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Friday Expiries

It’s expiration Friday.  And I’m moderately inebriated.

music selection: “Rain” — The Cult

I have nine positions expiring today.  Six expire out of the money.  One results in shares being called away and two result in shares being assigned.

Suncoke (SXCP) results in shares being assigned at 20.   This is as planned as the put was written in the money with hopes of acquiring shares.  Shares fell 7.75% today making this a less attractive position but the underlying still yields 12.15% and will allow for covered calls to be written for bonus yield.

Rig Partners (RIGP) has an unclear result.  Shares were all bought by the general partner and converted to RIG.  I *think* I may see shares called away on a ratable basis except for 120 shares that were added to the buyout offer to sweeten the deal when shareholders revolted.  RIG currently has no yield but has a bright future.  I’ll reassess when I know precisely what I receive post expiry.

A covered call in Seadrill Partners (SDLP) expired out of the money.  I earned 7.16% annualized there in addition to the underlying yield and expect to do even better with a new covered call on Monday.

Prospect Capital (PSEC) will result in shares being assigned.  This is another example of a desired outcome.  Puts were written in the money with hopes of being assigned.  There has been some price appreciation so the time value on at the money covered calls should be even higher.  If I don’t get called away, the underlying has a nice dividend yield to reward me while I wait.

BP Prudhoe Bay Trust (BPT) is going to expire out of the money.  I would have liked to have gotten assigned or seen the share price stagnate so I could write puts again for almost 63% annualized gain but the price has run away from me with the recent rise in WTI spot price.  I’ll say goodbye to this one for now.

A written call in Genesis Energy (GEL) expired well out of the money.  There was very little price movement here over the duration of the contract and I will write a new covered call for an expected return similar to the 5% recently earned.  In the meantime, I remain eligible for a shot at the 7+% dividend yield.

Mid America Apartments (MAA) has traded flat (with some volatility in between).  I should be able to duplicate the 28% annualized return on puts with this one on Monday.

A put in Cone Midstream (CNNX) has run away from me.  I collect the full 16.78% annualized return but there will be no encore performance.  I wave goodbye to this one for now.  Maybe there will be a pullback to allow me to take another swipe.

It’s the same story with Digital Realty (DLR).  The written put has run away from me.  The 23.85% annualized return will not be duplicated.   I’ll replace this one with a new position to be revealed on Monday.

All told, the above positions provided 2,905 in options premiums for the month of January.  I also picked up 900 from selling UVXY puts in the month and have had a record month.  February won’t look as tasty but I expect a solid month nonetheless.

Devour your prey raptors!

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Bought AWP, EFR, GLO, UVXY puts

The markets are open again after the holiday and I am putting capital to work.

music selection:  “Meant To Live” — Switchfoot

I moved to de-risk my portfolio before the election and raise cash.  Now, I have a lot of latent cash that needs to be deployed since it is evident the market is not going to do a post-election nosedive.  I’m going with three closed end funds for income.  And enough liquidity finally arrived to buy some UVXY puts at a reasonable strike.

First is Alpine Global Premier Property (AWP).  This is a closed end fund that is in global equity and a sliver of global debt.  The fund objective is high current income.  Perfect for an income hungry lizard like me.  The fund sells at  nearly 18% discount to net asset value.   A bargain!  It yields 11.43% annualized, paid out on a monthly basis.  This is a full position at 10k invested.

Next up, alphabetically, is Eaton Vance Senior Floating Rate Trust (EFR).  This is a closed end fund that is invested in senior variable interest rate notes.  I wanted to add more to JRO, which is another floating rate CEF I already hold but that one is trading at a significant premium to net asset value.  EFR is trading at a 2.38% discount to net asset value and represents a better value.  The fund yields 6.18% (paid monthly) and has upside in a rising interest rate environment.  This is a half position at 5k, as JRO is already a 1.5X size position.

I also bought Clough Global Opportunities (GLO).  The Fund seeks high total returns through investment in equity, corporate, sovereign global securities and through utilizing an options strategy.  It is another closed end fund that represents a great value as it trades at a 16.21% discount to net asset value.  The fund yields 11.14% percent annually, paid out on a monthly basis.  This is another full position at 10k invested.  These three buys get my 12 month projected distributions back up 23,397 or 97.49% of my projected budget.  That’s sleep at night security.

I also bought some long dated UVXY puts now that liquidity has returned post-split.  I bought 21 contracts of UVXY190118P00020000 for 12.95 a share in my taxable account.  I added another 11 contracts in my tIRA account at the same price.  I’ll hold till around the time the contracts are at the money or around 30 days if things go as planned.  Longer holding periods could be necessary if there is a volatility spike, especially if it is long lasting.

Devour your prey raptors!

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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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