Weekly Newsletter   Challenge account


Posted by Martin September 28, 2020
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#001 More trades opened today


We have added a few more trades today to our accounts:
 

Roll 1 IWM Sep30 148 call to Oct9 150 call for 0.53 credit
With the market renewed rally, we had to roll our IWM trade once again. We rolled it into the next week’s expiration and 150 strike. With the rally, we may need to roll this trade again tomorrow.
IWM trade
 

Bought 10 PBCT shares @ 10.17
We added new shares to our account #2 and now hold 31 shares total in this account. Our goal is to reach 100 shares so we can monetize the position by selling options around it.
 

Bought 30 PBCT shares @ 10.20
Sold 1 BAC Oct9 (weekly) 24.50 call for +0.33 credit
We added few more shares of PBCT stock in our account #4, we now hold 80 shares of this stock and our goal is to reach 100 shares so we can start selling covered calls, or covered strangles.

We also had our BAC covered call expired last Friday and therefore we sold a new covered call today for additional 0.33 credit (or $33 total credit).
 




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Posted by Martin September 28, 2020
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Sold 1 TSN Oct16 (monthly) 56 put for 0.34 credit

Sold 1 TSN Oct16 (monthly) 56 put for 0.34 credit

We sold a put against TSN stock (Tyson Foods) and collected $34 credit. We plan on holding the put until expiration and generate income. If the put expires worthless, we will sell a new one next month, if the put gets in the money, we will attempt rolling it for credit. If it gets assigned, we will buy 100 shares and start selling covered calls.
 

TSN @ 60.22
 


 




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Posted by Martin September 28, 2020
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Bought 5 PPL shares @ 26.64


We added a few more shares raising our holdings to 85. Once again, our goal is to reach 100 shares so we can start selling covered calls or covered strangles, or what have you to further monetize our position and receive more income than just the dividends.




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Posted by Martin September 27, 2020
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Updating our stocks and options holdings review


For some time I was neglecting updating our stock and options holdings on this blog. Most of the time, I was updating these positions on Facebook but since I decided to leave Facebook for good, I returned back here and will be updating our positions in this blog again.

I manage four (4) accounts of various size and the strategy is simple – accumulate dividend growth stocks by:

  • small deposits every month
  • reinvesting the dividends
  • reinvesting options premiums

The goal is to pick undervalued dividend growth companies and keep buying them until we reach 100 shares.

Once we reach 100 shares, we move to another stock and start accumulating that stock too while selling covered calls on the already accumulated stock. As soon as we accumulate the new stock pick to 100 shares, we again move to another stock and start selling covered calls.

Reinvest all proceeds until the income from dividends and options premiums exceeds our expenses.

If you want to see what stocks we currently hold, which stock we are accumulating, and what options positions we trade, go to Trades & Income page.
 




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Posted by Martin September 27, 2020
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Looks like the correction is over… boys are chasing the market up again…

Looks like the correction is over... boys are chasing the market up again...

If you were waiting for lower prices and wanted to buy in, do it quickly otherwise you just missed the boat. It seems, the 10% correction is over and we are heading up again. Not because anything has changed or the economy improved over Saturday and Sunday, but because the market players just had their mood changed and what was bad last week is no longer bad but a bargain.

I may be wrong, but the market looks extremely bullish to me.

I kinda hate it that for the last four weeks the market was falling with only a little blip in the middle and today it seems it is set for a mindless upward moving. I just hope, I am wrong and we are going to see more downside although, I am skeptical, and it is probably time to switch gears and go bullish again.

We have hit 61% retracement, Friday trading was very strong and futures are pointing for a strong open. A zig-zag move up seems inevitable.

 
S&P 500 chart




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Posted by Martin September 27, 2020
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Don’t waste money on $4,000+ seminars with bites for more $$$ seminars

Don't waste money on $4,000+ seminars with bites for more $$$ seminars

Just now, I have come across an announcement on Youtube about a never ever before and never ever in the future offered trading seminar with pre-lockdown and post-lockdown prices… “literally you get 50% off”…

So I went to the website, announcing such a great deal, to check those pre-lockdown and after-lockdown, never seen prices, and the seminars ranged from $997 to $3,997… Great discounts!

