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DIVIDEND CAPTURE – TRIPLE PLAY (ETE) TRADE ENDS


Back in December 2016 I opened a triple play trade using Energy Transfer Equity, L.P. (ETE) as underlying.

I was selling cash secured puts as long as I got assigned into the stock.

After I got assigned, I kept the stock, collected nice dividend, and started selling covered calls. Today, my covered calls ended in the money and got assigned. I sold my stock.

This ends this trade and on Monday I will start the cycle again by selling new cash secured puts.

 
Here is the ETE trade review in numbers:
 

Open date Strike Option Premium Trade Status
12/2/2016 15.00 puts 0.52 rolled
12/21/2016 17.00 puts 0.21 rolled
12/28/2016 19.00 puts 0.45 assigned
01/23/2017 19.00 calls 0.35 expired
02/27/2017 19.00 calls 0.28 rolled
03/09/2017 19.00 calls 0.34 expired
03/27/2017 19.00 calls 0.26 assigned
04/07/2017     2.41  

Summary:
 

Total Premiums Received: $241.00
Dividends Received: $28.50
Total Revenue: $269.50
Total Revenue %: 14.18%
Total Revenue Annualized: 40.77%
Days In Trade: 127

 

The dividends from this trade have been reinvested using DRIP program. I bought additional 1.505 fractional shares of ETE. These shares will bear dividends and I will continue reinvesting them.

This will ensure my stake in ETE will continue slowly growing.

 

 · What’s next?

 

On Monday, I will start selling new cash secured puts (CSP) – a new triple play cycle.

I plan on selling April 28 expiration 19 strike puts on Monday. Here is what the trade order would look like:

 
STO 1 ETE Apr28 19.00 put
@ 0.36 credit limit GTC
 

The expected ex-date is May 5th, 2017 (not confirmed yet) so the shares must get assigned in April 28th in order to own the shares before the ex-date (which would be the following Friday).

If the puts won’t get assigned, I will let them expire worthless and purchase 100 shares of ETE outright on Thursday the following day.

 




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Posted by Martin April 06, 2017
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March 2017 options income


March 2017 trading turned out to be successful again although at first not expected.

As I mentioned in my previous posts about options trading I dedicated this year to consolidate my trades from previous year. I opened a few trades which I no longer like and I got stuck in those trade by first over-trading and then rolling them far away. Now I sit on those trades and they are dead money.

So, I decided to sequentially get rid of those trades. In previous months I closed a few trades for a loss, but offset that loss by new trades. I was successful in January and Fenruary this year.

I did the same in March 2017. But I closed too many trades in March. At least I thought so. I closed trades for $2,600 dollars loss.

But I was able to trade this loss out and finished the month with gains.

My plan for March 2017 was to make $1,717.35 dollars of income.

Although I haven’t met our goal, given the circumstances that I was offsetting a loss, I am happy to say that we were able to make $1,619.74 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 $1,619.74 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 March 2017 we made: 49 trades
Total trades in 2017: 136 trades
March 2017 options trading income: $1,619.74 (47.27%)
2017 portfolio Net-Liq (net)*: $2,708.97 (-32.62%)
2017 portfolio Net-Liq (gross)*: $23,208.97 (-5.35%)
2017 portfolio Cash Value (net)*: $28,141.97 (20.10%)
2017 portfolio Cash Value (gross)*: $48,641.97 (10.72%)
2017 portfolio Equity (net)*: $33,328.97 (4.20%)
2017 portfolio Equity (gross)*: $53,828.97 (2.56%)
2017 Liability/Debt: $20,500.00 (0.00%)
2017 overall trading account result: -28.25%

* 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:

 

In March 2017, we made money to offset closing bad trades and yet ending up with gains.

However, these gains were immediately blocked by other existing trades and a few new trades.

The biggest problem was a $LULU trade. The company missed by very little when reporting earnings but provided weak guidance which sank the stock more than 20%. This trade had negative impact on our net-liq and overall account results.

However, I consider it a temporary decline since we haven’t closed any trades in our portfolio. There fore, once those trades get better again (by rolling , closing, offsetting etc.) our net-liq will go up again.

