I’ll be re-aligning the main trading portfolio over the next month or so.

music selection:  “Tender Years” — John Cafferty and the Beaver Brown Band

I took a loss in a bear put spread on ARKK.  This is a position that was recommended behind the paywall at Stansberry.  The analyst has been spot on on most trades but whiffed this one badly.  I didn’t learn my lesson with TSLA, it appears.  Never bet against “cult” stocks.  I booked 3,064 in losses on 4,413 in capital at risk over 5 days.  I am taking this as an opportunity to retrench.

I sold BLCN for a 837 dollar profit 1,742 capital at risk over 128 days or 137% annualized.  I also sold the shares of SII I have been holding in my main trading account.  The shares in the tIRA remain.  I booked 7,880 in profit on 10,000 capital at risk over 1,039 days or 28% annualized.  I will say goodbye to CLNY and PSEC at the march expiry due to covered calls.  I will also sell the underlying in FLO and KMB which will not be called.  I expect ABBV to be called away in April.  Altogether, these moves look to raise about 75,000 in cash.

I’ll be deploying 50,000 of my newly raised cash into CSQ, PDT, FEO, ETV, and UTG.  This mini portfolio of historically well performing CEFs will have a weighted average yield of around 8.23%.  This will increase passive cash flow by about 4,100 dollars and get me to about 65% of budget needs covered passively.  Even with some recent missteps, I should be at 100% of budget covered by trading profits by June.  The balance of the year’s trading profits will go to accumulating more passive income with the goal of getting to 100% of budget coverage.

I’ll still have 25,000 or so in latent cash.   Most of this will be used to write cash secured puts and for trading in net debit spreads.  Right now, PSEC puts at the 7 strike are paying about 27% annualized.  Assignment means picking up a tasty underlying yield and writing covered calls for more income.

Devour your prey raptors!

Retrenching

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3 thoughts on “Retrenching

  • March 12, 2021 at 10:22 pm
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    If you are not morally opposed to tobacco companies I think BTI, PM and MO are still at very good prices. Their dividend yields are on par with most CEFs and they have the advantages of div growth, stock buy backs, and 100% qualified dividends.

    Also FYI, these companies are moving into new products which don’t have the same detrimental health impacts. Their new products cut the harmful chemicals from 95% up to 100% depending on product. People that have switched to them show similar health benefits to those that quit cold turkey.

    Philip Morris (PM) is the farthest along on this conversion to new products. By 2025 half of revenue should be coming from them and they want to get out of cigarettes completely (still selling nicotine and tobacco but in a form that the data shows is equivalent to quitting smoking altogether).

    Reply
    • March 12, 2021 at 11:49 pm
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      JH,

      Thanks for the tip! The CEF’s I have chosen were selected primarily on the basis of having consistent distributions over time and maintaining share price over time e.g. no dividend traps. These are not the highest yielding options out there but I think they represent some of the best quality. I will definitely consider PM as trading profits raise sufficient cash for a new position.

      Reply
    • March 18, 2021 at 4:19 pm
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      I also like PM, although the options opportunities are limited by the 0.85 beta and it’s hard to see how they grow into these new markets with a 92% payout ratio (issue more stock?). The nicotine giants also seem vulnerable to rising interest rates, given their levels of debt. Also, I could see them paying out the nose to buy a weed company.

      Nonetheless, it would be a lot easier to hold a tobacco company through the next correction than a lot of their overpriced peers, and a 16% ROA that can be purchased for a PE of 17 is nothing to cough at.

      Reply

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