reach 100 shares of high-quality dividend stocks and build a weekly dividend income as per this calendar, but we have made no changes to this goal last week:
 

Weekly dividends income calendar
 
You can see the entire spreadsheet here.

 

Market Outlook

 

The market suffered another wave of selling. The panic was once again fueled by Omicron panic, FED early tapering, and bad employment data (which in my view should be good for the market preventing FED from tapering). The market is driven by craziness, volatility, and lack of direction.
 

SPX 2021 1204

 
There are no catalysts that could be driving this market, earnings are done, and all is left is just freaks panicking. So the market is driven by mood and news. All we can rely on is technical levels. From that perspective, there are only two levels – the 50-day moving average, the 200-day moving average, and previous resistance that is now a support.

We breached the 50-day moving average.
We are in breach of the previous support but there is still a chance that the support will hold. If it holds, I expect the market to resume the uptrend.
If the support doesn’t hold, the market might go to the 200-day moving average.
 

SPX 2021 1204
 

When can we expect this market to crash? Watch earnings reports and estimates. When these change, the market will change. It has not happened yet but be open to the possibility of this changing.
 

If you want to learn more about the stock market, events that moved the market last week and will likely impact it in the near future, I recommend you to subscribe to our weekly newsletter. Knowing where the market is heading and knowing when you should expect its reversal can benefit your trading and investing. Subscribe and you get one month free.

 

Investing and trading report in charts

 

Account Net-Liq

 

TW Account Net-Liq week 48

 

Account Stocks holding

 
TW Account holdings week 48
 

Last week, S&P 500 grew 56.89% since we opened our portfolio while our portfolio grew 23.53%. On YTD basis, the S&P 500 grew 27.05% and our portfolio 16.55%.

The numbers above apply to our stock holdings only. Our overall account net-liq grew by 324.25% this year! This is thanks to options trading that generates income. It can be also seen how the options help lower our cost basis. Just compare the P&L in the regular (left) column with the P&L in the “Options adjusted” column. For example, our AES holding would be a loser as of today (down -9.37%), but we generated enough income (we can call it also a return of our invested capital) and that position is 128.10% up.
 

Stock holdings Growth YTD

 
TW Account holdings Growth YTD
 

I expect our stock holdings to start outperforming the market hopefully soon. The entire portfolio beats the market by far thanks to monetizing those positions.

Our 10-year goal is to grow this account to $1,000,000.00 value in ten years. We are in year two and we accomplished 8.73% of that goal.

Our 6-year goal is to reach $175,000 account value to be eligible for portfolio margin (PM) and today we accomplished 49.87% of that goal.

Our 2021 year goal is to grow this account to a $42,344.00. We already accomplished this goal.

 

Investing and Trading Report – Options Monthly Income

 
TW Options Income week 48
 

Investing and Trading Report – Options Annual Income

 

TW Options Annual Income week 48
 

Our dividend goal and future dividends

 

TW Received vs Projected Dividends week 48
 

We have accomplished our dividend income goal. We planned to make $1,071 of dividend income this year and we finished receiving $2,667.85. However, we accumulated enough shares to start making $4,320.18 a year.
 

TW Received vs Future Dividends week 48

 

Our account cumulative return

 

The chart below indicates our cumulative adjusted return.
 

TW cumulative return wk 48
 

TW win ratio wk 48
 

As of today, our account cumulative return is 37.48% (note, data in this section are since March 13, 2021, only as that is the date we started tracking these metrics. Thus the results are skewed a bit and will show full picture next year.).

 

Conclusion of our investing and trading report

 

This week our options trading was within our expectations and I believe, the rest of the month will be even better.

We will continue accumulating the dividend growth stocks in our portfolio to reach 100 shares and continue building our cash reserves so we have enough cash to sustain any market corrections and be able to buy depressed stocks.

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




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Posted by Martin November 30, 2021
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Idiots returned to the market, rejoice and buy


And here we have it again. Hysteria renewed, or hysteria v2.0, whatever you name it. Despite cases of the new Omicron variant declining in South Africa hysterics returned to the markets selling everything. Powell didn’t help either this time as he said tapering may start sooner than expected.

But don’t worry, his words were to test market waters and see how the market reacts… combined with Covid matter that is not a matter at all.