 

 · Options Trading April 2017 outlook

 

Last month, my March outlook was quite optimistic.

Until the market presented itself in a reversal and decline.

In my last Trading Diary #4 post I wrote that the market retreated from the recent highs. I expressed a hope that the market could pushed up and break the downtrend.

 
SPX
 

As you can see in the chart above, the market is stuck with fighting between bears and bulls. But it cannot break the downtrend line. Anytime the price breached the downtrend line it was immediately sold off.

This was also happening on the downside and the market fell to the support or even below, it was immediately bought by buyers.

However, my overall bias is bearish. Nothing disastrous, but I expect the stocks sliding lower until the market breaks up.

 
What do you think about options trading?




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Posted by Guest April 04, 2017
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Unconventional Ways to Save Money


Saving money is a concern that affects most people today. We have probably heard all of the conventional money-saving tips, such as, cutting back on your personal fun money or trying not to eat out as often. There are other ways to save money that are not so conventional, though. Let’s take a closer look at some of them now.

 

 · TV Options

 

If you are paying for satellite or cable services, you have a pretty good chance to find ways to save money on your services. The savings you get can be as little as $5 or more than $100 depending on what you subscribe to and what you feel you can live without. The key to this is to constantly be looking at your service level to see what you are and are not watching. What you don’t watch, try to cut it out. We all enjoy our local channels though and with DIRECTV local channels are something that you will never need to go without.

 

 · Skip the Meat

 

When you are looking at ways to manage your finances so that you can save more money, one way to do this is to save money on groceries. Yes, we already know about price matching, shopping around, and using coupons, so we won’t get into that here. Instead, what about cutting out one of the biggest expenses on your shopping list… meat. Meat can be incredibly expensive. This is especially true if you are a big fan of steaks, corned beef briskets, and the like. By skipping out on the meat during your shopping, you will be doing more than making healthier choices… you will also be making it easier for you to save a lot of money on your grocery bill.

 

 · Give Up the Wheels

 

This might not be an option for a lot of people who live far away from their place of employment, or in rural areas, or even in cities that don’t have dependable public transportation options, such as in Mobile. AL. However, there are millions of people who remain without a vehicle, which enables them to save money on car payments, gas, insurance, taxes, and more. Some of the options you might have include using public transportation, biking, and walking. There are very creative ways to get around not having a vehicle. You can take a cab, rent a car on those occasions when you absolutely have to have a car, and you can even get your groceries delivered if you have a grocery store in your area that offers this. Almost everything else you might need can be ordered online.

 

 · Avoid Tolls

 

Living in Chicago has its perks, but getting around without having to pay tolls can be difficult without help. You can always make sure to set your GPS so that you can avoid them and this can save you a lot of money. This might take a few minutes out of your day, but the savings, especially in toll happy places, can be significant.

 

 · Make Your Own Clothes

 

A lot of people might be of the opinion that sewing is something that is hard to do. High levels of this activity can be quite difficult and can require a bit of experience, but you might be surprised at how much you can save on clothes just by hemming that pair of pants by yourself or doing a few simple alterations. At times, getting a single dress altered might cost you up to $20. You don’t need an expensive sewing machine either. You can get a good one for about $50. Then, just practice with a few patterns. You can make things like tote bags, skirts, pillows, and more with very little experience.
 

All in all, there are quite a few more obvious ways that you can save money. From not spending so much on your coffee every morning to sharing a ride with a co – worker. That being said, sometimes it can be a fun thing to try to stretch your limits and find more and more unconventional methods for you to save a bit more of your money. What can you come up with to save more money this year?




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Posted by Martin April 04, 2017
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Soft Versus Hard Economic Data And Why Wall Street Has It Wrong Again


I have followed Keith McCullough, the owner, CEO, and commentator at Hedgeye for some time and for the period of time he was spot on reviewing economic development of the US and its reflection to the stock market.

For a few last years, I think it was years, Keith was bearish on the US economy and the his view at market was reserved at minimum.

He caught my attention by pounding Janet Yellen and FED policy. Hedgeye’s memes that FED has it always wrong were entertaining.

But I considered Keith McCullough to be a permabear.

So I was surprised when his economic and stock market reversed some time ago (about a year ago now) and he presented his bullish view supported by economic data.

