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Sell BDCL, Buy IGD

I’m harvesting a tax loss and redeploying cash.

music selection:  “Broken Wings” — Mr. Mister

weigh-in:  214.2 +3.6 – ouch, worst weekly performance since I got started.

My first action today was to harvest a tax loss.  I was up overall after distributions in BDCL but the capital loss was pretty steep resulting in an ETN that badly underperforming since 2014.  I am also wanting to limit exposure to ETNs.  Unlike ETFs, if an ETN closes shop and liquidates, the underlying bank does not have to immediately disburse funds.  They are under no obligation to return capital until the underlying note matures so investors can be stuck without access to their cash for years.  I sold out of BDCL at 19.28 a share.

My next action was to redeploy the proceeds from the sale.  Longtime raptors know I love Closed End Funds.  These funds do not create and liquidate shares based on demand like an ETF.   Instead there is a fixed number of shares and their value floats.  Oftentimes, you can find these funds selling for significant discount to their Net Asset Value.  That is the case today with IGD as shares are trading for almost a 12% discount to the underlying assets.

This CEF is a Voya product and is a global equity fund that focuses on high dividend stocks.  It selectively writes covered calls to boost income and sometimes hedges foreign currency exposure.  I got in at 7.02 a share for a 12.99% annual yield.  This fund complements my options trading well but is completely passive on my part.  I just sit back and collect distributions.  I also stand to earn some capital gains if the discount to NAV reverts to mean.

Devour your prey raptors!

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Update UVXY, SPY hedge, FB, TSO

Busy day in the market for me.

music selection:  “Welcome To The Black Parade” — My Chemical Romance

I was able to close out the UVXY position in my tIRA account.  I initially purchased the Jan 2019 10 strike puts for 6.05 a share on 21OCT2016.  Today, I unloaded at 6.50 a share.  The trade was in force for 45 days and yields 60.33% on an annualized basis.  I have not rolled to a lower strike yet as I have to wait for cash to settle.

The Italian referendum over the weekend was “NO” vote which is the condition I was hedging against.  This almost certainly means “Quitaly” and possibly the death of the European Union as a whole.  The markets shrugged in response.  I closed my hedge for a 182 dollars loss including round trip commissions.  I’d do it again.

In my tIRA account, I closed ABT, ADM, and AMLP.  I replaced them with shares of Facebook (FB).  Facebook trades at an attractive PEG ratio, is executing well, and returning cash to shareholders via buybacks.  I see this as a capital efficient business that can compound wealth for a long time.  I do not have enough shares to write covered calls against the position.

I also closed my short position in refiner Tesoro (TSO).  TSO diversified its operations with an all stock buyout of a competitor in Texas.  The thesis was that the difficult regulatory environment in California would continue to cause the company to struggle.  The markets cheered the purchase and the short thesis is now less clear.  I closed with a loss 348 dollars or 6.95% (45.31% annualized).  I am sticking to my guns on my other shorts.

Devour your prey raptors!

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Financial Transparency 30NOV2016

It’s Financial Transparency time.

music selection:  “Slide” — The Goo Goo Dolls

weigh-in:  210.6 (1.4)

 

ASSETS:

Wells Fargo (taxable): This is up 596 dollars to 29,293, a 2.08% gain versus last month.  I have a change coming up in this account as I want to harvest a tax loss.

Interactive Brokers (taxable): This is up 5,522 to 263,754, a gain of 2.14% versus last month.  I’ll log into this account today to close my hedge.

Interactive Brokers (tIRA): I show 4,064 in gains here this month to 134,818, which is good for a 3.11% monthly gain.

Checking: I’m down 3,765 here to 7,012, a decline of 34.94% on the month. I’ll explain in the SPENDING section.

Total Assets: Good news over all as I’m up to 434,877 at the end of November.  Good for an overall monthly gain of 1.50%.

 

LIABILITIES:

House: Paid

Car: Paid

Taxes: I should be able to harvest enough tax losses to make my tax burden immaterial this year.  I should also qualify for an Obamacare credit!

 

WITHDRAWAL RATE:

My projected 12 month withdrawal sits at 23,816.  Against an asset base of 434,877, that is a projected withdrawal rate of 5.48%.  Quite a bit of improvement from the beginning of the year!  Current annualized distributions, dividends, and interest come to 23,252 or 97.64% of budget.  I also earned 1,525 in options premiums during the month.

 

SPENDING:

This was another spendy month.  The damage is 3,836 bones.  I had two real estate tax bills, auto insurance, and some Christmas expenses hit all at once.  I’m also taking a trip (flying) in December so the airfare hit the credit cards this month too.  Spending should return to normal in December as all expected out of ordinary expenses should be covered.  This brings average spending for the year to 1,910 a month.  Not too shabby.

