Weekly Newsletter   Challenge account


Posted by Martin March 20, 2021
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2021 Week 11 investing and trading report


Another week is over and I am providing my weekly investing and trading report. The last week was weak and we are on track to have the entire month underperforming. Our net liquidation value grew, but overall, the growth was small (only 7% compared to 23% and 25% in January and February – month over month growth). Let’s review how we did last week.

 

Here is our investing and trading report:

 

Account Value: $34,028.85 +$3,381.36 +11.03%
Options trading results
Options Premiums Received: $340.00
01 January 2021 Options: $4,209.00 +16.65%
02 February 2021 Options: $4,884.00 +15.41%
03 March 2021 Options: $2,458.00 +7.22%
Options Premiums YTD: $11,551.00 +33.94%
Dividend income results
Dividends Received: $2.91
01 January 2021 Dividends: $53.04
02 February 2021 Dividends: $63.00
03 March 2021 Dividends: $14.55
Dividends YTD: $130.59
Portfolio metrics
Portfolio Yield: 3.71%
Portfolio Dividend Growth: 7.73%
Ann. Div Income & YOC in 10 yrs: $3,877.00 12.60%
Ann. Div Income & YOC in 20 yrs: $23,504.42 76.40%
Ann. Div Income & YOC in 25 yrs: $82,046.63 266.70%
Ann. Div Income & YOC in 30 yrs: $406,504.59 1321.40%
Portfolio Alpha: 27.47%
Portfolio Weighted Beta: 0.60
CAGR: 711.46%
AROC: 27.43%
TROC: 21.38%
Our 2021 Goal
2021 Dividend Goal: $1,071.42 12.19%
2021 Portfolio Value Goal: $42,344.06 80.36%

 

Last week, we received $340.00 in premiums trading options against our holdings. We opened one new trade against Realty Income (O) but the rest of the trades were adjustments only. For the entire March 2021, we received $2,458.00 premiums. Our non-adjusted stock holdings market value increased from $28,642.83 to $33,327.00. All our income was kept in cash.
 

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).

Although, we have not opened any new trades we experienced a significant jump in buying power reduction. The BP reduction decreased from $28,780.90 to $27,393.00, a reduction of -$1,387.90 as some of our open trades expired. That represents a reduction of 4.82%. This helped to increase our net-liquidating value last week.

 

Investing and trading ROI

 

Our options trading delivered a 7.22% monthly ROI, totaling a 33.94% ROI.

Our account increased to 65.41% YTD growth. We are happy with this result.
 

Our options trading averaged $3,850.33 per month this year. If this trend continues, we are on track to make $46,204.00 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 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 gave in and bought Tesla (TSLA). Yes, you may be surprised but I bought a share and I might be adding more shares of this company. I was never a fan of Tesla and considered it a bad company that is just in a bubble and hyped to levels not justifying its valuation. It doesn’t make money, it has no revenue and it makes expensive cars on a very small scale compared to other automakers. Without government subsidies, far fewer people would buy a Tesla car.

But there was something that changed my mind and I didn’t see or refused to see.

When Tesla came out many years ago, my first thought was that it wouldn’t be able to survive. Elon was just a schmuck who would not be able to compete with big automakers. I was wrong. Not only he did make it, but he also forced the entire car industry to follow him. They didn’t steamroll him. He steamrolled them. Without his leadership, there would be no electric vehicles, and no big car maker would ever consider even thinking about them.

But I must admit I refused to look beyond car making division of Tesla. And Tesla is not just about cars. Tesla is a tech company. Tesla took leadership in electric vehicles and now taking leadership in AI and their autonomous driving. Again, I thought, that this would be something big automakers would do and develop on their own. But they didn’t. Elon Musk, again, took the lead and forced the industry to start looking at yet another feature they never dreamed of (only in 1950’s comics books).

Next, Elon Musk started developing batteries for his cars and the entire industry is waking up and starts thinking about how to copy him without infringement. And Tesla has the lead once again.

Tesla started looking at solar panels. And developed panels that are 40% more efficient than those we see today and Tesla is testing solar roofs when no one was seriously thinking about it (I was once thinking why no one is developing it and why you have to have a roof and on top of it install the PVs, why not have the roof as a PV? And just today, I watched a video that Tesla is in fact developing the roof PVs). Speaking of PVs, my other thought was why Tesla cars do not have a PV panel integrated into the roof of the car and be able to charge using solar energy when driving or just parking in front of a shopping mall. I guess the issue is with the equipment you need to transform the energy, standardize frequency, and store it into the batteries. I guess the equipment is still too large to have the car towing a transformer station behind it. But who knows, maybe Elon is already working on it.

I am still uneasy about this stock and hesitant to be buying it. But I missed Amazon before when I could buy it for $360 a share. I missed Apple when I could buy it for $60 a share. And since Tesla still has a good price appreciation in the future, I think, I shouldn’t be missing this boat either, although I have missed a significant portion of that boat already.

 

Accumulating Dividend Growth Stocks

 

Buying high-quality dividend stocks is our core strategy in our fund. And we will continue to do so and at a faster pace. Last week, we started accumulating Aflac (AFL) stock to reach 100 shares. As of today, we own 80 shares.