 
Hard Data
 

Today, Hedgeye came up with yet another article mocking Wall Street and talking heads for once again being on the wrong side of the river.

 
Enjoy:
 

Mainstream media and stock market bears have been kicking around this “soft” versus “hard” economic data meme for a while now.
 

“Soft” data are supposedly measures like Consumer Confidence, which just hit a 16-year high. Meanwhile, “hard” data are releases like Retail Sales, Durable Goods, Capital Expenditure and Jobs Growth which MSM says have been disappointing recently.
 

Nevermind that Retail Sales recently hit a five-year high, Durable Goods and Capex both accelerated for the month of March and Jobs Growth recently picked up for the first time in 23-months.
 

Forget that. The soft data will soften they say. Not a lot of softening of the “soft” data, yet. Today’s ISM Manufacturing data shows the Prices Paid component of the index closing the first quarter of 2017 at a 71-month high of 70.5 on the Index.
 

The Current Production component dropped below the 60-level while New Orders held just below multi-year highs. Employment is the big callout rising to 58.9 = highest level since June 2011 and Inventory positions continue to improve.
 

A few notes:
 

  • New Orders are still strong but its hard to expect sustainable ramp from current levels. Middling may be more realistic as commodity/industrial base effect support will be waning and a protracted run >65 in mean reverting, diffusion series is an elusive beast.
  • Inventories = custom inventory positions continue to improve as inventory-to-sales ratios continue to improve broadly. In other words, inventories are unlikely to be either an outsized driver or drag on investment nearer-term.

 

Too bad all these “soft” data experts didn’t call it out when it was softening like it did between first quarter of 2015 all the way to the low for GDP (of 1.3% year-over-year growth) in the second quarter of 2016.

 
Hard Data
 

Review the rest of the article at Hedgeye…




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Posted by Martin April 03, 2017
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Trading Diary #4


As I wrote in my March 2017 dividend report in an outlook that the market is on crossroads of either going higher or staying on the downward path, today’s trading showed us we are heading down.

 
SPX trend
 

Although the intra-day trading was quite impressive (see below) when the market could recover almost all losses, it wasn’t able to to move higher and break the downtrend line (see blue arrows above).

 
SPX trend
 

Until this changes, we have a problem. Well, this depends on the point of view. As a dividend investor I welcome a price drop as I will be buying cheap stocks. As an options trader I do not care as long as I can manage my strangles.

 
Let’s see what Tuesday brings in.




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March 2017 dividend income


March 2017 is over.

It was quite fast. I almost haven’t noticed. And many things happened in March. Good or bad. But financially, I did well and actually better than expected; both in dividend income and options trading income.

This month, we received $85.86 dollars in dividends.

It is slightly less dividends than last month.

But it was more than in the same month last year. In March 2016, I made $70.46 in dividends. That is 21.85% increase year over year.

Definitely, this month was another success!

Our annual dividend income increased to $1,068.55 from previous $1,062.66 of annual dividend income. 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 $85.86 in dividends and all dividends were reinvested back to the companies which generated them.

 
Here are some numbers:
 
Dividend Income = $85.86 (account value = $22,479.74 +1.23%)
The account is up 8.20% for the year.

 

 
Monthly dividend Income:

 

 
Last month, we purchased 100 shares of Energy Transfer Equity, L.P. (ETE) using triple play strategy. We sold cash secured puts with 19 strike and got assigned to the stock. We bought shares at $19 a share.

We were selling covered calls against the position with 19 strike. The calls kept expiring worthless in March. We will continue selling covered calls in April.

 
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. $3,017.70 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 $58.00 dollars income from options 1.92% return on invested capital.

 

 

In March, we had options trades opened using stocks Ensco plc (ESV). We didn’t have to do anything with those positions.

We traded options using Energy Transfer Equity, L.P. (ETE). We also decided to add an Iron Condor using Seagate Technology plc (STX). We had to roll the trade once in March to avoid assignment. Unlike ETE trade, we do not want assignment of this stock as of now.

 

 · Our dividend investing outlook

 

We saw the market getting to a complete halt in March. It even reversed and dropped.

