Weekly Newsletter   Challenge account

Posted by Martin March 14, 2017
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Seagate Technology (STX) triple play adjustment

Last week, I made an adjustment to the Seagate Technology (STX) when the stock suddenly dropped.

Maybe, I was a bit hasty adjusting the trade as the stock seemed to recover the losses. The sell off happened upon a downgrade from some so-called analyst who thought he could predict the future and all those clowns at Wall Street started hastily selling.

Normally, if this was my regular strangle trade I would do nothing about the trade and wait but this was a triple play trade where I didn’t want assignment of the puts at $48.50 a share when the stock dropped to $45 a share.

So I rolled.

I rolled puts down to $48.00 and sold calls at 46.50 strike. By the end of Friday last week, the stock recovered to $47.28…

Maybe, I was too in rush adjusting the trade.

Now my calls were in the money and if the stock continued higher the following week I ran into a risk of having those calls early assigned. That’s not what I wanted.

Thus, I placed a roll trade for Monday morning to adjust the trade once again.

This adjustment however required additional margin requirement. The idea was to leave the existing 48.00 puts untouched. I hoped for them to either expire worthless (should the stock continue higher), let them assign (should the stock stay near the money), or roll them into the next week (should the stock continue down).

Then, we rolled our calls into March 24 expiration and two strikes OTM and sell new OTM puts. Here is the trade and existing trade:

-1 STX Mar17 48.00 put (existing trade to remain)
BTC 1 STX Mar17 46.50 call (existing calls to be rolled)
STO 1 STX Mar24 48.00 call (new rolled calls)
STO 1 STX Mar24 46.50 put (sold new puts to create a covered strangle)
@ 38.00 credit limit DAY

If everything goes well, I expect the original put either expire or get assigned this week. If it expires or I have to roll it, I will buy 100 shares of STX outright. Next week, hopefully the calls will get assigned (and we will sell the shares) and the new puts expire worthless. But as of now we have to wait for the results.

STX adjustment

STX adjustment

Hope this adjustment would work well.

Here is the previous post about the trade which we have adjusted today:

Seagate Technology (STX) triple play trade adjustment after stock drop Published 2017/03/09

STX dividend capture – triple play Published 2017/03/07

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Posted by Martin March 12, 2017


Why I stopped contributing to 401k

Many future planner advisers who were trained to sell you their 401k plans to get their share of fees will be outraged if you tell them that 401k plans is a legal way how the financial industry is robbing us from our money and that there are better ways to save money for retirement.

It is stunning how far this industry gambling with our future could go convincing you that you are basically an idiot who cannot take care of his own money so you need them to do it for you.

I bet you have heard many times that Americans have nothing saved, or haven’t saved enough for retirement. While a few decades ago, having saved 50,000 to 100,000 dollars could be enough for retirement, today they tell you that you have to amaze million of dollars to retire. Have you ever tried those retirement calculators online? What was the number they threw at you? One million dollars? Three million dollars?

And even if you save every penny during your productive life, do not buy a house, do not buy a car, do not start a family, but save everything and thanks to enormous, hidden, and compounded fees, and their poor performance you find yourself 30 years later broke, they will be bold in telling you that you haven’t saved enough.

There are many myths people are told to believe about their 401k plans. Some are so outrageous that I can’t believe it didn’t come to me earlier what lies we are told when it goes about our future well being.

Let’s review a few myths and lies we are regularly told to believe and which made me to stop contributing to my 401k.

Read More

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Posted by Martin March 10, 2017
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February 2017 options income

February 2017 trading went well. I opened a few very profitable trades which allowed me to close some “skeletons in the closet” mainly WYNN trades.

That meant taking a loss but I am happy about it because that helped me to reduce exposure in that stock and still be profitable.

Again, I expected $1,605 dollars income in February.

I am happy to see that we were able to make $2,213.10 dollars of option income.


