# My income statement



## Dmoney

My main investment goal is to boost my "passive" income over time, so I'm going to try to post monthly charts showing the growth in my portfolio income.

My strategy includes long positions in dividend paying stocks, covered call writing and cash secured (or margin secured) put writing. Going forward I'll adjust my strategy as I see what works and what doesn't, and as I learn more about options and the market in general.

For record keeping, I record dividends when they appear in my account, and I record income from option sales on a straight line basis over the life of the option (If I sell an option on November 30 with a January expiry, the income is proportionally attributed to December and January). 

If I sell an option or it is exercised for a loss, I'll count it against income if and when the loss is realized (ie if I sell a put and it gets assigned for a loss, I hold and sell calls so income continues to flow. If a call is assigned below the strike price of the assigned put, the difference will count as negative income).

I've been recording dividends since March 2010 and Option writing since June 2011. Hope this gets some interest and generates some discussion.











Here's where I stand currently. I'm looking to grow both my option and dividend income substantially over time.

Also, what's the best way to get charts/graphs from excel into a post?


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## HaroldCrump

You are missing the Y-axis, Dmoney 



Dmoney said:


> Also, what's the best way to get charts/graphs from excel into a post?


Whenever I have posted something from Excel on the forum, I have done screen print > Save as JPG > Upload to flickr or similar site > paste link.
Not sure if this is the best way...takes about 2 - 3 mins. I think


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## Dmoney

HaroldCrump said:


> You are missing the Y-axis, Dmoney


Musta slipped my mind . It starts from a VERY low level though so the first months are misleading. When I get a bit more history behind me I'll cut them off so it doesn't make me look like Buffett. 



HaroldCrump said:


> Whenever I have posted something from Excel on the forum, I have done screen print > Save as JPG > Upload to flickr or similar site > paste link.
> Not sure if this is the best way...takes about 2 - 3 mins. I think


I did the same and it's a little bit of a pain. Oh well, that's life.


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## Dmoney

Updated with a Y-axis, just for you Harold . That and I guess it's always more interesting with numbers. I also included my latest trade.

Sold 5 puts on Telus today. Jan 54 strike price. Want to buy Telus for yield and some growth opportunity, but figure that by selling puts until I get assigned I can maximize my yield. I'll miss the December dividend ($0.58) but instead got $0.93 per share for the puts. 


Based on today's close of $55.67, my annualized yield is 13%. Will roll over the put in January if I don't get assigned, or write the covered call if I do.


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## Causalien

Oh oh.. The secret is out on how profitable options are...


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## Dmoney

Let's hope so. Only 6 months in so it's a little to early to tell. Will compare my returns with simple buy/hold to see how I do at year end.


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## Causalien

I have a similar strategy in my portfolio that has been running for longer to verify the outcome.

Though we might differ in our buy in point. I have some TA to determine the strike price. Don't know about you.


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## Dmoney

I wouldn't quite call it TA, but I consider general market dynamics, a given stocks gyrations relative to the market, timing of dividend dates, sensitivity to global events (oil prices/euro crisis/CAD$ etc.). I give the charts some consideration, but don't feel like they are going to tell me too much. 

I mostly look to options that give me a potential return with enough premium to be happy with only the premium, but enough room for capital gains to not be disappointed if the stock runs up. I don't yet have a strategy for rolling ITM options over, and am debating whether I should look into it more.

How successful have you been over what period of time? What strategies do you use and how do they differ from what I've laid out? Any recommendations or pointers?


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## Causalien

This is from a basic two sigma deviation bolinger band. + Avoidance of selling when the price is near a channel top or historic resistance level.

20%

I managed to reach 25% this year with some added TA. Theoretically, the new one should give me 50% return per year, but my other half of the portfolio is not currently online. i.e. it is waiting for a long term option to expire. 

My accounting is also different from you. I only book profit on the month when the option expires and I mark to market everything. It is important not to disillusion yourself especially with derivatives. It is the difference between GS and Lehman.


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## Dmoney

I'll likely include MTM for my full portfolio at the end of each month. I want to highlight my realized income from the portfolio, so would only include losses that are realized in this analysis. I'll be doing net worth or portfolio performance updates that will fully reflect everything that's going on. So far have only had one losing option position which I haven't solidified and I continue to earn income on. If/when I sell for a loss, I'll offset it against income in the applicable months (likely spread the loss over the period since being assigned).


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## Homerhomer

Dmoney said:


> I've been recording dividends since March 2010 and Option writing since June 2011. Hope this gets some interest and generates some discussion.


I think it would garner more attention in the more active investment forum, and since it touches on dividends and options it would be appropriate to post it there.


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## Dmoney

Well, I'll leave it here for now until it's a little more comprehensive, then will consider moving it I suppose. I figure it belongs in money diaries though as it's going to chronicle my experience for the next little while at least.


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## Dmoney

I took advantage of a strong day for TLM, buying back my Jan 14 calls for $0.09 and selling March 13 calls for $0.71. I removed the $0.09 plus commissions from December and January income then spread the income from the $0.71 across Dec, Jan, Feb and March.

I've also added in my expected Dec. dividend income.
I will update actual dividend income as well as a net worth update closer to Jan 1.


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## Dmoney

*Update for the New Year*

So another year come and gone, a good one overall, quite eventful.

Graduated university with a degree in finance, got a contract job and two months in got a job offer in Toronto with much better prospects so I made the move in July. 

Somewhat expensive starting up in a new city and making the transition from living at home (rent free) and going to school, to working crazy hours and living in downtown Toronto paying exorbitant rent. 

I have tracked my finances in quite some detail from early June, and one goal for 2012 is to have everything tracked in even more detail, some of which I will be posting here. 

