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Monday Trades 24OCT2016

I rolled some options positions from Friday expiries and also sold a discounted bond.

weigh-in:  210.8 (2.2) – w00t!

music selection:  “These Eyes” — Guess Who

First up is Genesis Energy LP (GEL), an MLP.  Shares were assigned some months ago at 37.50.  I am writing a second covered call at the 37.50 strike.  I sold GEL161118C00037500 for 70 cents a share.  The trade will be in force for 26 days and yields 26.21% on an annualized basis.  The underlying shares yield about 7.5%.

A second covered call I am writing is Mid America Apartment Communities (MAA).  I was previously assigned shares at 95.00 and am writing a 95 strike call.  I sold MAA161118C00095000 for 1.00 a share.  The trade will be in force for 26 days and yields 14.78% on an annualized basis.  The underlying shares yield almost 4%.

Next is a cash secured put.  A put in Blackstone Minerals (BSM) expired out of the money and I am replacing it with a put in CONE Midstream Partners (CNNX).  I like the risk/reward proposition better here as CNNX has a much stronger balance sheet.  I was able to sell CNNX161118P00020000 for 45 cents a share.  The trade will be in force for 26 days and yields 31.59% on an annualized basis while enjoying 8.13% downside protection.

Finally, among options trades is PennyMac Mortgage Investment Trust (PMT).  I had a cash secured put open here that was assigned on Saturday after closing 6 cents in the money.  I sold PMT161118C00015000 for 40 cents a share.  The trade will be in force for 26 days and yields 37.44% annually.  The underlying shares yield about 12.5% if I hold through the ex-dividend period before getting called.  Feel pretty good about prospects here.

I tried to sell a covered call on my shares of SDLP at the December expiry but could not get the market maker to take action.  I will try again tomorrow with a further out expiry to look for more liquidity.

In other news, another discounted bond sold today.  Linn Energy went into bankruptcy and has been in debtor in possession status for a couple months.  It could be some time before the bonds convert to equity and I had an opportunity to sell the bonds at a nice profit when a limit order cleared.  Back on 8DEC2015, I bought two units of the 15MAY2019 maturity 6.500 coupon bonds for 23 cents on the dollar.  I paid 2.00 in commissions and 37.00 in accrued interest.  Today, I sold the bond for 28.600 cents on the dollar.  I paid 2.75 in commissions.  No accrued interest was paid as the bond is in default and “trading flat”.  I picked up 60.50 in coupon payments during the holding period before the bond defaulted.  The trade was in force for 321 days and yields 29.79% on an annualized basis.  Not bad for a trade were I was “wrong.”

Devour your prey raptors!


Update UVXY (tIRA)

I sold my UVXY puts in my tIRA account.

music selection:  “When She Begins” — Social Distortion

I’ve been trying to close this position at a favorable point of the bid/ask spread for a couple days as it has moved into the money.  On 29JUL2016, I bought 15 of the 16 strike UVXY 19JAN2018 expiry puts for 8.40 a share.  That was a cash outlay of 13,440.  Today, I sold those puts for 9.95 a share for proceeds of 15,920.  My profit is 2,480.  The trade was in force for 84 days and yields 80.18% on an annualized basis.

I rolled about half of the position into new UVXY puts (the other half will remain in cash as a hedge).  I purchased the 11 strike 19JAN2018 expiry puts for 6.05 a share (10 contracts).  My cash outlay is 6,655.  I will target 200% annualized return or will sell around 10, whichever comes first.

In other news, I have positions expiring today.  A 15 strike put in PMT will be assigned after closing a stinking 6 cents in the money.  A put in BSM expires out of the money and will likely be replaced with puts in CNNX on Monday, depending on pricing.  Covered calls in SDLP, GEL, and MAA expired out of the money.  A covered call in HCLP will be exercised.  This was as planned as I wanted to exit the position to harvest a tax loss of 3,000.  Proceeds will sit in cash until the beginning of the year at a minimum while I play some defense.