 · Options Trading Strategy


Over time since I learned trading options I went from trading spreads, single naked puts, later added naked calls and landed on trading strangles. Many people are afraid trading strangles. They do not know how to protect themselves when having naked calls trades. I was afraid too until I found out that it is not as dangerous as others say.

I am not saying that there is no risk, but if you know how to handle the risk, you will be able to navigate through strangles with no fear.

Over time I developed my own rules and strategy. You can review it in this section.



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 · Options Trading Results


As stated above our trading in January was really great and we made $2,213.10 dollars.

Below you can see all data and progress in our trading account:

Month-to-moth trading results

Trading results

(The red dots on the chart indicate income estimate, blue bars actual earnings.)

In February 2017 we made: 48 trades
Total trades in 2017: 94 trades
February 2017 options trading income: $2,213.10 (64.59%)
2017 portfolio Net-Liq (net)*: $4,020.72 (-12.22%)
2017 portfolio Net-Liq (gross)*: $24,520.72 (-2.90%)
2017 portfolio Cash Value (net)*: $23,432.72 (-5.21%)
2017 portfolio Cash Value (gross)*: $43,932.72 (-2.85%)
2017 portfolio Equity (net)*: $31,984.72 (-4.81%)
2017 portfolio Equity (gross)*: $52,484.72 (-2.99%)
2017 Liability/Debt: $20,500.00 (0.00%)
2017 overall trading account result: +23.40%

* The numbers marked as “net” and “gross” are results with loan (liability) included (gross) or excluded (net).



We are presenting you our month-to-month business performance review:


Or February 2017 trading was successful and we made enough money to pay off the debt and grow our account.


 · Options Trading March 2017 outlook


I am still optimistic as far as the entire market performance.

Recently, I have read a report originally provided by Gallup survey and published at Stansberry Research Report citing that currently HALF of Americans don’t own any stocks, at all and that global investors sit on $70 TRILLION dollars cash (source: Blackrock President, Rob Kapito, Reuters)

That is a lot of potential prop for the market.

Many investors and traders I follow became worried lately about the market. They say that the stock market has been rising for 8 years and they think it can’t run much higher.

They think it’s up over the last few months because of the “Trump Bump.” But this is not how bull markets end. Bull markets do not end when so much money is on the sidelines.

Bull markets end when everyone is invested… and there’s no one left to buy. And that’s precisely why they end… because with no one left to buy, prices have nowhere to go but down. (Stansberry Research Report)

When investors, currently sitting on a cash, start panic buying that would be the time to start being conservative and moving into cash. We are not yet there.

Nevertheless, our goal for March will be reducing exposure and increasing cash. I must admit that we are still over-invested and that means I am breaking the rules of trading small!

This can be seen on our open trades (Inventory) as we increased our inventory by $6,965.80 from January $34,444.90 to February $41,410.70. This had impact to our net-liq and overall performance since the trades (Amazon failed earnings play) are still on and they will end in six months. Until then they will impact our net-liq value.

However, we have a few trades which are about to end and they will help boosting our performance. Then we will stick strictly to our strategy as described above.

This is important for us as our account currently has a potential of trading for a living; if we could successfully reduce the exposure to our technically dead trades and could move the money to our current strategy.

Out of $44,000 dollar account (cash) we can trade only $15,000. The rest of the money is tied to bad trades we had to roll further away into long term expiration (bad trades in 2016 mostly against WYNN, LULU, and MNK which happened due to a mistake in our allowed trading calculations and I over-traded the account).

Our outlook for March income is however very conservative. I think, I will not be able to reach the goal income for March which is $1,717.35 dollars. I think we will be negative or around zero income in March. The reason is further unloading bad trades (WYNN) early in March and I do not plan on offsetting this loss. But we will see at the end of the month. There may be a good opportunity trade which I may take and offset all the loss.

Last thing I would like to add to this report is that I will posting our trades in this blog too. As of now, I was posting them in our Facebook group and to email subscribers only.