Are you kidding me?
 

computer trading

 
And then, I read the comments under the video. I thought I was dreaming, well, I couldn’t believe what I have read. Thank you letters. We are saving for your seminar, 75% saved! Love and respect! Glad to be here! Glad to hand you my hard-earned money for learning what I can learn on the internet for free!
 

Are you kidding me again?

Well, this is really good and I bet these are great seminars! Unfortunately, not for you! It is great for seminar peddlers. No matter how great those seminars are, no matter how great the trader offering it is, DO NOT WASTE YOUR MONEY!

You won’t learn anything that is free on the internet. There is no secret, no magic formula, no short cut to riches. No magic seminar won’t make you rich quick.

If you could save $4,000 for a questionable seminar, then take that money and put them to work on your own. Don’t throw them out of the window for a good feeling that you might become a great trader on Friday afternoon and quit jor job on Monday morning because you attended a seminar for $4,000 of the dead Presidents! It doesn’t work that way! You throw the money out of the window and then start saving money to put the seminar knowledge in practice? Is that your strategy? Before you save another, at least, $5,000 to trade, you will forget everything you might have learned in the seminar and you would have to start over. And even if you remember everything from the seminar, in the end, you will learn that you need to purchase another, never before offered seminar for $8,000 per day with the guru himself watching over your shoulder. But, it will not be the guru himself but his left-hand associate because if you really need a guru himself to teach you personally, you have to buy a $50,000 personal coaching course…
 

Don’t be a fool!
 

I thought that these days in the era of free, no commissioning trading, people can learn and trade on their own. Yet, peddlers are still making their millions selling holy grails to fools.
 

Trading, or investing in the stock market is about things no one will be ever able to teach you but only you yourself. You need to put an effort to learn to trade. If you are really interested in this business, go to the internet, start searching topics you are interested in and learn on your own.
 

Are you interested in options?

Then search topics about “how to trade options”.

Are you interested in stocks?

Then search topics about “how to trade stocks”.

Are you interested in dividend investing?

Then search topics “how to invest in dividend stocks”.

Are you interested in forex?

Then search topics “how to trade forex”… or commodities, or futures, or anything on this planet… but you have to learn it yourself. And you can learn it for free, or a smaller cost than $4,000 for a seminar.

(Photo by Windows and Toni Koraza on Unsplash)




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Posted by Martin September 23, 2020
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The market keeps struggling, but it’s good folks!

The market keeps struggling, but it's good folks!

The market struggles to find the ground. A few bounce attempts failed. We are currently down -1.56% and it seems we are heading towards 200 DMA.

 

 

But this is ultimately a good thing, providing this market with a much needed correction. We rallied up hard with no break or pullbacks and we need to correct this craziness. Just make sure, you trade conservatively to preserve capital.

I keep accumulating cheap stocks (and there are many to choose from) and if this market keeps sliding, more cheap stocks will pop up.

We are 21 days into the correction of 10% as of today. You may expect this to be up to 15% correction (it seems like we are heading that way) or we may even enter a 20% bear market. But nothing goes down forever and I am preparing my ammunition for a potential reversal and buying stocks on sale.

Good luck and stay safe!




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Posted by Martin September 23, 2020
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Bought 14 PBCT shares @ 10.29


We added 14 shares of PBCT stock to our holdings in the account #1 and we have reached 100 shares in this account.

We will now start selling a covered strangle against this position (covered calls and cash-secured puts) to lower our cost basis.

Our current cost basis is $10.86 and we hope to be selling enough options to end up owning this stock for free (in other words, monetizing this position will generate enough income to return all our invested capital back to us, something Warren Buffett does, too).

We will utilize a “wheel of fortune” strategy. If we get assigned to our calls and forced to sell our 100 shares, we will start selling cash-secured puts (2 contracts), if our cash secured puts get assigned and we will be forced to buy additional 100 shares, we will buy and start selling 2 covered calls contracts.

 




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Posted by Martin September 21, 2020
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Selling covered calls below cost basis


  • This post is about my view on selling covered calls below the cost basis of your stock (stock purchase price) when overwriting your portfolio.
  • Is it a problem or a betterment to your portfolio?
  • Other implications, such as taxes.

 

I have seen investors expressing their concerns when the markets dropped earlier this year and now when we are seeing another 10% (and maybe even more than that) correction. Many said, that they had to sell their covered calls below their purchase price and now they are worried that if a stock goes up, they may be assigned and realize a significant loss being forced selling their position below their cost basis.