I won’t be declaring the profit on UVXY in my accounting for monthly transparency as it is in my IRA and can’t really be spent.  I don’t consider money I can’t spend as “income”; call me crazy.  It will count towards my liquid networth however and be part of the withdrawal rate calculation.

Devour your prey raptors!

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Monday trades

I am continuing to raise cash.

music selection:  “Through Glass” — Stone Sour

weigh-in:  213.0 +0.6

Of my Friday expiries, MSFT, LNG, and DIS left me with open long positions.  I have exited LNG by selling 400 shares at 40.99.  That raised 16,396 in cash and booked a 3,276 profit in about 8 months.  For Microsoft (MSFT), I sold MSFT161125C00057500 for 1.50.  The trade will be in force for 40 days and yields 23.8% annualized.  I hope to get called to continue raising cash.  For Disney (DIS), I sold DIS161125C00100000 for 8 cents a share.  The trade will be in force for 40 days and yields a miserable 0.73% annualized.  I remain eligible to collect dividends at least.  I could be some time before I am able to exit this position profitably.

I also did some tax loss harvesting on Capital Products Partners LP (CPLP).  I sold 4283 shares from Interactive Brokers for 3.07 a share.  That raised 13,148 in cash and resulted in booking a 15,467 capital loss (ouch!)  The position was roughly break even after dividends collected during the holding period but harvesting the tax loss was more important than hoping for a full price recovery.  I should have used a trailing stop loss on this one and locked in a fat gain.  Live and learn.  I also sold 619 shares of CPLP from my Wells Fargo account.  That raised 1900 in cash and resulted in booking a 2,204 capital loss.  I no longer expect a tax liability for 2016 and should qualify for the maximum Obamacare subsidy.  Bonus!

I redeployed the cash proceeds from CPLP.  In Interactive Brokers, I sold BPT161118P00020000 for 1.00 a share.  That trade will be in force for 33 days and yields 55.30% annualized with 5.48% downside protection.  In Wells Fargo, I actually put some additional cash back in the portfolio (withdrawal rate will reflect this change at month end).  I bought Advent Claymore Convertible Securities and Income Fund (AGC).  I picked up 579 shares at 5.55 each.  I’ll earn 10.16% yield on those shares.

Devour your prey raptors!


Friday Expiries (QCOM, MSFT, LNG, DIS)

Four options positions expired with the closing bell.

music selection:  “Erase/Rewind” — The Cardigans

The only position that expired in the money is Microsoft.  I will be assigned shares at 57.50.  I earned 18.23% annualized on the position and should be able to earn similar on a near the money covered call.

Expiring out of the money are a Qualcomm put (63 strike), a Cheniere Energy call (52 strike), and a Disney call (100 strike).  I’ll be rolling the MSFT and DIS positions but exiting QCOM and LNG, including a sale of shares to raise cash.  I am still playing defense in light of the European banking troubles and the 4DEC2016 Italian referendums.  That includes opening fewer new positions when positions expire.  If things go smoothly, I’ll go back into risk on mode after the first of the year.

Devour your prey raptors!

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Update Discounted Bonds

I sold two of my discounted bonds for a profit today.

music selection:  “Erase/Rewind” — The Cardigans

First up is the Peabody Coal (BTU) 6.000 coupon, 15NOV2018 maturity bond.  I had two units purchased on 19NOV2015 for 20.50 cents on the dollar.  I paid 4.00 in commissions and 3 dollars in accrued interest.  The company is in “debtor in possession” status (bankruptcy) and the bond has climbed nicely to a profit.  I decided to get out while the getting was good and before the bonds convert to equity and liquidity gets tight.  I sold the bonds for 35.511 cents on the dollar, paid 2.75 in commissions and received no accrued interest as the bond is in default and “trading flat”.  I did pick up 60 dollars in coupon payments during the holding period prior to default.  The trade was in force for 328 days and yields 93.53% annualized.