At the end I will then list a summary of those trades here in the report for your review. This will however happen in the March report.

What do you think about options trading?

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Posted by Martin March 10, 2017
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Third US Steel (X) strangle trade adjustment

I have three strangle trades with X as underlying. Two of the trades we already rolled into the next week. Now was the time to roll the last one since the stock continued sliding down.

Here is a trade we had:

-3 X Mar10 37.50 calls
-3 X Mar10 40.50 puts

As the stock continued sliding and expiration was approaching I decided to roll the trade as soon as our calls closed.

First, our 37.50 calls got closed:

BTC 3 X Mar10 37.50 calls @ 0.05 debit

Once we were cleared and had only puts on, I rolled them:

BTC 3 X Mar10 40.50 puts
STO 3 X Mar17 39.50 puts
STO 3 X Mar17 35.50 calls
@ 0.22 credit limit day

X rolling

For now, the trade is safe again until the next week. And again, the strategy to roll this trade is same as before.

If the stock continues lower, our new calls will end out of the money again, will be closed for 0.05 debit and we will roll our puts down again.

If the stock goes higher, we may still roll our puts lower, or we may start rolling calls higher and keep puts where they are. But this will all depend on the stock price action next week.

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Posted by Martin March 09, 2017
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Seagate Technology (STX) triple play trade adjustment after stock drop

You can predict the market all day long and yet you will end up 50% chance of being wrong. Sometimes you will be wrong right at the beginning of the trade.

And that is a reason why I do not predict the market or stocks’ move.

You plan a trade, set expectations, and everything runs perfect. Until it doesn’t.

STX opened more than 2 dollars down and dropped all the way down to 45 dollars. That wasn’t a price action I would like to see when playing the triple play trades.

I opened a new strangle with 48.50 puts and 50.50 calls and my intention was to let the puts assign and capture the dividend.

After today’s sell off I didn’t like it and didn’t want to be assigned at 48.50 when the stock is trading at $45 a share (although by the end of the day the stock recovered a bit)!

But it happened and these are the events you will never be able to predict. Our 48.50 puts are now ITM and our calls are worthless.

We decided to adjust the trade.

First, we closed our calls:

BTC 1 STX Mar17 50.50 calls @ 0.04 debit

Then we rolled our puts lower and sold new, lower calls too:

BTC 1 STX Mar17 48.50 put
STO 1 STX Mar17 48.00 put
STO 1 STX Mar17 46.50 calls
@ 0.15 credit limit day

This adjustment would require more attention and more adjustments in the near future.

X rolling

Our calls are now at the money which is OK with me and I am prepared to roll them if they get in the money.

If the stock starts recovering, I may leave the puts at the new strike ($48.00) assigned next week and just manage calls using strangles and later covered strangles.

If the stock stays where it is or even continues falling during the rest of this week or next week, I may choose the following trade adjustments:

1) Abandon the triple play trade and continue treating the trade as a strangle (and avoid assignment).
2) Still let the trade go as a triple play, but roll the puts away and lower (not letting them assign); and buy shares outright at a lot lower price.
3) After assignment or purchase I would continue as per the original plan and sell covered calls.

Some investors from our Facebook Group asked me if I knew why STX dropped so hard today.

I do not care much what’s going on or why the stock dropped so much. I may find out later during the day or next day what caused this but I do not care for the reasons. I care about the impact this could have on our trade, our plan for the trade, and how I will be adjusting the trade.

The balance of this trade is as follow:

Original credit received: $117.00
Today’s adjustment credit: $11.00
Expected dividend: $68.00
Current stock price: $46.68
Break even price:
if assigned at $48.00


Here is the previous post about the trade which we have adjusted today:
STX dividend capture – triple play Published 2017/03/07

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Posted by Martin March 09, 2017
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X strangle adjustment

Our calls from the next week trade with 38.50 strike got closed for 0.05 debit right now. We are left with 37.00 puts available to be rolled.