I was afraid of this event too. But, I was thinking about this and realized, that being assigned, is not such a bad thing as you may think. Let’s review my thinking process and see what roadblocks are there when selling covered calls and you have to sell below your cost basis.
 

If you are like me and try to build and accumulate your portfolio, you may have been accumulating shares of your favorite stocks when the market was all booming, everybody was optimistic, FED was raising interest rates (well, maybe not yet), the economy was rosy, someone was boasting how great job he has done and multiplied your 401k, the future was brighter and brighter every day, and you kept buying and buying your dream shares.

Then, you have reached your goal and accumulated 100 shares of your favorite stock and started selling covered calls to boost your income, so you too could boast about your investing skills.

But then, all the bright future dimmed. Actually, the future just crashed, you got sick seeing your work disappear and now, you were thinking: “What now?”
 

I had the same experience. I accumulated 100 shares of AT&T (T) and my cost basis was $31.94 (I was lucky on this one as I have another great stock which I accumulated at a lot higher cost). Today, AT&T is trading at $28.63. Looking at the options chain, there is no premium at the cost basis or above. No matter which expiration you look at, there is no premium worth taking the risk of an assignment.
 

What to do?
 

You have two options:
 
1) Do nothing, stop selling covered calls until the stock price recovers at or above your cost basis, and then you can start selling covered calls again.
Or
2) Keep selling covered calls but below your cost basis to collect a decent premium. For example, selling a 60 DTE at 30 strike can bring you 0.37 cents or 37 dollars premium. It is OK. I can take it.
 

But wait a minute. If you sell at 30 strike with a 31.94 cost basis and get assigned, you will realize a $1.94 or $194 loss! The premium will lower the loss but not much. And I do not want the loss.
 

There are again a few options you have
 
1) Try to keep rolling your calls higher and away in time. I have done that on a few positions to avoid their assignment and give the stock time to recover.
2) Close the position before it gets in the money. The closing cost will be probably less than the full loss and that may be acceptable for you.
Or
3) Let it assigned.

Once you get assigned, I usually use the proceeds to sell in the money puts. For example, I got assigned and my shares were called away at 30 a share but I immediately sold 29 in the money puts and collected 1.11 credit. If the stock stays depressed, then I get assigned and buy my 100 shares back at 29 a share. If the stock starts moving higher, I start rolling my puts higher too, collecting more credit.
 

What have I just achieved here?
 

First, I have collected a $37 credit on the original covered call.
Second, I got assigned, sold my 100 shares and realized $194 loss on the stock.
Third, I sold new in the money put and collected $111 credit.
Fourth, I lowered my original $31.94 cost basis down to a new $29 a share cost basis.
Fith, I can now sell a new covered call with 30 dollars strike, collect additional 0.40 credit and have a potential gain of $100 on the stock if I get assigned again.
 

I see this as betterment for my portfolio. For a small cost, I could “roll” my stock down, improve my position, and gain potential. And the cost I paid (about 0.46 per contract or 100 shares) was quickly offset by the new covered call sale and added potential gain on the stock which would not be possible should my original cost basis stay.
 

What’s the catch here?
 

Honestly, I do not see many (though there are a few). I actually liked the result of improving my portfolio holdings. The only issue is that you may lose a dividend if this swap of cost basis happens around the ex-dividend day and you happen to be so unlucky that you miss the dividend. In this case, it is better to buy shares outright and not using puts to buy in.

The second issue could be a taxable event. If you were called away on your stock prior to the minimum tax holding period in order to treat your sale as a long term gain and not a short term one, you may be hit with a higher income tax. Also, if you sell the stock and buy back in the position within the 30 day period, this would be treated as a wash sale and you will not be able to use the tax loss to offset your tax gains. However, my trades are small at this time that I do not worry about these events yet.
 

What about you? Are you afraid selling covered calls below your cost basis?
 




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Posted by Martin September 05, 2020
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Stocks to accumulate in September 2020


In my portfolio watch list, only a handful of stocks are good to buy in this overvalued market. The list is not yet complete, but I have time to fill in other stocks later on.

Most of the stocks are dividend aristocrats. Some lost the status many years ago yet I decided to keep them, others lost the status this year due to COVID, and I decided to keep them too as I still think they are good companies, e.g. Disney (DIS) and the dividend cut or suspension is temporary.
 

S&P 500 heat map
 




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