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Thread: My income statement

  1. #341
    Senior Member humble_pie's Avatar
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    Quote Originally Posted by Dmoney View Post
    Thanks. Though I have to say as I'm refining my strategy, I've actually reduced my overall risk.
    have you found, yet, that options actually reduce risk? this is contrary to popular belief, but they do.

    it's the hedging effect. Options & their underlyings are nearly always sold in pairs, trios or quads. This smooths price progression while setting limits.



    I'm putting much more weight into the underlying stock rather than focusing on the options premium when selling naked puts.
    imho the quality of the underlying stock is numero uno consideration, not only for puts but for calls as well. When i was very young doing options for the first time a derivative trader told me "You have to like the stock." I still totally believe this.

    do y'll remember metatheta? he used to post up wizard iron plays in the days prior to earnings announcements ... then he'd casually ask on here, in the forum, if anybody knew what kind of company his underlying stock was! there are many short-term iron strategies that go like this. It's a different approach from using options to enhance return in a lifetime portfolio.

    for a lifetime portf, imho it's better to forego higher premiums if it means owning or risking to own dodgier stocks. The ideal candidate is the quality stock with enough volatility to generate decent premiums. GOOGL types, maybe AAPL. There are not very many of those in canada. Most canadian companies that do have decent options have US options whose markets are bigger & more flexible than montreal (tck, pot, eca, cnq.)



    I've also scaled back the amount of margin (absolute and relative %) that my naked puts would put met out if exercised.
    puts are so alluring to sell ... all that free money ... oh, my ...

    but resist. The trap is the kind of global market collapse we saw in '08/'09. All accounts plummet 30-40-50%. Available margin vanishes. Puts get exercised but client has no margin, therefore has to sell the assigned shares at market price. Suppose market is $36 while 10 puts have suddenly been assigned to client at $56. Right away he has a $20,000 loss. Multiply that by 8 or 10 holdings. Pandemonium.

    in 2008 i had a good friend working at a major options broker. He's the person who gave me the simple formula to determine if an option is at risk of early assignment. This formula has been very popular here in cmf forum.

    back to november 2008: my friend said his firm was losing longtime clients left, right & centre. He said those quadruple iron plays were blowing up, because extreme markets will destroy the hedges. He said clients who had relied on those kinds of strategies for decades were being forced out of their accounts with margin calls.

    moral of the story: one should keep well under one's buying power. Especially in upcoming donald trump markets, when we can expect wild crazy unstable news to be the new norm.


    .

    ''bonté gracieuse et toute cette sorte de chose" - Astérix chez les bretons]

  2. #342
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    Quote Originally Posted by humble_pie View Post
    have you found, yet, that options actually reduce risk? this is contrary to popular belief, but they do.
    I would agree. While the naked put is a risky move, in the context of my broader portfolio it's less risky than outright buying the stock at market price.

    Quote Originally Posted by humble_pie View Post
    imho the quality of the underlying stock is numero uno consideration, not only for puts but for calls as well. When i was very young doing options for the first time a derivative trader told me "You have to like the stock." I still totally believe this.
    A couple trades that went south have me firmly believing this. My strategy now is to hit singles and doubles, with the bases loaded with blue chips, not swing for the fences with each position.

    Quote Originally Posted by humble_pie View Post
    puts are so alluring to sell ... all that free money ... oh, my ...

    Yup... puts are great until you own the underlying which just keeps going down.

  3. #343
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    Net worth update as of Dec 31: $471,000 up $12,000 or 2.5% vs November
    Up $147,000 or 45% vs December of last year

    Assets:
    Cash: $29,000 (flat)
    Unregistered: $302,000 (+$9,000)
    TFSA: $47,000 (+$1,300)
    Defined benefit pension: $9,400 (+$600)
    House: $603,000

    Liabilities:
    Mortgage: $518,500 (-$1,500)

    $1,100 of dividend income
    $675 of option income

    Solid end to the year.
    Net worth up by $147,000 or 45%
    More importantly, dividend income for the year ($12,400) was over $1,000/month, up 17% vs last year, and should remain comfortably above this hurdle barring any significant cuts
    Options income was $4,800 for the year. More active than last year, but well below the income I was earning a few years back while I was quite a bit more active.

    2017 goal is more of the same
    Maintain a half decent savings rate, plow bonus and any excess cash into the market

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  5. #344
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    Sold a round of Royal Bank covered call, March expiry, $96 strike, $0.70 premium
    SLF covered calls expire tomorrow, looks like they will be out of the money.
    Will probably roll them out a month or two on Monday - decent premiums at these levels.

  6. #345
    Senior Member
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    Net worth update as of Jan 31: $472,400 up $1,500 or 0.3% vs December

    Assets:
    Cash: $11,000 (down $18,000 - put $20k into investment accounts)
    Unregistered: $308,000 (+$6,000: $9,000 cash added)
    TFSA: $57,700 (+$10,700: $11,000 cash added)
    Defined benefit pension: $9,700 (+$700)
    House: $603,000

    Liabilities:
    Mortgage: $517,000 (-$1,500)

    $1,530 of dividend income - new monthly high
    $765 of option income
    Portfolio income.png

  7. #346
    Senior Member
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    Net worth update as of Feb 28: $476,400 up $4,000 or 0.8% vs January

    Assets:
    Cash: $16,200 (+$5,200)
    Unregistered: $304,100 (-$4,000)
    TFSA: $58,600 (+$900)
    Defined benefit pension: $10,400 (+$700)
    House: $603,000

    Liabilities:
    Mortgage: $515,900 (-$1,200)

    $1,060 of dividend income
    $650 of option income

    Decent month, savings offset some market losses.
    Busy at work, so updates/trading slower than usual.
    A few trades during the month that I didn't record:
    Bought 1,000 Northland Power for $24/share
    Bought 350 Emera for $45.70/share

    BAM puts expired worthless, as did SLF and CPG calls
    My RY covered calls are in the money at the moment, March expiry. Going to wait it out for now.

  8. #347
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    Bought back $96 RY March covered calls, which were set to expire this Friday for $0.95, which I then rolled forward out to May. Received $2.40 on the rolled calls, for $1.45 net on the transaction. Also significantly reduces the risk that I will not receive the next distribution, which has a late-April record date.

    Was considering letting the covered calls run their course, and if I had my stock called, writing puts in hopes of getting back into the stock. Figured the safer option was just rolling out at the same stock price.

  9. #348
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    Sold another round of SLF covered calls. $0.55 premium, $52 strike, May expiry.


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