For December I increased my net worth by 2.13%

*Assets*
Cash: $11,593 ($5k primed for TFSA in Jan)
TFSA: $17,309
Unregistered account: $70,432
Employee share plan: $1,500 (It's actually slightly lower but I don't have online access yet to get the accurate number so I'm recording at book value at the moment)


*Liabilities*
Margin: $5,975

*Net Worth*
$94,859

I've been working and saving since I was extremely young (mowing lawns, raking leaves, shovelling snow), got my first 'job' as a camp counsellor when I was 12 and never looked back. Had all my savings in mutual funds for about 10 years and have learnt my lesson there. 

I now have a job in equity research and love that I am connected to the financial markets more or less 24/7.

Going forward - goals for 2012:

Net worth target: $150,000 - Ambitious but a few things should hopefully get me there.
-I will hopefully get a raise sometime in the first half of 2012
-Two semi-annual bonuses, which if the past is a good indicator should sum up to roughly my base pay
-The girlfriend, who I live with, hopefully finishes school and gets a job, should let me save more

Savings targets:
-50% of after-tax base pay (~3,700/month, so save $1,850)
-100% of bonus pay - ????? haven't been here long enough to know how much I should reasonably expect

Other goals:
-Might look into getting my CFA designation
-Will keep myself open to buying a house or condo in the New Year, but no desire to rush it
-Get back into shape - hit the gym a minimum of 3 times a week, no excuses


Hopefully tracking myself here will keep me honest. I think the most challenging will be saving 50% of after-tax pay, so here's hoping I get a raise .

Happy new year to all.


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## Dmoney

With January options nearing expiry, I took the opportunity to roll over some of my positions today. 

BNS had a great day, so I thought I'd take advantage of the euphoria and replace my January $56 calls with April $56 calls. 

BNS was trading ~$53.74 when I initiated the position, sold 6 calls for $0.72.
I stand to make:
Capital gains of 16.5% annualized
Premiums of 5.3% annualized
Dividend of 4% annualized

Optimal total return of 25.6%

Telus was up in early trading, but fell later in the day, and I sold 5 February $56 puts for $0.94.
The annualized premium yield on this particular option is 20.4%.
I'm willing to buy the stock at $56, and will turn around and write covered calls if I am exercised, while collecting my dividend. 

Here's where I stand with portfolio income after today's option trades. I broke through $900 in option income for January and will break $1,000 in "passive" income after dividends. 
My next target is $1,500 which I will hopefully get sometime in 2012.
Also aiming to register at least 4 months of income over $1,000 for the year, particularly when my big dividend payments come in.











I will be updating again in early February with my monthly results. January dividends should be good with ~$312 in dividends from BNS and just under $100 from the rest of my portfolio.


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## cash

A little bit of a tangent. I'm just starting out in options trading. Can you recommend 1-2 good books for a beginner? I'm a pretty knowledgeable investor having managed my own 'coach potato' account for a few years, but I want to start adding options to the mix to increase my returns.


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## Dmoney

I haven't read nearly as many as I should have but here's a good start:

http://www.rotman.utoronto.ca/~hull/ 
Hull's books are very widely renowned and are used in most Canadian University level options courses.

There's lots of good websites (including Wikipedia) that can give you a breakdown of all the strategies available and when it's ideal to use them. Beware that most of these websites are trying to sell you on how easy options are and how you can't lose. 

Keep in mind that there is a big downside to most of the strategies that appear to be the best.


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## cash

Thanks for your input. What are a few low risk, modest return strategies commonly employed by retail investors to generate income?


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## Dmoney

cash said:


> Thanks for your input. What are a few low risk, modest return strategies commonly employed by retail investors to generate income?


It seems like the most common is writing covered calls. Buy the stock, write calls on the same stock. You limit your upside, but you have the full downside.

There are various spreads that you can use, I'll leave you to look them up yourself, as I'm no expert and don't use them myself.

More in depth options discussion in this thread
http://canadianmoneyforum.com/showthread.php?t=8232&highlight=options


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## cannadian

Hey Dmoney, awesome thread - you're right around where I hope to be 4 years from now. 

That is, graduated with a finance degree and around 100k net worth.

Do you have any books you'd recommend someone with zero knowledge of options to read?


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## Dmoney

Go three posts up.

Specifically Hull's _Options, Futures, and Other Derivatives_

Everything is also available online, you'll just have to aggregate it yourself if you go that route.

Are you in school right now?


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## cannadian

Dmoney said:


> Go three posts up.
> 
> Specifically Hull's _Options, Futures, and Other Derivatives_
> 
> Everything is also available online, you'll just have to aggregate it yourself if you go that route.
> 
> Are you in school right now?


Ahh thanks man.

Right now I'm working/saving for university and trying to get more scholarships (at $20k right now - I got pretty good grades out of high school in calculus/sciences), the money I have on the side after that goes into my TFSA..

I'm hoping I'll get into UBC business for the upcomming september (I'm moving to Vancouver in the summer).

How did you like studying finance? Did you study at U of T btw? Are there currently (m)any jobs for it in Canada?


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## Dmoney

There's always jobs, they're just quite competitive.

Unfortunately I studied in Ottawa, which made it even more challenging to find a job, as all the Toronto firms only recruited out of Toronto universities or Queen's and Western. 

Loved my program, had some very good profs, got out of it what I put in.

Can't stress enough that the hardest part of getting a job is getting your first interview at the organization.

Two ways of doing this, when the time comes:

1) Know someone who can get your resume directly to the right person (get to know them through alumni networks, business competitions, investment clubs etc.

2) Send your resume to 1000s of firms, follow up by calling each of the firms and pester everyone until you get a foot in the door.

As for now, get into UBC's portfolio management program after your second year http://www.ubcpmf.com/ and you're going to get a job, guaranteed.

And good job on working and saving, try and keep that up all through university and you'll graduate miles ahead of your peers. Also, get any in-course scholarships you can along the way. $20K should cover 3/4 of your tuition, try and get that up to 100%.


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## Dmoney

Bought 600 shares of Transalta at $20.20 in my TFSA today. 

Like the yield, the stock has suffered more than it should have on Sundance issues. Some long-term contracts likely to be signed in the next little while which can add some upside. 