Devour your prey raptors!

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Hedging the S&P 500 with Lizard King

I’m buying a hedge.

music selection:  “Instant Karma!” — John Lennon

There is an important referendum in Italy over the weekend.  If the challengers to the current government win, it will likely signal that Italy will exit the Euro common currency.  Right now, it looks like the effort will fail but we have recently been surprised by Brexit and Trump.  There could be a lot of carnage in the major indexes if the vote goes the wrong way so for a few days, I’m putting on a low cost hedge.

I bought 17 contracts of SPY190118P00150000 for 5.45 a share.  A ten percent drop in the S&P on surprise news might result in those puts being worth more than 8.50 a share.  My profit could be over 5,000 dollars.  Realistically, I expect that the S&P will be largely flat on Monday and to exit the position for a loss of a few cents per share.  A loss of a dime per share would be about 170 dollars plus round trip commissions.  I think that is a fair price to pay for protection against what could be a global commerce shaking event.

In other news, the price of oil has been rallying strongly on news of the OPEC production cut.  RIGP and SDLP have joined the rally for me and are now both in range to write covered calls again.

I sold RIGP170120C00017500 for 70 cents a share today.  The trade will be in force for 51 days and yields 28.63% annualized.  I remain eligible to collect on a fat 11% yield on the underlying.  In the same vein, I sold SDLP170120C00005000 for a nickle a share.  The trade will be in force for 51 days and yields 7.16% on an annual basis.  Like with RIGP, I can still expect to collect dividends worth over 12% at market.

Devour your prey raptors!

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Covered Call Disney (DIS)

My shares of MSFT were called away over the weekend.

music selection: “Son of a Poor Man” — REO Speedwagon

weigh-in:  212.0 +0.8 – Not bad for a week with an obligatory overeating holiday.

The last of the positions I’m trying to exit to raise cash is The Walt Disney Company (DIS).  I hold 100 shares with a cost basis of 100.  Shares are currently at 98.50 and I am writing a covered call to try to exit.  I sold DIS161230C00100000 for 75 cents a share this morning.  The trade will be in force for 33 days and yields 8.30% annually.  I’ve lost some dividend income over the last couple weeks as shares have been called away and I expect to lose some more to tax loss harvesting before year end.  I will be under 100% budget coverage by year end making trading income all the more important.  I hope to reduce the cash I hold in checking and increase my holdings of Closed End Funds after year end to alleviate that.

Devour your prey raptors!

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Write Put Digital Realty Trust (DLR)

I wasn’t able to get into PMT at favorable pricing and am substituting DLR.

music selection:  “Closer” — Nine Inch Nails

Digital Realty is a REIT that specializes in renting server space.  This is a growing company thanks to the trend towards cloud computing and towards the creation of large amount of data.  There are a lot of names in this space but I like DLR best because 77% of its revenue comes from long term contracts.  Most of the competitors are primarily on one year or month to month contracts.  The DLR contracts come with rate escalation clauses too.  This gives us a great deal of revenue certainty.  The past performance is very strong with continuous growth.  The stock has yielded over 30% annualized since inception.  Like all REITs, it pays out most of its operating cash flow as dividends and we see a rising distribution here.  The quarterly distribution has grown from 15 cents to 88 cents between 2004 and now.  The current yield is only 3.8% but there is a long runway of growth ahead of this company.

I want to get assigned and start writing out of the money covered calls on DLR to give the underlying some room to appreciate in price while collecting the growing dividend.  So I sold an at the money put, DLR161216P00090000 for 2.65 a share.  The trade will be in force for 24 days and yields 44.78% annualized.  It comes with 2.93% downside protection.  With any luck, I will get assigned and be able to write out of the money covered calls with a yield around 12-18% going forward while collecting the growing distribution.

I haven’t given up on PMT but it is currently in a price range between the 15 and 17.5 strikes where the annualized yield just isn’t very attractive.  I’ll keep watching it for an opportunity to strike.

Devour your prey raptors!

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Write Put SXCP

I wrote puts on SXCP.

music selection:  “Dead & Bloated” — Stone Temple Pilots

I tried to write out of the money puts on this one yesterday and failed to get attractive pricing.  I gave it some thought and decided that the coal space might deserve its new higher valuation in the Trump world and wrote at the money instead today.