This hysteria is temporary ease of the overvalued market. There is no impact, and probably will be no impact, on earnings and estimates, so the market will recover and this hysteria will be just a laughable event to talk about in a bar. I take this as an opportunity to buy more shares of the stocks I want to own and let the idiots panic and sell. Tomorrow, they will be buying it all back incurring losses on transaction costs and possibly buying higher than when they sold off.




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Posted by Martin November 28, 2021
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“The new Omicron variant of the Coronavirus results in MILD disease, WITHOUT prominent symptoms”


“This mutation is unlikely to be more malicious and that the existing vaccines will most likely continue to be effective in preventing hospitalizations and deaths” and as a result, while Goldman “would monitor the situation in Gauteng closely over the next month, we do not think that the new variant is sufficient reason to make major portfolio changes.”
 

Translation: brace for a face-ripping rally come Monday when carbon-based traders finally take over from the idiot algos.

Read the entire article at Zerohedge.




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Posted by Martin November 27, 2021
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2021 Week 47 investing and trading report


Wow, the end of the month got pretty wacky! We have received news about a new Covid variant and “although experts do not know yet if it will cause more or less severe COVID-19 compared to other strains” investors already started shooting themselves, jumping out of the windows, and selling their wives and kids off. This panic obviously hit our account but I consider this selloff panic as an overreaction and a buying opportunity even though it may continue next week. We just need to wait for the panickers out there to calm down. However, calming down will be a difficult process now that the new strain was detected in Belgium, the UK, Hong Kong, and Israel despite the ramping travel bans. Looks like, Covid has its own planes and travels on its own.

Our account net-liq lost -3.22% last week compared to -2.70% SPX, but our options trading improved (and I expect it to get better next week as I will be adjusting positions for the new selloff. I usually make a lot more money when the markets panic). We had no dividend income last week but we are still on track with the dividend income monthly projection.

 

Here is our investing and trading report:

 

Account Value: $91,149.20 -$3,035.80 -3.22%
Options trading results
Options Premiums Received: $1,670.00    
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%  
05 May 2021 Options: $6,346.00 +9.22%  
06 June 2021 Options: $4,677.00 +6.37%  
07 July 2021 Options: $3,865.00 +5.14%  
08 August 2021 Options: $6,133.00 +7.40%  
09 September 2021 Options: $2,353.00 +2.97%  
10 October 2021 Options: $8,721.00 +9.27%  
11 November 2021 Options: $3,523.00 3.87%  
Options Premiums YTD: $52,305.00 +57.38%  
Dividend income results
Dividends Received: $0.00    
01 January 2021 Dividends: $53.04    
02 February 2021 Dividends: $63.00    
03 March 2021 Dividends: $30.31    
04 April 2021 Dividends: $139.70    
05 May 2021 Dividends: $167.45    
06 June 2021 Dividends: $168.56    
07 July 2021 Dividends: $228.62    
08 August 2021 Dividends: $780.09    
09 September 2021 Dividends: $176.60    
10 October 2021 Dividends: $256.73    
11 November 2021 Dividends: $349.82    
Dividends YTD: $2,471.25    
Portfolio metrics
Portfolio Yield: 4.59%    
Portfolio Dividend Growth: 8.80%    
Ann. Div Income & YOC in 10 yrs: $23,281.65 19.71%  
Ann. Div Income & YOC in 20 yrs: $237,792.95 201.35%  
Ann. Div Income & YOC in 25 yrs: $1,317,843.38 1115.88%  
Ann. Div Income & YOC in 30 yrs: $12,823,046.88 10,857.90%  
Portfolio Alpha: 51.11%    
Portfolio Weighted Beta: 0.58    
CAGR: 582.19%    
AROC: 56.34%    
TROC: 17.19%    
Our 2021 Goal
2021 Dividend Goal: $1,071.42 230.65% Accomplished
2021 Portfolio Value Goal: $42,344.06 215.26% Accomplished
6-year Portfolio Value Goal: $175,000.00 52.09%  
10-year Portfolio Value Goal: $1,000,000.00 9.11%  

 

Dividend Investing and Trading Report

 
Last week we have received no dividends. Our dividend income is still well in line with our goals and plans. We planned on receiving $472.82 in dividends in November and so far we have received $349.82 income.