Stable enough that I plan to hold for the yield alone, will write the occasional call perhaps as time unfolds.


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## cannadian

Dmoney said:


> There's always jobs, they're just quite competitive.
> 
> Unfortunately I studied in Ottawa, which made it even more challenging to find a job, as all the Toronto firms only recruited out of Toronto universities or Queen's and Western.
> 
> Loved my program, had some very good profs, got out of it what I put in.
> 
> Can't stress enough that the hardest part of getting a job is getting your first interview at the organization.
> 
> Two ways of doing this, when the time comes:
> 
> 1) Know someone who can get your resume directly to the right person (get to know them through alumni networks, business competitions, investment clubs etc.
> 
> 2) Send your resume to 1000s of firms, follow up by calling each of the firms and pester everyone until you get a foot in the door.
> 
> As for now, get into UBC's portfolio management program after your second year http://www.ubcpmf.com/ and you're going to get a job, guaranteed.
> 
> And good job on working and saving, try and keep that up all through university and you'll graduate miles ahead of your peers. Also, get any in-course scholarships you can along the way. $20K should cover 3/4 of your tuition, try and get that up to 100%.


Thanks!

Man, I want to get into that portfolio management program so bad - apparently it's ridiculously hard to get in though. Hopefully managing my own portfolio for 3+ years, having a 3.7+ GPA (what I intend on getting), and being in the finance/investing clubs will help set me apart.

What's your first finance job been like? What kinda GPA did you have? I hear they work finance graduates like dogs for their first few years but the pay is pretty good and you learn a ton


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## Dmoney

It wasn't overly competitive getting into the portfolio management program at my university. Only about 15-20 people apply annually and 3-5 get on. I had a pretty good GPA (~11/12 which is pretty much an A average, would translate into 3.7-3.9 as far as I know).

Once you're in the portfolio management program, you're likely going to have to add 20-50 hours of work to your week (depending how much you put in and want to get out of it), but you're also going to likely have the opportunity to meet with pension fund managers, analysts etc. Take advantage of all these meetings and try and make an impression on all of these guys.

As for my job, it's in equity research, so the work is cyclical. We are extremely busy during earnings season (in the office at 6:30, out as late as midnight/1:00 or 2:00 AM, working weekends). My team covers nearly 30 companies so it gets hectic. The rest of the year it's generally ~7AM to 6/7PM.

Our junior investment banking guys put in longer hours, generally ~9AM to between 8 and 11PM year-round. 

Depending where you get in, what role you take and the corporate culture, you'll be working either a 9-5 or 16 hour days. I-banking is usually 14-16 hour days but you get amazing bonuses and move up quickly. Buy-side (portfolio management or analysts for funds) usually have very short hours since they pay other firms to do most of their work. Sales/trading have very short hours since they work only when the market is open and when buy-side guys are at their phones. Equity research is somewhere in between, and also depends on your team/analyst. Some analysts are easy going, some work you like dogs all year long (unfortunately I'm in the dogs category). 

All in all, the pay is commensurate to the work you do. I-bankers make the most money followed by sales/trading/research followed by buy-side. Just to give you an idea, some of the senior guys (analysts, head traders, I-bank managing directors) in my firm made semiannual *bonuses* of over $500K. On top of base salaries that are closer to 7 figures than to 5 figures. If you ride it out, the benefits are amazing, but it's a tough ride.


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## cannadian

Dmoney said:


> It wasn't overly competitive getting into the portfolio management program at my university. Only about 15-20 people apply annually and 3-5 get on. I had a pretty good GPA (~11/12 which is pretty much an A average, would translate into 3.7-3.9 as far as I know).
> 
> Once you're in the portfolio management program, you're likely going to have to add 20-50 hours of work to your week (depending how much you put in and want to get out of it), but you're also going to likely have the opportunity to meet with pension fund managers, analysts etc. Take advantage of all these meetings and try and make an impression on all of these guys.
> 
> As for my job, it's in equity research, so the work is cyclical. We are extremely busy during earnings season (in the office at 6:30, out as late as midnight/1:00 or 2:00 AM, working weekends). My team covers nearly 30 companies so it gets hectic. The rest of the year it's generally ~7AM to 6/7PM.
> 
> Our junior investment banking guys put in longer hours, generally ~9AM to between 8 and 11PM year-round.
> 
> Depending where you get in, what role you take and the corporate culture, you'll be working either a 9-5 or 16 hour days. I-banking is usually 14-16 hour days but you get amazing bonuses and move up quickly. Buy-side (portfolio management or analysts for funds) usually have very short hours since they pay other firms to do most of their work. Sales/trading have very short hours since they work only when the market is open and when buy-side guys are at their phones. Equity research is somewhere in between, and also depends on your team/analyst. Some analysts are easy going, some work you like dogs all year long (unfortunately I'm in the dogs category).
> 
> All in all, the pay is commensurate to the work you do. I-bankers make the most money followed by sales/trading/research followed by buy-side. Just to give you an idea, some of the senior guys (analysts, head traders, I-bank managing directors) in my firm made semiannual *bonuses* of over $500K. On top of base salaries that are closer to 7 figures than to 5 figures. If you ride it out, the benefits are amazing, but it's a tough ride.


Damn man, thanks for the info!

I believe the PM program at UBC takes in like 20-30 students annually, there was no information on how many apply to it though so I sort of assumed it was a very high number. 

So if I can keep my GPA above 3.7, join investing clubs, and maintain my own portfolio/document my own investing progress do you think that'll be enough to give me decent odds of getting in?

Is there anything else you would recommend? I may try getting an internship after first year, but I imagine that would be quite hard..

The PM program sounds like an absolutely amazing opportunity. It would be incredible to not only meet other people who enjoy investing/talking about investing and bashing ideas around - but people who are at the top of the investment world...

I wouldn't mind getting an analyst job killing myself at it for 5 years or so to learn as much as I can, gain experience and contacts, and then try to start up my own portfolio management company, but we'll see what life brings!