We also added 100 shares of Liberty All-Star Growth Fund, Inc. (ASG) to our portfolio. This stock is not necessarily a dividend growth stock. It is a speculative, high yield dividend stock and we may remove the stock from our portfolio if it no longer follows our criteria.

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

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
 

We are also interested in adding some high-yield, yet still safe, dividend earners to further boost our dividend income. I found a few good stocks and closed-end funds, candidates I believe are worth accumulating. Every month I will be posting these stocks, accumulation progress, or stock removal from the portfolio. These stocks or funds may be riskier than the aristocrats and I plan on monitoring them carefully. When the stocks no longer meet my criteria and/or underperform, I will remove them from our portfolio. My first list for March accumulation can be found here.

 

Market Outlook

 

Although the stock market recovered its 5% correction and reached a new ATH (all-time high) it couldn’t hold the new highs and sustain the rally. On Thursday and Friday, the market dropped again as the new euphoria from the FED meeting faded away.

However, if you know the market history and look at the past behavior, such choppiness is normal. It doesn’t predict that we are going to crash from here, nor it doesn’t predict that we are about to skyrocket again. From the historical perspective and past performance, this market can drop to $3,700 and it still will be a normal performance in the given historical perspective. Similar behavior occurred in 1982 and 2010. In both instances, the market posted a significant correction of 14% before renewed rally moved the market back to nice gains (if you had a stomach to stay invested).

 
SPX March 20 2021 outlook
 

I still expect an additional 15% to 75% gains in the next one to five-year time horizon even if we dip lower from here (which I do not expect but it may happen). If we dip to $3,700 it will be a great buying opportunity.

 

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.

 

Investing and trading report in charts

 

TW Account Net-Liq week 10
 

TW Account holdings week 11
 

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 8.33%. With options, our holdings are up 14.85% (from inception on 4/1/2019). The SPX is up 35.27% since inception. Our stock holdings underperform the overall market since the inception of the fund (up only 14.85% on a cumulative basis). However, this week, our adjusted stock holdings significantly beat the market. The market gained 5.43% YTD, our portfolio options-adjusted stock holdings grew by 7.87% YTD (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

TW Options Income week 11
 

TW Options Annual Income week 11
 

TW Received vs Projected Dividends week 11

 

Conclusion of our investing and trading report

 

This week our options trading was weak and as we laid it out in our previous report we were primarily adjusting our trades and opened only very few new trades. Next week, we may reopen trades that expired last Friday.

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 March 13, 2021
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2021 Week 10 investing and trading report


Last week was difficult and strange at the same time. As the stock market continued recovering its recent 5.9% correction our account net liquidating value dropped. It was frustrating, mainly because we haven’t opened any new trades, only rolled the old ones. I was angry seeing our buying power fluctuating for no particular reason. Of course, there was a reason – the broker. Although the market was going up, the volatility was going up too, and our capital requirements with it. That caused margin calls and dropping net-liq. In this week’s investing and trading report I will provide insight into this issue.

 

Here is our investing and trading report:

 

Account Value: $30,647.49 -$945.83 -2.99%
Options trading results
Options Premiums Received: $697.00
01 January 2021 Options: $4,209.00 +16.65%
02 February 2021 Options: $4,884.00 +15.41%
03 March 2021 Options: $2,118.00 +6.91%
Options Premiums YTD: $11,211.00 +36.58%
Dividend income results
Dividends Received: $4.99
01 January 2021 Dividends: $53.04
02 February 2021 Dividends: $63.00
03 March 2021 Dividends: $11.64
Dividends YTD: $127.68
Portfolio metrics
Portfolio Yield: 3.47%
Portfolio Dividend Growth: 7.44%
Ann. Div Income & YOC in 10 yrs: $2,890.88 11.07%
Ann. Div Income & YOC in 20 yrs: $15,395.55 58.95%
Ann. Div Income & YOC in 25 yrs: $48,135.69 184.32%
Ann. Div Income & YOC in 30 yrs: $203,652.61 779.82%
Portfolio Alpha: 29.52%
Portfolio Weighted Beta: 0.67
CAGR: 684.96%
AROC: 28.62%
TROC: 27.12%
Our 2021 Goal
2021 Dividend Goal: $1,071.42 11.92%
2021 Portfolio Value Goal: $42,344.06 72.38%

 

Last week, we received $697.00 in premiums trading options against our holdings. However, all trades were just adjustments and rolls, no trade was a new one. For the entire March 2021, we received $2,118.00 premiums. Our non-adjusted stock holdings market value dropped from $30,044.95 to $28,642.83, a $1,402.12 market value reduction. All our income was kept in cash.
 

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).

Although, we have not opened any new trades we experienced a significant jump in buying power reduction. The BP reduction jumped from $20,332.53 to $28,780.90, an increase of $8,448.37. That is a staggering and sudden jump of 41.55%. No wonder our net-liquidating value dropped.

This caused our broker to issue a few maintenance calls (a version of a margin call) and we had to sell positions in the ICSH fund to release cash. Yet it was not enough and we had to roll some trades to adjust the BP reduction. For example, our Boing (BA) trade released almost $2,000 in BP after we adjusted the trade although our BA strangle was safe and out of the money. The only reason for the BA BP jump was that the company was about to report earnings and its IV went up significantly. Rolling farther away and centering the stock price between our strangle’s legs helped in reducing the BP requirements.