We will roll the puts into the next week and sell new calls against it to create a new strangle. Here is the trade we will be doing:

BTC 1 X Mar10 37.00 put
STO 1 X Mar17 35.50 put
STO 1 X Mar17 37.00 call
@ 0.54 credit limit DAY

We again moved our puts from in the money to out of the money, sold new out of the money calls and collected credit doing so. Our trade is again in good shape for the next week expiration.

X rolling

I usually open near the money strangle and as the stock moves one direction, I close the untouched side for zero-zero-nothing and roll the touched side down (if puts) or up (if calls). So I am closing winners and roll losers and try to improve them to make them winners next time.

So in this trade, calls were winners (closed them worthless) and rolled puts (loser) from ITM into OTM so i improved the trade.

If the stock continues down next week and the puts will again be losers and calls the winners, I will close calls for nothing and roll ITM puts down to make them OTM again.

If however the stock reverses and my calls become losers and puts winners, I will reverse this process, close puts for nothing, and roll calls higher to make them OTM again (and sell new puts against it.

And here is the original trade which we rolled today.

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Posted by Martin March 08, 2017


US steel (X) strangle trade roll

Another of my strangle trade against US Steel (X) got ready for a roll.

As my calls against US Steel (X) got closed today, I decided to roll the puts into the next week:

BTC 1 X Mar3 38.50 put
STO 1 X Mar 17 37.50 put
STO 1 X Mar17 37.00 call
@ 0.67 credit limit DAY

The trade executed and we rolled the puts into the next week.

X rolling

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Posted by Martin March 07, 2017
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STX dividend capture – triple play

We are opening a new triple play – dividend capture trade against STX (Seagate technology) stock.

The stock has ex-dividend on March 20th so we must become owners of the stock before that day. This goes perfectly with the March 17th options expiration. We can sell naked (or cash secured) puts, collect premium, and let the puts expire in the money, get assigned to the stock and become owners on Saturday, March 18th. We then will be eligible to collect dividends.

The stock pays 0.68 quarterly dividend, so our 100 shares would pay $68 additional dollars.

I decided to sell naked puts but also a naked calls, high enough for the calls to expire OTM:

STO 1 STX Mar17 48.50 put
STO 1 STX Mar17 50.50 call
@ 1.17 credit limit DAY

We collected 0.92 dollars for the puts side and 0.25 dollars for the call side.

We will let the calls expire OTM (if the stock rallies hard, we will roll them) and we will let our puts expire OTM and get assigned to the stock. If the stock moves higher, we may roll the puts higher too or let them expire OTM and buy the stock outright.

STX triple play 1

STX triple play 2


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Posted by Martin March 04, 2017


February 2017 dividend income

We are once again at the end of the month. I still feel like the month just started and it is time to report our achievements in dividend investing (and options trading which I will publish in my next post).

This month, we received $87.79 dollars in dividends. I am happy about it for two reasons:

1) It was more dividends than what we received last month!

2) I checked my last year February dividend income, and February is typically my weak month! Last February, I made $57.42 in dividends, this month it was $87.79 dollars!

Definitely, this month was a success!

Another very positive aspect of our dividend portfolio is the dividend growth. Our annual dividend income increased to $1,062.66. This is a great increase compared to $883.48 annual dividend income from 2016.


 · ROTH IRA investing/trading strategy


Here is my investing & trading strategy I use in my IRA account. If you want to read about this strategy


 · ROTH IRA dividend income


As I mentioned above my dividend income was better than last year. I made $87.13 in dividends and all dividends were reinvested back to the companies which generated them.

Here are some numbers:
Dividend Income = $87.79 (account value = $22,205.80 +3.39%)
The account is up 6.88% for the year.


Monthly dividend Income:


This month, we purchased 100 shares of Energy Transfer Equity, L.P. (ETE) using triple play strategy. We sold cash secured puts and got assigned to the stock.

Now we are selling covered calls.