Hell, if I could just grow my own nest egg and invest purely on my own for income I would.


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## Dmoney

cannadian said:


> I wouldn't mind getting an analyst job killing myself at it for 5 years or so to learn as much as I can, gain experience and contacts, and then try to start up my own portfolio management company, but we'll see what life brings!


Keep in mind that's what everyone wants to do 

If it were that simple, we'd all be doing it. 

But yes, get good grades, a good network and good extracurricular experience and you'll have no problem getting a job. I went to what I'd call a second, maybe even third tier university, but did all of the above and ended up ahead of many who went to top tier schools.


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## Dmoney

For January I increased my net worth by 3.49%

*Assets*
Cash: $6,974 (-40%: $5K put into TFSA)
TFSA: $22,909 (+32%: $5K contribution, $600 gains)
Unregistered account: $70,432 (+1%: $566 gains)
Employee share plan: $2,000 (+33%: $500 contribution) (Actual amount is slightly lower, waiting for online access, recorded at book value at the moment)


*Liabilities*
Margin: $4,715 (-21%: $1,260 paid off, dividends and option premiums)

*Net Worth*
$98,167 (+3.49%: $3,308)


Net dividends after margin interest were $410 for the month. 
Options premiums for the month were $903.
Total portfolio income was $1,313.


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## Causalien

What % of your portfolio is involved in options?


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## Dmoney

About 48% of my long positions have covered calls associated with them, and I have written puts, which if exercised would increase my margin to about 35% of the value of my long portfolio.

What do you think are good ratios for options strategies? For now I'm comfortable with the chance that margin goes up to ~50% of my portfolio as I can easily cover it, but as my portfolio grows, I'll likely try and limit possible margin exposure to between 25-35%.

I don't mind having most of my portfolio covered with call writes as the ideal situation will see them exercised for a significant annual rate of return.


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## Causalien

The current portfolio I have for this strategy has 50% allocation for call/put writing. Current tally (due to an exceptional January) says that it grew by 30% annually and have since doubled from inception. Yes, it means that I have not been writing the covered calls/puts with the profit. They are just sitting there in BP, waiting for the IRAN war to start. The two part combined together forms the "call/put writing" to fund "Black swam risk events" strategy. A trick I learned from GS's underwriting of MBS.

I can only imagine the profit if I put full allocation into writing. But... that will also increase the risk and I am not sure if I can handle the stress associated with it.

Without the exceptional January, it is only a 25% annual growth strategy like I mentioned in December.


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## ddkay

lol Iran has been months away from war since I was in diapers, that is a clever setup though


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## Dmoney

I have nat gas exposure (TLM) and utility exposure (TA) but I'm looking to get some oil sands exposure in the next couple of months in case the middle east heats up a little bit. 

Causalien, what are some stocks you write options on? I want to get up to about 5-10 that I'm comfortable with holding and familiar with in all respects.


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## Causalien

Same as my investment portfolio. It saves me time on analysis. Some of the more notable investments that I am more sure of I post here. I usually write them until volatility dies.

I don't mention some of the stocks because they are pretty boring. Take V for example. Writing option for it has become completely unprofitable recently.


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## Dmoney

Of my holdings, only TA isn't worth writing options on. I might look into writing 6 month options but nothing shorter than that has much upside. Would be good to squeeze out a couple % above and beyond the 6% yield though.

TA is a stock that I wouldn't care if it never appreciated, as long as the dividend remains stable.


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## Dmoney

My Telus puts expired just out of the money. $56 strike, stock closed at $56.02 on Friday. 

Rolled them over again today with 5 April $56 puts. Unfortunately I missed a couple key opportunities to maximize my premiums. I hesitated to sell on the news of their consolidation of voting and non-voting shares. Wasn't sure what impact that would have on the voting shares which trade at a premium. 

Shares were trading right around $56, so options premiums were much higher. Also bought too early in the day today, while the underlying was trading just below $57. Had I waited I could have made ~$20 more per option sold.

Anyway, sold 5 puts for $0.95 each for $459 net after commission. Also transferred $5k to my account to clear up my margin.

No exciting dividend income likely this month, and the options premiums are down a little from January.

Need to figure out what to do with my 10 March TLM calls. Strike is $13, stock broke through $14. Any advice from Causalien or the other options guys?


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## Dmoney

For February I increased my net worth by 6.34%

*Assets*
Cash: $4,127(-41%: $5K invested in non-registered)
TFSA: $23,961 (+4.6%: $1,052 gains)
Unregistered account: $73,612 (+11%: $5K invested, $2,328 gains)
Employee share plan: $2,688 (+34%: $500 contribution, $188 gains - finally got online access, so will reflect market price going forward)


*Liabilities*
Margin: $0 (-100%: fully paid off)

*Net Worth*
$104,388 (+6.34%: $6,221)

Broke the $100K mark, so far up $9,500 for the year, so on good pace to break through my $150K target.

If the market keeps going the way it is for me, I'll likely do a little better than I had hoped for (provided bonus time is as generous as expected).

Net dividends after margin interest were only $92 for the month. February is very light. 
Options premiums for the month were $734.
Total portfolio income was $826.

I rolled over my TLM March calls, didn't have fantastic timing with the transaction though. Bought back my calls for $1.10, wrote September $13 calls for $1.80.

Unfortunately I was busy throughout the day when I wanted to execute the trade, so I ended up buying back the calls when TLM was trading slightly over $14, and selling the next round of calls when it was trading at around $13.75. Ideally, both transactions would have been closer together. I estimate it cost me around $300-400 in lost options premiums.


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## Dmoney

I guess I'm gradually learning the value of patience. Had I waited to roll over my TLM position, I would have made ~$400 more. 

Lesson learned: set out a strategy and stick with it.

Rough day in the market all around. Only bright spot is the 6% increase in BNS dividend.


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## Causalien

So...I see 2k made from investment. 4k is new money? Is this a locked down portfolio or are you contributing?

