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Happy MLK holiday!

Happy Martin Luther King day!

music selection:  “Follow Me Down” — The Pretty Reckless

weigh-in:  212.0 +1.4 (doh!)

The markets are closed in observation of the holiday.  I’ll be back tomorrow with four trades.  Three fixed income plays and the rolling of the UVXY puts to the 20 strike.

Devour your prey raptors!

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Update UVXY puts

I sold my UVXY puts in the tIRA account.

music selection: “Shepherd Of Fire” — Avenged Sevenfold

I now hold no UVXY puts.  I’ll re-enter the position after tomorrow’s reverse split.

On 7DEC2016, I purchased 35 UVXY puts at the 6 strike and 18JAN2019 expiration.  I paid 3.90 a share.  After a nice move for volatility, I was able sell the puts for a good profit today.  I received 4.30 a share.  The trade was in force for 35 days and yields 106.96% annualized.

UVXY attempts to track double the daily movement in the VIX index by rolling the 14 and 40 days futures on a daily basis.  Contango in the futures market, cause the fund to repeatedly sell a “cheap” asset to buy an “expensive” one.  The double leverage compounds the folly.  The result is an ETF that declines approximately 90% per year.  I’ve found great success by betting against this dog with long dated out of the money puts.  I hope to continue with the trades many times in the future.

Devour your prey raptors!

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Monday Trades – AMLP, PMT, COF

I opened two positions and closed one.

music selection:  “Number 1” — Goldfrapp

weigh-in:  210.6 (1.8)

Two of today’s trades are driven by reaction to Trump.  First, I am closing my Capital One (COF) short for a loss.  The bank has serious headwinds in the form of lots of questionable credit card lending but the entire financial industry looks to benefit enormously from the Trump administration.  I shorted 68 shares on 10OCT2016 for 73.56 per share.  I am closing the short today at 87.90.  I book a loss of 975 dollars or 19.49%.

My second Trump trade is to fill out my half position in AMLP to a double position.  I want to go overweight here as Trump has vowed to approve Keystone and Dakota Access pipelines.  It is clear the entire midstream sector is going to benefit from a favorable regulatory environment.  The ETF yields over 8% while I wait.  I sold an in the money put to try to get assigned, AMLP170217P00013000 for 50 cents a share.  The trade will be in force for 40 days and yields 35.10% annualized while enjoying 2.50% downside protection.

Finally, I want to get back into PennyMac (PMT) to restore some lost distribution income as I trimmed positions to get defensive at year end.  I did a buy/write strategy here, buying 600 shares at 16.69.  I then wrote 6 calls, PMT170217C00017500, for 25 cents a share.  The trade will be in force for 40 days and yields 13.04% annualized on top of the underlying 11.31% distribution yield.  A total yield of 24.35%.

I’ll be back next Monday with some fixed income type investments to further improve my passive yield.

Devour your prey raptors!

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Update UVXY puts

I sold the 8 strike puts.

music selection: “Mountain Song” — Jane’s Addiction

On 17NOV2016 I purchased 45 of the 8 strike 18JAN2019 expiry UVXY puts for 5.65 a share.  The position has moved into the  money so it is time to sell.  This morning, I sold the position for 5.85 a share.  The position was open for 48 days and yielded 26.92% annualized.

The fund will be undergoing a 1:5 split on 12JAN2017 so I am going to wait until then to roll the position.  I have a 6 strike position in my tIRA account that I might sell before the split as well.  I’ll keep you posted.

Devour your prey raptors!

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Financial Transparency 31DEC2016

The year in review.

music selection:  “Kiss Kiss” — Yeah Yeah Yeahs

weigh-in:  212.4 +2.0

ASSETS:

Wells Fargo (taxable): This finishes the year at 29,134, up from 23,309 at year end for a gain of 24.99%.

Interactive Brokers (taxable): The year end here mark is 269,526, up from 213,223 which is a gain of 26.41%.

Interactive Brokers (tIRA): This is up to 140,217 from 106,722, a gain of 31.39%

Checking: Checking finishes the year at 8,443.  Last year’s mark was 6,401.  That is a gain of 31.90%.

Total liquid net worth: The total now stands at 447,320.  Last year’s total was 349,655.  The gain is 97,665 or 27.93%.  For the curious, I spent 22,226 on the year.  Without that drain on assets, my gain would have been 119,891 or 34.29%.

 

LIABILITIES:

Car: Paid.

Home: Paid.

Income tax: I should qualify for the full Obamacare subsidy this year and go into 2017 with about 9,700 in prepaid tax liability (I won’t take a refund.)  I’ll be looking to convert 20,000 of tIRA to Roth during the year but also expect to make enough to cover that from a side gig.  Prepayments during 2017 should be trivial.

 

WITHDRAWAL RATE:

Instead of an estimate this month, I have actual numbers from my checking account withdrawals.  The total withdrawn/spent is 22,226.  Against a liquid net worth of 447,320, that is  a withdrawal rate of 5.32%.  This is much improved from the beginning of year estimate of 9.61%.  For the month I pulled in 1,525 in options income.  The mark for the year is 29,618, of which 10,036 is from closing UVXY long dated puts.  My current twelve month annualized dividends, distributions, and interest is at 20,462.  The sum of options income and distributions is 50,080 for the year or over double my actual needs.

 

SPENDING:

Spending for the month was the lowest on record at 839.  That brings the annual total up to 22,226 as mentioned above.  I’m going to target 24,000 for next year’s withdrawal rate just to keep the math simple.

Devour your prey raptors!

