Made two moves today.

music selection:  “Collide” — Howie Day

I hinted yesterday at how I  planned to proceed.  Today, I made two moves.  The first was to put in a low “stink” bid on the Tupperware bond CUSIP: 899896AC8.  I have a good till canceled bid in at 60 for 10 bonds.  If that clears today, it will be good for a 54% yield to maturity.  I consider the bond money safe as the company is absolutely minting free cash flow.  Revenue  will take a hit during social distancing but the widespread quarantines and legions of people cooking from home will reinforce the value proposition of the product going forward.  When I catch a bid, I will reduce lower yielding exposure elsewhere to contain margin.

I also sold two sets of puts on Annaly Capital Management (NLY).  This is a stock that for a very long time has treated anyone who bought when the yield was over 12% very well.  Right now, the yield is about 16%.  I chose strikes (5 and 4.5) that would net a 20 and 22%, respectively yield.  I have about 25,000 in exposure to each strike.  That is 50 contracts at 5 and 55 contracts at 4.5.  I went with the 17APR2020 expiry and got 31 and 19 cents respectively pricing.  The 5 strike contracts have 8.93% downside protection and yield 125% annualized.  The 4.5 strike contracts have 16.31% downside protection and  yield 85.62% annualized.   I collected 2,595 in cash that is mine, win, lose, or draw.  I’d be delighted to get assigned and start writing out of the money covered calls for additional income.  The 10,500 in annual distributions would put my passive income back to last year’s spending.  Additional trading would be applied to reduce the 45k margin loan over time.

If I can repeat the NLY trade for a year, it would yield over 52k in cash.  I only need about 10k in cash a year to cover the rest of my budget needs (less if I can save some money – belt tightening is already in progress).  I don’t expect this trade is repeatable for a year.   Sometime before then, volatility will decline and premiums will fall from their current very fat levels.  That will be an opportunity to earn from VXX by playing contango.

Except for NLY and distressed bonds when I can find good ones, there will be little trading.  The market is too hot for net debit spreads.  I’ll get back to those in time though.

Finally, I’ll continue my job search.  I prefer a 40 hour a week gig for a non-profit I can be proud of.  As I’d only need to gross about 20k, the lower salary non-profit will pay will not be a problem. Alternatively, I can realistically make 35 to 50 dollars an hour as an accounting/finance contractor.  Both jobs will have to wait until after 30APR2020 however as no one is going to be interviewing until at least then.  My budget will survive that long.

Devour your prey raptors!

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Executing the plan

Never miss another opportunity to devour prey!

6 thoughts on “Executing the plan

  • March 31, 2020 at 7:21 pm
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    Glad to see you are taking action and getting a handle on things. I have a question. I know you used to keep a lot of money in CEFs and bonds so that you always had enough passive income coming in to take care of living expenses. So, were you forced to sell those off or do you think that method doesn’t work and you abandoned it by choice?

    I’m really curious as I was planing on adding in CEF debt as well to boost my income in my fire portfolio.

    Reply
    • April 1, 2020 at 1:34 am
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      I was forced to sell. I still think it is a good strategy and will be adding some CEF exposure probably tomorrow.

      Reply
  • March 31, 2020 at 8:22 pm
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    do you have any Plan B if for example NLY suddenly cuts their dividend ?

    Reply
    • April 1, 2020 at 1:35 am
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      I’m assuming a 30% dividend cut possiblity is already priced in. They can’t cut to zero as they are legally obligated to distribute the majority of FCF. You pays your money, you takes your chances.

      Reply
  • March 31, 2020 at 11:49 pm
    Permalink

    Will you post a transparency report?

    Reply

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