We saw the first dip of more than 1% since election.

Many saw this as a positive event and I tend to agree with them.

The dip was bought again by investors but there weren’t enough buyers to move the market to higher highs. It still may happen if the purchase continue, but as of now, we are at a cross road.

Will the market go higher or are we seeing a creation of a new lower high?

Here is what I am seeing:

 
SPX trend
 

If the market fails to break the thin grey line, we will most likely see a correction.

While many may freak out. I am actually happy about it.

I keep telling to all dividend investors who are not comfortable with the current market that it doesn’t matter to them where the market is.

Of course, this depends on where you are in building your dividend portfolio but if you are at the beginning or even middle of the accumulation phase, you do not have to worry about crisis, panics, sell offs, or any sort of disasters.

As a dividend investor, you keep buying and building your dividend income. And when stocks drop even 50% you should welcome it with open arms and keep buying, keep reinvesting your dividends.

I have heard investors saying that they do not want their portfolio to drop 40 or 50% and then wait for a long term recovery. They want to time the market, sell now and buy back when the market drops. I have watched investors selling in August and September 2016 when the market was at all time high.

Back then the market was at 2120 and they couldn’t stomach it. They kept selling (trimming) their positions.

Today, the market is at 2340.

220 points higher!

So, you sell now and keep waiting for a drop, sell off, or correction which may not yet come. It may happen in six months from now. And you will be sitting sidelines depriving yourself of dividend income which could have been reinvested.

And if that really happens, I do not mind that my portfolio value drops.

I do not follow my portfolio value.

I follow what my dividend income is.

When building a dividend growth portfolio, you should always have in mind what was the reason you started building that portfolio.

In my case, it was income.

So if I invested $22,000 dollars to stocks which pay me $1,070 dividend income and there is a sell off and my portfolio drops to $9,000 dollars but keeps paying me the same $1,070 dividends, should I be concerned about the value?

No, my reason was income. And with the value drop my income hasn’t changed. I do not have to worry at all but on the contrary, I will be very happy that my dividends are now buying a lot cheaper stocks!

Many of my stocks in my dividend portfolio not only recovered well from the 2008 Great Recession, they actually increased dividends! Why selling them then?

Let me know what you think!
 




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Posted by Martin March 30, 2017
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Trading Diary #3 (LULU) down more than 23%


LULU tragedy continued this morning when the stock opened down more than 23%.

Surprisingly, it didn’t have any worse effect on my account than what was priced in last night when I recorded my notes on this piece if crap.

You work hard and try to improve and make a few bucks and after you start seeing some results and improvement you get crashed.

 
As one trader I spoke with said:

“Trading in the stock market is the hardest way to make easy money.”
 

Well, this sell off didn’t hurt my account more than what I saw last night. Yes, I still did receive my margin call but it was only $38.45 dollars. Nothing too harsh to freak about.

Of course, if I haven’t overtraded my account last year and instead of dragging those trades around rather unloaded them I didn’t have this problem today.

Here is a new look at the stock disaster:

 
LULU disaster
 

My goal for 2017 was to actually unload my positions and get the account in line with my rules on how much buying power I can use. I probably need to be more aggressive in doing so.

The LULU tragedy allows me unloading at least the call side. So I closed one call which lost value and I will wait for the other one to go the same path. I might close it next week too.

 
LULU disaster
 

Surprisingly, this hiccup will have no effect on my March cash income. I still will end up March positive on cash flow side.

But my net liquidation value got hit very hard. And the net-liq is a metric I use to track a valuation of my account. From this perspective, March will be a terrible loss. But it is just a paper loss until margin calls start forcing you to be closing positions which are currently losing money. Hope I will not have to go this direction.
 




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Posted by Martin March 29, 2017
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Trading Diary #2 (LULU) got crashed


LULU reported 1.00 EPS, WS expected 1.01 EPS. A slight miss.

But the AH chart looks like an end of the world. Blame guidance which made WS over-reacting (as usual).

 
LULU
 

This is a bad blow to my account. Hope, this shit will recover by tomorrow morning opening although I have very low expectations that it would happen. I think this crap will continue lower. But who knows.