 

Investing and trading ROI

 

Our options trading delivered a 6.91% monthly ROI, totaling a 36.58% ROI.

Our account decreased to 48.97% YTD growth. We are still happy with this result as I do not expect our account value to go up only. There will be days when it will go down. The goal will be to keep it going up overall but fluctuations are normal and expected.
 

Our options trading averaged $3,737.00 per month this year. If this trend continues, we are on track to make $44,844.00 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

 

Last week we had a chance to start repairing one of our SPX trade. We closed an old SPX put spread for 0.05 debit, then rolled the calls higher and away in time. After the rade rolled, we opened a new put spread to offset the cost of the entire roll. Unfortunately, rolling Iron Condors has to be done in two trades unlike strangles where you can roll both legs in one trade. And also, to reduce the BP requirements, one leg (in our case the put leg) has to be closed first in order to roll the endangered leg without doubling the BP requirements.

Here are the tickets of the trades we took:

 
Old SPX trades repair wk 10
 

The trade adjustment required 0.40 or $40 debit to roll it higher (closer to the money). Our goal is to do it several times to get the calls out of the money, even if the put side being in the money, have the calls expire, and roll the put side only, and hopefully, one day, have the put side expire too. This trade blocks $2,500 buying power. If we keep the cost of adjustments down, it makes sense to salvage this trade. If it starts becoming costly, we will let it go.

 

Accumulating Growth Stocks

 

This week, our net-liq and buying power prevented us from accumulating the growth stocks. It is still our plan to have at least 10% of the account value in these stocks. As of now, we hold BX and CUTR only.

We created another Finviz screener to pick stocks that are poised to spike up significantly. This screener looks for an unusual volume spike and price movement with strong upward momentum. It picks stocks in a small-cap category but it can be changed to “mid”, “large”, or “mega” caps. But the selected candidates need to be reviewed further.

 
Finviz screener
 

Some of the selected candidates will be already extended, you want to avoid those. You do not want to chase the stock. Some candidates will show bearish setups but the screener is a bullish set up so you are in fact looking at a contradictory stock and you do not want that either, e.g. DRRX.

Then you get a nice setup like NOG on the picture if on Monday you see it breaking above the resistance (e.g. $12 a share), you may enter the trade. Others will be already in a breakup runaway like FLNT, which could be a good stock to enter on Monday too. But since it already broke on a large volume and long candle, there may be a pause. You can still enter the trade but use stop loss!

This link can get you to the screener.

 

Accumulating Dividend Growth Stocks

 

Buying high-quality dividend stocks is our core strategy in our fund. And we will continue to do so and at a faster pace. Last week, we started accumulating Aflac (AFL) stock to reach 100 shares. As of today, we own 46 shares.

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

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
 

We are also interested in adding some high-yield, yet still safe, dividend earners to further boost our dividend income. I found a few good stocks and closed-end funds, candidates I believe are worth accumulating. Every month I will be posting these stocks, accumulation progress, or stock removal from the portfolio. These stocks or funds may be riskier than the aristocrats and I plan on monitoring them carefully. When the stocks no longer meet my criteria and/or underperform, I will remove them from our portfolio. My first list for March accumulation can be found here.

 

Market Outlook

 

The stock market posted its first correction in 2021. We dropped by 5.9% from an all-time high and everybody out there was predicting a crash, doom, and end of the world. Yes, the market is vulnerable, there is a lot of fear, but, in my opinion, this fear is not justified.

 

Market correction
 

It is perfectly normal and expected to have corrections on the way to new highs. No one should ever expect the market to go up only. There will be corrections. But I do not expect a crash like you can see predictors on Youtube predicting. We see VIX elevated these days. The normal mean value of VIX is in the 10 to 20th level. As of today, we are significantly above that level. Until we see complacency in the market, do not expect any crash.

 
SPX March 2021 correction
 

Instead, after a painful initial 5.9% correction, the market briefly dipped below its upward moving trend and today, it is back above it. Comparing several indicators and past historical signals when the market behaved in a similar manner to today’s price action, I expect an additional 15% to 75% gains in the next one to five-year time horizon. Will it be a smooth ride? No. But we are going up.

 

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), it 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.

 

Our fund in charts:

 

TW Account Net-Liq week 10
 

TW Account holdings week 10
 

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 9.68%. With options, our holdings are up 16.48% (from inception on 4/1/2019). The SPX is up 36.32% since inception. Our stock holdings underperform the overall market since the inception of the fund (up only 16.48% on a cumulative basis). However, this week, our adjusted stock holdings significantly beat the market. The market gained 6.47% YTD, our portfolio options-adjusted stock holdings grew by 9.49% YTD (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

TW Options Income week 10
 

TW Options Annual Income week 10
 

TW Received vs Projected Dividends week 10

 

Conclusion of our investing and trading report

 

This week our options trading got significantly extended and we have deployed more capital than we can handle. It was not because of opening new trades but due to the implied volatility spike. Until the volatility drops (or we add additional funding) we will not be opening new options trades next week.

If we stay in the already opened positions, we will maintain them 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!




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Posted by Martin March 11, 2021
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More Dividend Growth Stocks to Accumulate in March 2021


Since I posted our last post about stocks to accumulate in March 2021 I spent some time researching dividend growth stocks to accumulate and achieve a growing dividend income, high yield, dividend safety, and capital appreciation.
 