Here you can see our dividend income per stock holding:

 
Annual Dividend Payout week 47
 

Options Investing and Trading Report

 
We received nice options income last week as we were re-opening the trades that expired the previous week. I expected that to boost our income. We also rolled some trades that were not in a good shape.

We opened new trades replacing the ones that expired:
 
BAC 42/50 strangle for 0.38
WBA 43/51 strangle for 0.45
TSLA 1035/1040 bull put spread for 1.10
SPY 450/455 bull put spread for 0.55
TSLA 995/1000 bull put spread for 1.34
BA 185/237.5 strangle for 3.22
KBE 53/62 strangle for 0.42
F 23.5 covered call for 0.26
O 62.5/77.5 strangle for 0.49
&nbs;

We rolled these trades:
 
AAPL 125/165 strangle to 155/185 strangle for 1.00
BABA 130/165 strangle to 110/165 strangle for 0.90
DKNG 35/45 strangle to 30/45 strangle for 0.07 (debit)
MU 70/85 strangle to 75/90 strangle for 0.80
SNOW 335/340 bull put spread converted to 315/320/365/370 Iron Condor for 0.12
VZ 55/60/60/65 Butterfly converted to 40/47/60/65 Iron Condor for 0.38
SPCE 1x 23/ 3x 27 uneven strangle to 2x 18 / 3x 25 uneven strangle for 5.36

These adjustments delivered $1,670.00 of additional options income topping November at $3,523.00. Not the best month but not the worst one either. I expected November to be choppy but unfortunately, I was not very well prepared for it.

 

You can watch all our trades in this spreadsheet. You can watch the spreadsheet and look for a “NEW” indication next to the trading date. When the indicator shows up, it is typically good for up to 3 days to follow that trade.
 

Expected Future Dividend Income

 
We have received no dividends last week. Our portfolio currently yields 4.58% at $91,149.20 market value.

 
Our projected annual dividend income in 10 years is $23,281.65 but that projection is if we do absolutely nothing and let our positions grow on their own without adding new positions or reinvesting the dividends.

We are also set to receive a $4,694.96 annual dividend income. We are 20.17% of our 10 year goal of $23,281.65 dividend income.

 
Future Divi on YOC week 47
 

The chart above shows how our future dividend income is based on the future yield on cost and what dividend income we may expect in the future. The expected dividend growth depends on what stocks we are adding to our portfolio and the stocks’ 3 years average dividend growth rate. It is interesting to see what passive income we may enjoy 10, 20, 25, or 30 years from now.

 

Market value of our holdings

 
Our non-adjusted stock holdings market value increased from $109,599.80 to $126,058.32 last week. I expected the improvement after closing the short AAPL position after the assignment. In the hindsight, I should have held the position. It would be making me money today. But I do not short stocks as I do not have the skills to do it successfully.

 
Stock holdings week 47
 

Our goal is to accumulate 100 shares of each stock of our interest and we are getting to that goal.
 

Investing and trading ROI

 

Our options trading delivered a 3.87% monthly ROI in November 2021, totaling a 57.38% ROI YTD. We again exceeded our 45% annual revenue selling options against dividend stocks target!

Our account grew by 343.07% beating our projections and the market.
 

Our options trading averaged $4,755.00 per month this year. If this trend continues, we are on track to make $57,060.00 trading options in 2021. As of today, we have made $52,305.00 trading options.
 

Old SPX trades repair

 

This week, we didn’t adjust any SPX trades. Our goal is to reach a level that we will be eligible for portfolio margin (PM). Once that happens, we plan on converting the existing SPX Iron Condors to strangles and trade these positions as strangles.

With RegT margin, the capital requirements would be approx. $66,586.06 and that is beyond our means. With PM the requirement for margin would drop to around $10k. That is doable in our account. Once we reach this level, we will start adjusting our SPX trades accordingly. Until then, we will just roll these trades around.

 

Accumulating Growth Stocks

 

Last week we liquidated our RIVN position (for a loss) and purchased 100 shares of Ford (F). Ford is an established automaker that is now going electric and will be manufacturing their electric F-150 Lighting truck. Unlike Rivian, Ford is delivering their cars and they have the capacity to deliver the number of trucks their CEO announced. Rivian doesn’t even have a factory established and so far delivered a prototype only. This video below made me change my mind about Rivian:

 

 

Ford is also a dividend stock as they re-established their dividend recently. I wouldn’t consider it a dividend growth stock, but along with the dividends, I expect the company to deliver returns on their electric trucks.