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Friday Expiry (DIS)

A covered call on Disney expired in the money.

music selection:  “Loves Me Not” — t.A.T.u

Disney closed the day at 104.22.  My 100 covered call is in the money and results in shares being called away.  The trade was in force for 33 days and yields 8.30% annualized.  For now, I’ll be saying goodbye to Disney.  I’ll be deploying some cash towards a long term Closed End Fund income holding.  Ultimately, I will get back to writing puts on dominant cash gushing businesses like Disney, Intel, Qualcomm, and others.

I’ve been very defensive since October and will be looking to extend my exposure in the new year.  The election is over and the market is breathing a sigh of relief.

Devour your prey raptors!

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Update Discounted Bonds

A limit order for a bond filled today.

music selection:  “Here And Now” — Letters to Cleo

Discounted bonds have been good to me. On 2AUG2016 I bought two of the 9.750 1JUN2021 expiry bonds of Enova International.  I paid 84 cents on the dollar as well as 2 dollars in commissions 34.67 in accrued interest.  During the holding period I collected 66.24 in coupon payments.  I sold today for 99.1 cents on the dollar, paying 7.75 in commissions and collecting 17.88 in accrued interest.  The trade was in force for 149 days and yields 48.76% in annualized commissions.

These kinds of yields are frequently available in the discounted bond space and can easily outstrip the return of stocks with lower risk.  I have earned 8,773 in profits from these bonds since I began tracking them on the blog.  That includes my unrealized losses which total 1,858.  The losses may never be realized however.  Bonds that go into bankruptcy often pay out a portion of the amount owed or provide the owners with equity in the debt free post bankruptcy company.  The shares are illiquid but can often see astronomical returns in the space of a couple years.  This was the case for me with Seventy Seven Energy.  I received shares in bankruptcy and the shares are being bought by Patterson at a significant premium, leaving me with a profitable position.  I expect to at least break even on my remaining underwater positions.

Devour your prey raptors!

 

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Friday Trades PSEC, BPT, GEL, MAA, CNNX, DLR, NAP

I rolled several positions on Friday.

music selection: “Nikita” — Elton John with George Michael (In Memorium)

weigh-in:  210.4 (3.8)

Shares of PSEC were called away and I am getting back in by writing an in the money put.  I sold PSEC170120P00009000 for 70 cents a share.  The trade will be in force for 29 days and yields a very strong 97.89% annualized while enjoying 1.31% downside protection.

I sold puts on BPT on Friday as well.  The last set of puts expired out of the money so I have had to increase the strike.  I sold BPT170120P00025000 for 1.25 a share.  The trade will be in force for 29 days and yields 62.93% annualized while enjoying 7.05% downside protection.

A covered call expired out of the money on GEL.  I wrote a new call on Friday.  I sold GEL170120C00037500 for 15 cents a share.  The trade will be in force for 29 days and yields 5.03% annually.

A covered call expired in the money and I’m going back to the well.  I sold MAA170120P00095000 for 2.15 a share.  The trade will be in force for 29 days and yields 28.48% annualized while enjoying 3.19% downside protection.

A put on CNNX expired out of the money so I’m writing a new one for more income.  I sold CNNX170120P00022500 for 30 cents a share.  The trade will be in force for 29 days and yields 16.78% annualized with 5.45% downside protection.

A put on DLR expired out of the money.  I’m using the same strategy again.  I sold DLR170120P00095000 for 1.80 a share.  The trade will be in force for 29 days and yields 23.85% annualized with 4.06% downside protection.

A new position for me is Navios Maritime Midstream Partners (NAP).  This is a hydrocarbon shipping company that is well positioned to profit from increased exports from the US to Europe. The underlying stock yields 15.50% and is very attractive as an income producing investment.  I can do better with options though.  I sold NAP170217P00010000 for 50 cents a share.  The trade will be in force for 57 days and yields 32.02% annualized while enjoying a very strong 11.63% downside protection.

The simple average annualized return of the above seven investments is a powerful 38.14%.  All of this comes with front loaded cash flow and downside protection simple longs do not enjoy.  I hope you can see why I think the 4% rule is unreasonably conservative for an options investor.  In my opinion, much higher withdrawal rates can be sustained.

Devour your prey raptors!

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Friday Expiries 16DEC2016

Seven positions expired for me today.

music selection:  “The Reincarnation of Benjamin Breeg” — Iron Maiden

Three of four covered calls are resulting in shares being called away.  These are PSEC, MAA, and HCP.  I retain control of shares in GEL.  Three puts are expiring without resulting in assignment.  These are BPT, CNNX, and DLR.  For these seven positions, I earned 1,450 in premium income.

I’m traveling next week and will not have an opportunity to establish new positions until next Friday.  I plan to get back into all seven names, assuming prices don’t run away from me during the week.  I also have DIS expiring on the 30th and expect shares to be called away at 100.

Devour your prey raptors!

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Update Discounted Bonds (SVNT)

I have an update on Seventy Seven Energy (SVNT)

music selection:  “The Freshmen” — The Verve Pipe

On 15NOV2015, I purchase two Seventy Seven Energy bonds at 36.55 cents on the dollar.  The company later filed bankruptcy.  Upon exiting bankruptcy, I received 65 shares of the newly constituted and debt free SVNT.  Today, a deal was announced with Patterson UTI (PTEN) that sent shares soaring 67%.  My position is now worth 2,860 (original basis was 731).  After accounting for coupon payments and commissions, the annualized yield (over 371 days) is now 289.31%.   I got lucky in that limit orders to sell for much less never filled as liquidity of this over the counter stock has been very low.  Today, I received a gift from Mr. Market.

I will be closing my limit order to sell SVNT and await an exchange for 1.7725 shares each of PTEN.  Liquidity of that issue is a lot higher and I should have no problem executing a sale thereafter.

Devour your prey raptors!

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