My dividend holdings:

Options Income
(Click to enlarge)


 · ROTH IRA options income


As I mentioned above we trade options in our ROTH IRA account to generate income which could be re-invested into dividend growth stocks.

We are in an “accumulation phase” when we deposit our sparse contributions of $50.00 dollars monthly and keep that cash in the account to trade cash secured options with it. This way we generate income from the options.

As of today, we only have approx. $2,843.90 dollars in ROTH IRA available for options trading. The goal in 2017 is to reach $6,000 available dollars for options trading.

With that money available for trading, in January 2017, we generated $35.00 dollars income from options 1.23% return on invested capital.



This month, we traded options using stocks Ensco plc (ESV) and Energy Transfer Equity, L.P. (ETE).

For ETE stock we used a triple play – dividend capture strategy we described in this post. Currently, we purchased the stock to capture the dividend. The dividend ex-day will be in February 3. As soon as we purchased the stock via cash secured puts, we sold a new covered call. If the stock stays below our covered call strike ($19.00) then we should capture the dividend (if the stock stays above the strike we may get an early assignment, although I do not expect it since we trade long term contracts).

With all collected premiums our cost basis is $17.47 per share. We got assigned at $19.00 a share, expecting 0.28 a share dividend and hopefully sell the stock at $19.00 a share. This would leave us with a nice $153 cash or 9.53% profit or 83.98% annualized return.

The play is still under progress so I will be able to report it next month.


 · Our dividend investing outlook


The stock market rallied even more since January. The more the market rallies the more investors become nervous and predicting stock market crash. More and more I see people talking about the market to be too expensive.

But are the stocks really expensive? And even if so, how much can you be sure that the stocks cannot be even more expensive?

Many investors who are afraid about the market today however forget underlying fundamentals. Is the growth justified?

In my opinion it is justified. The US economy is growing at aggregate EPS growth rate of +4.90% rate. The last earnings season showed that all sectors except energy grew:

Consumer Discretionary +6.29%
Financials +5.85%
Health Care +7.95%
Technology +8.58%
Consumer Staples +6.54%
Industrials +5.45%
Materials +5.27%
Energy -4.86%
Utilities +4.63%
S&P 500 +5.58%

Can this expensive market be more expensive?

Yes, it still can be more expensive. On the way up, we will of course see many consolidations and pullbacks. But as of now, and the growing US economy, a large crisis and sell off is unlikely.

Here is another view at the market.

Let’s take a look at today’s S&P 500 TTM P/E the current multiple is at approx. 22 PE. According the the chart below, the stock market reached a lot higher levels in the past such as 30 PE multiple in 1999 – 2001 or 28 multiple PE in 2009 -2010.

S&P 500 P/E
Source: Bloomberg

The bottom line is that EPS growth data point to higher market growth. The US economy is also growing and that may be the catalyst for further growth of the market. There fore the already “expensive” market may become much more expensive!

Let me know what you think!

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Posted by Martin March 03, 2017
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X trade adjustment

We have a three trades using US Steel (X) as underlying stock. The stock is not one I would normally buy as a long term investment, but it is a great stock to trade options against it.

As of today, we have 3 March 10 inverted strangle contract, 1 March 10 strangle, and 1 March 3 strangle. This post is to show rolling the last strangle into the next week.

Our X trade is in ideal spot to be adjusted. So we will be rolling into the next week. Since both legs are in the money, we will be rolling both legs together:

BTC 1 X Mar3 38.00 put
BTC 1 X Mar3 37.50 call
STO 1 X Mar10 37.00 put
STO 1 X Mar10 38.50 call
@ 0.65 credit limit day

To roll this trade, we collected $65 dollars credit and now we have the following trades expiring next Friday:
(3) X March 10 40.50p / 37.50c inverted strangle
(1) X March 10 38.50p / 40.00c strangle
(1) X March 10 37.00p / 38.50c strangle

X trade adjusmtent

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