Nothing I could say about TLM. Was on vacation.


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## Dmoney

Total of ~3.5K in investment gains for the month, the rest is new money. I try and contribute savings every ~2 months or so, while keeping about $3,000 in the bank to pay the bills.

TLM was a case of acting too soon initially (saw it at $14, felt I had to do something with my $13 strike price calls) but not acting fast enough (was really busy with work so put in a limit order to buy back my calls, but didn't write the new calls in time). 

Not the end of the world, but I made ~$700 instead of >$1000 on the transaction.


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## Causalien

I've recently run into limits of this strategy.

To keep a high premium that I like to generate the type of % income I want, I dabble in low volume options of stocks that are not covered by the media. Now that things have grown and I have to expand, I am bumping into liquidity problems. 

So I either have to 1. invest more time in researching another stock symbol or 2. take up a higher volume but lower premium stock. 

I don't see the 25% per year return continuing, but I will try.


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## Dmoney

Do you not find that even the higher volume stocks provide similar returns? I would have thought the increased liquidity in higher volume stocks leads to tighter bid ask spreads, and easier entry and exit of positions. 

So far, my average potential total annualized gain is over 40%... too soon to say what my actual results are/have been.


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## Causalien

I find that higher option liquidity usually leads to lower premium overall (low volatility). The tightening of the bid ask spread is only good if you are very actively trading it. For this strategy, I don't do that.


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## cannadian

Congrats on breaking the 6 figure level man, that's awesome!


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## Dmoney

Thanks it feels good. The $150K target is next, ideally by Dec 31 this year. I figure if I can add $50K in my younger lower income years, as my career progresses and my portfolio returns contribute more on an absolute value, I should be able to increase annual growth significantly.

Hope all goes as planned.


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## Duongbka

Dmoney said:


> Total of ~3.5K in investment gains for the month, the rest is new money. I try and contribute savings every ~2 months or so, while keeping about $3,000 in the bank to pay the bills.
> 
> TLM was a case of acting too soon initially (saw it at $14, felt I had to do something with my $13 strike price calls) but not acting fast enough (was really busy with work so put in a limit order to buy back my calls, but didn't write the new calls in time). nội thất văn phòng
> 
> Not the end of the world, but I made ~$700 instead of >$1000 on the transaction.


To keep a high premium that I like to generate the type of % income I want, I dabble in low volume options of stocks that are not covered by the media. Now that things have grown and I have to expand, I am bumping into liquidity problems.


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## Causalien

Remind me to discuss this $100k level with you again in say... 3 years.


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## Dmoney

Duongbka said:


> To keep a high premium that I like to generate the type of % income I want, I dabble in low volume options of stocks that are not covered by the media. Now that things have grown and I have to expand, I am bumping into liquidity problems.


What's with the random new accounts that just copy something said upthread????


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## Dmoney

Causalien said:


> Remind me to discuss this $100k level with you again in say... 3 years.


Gladly... let's just hope it's from a much higher vantage point in 3 years. How long have you been selling options? What kind of returns have you managed consistently? ($ or %)


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## Causalien

Dmoney said:


> What's with the random new accounts that just copy something said upthread????


Oh cool.

I never thought someone would deem this forum important enough to activate a forum bot for it. The author of the bot forget to include the rule to never repost the same excerpt in the same thread it was extracted from. The bot probably scanned for options talk to repost extracted sentences, however, this is the only active thread discussing options for now. It would've worked if there are several threads going on.

This is evidence that we now have forum bots YAY!


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## Causalien

Dmoney said:


> Gladly... let's just hope it's from a much higher vantage point in 3 years. How long have you been selling options? What kind of returns have you managed consistently? ($ or %)


Pure selling is done only in this portfolio  So 2 years of actual selling. There was 1 years prior of computer simulation tracking real market. Then before that there were a lot of back testing against historical data. Selling has been consistent. 3%~5% per trade on average. Though annual profit is around what we've been discussing because sometimes I stop doing anything either for vacation or because I smell something fishy.


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## caricole

Dmoney said:


> How successful have you been over what period of time? What strategies do you use and how do they differ from what I've laid out? Any recommendations or pointers?


Dmoney

Can I walk in to this thread

I saw the arrival of options in the 70's

Did all kind of stratégies and operations

At this point, since several years, I lay out my actual stratégies 

1) 2 margin accounts...TDW and Itrade...each with OPTION TRADING PERMISSION....including Naked calls and Naked puts

2) I «SELL» calls (covered) and never buy them back 

3) I buy the stock, immediatly sell a covered call in the hope it will be exercised and give me the profit of a combined operation...buy en sell the stock....sell the call. Sometimes there could be a loss on the stock...but that will be made up by the premium received on the call ( I cal it «A RUN)

4) Ideally I went for 1.000 shares and 10 calls, but lately the commisions on options and execising have been reduced, so 500 shares and 5 options fall easily in reach

5) I calculate PER SHARE...mentaly...and see at once what is douable and what is not

6) Did it make me «RICH» no, but did I loose my shirt....no I still have it...LoL

7) I never brag or cry about my descisions....I take them and live with them...enough to go for weeks at a time to the countre...no électricity, no TV, no Phone and CELLPHONE does not work in our spot

8) No depth, no margin....just piece of mind

9) The higher you climb up a three...the higher you can fall down

10) I trade little....4 to 8 trades per trimester

11) Canadian options, the spreads are indecent and the volume VERY LOW....but i dont want to live with the problem of echange rate on top of that...

caricole....100% financial autodidact


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## Dmoney

Thanks for the input caricole, and welcome to the forum and this thread.

I have heard several variants of the option writing strategy. Most seem to recommend buying back options and rolling out the term, but some say to just let them be assigned if the price runs up. I'm new enough that I'm willing to try both ways and see which I like most.

