≡ Menu

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!

{ 2 comments }

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!

{ 2 comments }

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!

{ 0 comments }

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!

{ 9 comments }

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!

{ 0 comments }

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!

{ 1 comment }

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!

{ 0 comments }

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!

{ 0 comments }

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!

{ 0 comments }

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!

{ 0 comments }