I think I have found a few good candidates I would like to add to my accumulation list.

Stocks to accumulate list:

Ticker Name Today’s
Price
Estimated
Annual
Dividend
Estimated
Yield
Accumulated
AFL Aflac 49.95 0.33 2.42% 46.0%
OMF OneMain Holdings 52.70 7.06 14.35% 0.0%
APAM Artisan Partners 47.91 3.08 6.69% 0.0%
ASG Liberty All-Star 8.83 0.66 7.44% 0.0%
QYLD Global X NASDAQ Cov Calls 22.06 0.23 11.49% 15.0%
CHI Calamos Convertible Opps 13.88 1.14 8.11% 0.0%
CSQ Calamos Total Return 16.58 1.23 7.54% 0.0%
NEWT (NEW) Newtek Business Services 26.72 2.11 8.21% 0.0%
ADC (NEW) Agree Realty Corporation 65.83 2.48 3.80% 0.0%
STAG (NEW) STAG Industrial 32.70 1.45 4.42% 0.0%
MAIN (NEW) Main Street Capital Corporation 37.81 2.46 6.54% 0.0%
O (NEW) Realty Income Corporation 61.82 2.81 4.58% 5.0%
RYLD (NEW) Global X Russell 2000 Cov Call 24.33 2.88 11.84% 0.0%

 

Do your own due diligence if you decide to invest in these stocks. The information here is believed to be accurate but may have changed since publishing.
 
 




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Posted by Martin March 06, 2021
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2021 Week 9 investing and trading report


Another week and the first week of March 2021 is gone and our investing and trading report can be closed in the books, again. This week was painful as the selling continued pushing pressure on our cash and net-liquidation value. We had to start releasing cash from our ICSH fund to avoid margin calls. Having enough cash saved was mind relieving. We opened more trades this week but I must admit, I regretted that. I should have remained in cash and buy more shares of stocks such as APPL. However, our options income exceeded my expectations. We made more money than I expected but due to the market weakness, our net liquidation value didn’t move. The net-liq didn’t move much despite selling out there.

 

Here is our investing and trading report:

 

Account Value: $31,593.32 -$94.31 -0.30%
Options trading results
Options Premiums Received: $1,421.00
01 January 2021 Options: $4,209.00 +16.65%
02 February 2021 Options: $4,884.00 +15.41%
03 March 2021 Options: $1,421.00 +4.50%
Options Premiums YTD: $10,514.00 +33.28%
Dividend income results
Dividends Received: $6.65
01 January 2021 Dividends: $53.04
02 February 2021 Dividends: $63.00
03 March 2021 Dividends: $6.65
Dividends YTD: $122.69
Portfolio metrics
Portfolio Yield: 3.58%
Portfolio Dividend Growth: 7.26%
Ann. Div Income & YOC in 10 yrs: $3,202.52 11.34%
Ann. Div Income & YOC in 20 yrs: $16,885.37 59.81%
Ann. Div Income & YOC in 25 yrs: $52,191.71 184.86%
Ann. Div Income & YOC in 30 yrs: $216,348.10 766.30%
Portfolio Alpha: 26.67%
Portfolio Weighted Beta: 0.62
CAGR: 714.01%
AROC: 26.52%
TROC: 29.59%
Our 2021 Goal
2021 Dividend Goal: $1,071.42 11.45%
2021 Portfolio Value Goal: $42,344.06 74.61%

 

We received $1,421.00 in premiums trading options against our holdings this week. For the entire March 2021, we received $1,421.00 premiums. We increased our stock holdings from $29,034.92 to $30,044.95 of the current, non-adjusted market value. All our income was reinvested back into stocks.
 

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. My 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).

These trades alone block approximately $20,332.53 of buying power, an increase of $2,032.53 and 11.11%. I have not tracked this metric of our portfolio before but I will start tracking it to see if my trading is scaling up or down and how it impacts the net-liq of our portfolio and eventually, how it may affect our portfolio during the stock market downturn.

 

Investing and trading ROI

 

Our options trading delivered a 4.50% monthly ROI, totaling a 33.28% ROI.

Our account decreased to 53.57% YTD growth. We are still happy with this result.
 

Our options trading averaged $3,504.67 this year. If this trend continues, we are on track to make $42,056.00 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

We are still on track to attempt fixing our SPX trades that still block approximately $12,000 in our buying power. We set a buy-back order for deep OTM put spreads for 0.10 debit. Once these get closed, we will roll the deep ITM higher and sell new OTM put spreads to offset the cost. It will be a slow process but I believe, it will be worth releasing an additional $12,000 in cash. As I said last week, we will be rolling these trades only if it will be resulting in credit rolls or a wash. If rolling for a credit or a small debit (no more than $10 or $15) will not be possible, we will let those trades go. The recent sell-off in the market would help with rolling these trades although that same selloff is putting pressure on my cash that needs to be used to roll the trades.

Accumulating Growth Stocks

 

I am still interested in some growth stocks that would boost my portfolio in the long run. I have created a screener in Finviz.com to help select stocks that are more solid investments and growth potential rather than the speculative penny stocks in overhyped industries such as “electric vehicles”. The screener returns stocks that are considered by analysts, institutional investors, and insiders as a great investment and that these stocks are accumulated by these investors. The stocks also create revenue and growth and increase that growth.