Second is Vanguard Natural Resources (VNR).  This one is in technical default, enjoying the 30 day grace period before bond holders can force bankruptcy.  It moved narrowly into the green today so I decided to take my money and run as the average recovery in bankruptcy is only 40 cents on the dollar but the bond was trading for 58.25 cents on the dollar.  I originally purchased the bond on 20NOV2015 for 55 cents on the dollar.  I paid 2 dollars in commissions and 23.63 in accrued interest at that time.  Today, I got 58.25 cents on the dollar, paid 2.75 in commissions and received no accrued interest as this bond is also “trading flat”.  I did pick up 157.52 in interest payments from coupons during the holding period, prior to technical default.  The trade was in force 327 days and yields 19.25% on an annualized basis.  I feel like I did pretty well on both trades considering I was “wrong” in both cases yet came away with nice profits.

Devour your prey raptors!


Short Stuff With Lizard King

I’m moving into a more defensive mode through year end.

music selection: “Right Here” — Staind

weigh-in:  212.4 – no change from prior week

I have concerns about the European banking situation.  Deutsche Bank is potentially facing a 17 billion dollar fine from the US DOJ.  They will probably will settle for less but it could still be enough to completely wipe out their capital cushion.  Could this be Europe’s Lehman moment?  I’m even more concerned about the 4DEC2016 Italian referendum.  Italy could leave the Euro currency union and return to the Lira.  This could also rock Europe and World Markets.  Finally, there is the November election in the US.  With the markets looking richly valued and potential triggers for a sell-off, I want some short exposure.  I’ll be making some sales next week after options positions expire to raise additional cash as well.

First up is a short of Tesoro Corporation.  The thesis here is Tesoro is a domestic refiner on the West Coast that is under regulatory pressure.  At the same time, the good times for US refiners is ending.  Now that the US can export crude oil directly, the huge ‘crack spreads’ refiners have enjoyed are shrinking as the price of WTI crude normalizes against Brent crude.  Tesoro will come under margin pressure as a result.  I shorted 62 shares at $80.831.

My remaining shorts are all on the same theme of rich valuations coupled with crushing debt loads.  A European banking crisis or a strong move by the Fed to raise rates could hit the following companies hard.  Whipping boy number one is General Motors.  GM’s sales are heavily dependent on subprime financing.  Any economic weakness will send defaults soaring and financing for new sales crashing down.  That’s a double whammy.  I sold 155 shares short at $32.3211.

My next victim is Capital One Financial.  COF has made a name for itself extending credit to people who probably shouldn’t have it.  They have a ton of subprime credit card debt outstanding.  I see this company as subject to the same dangers as GM.  I sold 68 shares short at $73.56.

My next position is a pair of half positions in the two main publicly traded rental car companies, Avis Budget Group and Hertz Global Holdings.  CAR and HTZ both have a capital inefficient model that is heavily dependent on bundling Asset Backed Securities to finance their fleets.  We saw in the 2008 crisis both companies nearly went bankrupt when the ABS markets froze.  Revenues are also heavily dependent on non-business recreational travelers.  That business could take a wicked hit in an economic downturn.  So I sold 75 shares of CAR short at $33.40 and 67 shares of HTZ short at $36.95.

Altogether, I raised 20,004.02 in cash with these short positions.  I picked up some hedging in a frothy market and feel better positioned for some potentially rough waters ahead.

Devour your prey raptors!


Financial Transparency 30SEP2016

Another month in the bag.

music selection:  “Absolution” — The Pretty Reckless

weigh-in:  212.4 +1.4 – doh!



Wells Fargo (taxable): 28,697 – up 310 from 28,387.  Yield on account 10.98%

Interactive Brokers (taxable): 258,232 – up 5,288 from 252,944.  Yield on account 9.00%

Interactive Brokers (tIRA): 130,754 – up 3,425 from 127,329.  A 2.69% return on the month.

Checking: Cash on hand is up to 10,777.  It will draw down next month as I just authorized 1,100 to be paid for my home insurance.