Last Q earnings the company beat expectations and it skyrocketed back to 72 a share. This earnings a slight miss and it swamped. What a joke.

But I should have dumped my shares when it jumped up above $70 a share and not holding the stock! Stupid me!

Because surprisingly, it is not the options in my account which are hurting me now. It is the f** stock!

 
LULU
 

As you can see, even my puts are still making me money! It is the stock which is now down by almost $2,000 dollars which blew my account now. Another reason for not trading high flying non-dividend stocks. If this happens to a dividend stock, you will at least get paid for holding the stock. With LULU, I get nothing.

Tomorrow will be a bad day!




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Posted by Martin March 29, 2017
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Trading Diary #1


(Wednesday, March 29, 2017)

Wow! And wow again. If you start predicting the market, this is what you get. I am glad I stopped predicting the market but focus on trading and adjusting those trades.

But sometimes this can backfire too.

Like my US Steel (X) trades which recently the stock acted so violently that all my positions in X were totally destroyed. And I mean out of order.

What happened? First the stock sold hard, so I rolled worthless out of the money calls into the in the money calls so I could pull my deep in the money puts up the hole. But then the stock rallied again making my calls a problem instead of a help.

Now I have to work the calls out of the hole.

money

But, this is still a part of my strategy. Although it can be frustrating at times.
 
 

The next thing I did yesterday was that I somewhat liquidated a small portion of my WYNN contracts.

At the beginning of the month I had 6 strangles against WYNN with January 2019 expiration. Yes, you read it correctly. It is an almost two year contract.

Last year, I made $20,000 on WYNN, but in December 2016 WYNN bit me hard. A few very hard sell offs flushed my 100 strike puts to the sewer. And my net-liq with it.

I was more than $6,000 dollars in a margin call. I had to act. I took some losses by closing a few contracts and the remaining ones I rolled. And I rolled them several time until I ended in January 2019 expiration day.

I ended with 6 strangles and very good strikes – 80 strike puts and 100 strike calls.

I thought, this would safe and wide enough spread so the stock could do whatever it wanted for the next two years.

Wrong thinking!

I still managed to lower my strikes on the puts side even lower, down to 77.50 puts, and rolling calls from 100 to 125 strike. I was also able to close 2 contracts at the beginning of March 2017. I was left with 4 contracts total.

It cost me around $2,600 dollars. I expected March to be a losing month. Yet, I continued trading and made all that loss back! I made the entire $2,600 plus $300 on top of it!

This makes me happy as I haven’t expected this at all.

Yet soon I was hit by WYNN again. The stock, which was trading in 2 years long channel of 100 – 80 price suddenly broke up from that long consolidation. The rally quickly endangered my 125 calls.

I managed to roll the entire trade higher – calls to 140 strikes but I had to roll my puts higher too to 100 strike, 105 strike and 115 strike. This helped me to unload another call contract yesterday for a small loss which is still covered by money I made this month.

It still baffles me as my WYNN trade blocks over $15,000 dollars of my buying power! It is dead money!

Now, I have 3 call contracts and 4 put contracts. Still blocking a lot of cash!

Next month, I plan on doing the same thing as this month. I will close another either put or call contract for a loss and will trade it to offset that loss.




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Posted by Martin March 27, 2017
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What a day today!


SPX opened down significantly as investors digested Trump’s healthcare failure. At least that’s what headlines were showing this morning.

Evidently, they had great digesting today as the markets recovered most of the losses and went from 0.98% loss to about 0.10% at the end of the day. Let’s just hope that they will not suffer from diarrhea tomorrow.

The Trumpfear seems to be premature and over-reaction.

I took advantage of the move and adjusted a bunch of my trades (see the picture below). This brings my trading results to be positive for March as at the beginning of the month, I closed a trade for a loss hoping I would be able to offset the loss with other trades. It just happened. I realized $2,600 loss on March 1st closing the bad trade.

Today, I am slightly in green. If nothing changes, I should be finishing this month with around $300 dollars profit. Basically going from negative $2,600 to $300 positive. Although, I would love to see the entire amount as my monthly gain, I am happy. I got rid of a bad trade and still finish in green.
 

Here are the trade adjustments from this morning:
 
Trade adjustments
 




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