Stocks from this screener we will be accumulating for the long run are currently Cutera, Inc. (CUTR) and The Blackstone Group Inc. (BX). More stocks like that may be added in the future. As long as these stocks appear in the screener results, I will be accumulating them. Once I reach 100 shares of each, I will start selling covered calls.

Here is a picture of the screener and all settings if you want to follow it and try it for yourself.

 
Finviz Screener
 

Accumulating Dividend Growth Stocks

Buying high-quality dividend stocks is our core strategy in our fund. And we will continue to do so and at a faster pace. Last week, we started accumulating Aflac (AFL) stock to reach 100 shares. As of today, we own 46 shares

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

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
 

However, I am also interested in adding some high-yield, yet still safe, dividend earners to further boost our dividend income. I found a few good stocks and closed-end funds, candidates I believe are worth accumulating. Every month I will be posting these stocks, accumulation progress, or stock removal from the portfolio. These stocks or funds may be riskier than the aristocrats and I plan on monitoring them carefully. When the stocks no longer meet my criteria and/or underperform, I will remove them from our portfolio. My first list for March accumulation can be found here.

Trading options

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

Our fund in charts:

TW Account Net-Liq week 8
 

TW Account holdings week 9
 

The table above shows our current holdings and gains on those holdings. Adjusted columns indicate how options help to boost (or ruin) our stock holdings appreciation, or in other words, lowering the cost basis. Without options, our holdings would be up 6.42% with options, our holdings are up 12.23% (from inception on 4/1/2019). The SPX is up 32.81% since inception. Our stock holdings underperform the overall market since the inception of the fund (up only 12.23% on a cumulative basis). However, this week, our adjusted stock holdings significantly beat the market. The market gained 2.97% YTD, our portfolio adjusted stock holdings grew by 5.25% YTD (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

TW Options Income week 9
 

TW Options Annual Income week 9
 

TW Received vs Projected Dividends week 9
 

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




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Posted by Martin March 05, 2021
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Stocks to accumulate in March 2021


Here are our stocks to accumulate in March 2021. We plan on accumulating these stocks although it will depend on our available cash. We also plan on reaching 100 shares of each stock so we can start selling covered calls (using the wheel strategy).

The goal is to accumulate high dividend yield stocks that provide safe dividend but also provide capital growth (that is, however, a secondary goal; the primary goal is income, that can be reinvested).
 

Stocks to accumulate list:

Ticker Name Today’s
Price
Estimated
Annual
Dividend
Estimated
Yield
Accumulated
AFL Aflac 49.95 0.33 2.42% 46.0%
OMF OneMain Holdings 52.70 7.06 14.35% 0.0%
APAM Artisan Partners 47.91 3.08 6.69% 0.0%
ASG Liberty All-Star 8.83 0.66 7.44% 0.0%
QYLD Global X NASDAQ Cov Calls 22.06 0.23 11.49% 10.0%
CHI Calamos Convertible Opps 13.88 1.14 8.11% 0.0%
CSQ Calamos Total Return 16.58 1.23 7.54% 0.0%

 

Do your own due diligence if you decide to invest in these stocks. The information here is believed to be accurate but may have changed since publishing.
 
 




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Posted by Martin March 04, 2021
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5% to 10% correction


Today, the stock market went down again marking a drop below the 5% threshold and beginning a 5% to 10% correction. It now counts for 16 days of selling and choppy movement up and down. As of today, we closed 5.9% off of the peak. And it may not be over yet as fear is out there.

Today’s drop below 5% started our counter. However, this type of correction is normal and to be expected. It can end here, or develop into something more serious. We can go 10% down or even more as people start panicking and selling everything.

 
5% to 10% correction
 

These are the times I like to be in high-quality dividend stocks because no matter what happens from now on, I still will be receiving my dividends and my stocks most likely recover the losses. In fact, I will be buying more shares if the market keeps going down.

 

Adding high yield dividend stocks to fight the 5% to 10% correction

 

Despite the selling pressure I decided to boost our portfolio with some high yield dividend stocks and raising more cash reserves. I did some reading and research hoping to find some good stocks that can provide income and perform well during market tension.

I found the following stocks:
 

QYLD
Global X NASDAQ Cov Calls
ETF Monthly (NASDAQ Covered Calls)
Price: $21.75
Yield: 11.49%
 
CHI
Calamos Convertible Opps
Closed-End Monthly (U.S. Stocks & Bonds)
Price: $14.16
Yield: 8.05%
 
CSQ
Calamos Total Return
Closed-End Monthly (U.S. Stocks & Bonds)
Price: $16.42
Yield: 7.49%
 
APAM
Artisan Partners Asset Mgmnt.
Private Equity
Price: $45.77
Yield: 6.73%
 
OMF
OneMain Holdings
Div. Speculators (Personal Loans)
Price: $51.06
Yield: 13.83%
 

Bullish case

 

Investors are selling stocks despite good economic data and a dovish stance from Powell. And reason? Rising bond yields.

They say: “Higher rates are bad for stocks.”

That might be true, then you look at the data.

The truth is a higher 10-year yield has been extremely bullish for stocks, especially since the mid-’90s.