I use my margin very sparingly, but when the opportunity is there, it's good to have the ability to access extra capital. I also take the buying one step further by selling puts on stocks I want to buy. If I get assigned, I'm happy as I get the stock a little cheaper, and if I don't get assigned, I get the premium with no capital outlay (secured by margin, so it's pure return).

I'm not expecting this strategy alone to make me rich, but I definitely hope it contributes to that end. Even just a couple percent of excess returns can make a HUGE difference over the long haul. Since I have decades ahead of me, hopefully it all adds up.

I also love the recurring income this strategy generates, above and beyond what a dividend only strategy could. 

Do you mind sharing which equities you use with this strategy?


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## caricole

*



I have heard several variants of the option writing strategy. Most seem to recommend buying back options and rolling out the term, but some say to just let them be assigned if the price runs up. I'm new enough that I'm willing to try both ways and see which I like most

Click to expand...

*1) Those who recomend buying back are the TRADERS, BROKERS, MARKET MAKERS and the teachers who never invested or trade.....it pays them

2) You do not have to try it out....observe the spread at expiing date (next friday) of the options IN THE MONEY....the price of the last tade during the day and the ASK for that option in the money at the same time of the day

3) Here the cost of a run per share....
500 shares....commission 10,00$ = 2 cents
5 options .. commission 16,50$ = 3,5cents
Exercise 500 shares........46,00$= 9 cents
total.....................................= ±15 cents /share

You will SEE how much the difference ...in real time a any time of the day the spread is on the option ASK side

Here what I do if on Friday afternoon...14h-15h it looks my option sold will expire worthless

I Sell a covered call further down the road immediatly....and stay DOUBLE covered for an hour or two

The reason....that option I sold on friday afternoon will drop by 10, 15, 20 cents next monday morning

One other observation

The marketmaker will take the price of the stock at expiration (16H) to the point where the MAXIMUM OF OUTSTANDING OPTIONS EXPIRE WORTHLESS

Next Friday,between 15H and 16H15....you should be in front of your computor and OBSERVE...you will learn more than was ever TEACHED

Ps:
If I can DOUBLE the yield of a good divdend paying stock by selling covered calls....that satisfies me...altoug a better return is always welcom


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## Causalien

caricole said:


> The marketmaker will take the price of the stock at expiration (16H) to the point where the MAXIMUM OF OUTSTANDING OPTIONS EXPIRE WORTHLESS


This is called max option pain. Be very careful not to blindly follow this and do the due diligence of going back through the dates and see whether or not the Market Makers actually sold or bought.


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## caricole

*



..Dmoney..Do you mind sharing which equities you use with this strategy?

Click to expand...

**I wont say what I HAVE, HAD, or just LURKING AT....But these a worthwile in my eyes to be at least in a WATCHLIST...and there are others of course

Requirment: Paying reasonable dividends ( exept the Ishares ETF) and OPTIONABLE*
BCE..Bell
BNS..Bank of Nova Scotia
MBT..Manitoba Telecom
NA...National Bank
EMA.....Emera
FTS ...Fortis
SLF...Sun Life
T...Telus
TA....Trans Alberta
TRP...Trans Canada pipelines
XIC...Capped Composite Index
XFN...Financial
XSP...S&P 500 Index


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## Dmoney

Those are all stocks I've considered. I find TA, FTS, TRP have very small options premiums, so almost not worth it. You give up pretty much any capital upside to get a small premium. 

Currently writing on BNS, T, TLM (a little too volatile for the strategy perhaps) and am looking to add maybe 5-7 more. Don't wan't more than 10, but want to have enough diversity amongst holdings.


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## Dmoney

For March I increased my net worth by 2.89%

*Assets*
Cash: $5,703(+38%: Will likely invest $5K after my next pay cheque)
TFSA: $23,731 (-0.96%: $229 in losses, mostly on TA-T down a little)
Unregistered account: $75,023 (+1.92%: $1,411 gains. Happy considering the market was all over the place.)
Employee share plan: $2,950 (+9.74%: $500 contribution, $238 losses)


*Liabilities*
Margin: $0 (0%: no change)

*Net Worth*
$107,407 (+2.89%: $3,020)

Stayed above the $100K mark, so hopefully only positive growth from here.
The market wasn't as good as I'd have liked, so mostly gains from dividends and saving for March.

Net dividends after margin interest were only $187 for the month. March is a little better than February, but April should be $350+. 
Options premiums for the month were $515, since there was very little activity. In April my T-T puts and my BNS-T calls expire. T-T I will hopefully roll over for ~$600 with a 1-3 month put. BNS-T, if I am assigned I will write a short term put to try and get it back. Otherwise, I will write another 1-3 month call for another ~$600 hopefully.

Total portfolio income was $703, short of my near term goal of $1,000. Aiming for at least 4 months over $1,000 this year (January, April, July, October), when my bigger dividends give my option writing a boost.


----------



## Dmoney

*Real estate investment: Worth the hassle?*

I've been giving some thought to direct real estate investment and am wondering if the returns are worth the added hassle. A colleague of mine has a few properties in London, ON and is getting double digit ROE. The issue is that the equity is fairly small, and a few hundred $$$ a month of cash flow/equity paydown is likely not worth the effort. Particularly as he lives in the GTA and has to travel to London (or his partner does) if issues arise.

Just running through the numbers myself on a few properties currently listed in London, ~12% ROE seems very attainable.

Rough numbers as follows: 

$280,000 property
$224,000 mortgage at 3.5% (80% LTV, conservative mortgage rate assumption)
$56,000 equity

5 rooms at $400/month net (assume tenant pays utilities - looking at Kijiji London room rentals seem to be in the ~$450 range all inclusive)
$2,000 net rent/ month
$24,000 annually

$7,840 mortgage interest
$2,800 taxes (assume 1% of purchase price, likely to be lower than this)
$1,200 vacancy (5% vacancy assumed - might be higher depending how well managed)
$5,600 maintenance (2% of property value. Have to assume would be quite a bit less if less maintenance is done, or if it is DIY)

$6,560 net for 11.7% ROE

Are these assumptions reasonable?
Is it worth the risk and hassle for $6,560/year?
I'm sure with good property selection this ROE can be increased to the ~15% range.