We also added 6 more shares of SNOW to our portfolio.

But I realized that I was deviating from my original accumulating plans and rules. See below.

I also split my SPXL and SSO accumulation goals into an HFEA strategy.

 

Accumulating Rules

 

Despite the rule below, I was still running low on buying power and I was wondering why. Then I saw it. Although I am limiting my options trading, I go on a shopping spree and use a lot of free BP buying stocks. That is not necessarily bad, but these purchases reduce my BP and when the market drops, my BP is depressed even more. I am buying more shares than what my options are generating. When I sell options and generate for example $100 dollars, I go and buy shares worth $200 (thank you margin!). That depletes my reserves. And this also was not my plan at the beginning!

Originally, my goal was to use options income only, so it is time to return to the roots.

Our rule is to buy shares of growth stocks using options income only and only when the BP is above the $4,000 November limit. In December 2021, we plan on increasing the limit to the $5,000 level.

Why such a rule? Up to today, I was scaling up my trades and portfolio. That resulted in rapid growth but also all our proceeds were constantly locked in the trades. If we want to live off of our dividends and options income, we cannot have them locked by new trades. We need to start accumulating “cash available to withdraw”. Therefore, I am shifting my trading to trade the same amount of contracts and invest only a certain excess of the accumulated cash.

Another reason, of course, is to have enough cash to buy opportunities when the market crashes or corrects. As is typical, Wall Street usually overreacts (stupidly) and I want to buy shares when the market is in panic. Like last week. the almost 3% sell-off provided a good opportunity but I have no available buying power!

 

Accumulating Dividend Growth Stocks

 

Last week, we also added BAC, FLMN, and LMT shares to our portfolio, obviously spending more than our BP allowed. Now I will have to sit tight and let our portfolio consolidate.

Our goal is to reach 100 shares of high-quality dividend stocks and build a weekly dividend income as per this calendar, but we have made no changes to this goal last week:
 

Weekly dividends income calendar
 
You can see the entire spreadsheet here.

 

Market Outlook

 

The market was going mostly sideways last week, as expected. Yet, I noticed that most of the stocks in our portfolio were constantly in red despite the flat market. That was not a good sign. Then on Friday, covid fear hit and we sold off sharply on a significantly high volume despite the US traders digesting their turkeys from the night before. If we see a continuation or even a gap down on Monday next week, brace yourself for more selling next week. If traders shake the Covid news off, this market will recover.

Here is what happened last week:
 

SPX 2021 1127

 
It is hard to say where we will be going from here. We are sitting on a 50-day moving average right now. It may work as resistance and we may bounce from here, or it will slash through like a hot knife through butter and more damage is to come. We see another stop at $4,550 (and Monday selling pressure may push us there) and then we may bounce. If that doesn’t hold, $4,300 would be the next stop.
 

Given that more negative news about the new Covid strain is coming from mainstream media, I would expect more selling next week.
 

If you want to learn more about the stock market, events that moved the market last week and will likely impact it in the near future, I recommend you to subscribe to our weekly newsletter. Knowing where the market is heading and knowing when you should expect its reversal can benefit your trading and investing. Subscribe and you get one month free.

 

Investing and trading report in charts

 

Account Net-Liq

 

TW Account Net-Liq week 47

 

Account Stocks holding

 
TW Account holdings week 47
 

Last week, S&P 500 grew 58.83% since we opened our portfolio while our portfolio grew 23.64%. On YTD basis, the S&P 500 grew 28.99% and our portfolio 16.65%.

The numbers above apply to our stock holdings only. Our overall account net-liq grew by 343.07% this year! This is thanks to options trading that generates income. It can be also seen how the options help lower our cost basis. Just compare the P&L in the regular (left) column with the P&L in the “Options adjusted” column. For example, our AES holding would be a loser as of today (down -9.10%), but we generated enough income (we can call it also a return of our invested capital) and that position is 120.31% up.
 

Stock holdings Growth YTD

 
TW Account holdings Growth YTD
 

I expect our stock holdings to start outperforming the market hopefully soon. The entire portfolio beats the market by far thanks to monetizing those positions.