 
Bullish case
 

Bearish case

 

And here is a not-so-good view. It is evident that the stock market is significantly detached from the underlying earnings. Either earnings will catch up or valuation must go down:

 
Bearish case
 

But then, there is that pesky FED…

 




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Posted by Martin February 28, 2021
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Why there is no bubble except fear bubble


The only bubble out there is the fear bubble.

The best way to look at the psychology of the markets and how Wall Street works. And the best way to look at market psychology is to look at VIX.

The long-term mean value of VIX is between 10 and 20, see the blue box. Recently we saw a large spike in March 2020 due to covid but the fear has not disappeared. VIX is still well above 20 (27.95 as of today). That means that there is a lot of fear out there and investors are hedging and buying protection. Money is flowing out of the equities and into protective and defensive vehicles or sidelines. That’s not how bubbles are created and how they burst.

In order for this to be a bubble and burst, you need to see money flowing into equities, everybody investing in stocks, VIX dropping well below 20 (more like 10 – 12) indicating large complacency among investors. That is not what we are seeing in the market today. Every spike in VIX started when VIX was trading at 12 or around.

 
Fear Bubble today
 

This is what you want to see first to happen before there will be any serious sell-off again. And given the dynamic of the VIX today, dropping below 20 would take some time, possibly the entire 2021. However, there still may be spikes and pullbacks but not any serious crashes.

 
VIX must drop
 

The House of Representatives approved the $1.9 trillion stimulus package this last Saturday and that may add more fuel to the market to go higher. Polls show that up to 37% of people eligible to get the stimulus check will invest it or save it. This behavior may prop the market higher but not if there is fear out there and people sitting on the sidelines and saving money in savings accounts or buying protective hedges.

We need VIX to get down first to see a bubble of everything to burst.




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Posted by Martin February 27, 2021
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2021 Week 8 investing and trading report


February 2021 is gone and our investing and trading report can be closed in the books. February was a good month despite the market selling off the last few days. Our options income exceeded my expectations. We made more money than in January but due to the market weakness, our net liquidation value didn’t move. That made me wonder why since we made money.

 

But now, let’s jump to our investing and trading report:

 

Account Value: $31,687.63 $47.03 +0.15%
Options trading results
Options Premiums Received: $1,309.00
01 January 2021 Options: $4,209.00 +16.65%
02 February 2021 Options: $4,884.00 +15.41%
03 March 2021 Options: $0.00 0.00%
Options Premiums YTD: $9,093.00 +28.70%
Dividend income results
Dividends Received: $2.08
01 January 2021 Dividends: $53.04
02 February 2021 Dividends: $63.00
03 March 2021 Dividends: $0.00
Dividends YTD: $116.04
Portfolio metrics
Portfolio Yield: 3.48%
Portfolio Dividend Growth: 5.91%
Portfolio Alpha: 22.63%
Portfolio Weighted Beta: 0.56
CAGR: 732.69%
AROC: 25.07%
TROC: 31.10%
Our 2021 Goal
2021 Portfolio Value Goal: $42,344.06 74.83%

 

We received $1,309.00 in premiums trading options against our holdings this week. For the entire February 2021, we received $4,884.00 premiums. That is almost $5,000 for the month. If I received such income, why our net liquidation value has not moved? I looked at the numbers and I saw it. I had more trades open than before this week that required more buying power, and I increased our stock holdings from $18,179.67 to $29,034.92. All our income was reinvested back into stocks. But because the market was weak the last few days, our margin requirements and stocks moving mostly down suppressed the net-liquidation value of our account.
 

Open trades

 

Investing and trading report
 

The table above shows all my open trades and expirations. It is just a simplified tracking and buying power reduction. My 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).

These trades alone block approximately $18,300 of buying power. I have not tracked this metric of our portfolio before but I will start tracking it to see if my trading is scaling up or down and how it impacts the net-liq of our portfolio and eventually, how it may affect our portfolio during the stock market downturn.

 

Investing and trading ROI

 

Our options trading delivered a 15.41% monthly ROI, totaling a 28.70% ROI.

Our account jumped up to 54.03% YTD growth. We are very happy with this result.
 

Our options trading averaged $4,546.50 this year. If this trend continues, we are on track to make $54,558.00 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

We are still on track to attempt fixing our SPX trades that still block approximately $12,000 in our buying power. We set a buy-back order for deep OTM put spreads for 0.10 debit. Once these get closed, we will roll the deep ITM higher and sell new OTM put spreads to offset the cost. It will be a slow process but I believe, it will be worth releasing an additional $12,000 in cash. As I said last week, we will be rolling these trades only if it will be resulting in credit rolls or a wash. If rolling for a credit or a small debit (no more than $10 or $15) will not be possible, we will let those trades go.

Accumulating Speculative Stocks

We have sold all speculative “innovative, disruptive” (whatever you call them) stocks. We no longer hold stocks such as ISR, DDD, NIO, NNDM, RESN, XONE, and other similar penny stocks. They do not fit my strategy and I do not believe in them. Overall, I do not feel comfortable with the volatility and risk they provide. One example could be DDD (3D Systems Corporation). That company has been around since 1983 (more than 30 years) yet it has not been able to provide any significant breakthrough that would keep this stock and industry hot for decades in the same manner as Apple (AAPL) or Amazon (AMZN) did in the past and continues to do so today.