Total Liquid Networth: This is up 10,839 from 417,621 to 428,460.  Increase for the month was 2.60%.



House: Paid

Car: Paid

Taxes: I currently have an additional unfunded tax liability of about 1,500.  I will be tax loss harvesting this year to reduce that to zero and hopefully qualify for an Obamacare subsidy.



Projected twelve month withdrawals are unchanged at 24,863.  Against a networth of 428,460, that is a withdrawal rate of 5.8%.  Offsetting the 25k withdrawal is 26,390 in projected twelve month interest, dividends, and distributions.  That is 106.14% of the budget.  In addition, there were 2,249 in month options premiums earned.



Spending is up this month to 1,857.  It’s under budget but not by much.  For the rest of the year, I have some big expenses of 1,100 in home insurance to pay plus about 2,500 in real estate taxes coming due.  I’ll struggle to stay on target but I’m well ahead of pace and have some room to give.


Devour your prey raptors!


Thoughts on Frugality

No trades today.

music selection:  “Karn Evil #9” — Emerson, Lake, and Palmer

weigh-in:  211.0 (1.4) – Doctor told me this morning “you’ve lost some ell-bees, didn’t recognize you”

Attaining Financial Independence is a world easier when you can control your spending.  I have my spending dialed down somewhat but I don’t believe in being extreme about it.  I still go to a movie most Saturday nights and I still regularly eat out.  Like my diet, I have to maintain this for the rest of my life so it can’t cause misery or it isn’t sustainable.

The big two items on most budgets are housing and transportation.  I have friends and former co-workers who fairly regularly “upgrade” both.  It is costing them their freedom.  Sure, they have nice houses and nice cars; but they are trapped in a never ending debt cycle.  It’s a trap, and you shouldn’t fall for it.  Cost of living in Houston is pretty low.  My four bedroom two bath home was purchased in 2002 for $97k.  Zillow seems to think it could be worth as much as 115k today.  There are plenty of houses in the Houston area upwards of 250k.  I’d be no happier (or less happy if I was still working to pay for it) in those homes.

I’d like to be able to do away with my car altogether but it isn’t practical in north Houston.  Public transportation just isn’t quite up to snuff here.  I could do it if I moved inside ‘the loop’ but that would double my housing costs.  To my way of thinking, a well maintained and paid for compact car solves the need without costing me a fortune.  I’m currently driving a 2002 Chevy Cavalier with 159k miles on the odometer.  It has no mechanical problems and should be good for another 100k or more with regular oil changes.

I’m trying to save on the food bill by growing my own.  Turns out, 4 years into FIRE, I still have a very “brown thumb.”  Out of four plants, I got exactly 3 tomatoes so far this year.  I finally have my first pepper on the vine.  Nothing else has bloomed this year.  I intend to research when to plant fruit trees in Zone 9 and see about planting 4 plum trees.  I think I might have better luck.  And with a surplus of plums, I can make homemade wine.  Perhaps a nice honey and plum melomel.

The final major category for me is health insurance.  Before Obamacare, I couldn’t get normal insurance and had an “indemnity” plan as an alternative.  It worked OK and was cheap.  I pay a little more for formal insurance through the ACA exchange these days but my Bronze plan with Blue Cross Blue Shield is a reasonable 243 a month.  I collected the full subsidy for 2015 by doing some tax loss harvesting.  I should be able to harvest enough tax losses one more time to collect the full subsidy and then back to paying retail after that.

I think for some FI/RE however, their main problem with spending is they aren’t spending enough.  If you don’t have any fun and only eat Ramen noodles, it isn’t a very nice life.  For those people, I think a budget that has some *minimum* spending categories is called for.  If you really like live music for example, you might set a minimum of 50 dollars a month to spend on that.  Let it be a guilt free indulgence.  The key is to be mindful about your spending and to direct dollars to the things that truly make you happy instead of blindly consuming excessive amounts of mindless plastic crap.