Our 10-year goal is to grow this account to $1,000,000.00 value in ten years. We are in year two and we accomplished 9.11% of that goal.

Our 6-year goal is to reach $175,000 account value to be eligible for portfolio margin (PM) and today we accomplished 52.09% of that goal.

Our 2021 year goal is to grow this account to a $42,344.00. We already accomplished this goal.

 

Investing and Trading Report – Options Monthly Income

 
TW Options Income week 47
 

Investing and Trading Report – Options Annual Income

 

TW Options Annual Income week 47
 

Our dividend goal and future dividends

 

TW Received vs Projected Dividends week 47
 

We have accomplished our dividend income goal. We planned to make $1,071 of dividend income this year and we finished receiving $2,471.25. However, we accumulated enough shares to start making $4,669.60 a year.
 

TW Received vs Future Dividends week 47

 

Our account cumulative return

 

The chart below indicates our cumulative adjusted return.
 

TW cumulative return wk 47
 

TW win ratio wk 47
 

As of today, our account cumulative return is 43.57% (note, data in this section are since March 13, 2021, only as that is the date we started tracking these metrics. Thus the results are skewed a bit and will show full picture next year.).

 

Conclusion of our investing and trading report

 

This week our options trading was within our expectations and I believe, the rest of the month will be even better.

We will continue accumulating the dividend growth stocks in our portfolio to reach 100 shares and continue building our cash reserves so we have enough cash to sustain any market corrections and be able to buy depressed stocks.

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




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Posted by Martin November 26, 2021
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Adding HFEA strategy to our account


If you are reading our weekly investing and trading reports, you know that we started trading SSO and SPXL leveraged ETFs to our portfolio. The reason for that was that we wanted to outperform the SPY better than just trading single stocks or indexes. We wanted more aggressive growth in our portfolio. The leveraged ETFs (LETFs) seemed like the way to go. Of course, I have options but these require a lot of work and I wanted something more passive, sort of.

But as you know (or may not know), the LEFTs work great both ways. They outperform the index significantly. Although the prospectus says that 3x leveraged ETF outperforms the market 3 times, in reality, it outperforms the market almost 8 times (due to daily rebalancing).

But this feature works both ways. In markets selloff, it outperforms the market too (although not as good as in uptrend, which is good). So today, when the market sold off by 2.70%, the SSO sold off by 4.33%, and SPXL by 6.73%.

And then you have an issue media and pundits will tell you that these leveraged ETFs are not suitable for long-term holdings due to decay and other fearmongering. It is all bullshit. If the decay was an issue, the chart below would look completely different:

 
SPXL chart
 

But, as you can see, if you bought SPXL in 2010, you would be buying for less than $5 and today, your holding would be $129.52 after two splits in 2013 (3:1) and 2017 (4:1). The only issue you have to sustain psychologically is the deeper drawdowns compared to the standard index. If the index drops 3%, SPXL will drop 10% and recovery will take longer. If you cannot sustain this type of drawdowns, then obviously, trading LEFTs is something you must avoid.

So, if I say that SPXL’s claims by pundits are a noise to ignore, is there a risk? Or is buying and holding a 3x Leveraged ETF a no-brainer?

Of course, there are risks. We experienced an extreme bull market so far and in this market, everyone is a king. And when the market goes sideways or experiences extreme volatility, the SPXL and any other leveraged ETF may not perform as great as it was so far. The contango, volatility decay, and other nasty stuff may happen and slowly eat your position away.

So I did a lot of reading on how to invest in 3x LEFTs and protect my portfolio from being depleted when the brown stinky thing hits the fan. There were a few suggestions to sell 3x LEFT when the market drops below 200-day MA or similar strategies. But I still didn’t like the prospect to let the market drop to 200-day MA first and then sell SPXL. In today’s conditions, the market would have to drop to $4,300 (an additional 6.2% drop from today’s close of $4,582). The SPXL would have to lose another 18% before I would close the position to “protect” my investment. But usually, when the market hits 200-day MA, many algos start buying back, unless we see black swans like the 2020 selloff or 2008 crash, etc. But these black swans do not happen very often. And so, I may implement this strategy, but short term, this will not protect my portfolio.

That’s when I came across a HFEA strategy.