Yes, there was a spike of interest in 2012 – 2014 when 3D printing progressed so much that the printers became smaller and capable of printing the entire cars, for example. Even NASA became interested and experimented with 3D printing in space. And people kept rushing into 3D printing companies buying their stocks. After the big fuzz ended in 2014, the stock collapsed and traded in a downwards zig-zag move until today. Now ARK came with an “innovative and disruptive” mantra and people rush into these types of stocks again.

 
3D System 20 year chart
 

Accumulating Growth Stocks

 

I am still interested in some growth stocks that would boost my portfolio in the long run. I have created a screener in Finviz.com to help select stocks that are more solid investments and growth potential rather than the speculative penny stocks in overhyped industries such as “electric vehicles”. The screener returns stocks that are considered by analysts, institutional investors, and insiders as a great investment and that these stocks are accumulated by these investors. The stocks also create revenue and growth and increase that growth.

Stocks from this screener we will be accumulating for the long run are currently Cutera, Inc. (CUTR) and The Blackstone Group Inc. (BX). More stocks like that may be added in the future. As long as these stocks appear in the screener results, I will be accumulating them. Once I reach 100 shares of each, I will start selling covered calls.

Here is a picture of the screener and all settings if you want to follow it and try it for yourself.

 
Finviz Screener
 

Accumulating Dividend Growth Stocks

Buying high-quality dividend stocks is our core strategy in our fund. And we will continue to do so and at a faster pace. Last week, we started accumulating Aflac (AFL) stock to reach 100 shares. As of today, we own 21 shares

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

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
 

Trading options

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

Our fund in charts:

TW Account Net-Liq week 8
 

TW Account holdings week 8
 

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 4.43% with options, our holdings are up 9.19% (from inception on 4/1/2019). The SPX is up 31.75% since inception. Our stock holdings underperform the overall market. This week, our adjusted stock holdings beat the market. The market gained 1.90% YTD, our portfolio adjusted stock holdings grew by 2.21% (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

TW Options Income week 8
 

TW Options Annual Income week 8
 

TW Received vs Projected Dividends week 8
 

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




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Posted by Martin February 20, 2021
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2021 Week 7 investing and trading report


Another week of February is gone and it is time to provide our investing and trading report again. This week was slow but as the market continued mostly lower, our portfolio held value and grew moderately. We adjusted a few of our positions removing some speculative stocks, adding a few growth stocks, and adjusted a few of the options trades. Overall, this week was a success again.
 

But now, let’s jump to our investing and trading report:

 

Account Value: $31,640.60 $503.9 +1.62%
Options trading results
Options Premiums Received: $673.00
01 January 2021 Options: $4,209.00 +16.65%
02 February 2021 Options: $3,575.00 +11.30%
Options Premiums YTD: $7,784.00 +24.60%
Dividend income results
Dividends Received: $20.47
01 January 2021 Dividends: $53.04
02 February 2021 Dividends: $60.92
Dividends YTD: $113.96
Portfolio metrics
Portfolio Yield: 3.51%
Portfolio Dividend Growth: 5.91%
Portfolio Alpha: 18.86%
Portfolio Weighted Beta: 0.52
CAGR: 750.17%
AROC: 21.13%
TROC: 39.52%
Our 2021 Goal
2021 Portfolio Value Goal: $42,344.06 74.72%

 

We received $673.00 in premiums trading options against our holdings and shares we want to own. Our options trading delivered a 11.30% monthly ROI, totaling a 24.60% ROI. Also, our net-liq increased amid the weak market. The entire week, our net-liq was suppressed by higher volatility and the broker’s higher margin requirements, however, it was slowly trending upwards.

Our account jumped up to 53.80% YTD growth. We are very happy with this result.
 

We are still on track to complete goals in our portfolio. We make 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

We are still on track to attempt fixing our SPX trades that still block approximately $12,000 in our buying power. We set a buy-back order for deep OTM put spreads for 0.10 debit. Once these get closed, we will roll the deep ITM higher and sell new OTM put spreads to offset the cost. It will be a slow process but I believe, it will be worth releasing an additional $12,000 in cash. As I said last week, we will be rolling these trades only if it will be resulting in credit rolls or a wash. If rolling for a credit or a small debit (no more than $10 or $15) will not be possible, we will let those trades go.

Accumulating Speculative Stocks

There has been a change to my mind trading speculative stocks and I decided not to do that. I do not feel comfortable with it and it is not my money-making strategy. I still may use these stocks for options trading as I feel fit, however.
I decided to sell NIO, ISR, and XONE. I will plan for exposure in these stocks using ETFs instead. As of now, I kept some other stocks such as DDD, RESN, and NNDM but I may unload them in the future too.

Instead, I have created a screener in Finviz.com to help select stocks that are more solid investments and growth potential rather than the speculative penny stocks in overhyped industries such as “electric vehicles”. The screener returns stocks that are considered by analysts, institutional investors, and insiders as a great investment and that these stocks are accumulated by these investors. The stocks also create revenue and growth and increase that growth.

One example was Cutera, Inc. (CUTR) that was on the list for a while and since we purchased the stock last week, it is already showing 7.94% gain.