What would it take to make this a worthwhile *Full-time* business?
In the above example, even 10 properties would only net $65,600/ year which is less than I'm aiming for by a long shot. Would also tie up $560,000 of capital at this leverage level.

Part of me looks at the ROE and says that even without any price appreciation, the math looks fantastic.
Part of me looks at the bottom line ($6.5K/year) and says that the hassle isn't worth it at the beginning with just one or two properties. 

I can make far more just by working my day job in the near term.
However, the long term value of this strategy is what's truly enticing. 

Assuming the math works out, the tenants are paying all expenses, and based on my savings rate, I could save a 20% downpayment every 2 years quite easily. 

Has anyone dealt with student housing before? 
How does the math work?
Is it worth the hassle while working long hours at a full-time job?
How high can it be scaled up? (10 properties, 20 properties, 50 properties)

If I look at this strategy over 20 years, I assume I'd end up with 5-10 fully paid off properties, valued at a conservative ~$300,000 each (not allowing for much appreciation). Not a bad retirement plan in my books. 

Thoughts anyone? 
Particularly those who have done/are considering doing this?


----------



## humble_pie

Dmoney said:


> *Real estate investment: Worth the hassle?*
> 
> I can make far more just by working my day job in the near term ...
> 
> Has anyone dealt with student housing before?




lol it reminds me of actor donald sutherland's story about the first advice he ever got from high-powered US financial advisors after he became a bigtime US movie star.

they analyzed his situation. Sutherland was living in hollywood. He went back for the 2nd appointment, the one where they would hand him the Grand Design & tell him how he could stay rich forever.

from a tax perspective, you have only really got 3 choices, they explained. It's oil wells. Or railcar containers. Or slums.

so we're putting you in slums, they told donald.


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## Dmoney

Tried to find any reference to the above Humble, but was unable to.

The advice was probably sound though.

It seems like slums/student housing etc. is *EXTREMELY* profitable from an ROE perspective, but it's also extremely difficult from a management perspective. It's possible to live for free in a respectable house if you fill the remaining rooms with students. They'll not only pay off the mortgage, but you'll live rent-free and you *may* have some cash flow left over. 

$300,000 mortgage can be had for less than $1,600/month, rent is easily $2,000/month plus utils in this kind of house, plus take a room for yourself at no cost. 

The problem is growing this business model. Turnover is very high, and it's harder to monitor a place if you're not living in it.


----------



## ddkay

I accidentally stumbled across a site called today called condos.ca and am happy that I found it. They let you see historical average prices per square foot of specific buildings. For now they seem to only operate a database for TO and a lot of places are missing. Afaik MLS require people to privately query past solds for this kind of info (pretty opaque process). I am guessing that is what this site does, manually adding each and every address to a program that will do scheduled queries and parse out relevant info - price data, transaction volume. It's pretty unique so I hope it doesn't get shut down or something.

Some examples
http://condos.ca/condominiums/toronto-no-10-bellair-10-bellair-st#trends - volatile looks correlated to equity market
http://condos.ca/condominiums/toronto-graphic-arts-building-73-richmond-st#trends - volatile super low volume
http://condos.ca/condominiums/toronto-the-metropole-7-king-st#trends - powered by momo
http://condos.ca/condominiums/toronto-optima-city-place-81-navy-wharf-crt#trends - powered by momo
http://condos.ca/condominiums/toronto-1-king-west-1-king-st#trends - total disaster, original owners underwater after dev miscalculated expenses for building insurance among other stuff, consequently wears the highest psf maint fee in the city

If you look back 10 years it was "hard to go wrong" purchasing anything, prices were reasonable, you could easily get a high return, sometimes double digits renting to people staying extended periods for business, local workers or families with little credit risk etc. Now punch bowls are sitting around the room and everybody has had one too many sips it's hard to say the same thing.


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## Dmoney

Seems that the realtors have access to a huge database of information that would be very valuable in the general public's hands. Would be fantastic to see this monopoly dealt with. Need some competition from some entrepreneurial individuals on the inside who can make this widely available without the need for a binding buyer's agreement or other realtor nonsense.


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## GOB

If you decide to get into real estate (and eventually own several houses) I strongly suggest you get a reliable property manager. Doing it yourself is a huge inconvenience especially if you have other employment. I'm not positive but I think the cost would be about a month's rent for each house managed, so it would reduce the gains but still offer good returns and the value of your time saved would be priceless, especially with student housing.


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## Dmoney

GOB, I'm starting to feel like the active real estate side of things is probably too time consuming to be called passive income. It might be difficult to find a property with a high ROE if you're paying ~10% of gross rent in management fees, which a lot of the single family home management companies are charging. For now I'll likely keep my eyes open, but only buy a great opportunity, or a very easily managed opportunity.


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## Dmoney

BNS calls and Telus puts likely to expire worthless tomorrow provided BNS stays below $56 (closed at $55.05) and Telus above $56 (closed at $59.35).

Will likely roll the BNS calls into July $56s, going for ~$1.10 right now.

Any input on the Telus puts? I like Telus at $56, but at $58/$60 it's beginning to get pricey. May $58s are ~$0.80 but commissions will eat a chunk out of that, especially if I get assigned or have to buy/sell to roll the position forward. August $58s have a wide spread, but are giving premiums >$2.00.

Will wait for Monday to see how it all plays out, but in the meantime, any suggestions?


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## Dmoney

Went with the middle ground on the Telus puts and sold 6 June $58 strike contracts for $1.74 premium today.

Net cash of just over $1K. 
Annualized, the premium is just over 20%. 
Missing out on the dividend, but that should be built into the high premium I received, so that's okay.

~$30K at risk on my margin if Telus falls below $58, though my premiums offset this by $4.56, so would be as though I had bought at $53.44... hope to keep dropping this number. 