 

What is HFEA strategy?

 
HFEA is an acronym for “Hedgefundie’s Excellent Adventure” strategy. The strategy is about a risk parity portfolio. In other words, it hedges one part of a portfolio with negatively correlated another part of a portfolio. In this case, the SPXL 3x LEFT is hedged with long-term Treasuries in our case it would be TMF. The original strategy calls for using UPRO. I think replacing it with SPXL is not a big deal.

You can read about this strategy here or the original thread on Bogleheads.org – part I and part II; if you want to read details about this strategy.
 

Or you can watch the following video about HFEA strategy:

 

 

Implementing HFEA strategy

 
In accordance with what I have read about trading 3x LEFT I will be reducing my exposure from 25% to 15% of my entire portfolio. Here are my steps:
 

  1. Invest 15% of our net-liq in SPXL/TMF HFEA strategy.
  2. Invest 45% in SPXL and 55% in TMF.
  3. Rebalance HFEA quarterly.
  4. When HFEA outperforms the portfolio (rises above 15% allocation), trim the gains and park them in a BSV fund.
  5. When HFEA underperforms the portfolio (drops below 15% allocation), use BSV savings to buy more SPXL/TMF or add new cash.
  6. When the market crosses 50-day MA down, change allocation to 40% SPXL / 60% TMF
  7. When the market crosses 200-day MA down, change allocation to 0% SPXL / 100% TMF
  8. At the bottom or near the bottom of a bear market (when we drop below 20% or more), change allocation to 100% SPXL / 0% TMF
  9. When the market crosses 200-day MA above, change allocation to 45% SPXL / 55% TMF

 

Based on today’s account net-liq value, we will be investing in HFEA approx. $15,000 value. I will be reporting my HFEA separately from our weekly reports on a monthly basis (I might shorten it to weekly reports too, but I want to see first how the strategy performs).

 
This is still a risky strategy. But the entire LEFTs are risky. But I think, risking 15% of my investments is acceptable. I believe the TMF hedge would protect the investment unless the bond market and the stock market crash together in one day. Possible, but unlikely.
 

HFEA charts I will be showing from now on

 
This is my day #1, although I will have to do some rebalancing in the coming weeks, like closing my SSO position and adding a TMF position to my current holdings. Then, raising my allocation to 15%. After that, my HFEA will be set up and running.

Here are the strategy initial charts:
 

HFEA chart

 
HFEA chart
 

HFEA vs. SPY chart

 
HFEA vs. SPY chart
 

Let’s see how this strategy performs long term.
 
 




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Posted by Martin November 26, 2021
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Covid new variant and market panic


Earlier this week, scientists discovered a new Covid variant that spooked the markets and S&P 500 sold off by 2.7% (down -126.61) and DJI was down -905.04.
 

Everyone panics that this would cause a new travel ban, new restrictions, and new lockdowns. Yet the scientists admit that they do not know about the new variant much yet. Supposedly, the new variant has a spike protein that has mutated to be different from the one the original vaccine was based on.

Moderna and Pfizer/Biontech announced that they can have a new vaccine updated in less than three months. Novavax and Moderna are already developing a new vaccine for this new variant of Covid.
 

This will likely create a little more selling early on Monday. I expect a little more volatility. There are some “unknowns” in regards to the variants and risks. The odds favor this being more of a buying opportunity and it wouldn’t be shocking if a low is put in early next week after the initial wave of fear-based selling has played out.




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Posted by Martin November 26, 2021
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Troubles with hosting


Recently I have experienced issues with our hosting and plan on transferring the blog to a new host. The website is now semi-working. If you need help or have questions, please, contact us.




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Posted by Martin November 25, 2021
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Futures Crashing on Thursday Evening Amid Sudden Fears Over “Dramatically” New Covid Strain


Here we go again. While the US traders are digesting their turkeys with gravy and mashed potatoes the rest of the world is freaking out and algos are hitting bids, amid fears that a new coronavirus strain detected in South Africa, known as B.1.1529, reportedly carries an “extremely high number” of mutations and is “clearly very different” from previous incarnations, which may drive further waves of disease by evading the body’s defenses South African scientists said. Now you know why S&P 500 futures are down -1.00% as of this writing.
 
Beta Delta Gamma, just not options




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