Here is a picture of the screener and all settings if you want to follow it and try it for yourself.

 
Finviz Screener
 

Accumulating Dividend Growth Stocks

Buying high-quality dividend stocks is our core strategy in our fund. And we will continue to do so and at a faster pace. Last week we finished accumulating our position in Altria (MO) and now we hold 100 shares of this stock. We can now proceed to sell more covered calls or have the existing strangles partially covered. Now, we will start accumulating Aflac (AFL) stock to reach 100 shares.

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

Trading options

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

Our fund in charts:

TW Account Net-Liq
 

TW Account holdings
 

The table above shows our current holdings and gains on those holdings. Adjusted columns indicate how options help to boost (or ruin) our stock holdings appreciation, or in other words, lowering the cost basis. Without options, our holdings would be up 6.79% with options, our holdings are up 12.11% (from inception on 4/1/2019). The SPX is up 35.05% since inception. Our stock holdings track the market. This week, our adjusted stock holdings didn’t beat the market either. The market gained 5.21% YTD, our portfolio adjusted stock holdings grew by 5.13% (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

TW Options Income week 7
 

TW Options Annual Income week 7
 

TW Received vs Projected Dividends week 7
 

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




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Posted by Martin February 15, 2021
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Thoughts on investing, options, and yields


I read a few posts on social media about dividend investing and criticism from investors. I decided to write my thoughts about investing, options, and yields and how they can help you to significantly boost your path to financial freedom.

In the past, I was not trading stocks, I was trading options only, and I was trading options using SPX as underlying. I was making money but I was also losing them as fast as I made them (sometimes faster).

 
Investing, options, and yields learning
Photo by Julia M Cameron from Pexels
 

But I learned a lesson on how to do it and build a portfolio for a living (well, at least, I hope I had).

My Original Investing Strategy

My strategy is to be buying high-quality dividend stocks (dividend aristocrats) and accumulate enough that I will have enough income from dividends no matter what a stock is doing. A great example was JNJ in the 2008 crisis. The stock lost 50% of its value yet they continued paying their dividends and even increased them. And there were many other stocks in the same category. So, my theory is, if I accumulate enough stocks in this category to pay me for example $90,000 a year when the market is high as well as when it loses 50% of its value and I still receive my dividends, then I really do not care what is going on out there.

Trading Options Help

On top of that, since I have substantial knowledge of trading options, I decided to trade options against these stocks using a wheel strategy. In my opinion, the wheel strategy is pretty much a win-win strategy (of course if done correctly). So I started selling puts against these stocks (later on I started trading strangles) and have enough cash or shares for assignments. I have peace of mind now not worrying about the stock volatility. I roll the options as much as possible up or down as needed and if I cannot roll for a credit I let it assign. And I have enough cash (or shares) to let the assignment go without ruining my account. And I reinvest all proceeds to buy more shares. I keep reinvesting the dividends and premiums. It is not a quick-rich scheme (as many people believe or hope for) but still substantial growth compared to just passive investing (like what you would normally do in your 401k account).

Strategy Results

Thanks to this strategy, I feel relaxed, I was able to navigate through the market 40% crash in March 2020 without losing anything, and in fact, I was buying more shares when they were on sale, my account is up 50% for 2021, and my options premiums average $3,000 a month in 2021.

And What’s Next?

I plan on accumulating until I have enough to have a sustainable income from dividends and options. I will accumulate a 1-year salary saved in a money market account as reserves and then I will be ready to “retire” and trade for a living. And if something bad happens, I will have a 1-year salary saved to eventually sustain any losses and find a job, but I do not expect that. I feel quite confident that with this strategy I will be able to navigate through good and bad. The goal is not to overdo the trading and not to over-extend the trades beyond cash security or shares coverage because if you trade more than what your cash or shares allow you, you are forced to close the positions due to margin calls and for a loss. Many times, a substantial loss. I learned that the hard way.

Dividend Investing Misconceptions

There are misconceptions and misunderstandings about the dividends I have seen in the past from people. Many investors do not want to buy dividend stocks and prefer growth stocks because they consider a 3% yield and sacrificing the stock growth not enough to bother to invest in these stocks.

Another claim is that in order to achieve let’s say $90,000 annual dividend income, an investor would have to accumulate a $2.5 million account at current yields, and that is not realistic in today’s world since it would take a person over 30 or more years to do.

Both claims are only partially valid. None take into account dividend growth.

Yield On Cost (YOC)

If you take into account the dividend growth, the time and amount needed to accumulate shrinks significantly. For example, my current portfolio has a current dividend yield of 3.52% and dividend growth of 5.91%. With these numbers, the future yield on cost will be:
 

  • 8.75% yield in 10 years shrinking the capital requirements to $1,028,571 portfolio value
  • 31.26% yield in 20 years shrinking the capital requirements to $287,907 portfolio value

 

and so on (This is when you are reinvesting all dividends and not adding new money. If you start adding more of the new money, it will grow even faster). And, I speed up this process with options income. That was always my dream and goal in investing and trading – generate enough income that can be invested to buy more shares that would generate even more income. At some point in the future, I should accumulate enough income to start paying my bills on top of the accumulating of more stocks.

But yes, you have to give your portfolio time to work it out. If you are looking for a faster way to get rich, then this probably is not for you.




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