So, if it is what matters to you, go ahead and have that double foam latte.  Personally, I’m on an “anti-budget”.  I don’t track my categories, I set a total spending goal for the month with a savings goal and then otherwise do whatever I want so long as I can come in on target.  Some months I miss, and I make it up next month.  That is what works for me.  How are you managing your spending?

Devour your prey raptors!


Option Trades 19SEP2016

I opened 10 positions today.

music selection:  “Bring Me To Heaven” — Unsun

weigh-in:  212.4 +1.2 – too much football and pizza.

A little housekeeping first.  I didn’t get to post Friday or over the weekend about my expiring positions.  AAPL, PMT, SXCP, BSM, and GEL all expired out of the money.  I am establishing new positions in all today.  AXP, PSEC, and MAA all resulted in assignment of shares.  I wrote covered calls on all today.

I sold PMT161021P00015000 for 35 cents a share today.  The trade will be in force for 33 days and yields 25.81% annualized.  The trade also enjoys 3.43% downside protection.  I’m hopeful to get assigned again as this one also has a strong dividend yield.

I also sold BSM161021P00017500 for 55 cents a share.  The trade will be in force for 33 days and yields 34.76% annualized.  Downside protection is 2.70%.  I am indifferent to assignment here.  The yield isn’t that high and the options pay very well.

Next I went one strike out of the money to leave some room for capital appreciation on GEL161021C00037500.  I sold the contracts for 15 cents a share.  The trade will be in force for 33 days and yields 4.42% annualized.  I’m near certain to collect on the 8+% yield holding this one as well.

I also sold MAA161021C00095000 for 1.00 a share.  This trade will be in force for 33 days and yields 11.64% annually.  If I don’t get called, the underlying yields another 3.5% annually.

I went a little out of the money for AAPL puts to get some downside protection.  I sold AAPL161028P00109000 for 1.72 a share.  The trade will be in force for 40 days and  yields 14.40 on an annualized basis.  I enjoy 6.54% downside protection here.  I like to keep my exposure to individual equities down to the 10,000 dollar range so I’m reaching a little bit overweight here.  That is one of the reasons I’m going out of the money to defend myself here.

I also sold AXP161028C00065500 for 1.18 a share.  This one is a little bit out of the money.  I’m trying to capture up to 50 cents in upside capital appreciation before selling.  This trade will be in force for 40 days and yields 16.57% against my cost basis.  If shares are called, the yield with capital gains included will be 23.58% annualized.

I’m already in the money on PSEC161118C00008000.  I’d like to hold on to this one and collect distributions but I’ll do fine with just options premiums as you’ll see.  The trade will be in force for 61 days and yields 18.70% on an annualized basis.

Last of the group that expired Friday is SXCP.  I’m in the money here as well because I’m eager to get reassigned.  I sold SXCP161118P00015000 for 1.40 a share.  The trade will be in force for 61 days and yields 55.85% (wow!) on an annualized basis.  The trade comes with 7.98% downside protection.

A little different than the above trades are two trades where I’m trying to exit positions at a loss to engage in some tax loss harvesting.  Each of these two names has just one expiry left before year end.  If I can’t get called away, I’ll sell the underlying in late December.

I sold HCLP161021C00015000 for 1.10 a share.  The implied yield is 81.11% annualized over 33 days.  This will result in a 15.00 per share capital loss though.

I also sold CLNE161216C00005000 for 10 cents a share.  The implied yield is 8.20% annualized over 89 days.  This would result in a capital loss of 5 dollars a share.

Devour your prey raptors!


Update Discounted Bonds

Another limit order cleared for a discounted bond.

music selection:  “You” — Candlebox

I just got from running errands and saw an email that a limit order triggered for Rent A Center (RCII) bonds.  The street seems to think Rent A Center has a shaky balance sheet but I see a business with fat margins that can make interest payments.  I purchased two units of the 4.750 coupon, 01MAY2021 maturity bonds for 85 cents on the dollar.  I paid seven dollars in commissions and 36.68 in accrued interest.  Now, I get paid to wait.

Devour your prey raptors!