I sold SXCP170120P00020000 for 1.15 a share.  The trade will be in force for 60 days and has an annualized yield of 34.98% while enjoying 8.05% downside protection.  This is an excellent yield.  Assignment would result in a yield on the underlying over 11.5%.  I expect to do well here.

Devour your prey raptors!

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Monday Trades

I rolled most of the positions that closed Friday.

music selection:  “Tonight She Comes” — The Cars

weigh-in:  211.2 (1.8)

I wrote a covered call (again) on PSEC.  I sold PSEC161216C00008000 for 10 cents a share.  The trade will be in force 26 days and yields 17.55% on an annualized basis.  If I hold onto shares, the underlying yields over 12%.

I sold a cash secured put on BPT.  I sold BPT161216P00020000 for 65 cents a share.  The trade will be in force for 26 days and yields 45.63% on an annualized basis (quite good!)

I wrote a covered call (again) on GEL.  I sold GEL161216C00037500 for 15 cents a share.  The trade will be in force for 26 days and yields 5.62% on an annualized basis.  I am likely to retain the shares and collect an underlying yield over 8%.

I wrote a covered call (again) on MAA.  I sold MAA161216C00095000 for 30 cents a share.  The trade will be in force for 26 days and yields 4.43% on an annualized basis.  I am also likely to retain these shares and collect on the underlying yield of 3.5%.

I sold a cash secured put on CNNX.  I sold CNNX161216P00020000 for 20 cents a share.  The trade will be in force for 26 days and yields 14.04% on an annualized basis.

New action this month includes writing an in the money covered call on HCP.  This one recently had a share price decline related to a spin off an operating unit.  I like the prospects for this one but am striking to harvest the tax loss before year end.  I sold HCP161216C00027500 for 1.65 a share.  The trade will be in force for 26 days and yields 18.38% on an annualized basis.

I was unable to roll SXCP or PMT for attractive pricing.  I’ll try again tomorrow with a 2017 expiry to see if I can find some additional liquidity.

Devour your prey raptors!

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18NOV2016 Expiries

Seven positions expired today with the closing bell.

music selection:  “Sunshine Of Your Love” — Cream

Unlike most people who have taken to blogging about options, I usually let my contracts go to expiration rather than close early.  I just don’t feel it is worth the effort to squeeze out a few more basis points but trade twice as often.  Six of my seven positions expired out of the money.  One covered call will result in shares being called away.

A covered call in PSEC expired 3 cents out of the money.  I earned 18.70% annualized on that position and will roll it forward on Monday.

A cash secured put on SXCP expired well out of the money.  I earned 55.85% annualized on that position.  The position has run away from me a little bit.  I don’t want to go up a strike so I’ll probably take less premium and more downside protection here on Monday.

A cash secured put on BPT expired a buck-fifty out of the money.  I earned 55.30% annualized on BPT.  I should be about to roll for something in the range of 40% annualized on Monday.

A covered call in GEL expired 3.38 out of the money.  I earned 26.21% annualized on that position.  I will open a new covered call at the same strike on Monday and expect to fetch a lower return as I’ll be writing further out of the money.

A covered call in MAA expired 5.95 out of the money.  I’m a little disappointed by price action here but I’m being compensated well by dividends while I wait for this one to recover.  I earned 14.78% annualized on the options position and will reopen on Monday.

A cash secured put in CNNX expired out of the money as the position moved mostly sideways since inception.  I earned 31.59% annualized on the position and will roll it forward on Monday for more fun and profit.

My covered call in PMT is going result in shares being called away.  I earned 37.44% on the options position and will go back to the trough with a cash secured put on Monday.  The yield will be a little lower but well within my 12% target.

Two positions expire next Friday (DIS, and MSFT) and I hope to be called away on each to raise cash.

Devour your prey raptors!

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Update UVXY 50% annualized return

I sold my 13 strike UVXY puts.

music selection:  “Jersey Girl” — Bruce Springsteen

I purchased UVXY180119P00013000 for 6.95 a share on 15AUG2016.  I put in a sell order as the strike has moved into the money.  I sold my contracts for 7.85 a share this afternoon.  The trade was in force for 94 days and yielded an exceptional 50.28% annualized.  I collected over 3.3k in profits on my 37 contracts.

I rolled down and out to the 8 strike with UVXY190118P00008000 and paid 5.65 a share. I’ll be looking to exit the trade after 30 days or when the strike moves into the money, whichever comes first.  I’m keeping my allocation here to 10% of my IB account balance by cost basis.  I also have an 11 strike play on this same theme in my IRA account that should move into the money and be ready to roll soon as well.  Long dated, out of the money, puts on UVXY remains my highest conviction idea.

Devour your prey raptors!

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