Still need to roll my BNS calls over, waiting for an up day so I can get a nice premium for $56 strikes.


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## Dmoney

Sold 6 BNS October $56 strike calls for $1.60. 
I think the premiums on these might be higher tomorrow since BNS had a strong finish today, but no guarantees.
I put in the order midday and watched the ask hover around $1.58/$1.59 all day before my order filled in the final minutes of trading.

$933.50 net cash to me... I really wish I could trade with a cheaper brokerage, but that's life. Hopefully will be working with 10 BNS and Telus contracts in a few months, so the commission will be a little less as a %.

Premium is ~6.2% annualized
Possible capital gains ~4.6% annualized 
Dividend of ~4.0% annualized

Total return of 14.8% possible. Not a fantastic trade, but still decent. The July $56s would have been a better play if commission wasn't a factor, but I'm worried about the big cost of getting assigned or rolling the trade forward. Stupid required brokerage for work is useless.


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## Dmoney

In April I increased my net worth by a pretty weak 0.12%

*Assets*
Cash: $6,710(+18%)
TFSA: $22,803 (-3.91%: $928 in losses, TA-T down, although I did get its dividend this month)
Unregistered account: $74,947 (-0.10%: $76 loss. Market didn't do much in April, I'm marking my options to market so I'm taking a $3,000+ hit.)
Employee share plan: $3,073 (+4.18%: $500 contribution, $377 losses)


*Liabilities*
Margin: $0 (0%: no change)

*Net Worth*
$107,534 (+0.12%: $126)

The bad news was that I lost ~$1,000 in the market. The good news was that I saved enough to still have a positive month for net worth growth.

Not a great month for market performance, with TA-T and BNS-T down. 
However, a really good month for dividend income ($624.20 - TA, BNS and the usual monthly suspects contributed) and option income ($509.31)
Total portfolio income of $1,131.51, so for a second month in 2011 I've reached my target of $1,000+ monthly portfolio income. I now have two months of $1,000+ income, out of my target of 4. It's looking likely to be Jan, Apr, Jul, Oct, which will be $1,000+, due to big dividends in those months.

Hoping for stable markets for the next few months, which should benefit my writing strategy the most. Keep Telus at $58.01, BNS at $55.99 and TLM at $12.99 and I'll be happy for life .

Still contemplating buying a place, but in no real hurry. Enough volatility in the job market without the added headache of worrying about a potential Toronto housing crash. 

Hopefully bonus comes in May, which will likely dictate if I reach the $150,000 target by year-end. Fingers crossed.


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## Dmoney

In May I increased my net worth by 10.4%

*Assets*
Cash: $20,632(+107.5%) - Increase is from my year-end bonus at work
TFSA: $22,724 (-0.3%: $78 in losses, pretty much flat)
Unregistered account: $74,947 (-3.1%: $2,289 loss. Wasn't a fantastic month, most holdings were down.)
Employee share plan: $2,678 (-12.9%: $500 contribution, $895 losses... doesn't help when the company's stock tanks)


*Liabilities*
Margin: $0 (0%: no change)

*Net Worth*
$118,692 (+10.4%: $11,159)

Another bad month in the market. Year-end bonus came in though which was a nice offset. Not quite as high as I had expected, and it comes with a hefty tax bill which I should get back next year. Still more or less on pace for $150,000 by year-end, but will be close.


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## Dmoney

Bit of a setback towards the end of June. My computer died and needed to be replaced, so not only was I unable to update in time for the month-end, but I also ended up shelling out just under $900 for a new one. This monthly update will reflect today's closing prices rather than June's month end, as well as dividends received in early July.

I increased my net worth by 1.5%

*Assets*
Cash: $19,448(-5.7%) - Bought new computer, went on a four day trip to the US
TFSA: $23,327 (+2.65%: $602 in gains and dividends)
Unregistered account: $74,947 (+2.8%: $2,047 gain. Good month, reversed losses from the previous month, good contribution from dividends.)
Employee share plan: $2,989 (+11.6% : $500 contribution, $189 losses... Company stock still falling, slower now, hopefully stays here and I can lower my average cost)


*Liabilities*
Margin: $0 (0%: no change)

*Net Worth*
$120,468 (+1.5%: $1,776)

Better month in the market in June. Gains in TFSA and Unregistered, as well as good dividend flow and option income.
June dividends were $328.70, and I expect it to be higher in July.
Option premiums for June were $591.54.
Total portfolio income was shy of my $1,000 target again, but should be well over $1K in July. 
Year to date my average monthly portfolio income is $964, so I am aiming for total portfolio income of $12,000 for the year.

I have a good chunk of cash ready to invest and am looking to diversify a little now. I am still short 6 Telus puts ($60 strike price, expire in July so not too worried) which I hope to roll over monthly, but T is looking a little too expensive for me right now. This means I need to find something new to either go long on, or write naked puts against. 

Hopefully will be a little more active now, and will keep the updates flowing.


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## ddkay

I was wondering where this thread went, welcome back!


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## Dmoney

Thanks, glad to be back online.

Right back into action today. Sold 10 September $23 puts on Finning International for $1.00 each. Unfortunately after selling, FTT fell from ~$23.65 to $23.09, so I left about $250 on the table based on where options were trading later on in the day. Not the end of the world, as I have the cash to back the options if it ends up below $23 in September, and I don't mind buying it at that price. 

Latest chart of portfolio income:


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## Dmoney

Some good news and some less good news.

The good news: I was told I got a raise effective two pay periods ago.

The less good news: The paper work was supposed to be completed two pay periods ago, and as of yet, is still incomplete.

HR said once it is complete, I will receive the missed pay, so it should sort itself out shortly.

Good news for my goal of $150K net worth by Jan 1, 2013. I'm not sure how much the raise is, but it's all going into the bank regardless of the amount. Not sure if it's $1,000, $5,000, $10,000 or $20,000 but every bit is welcome.

Also glad to see Finning rebounded nicely today back above my September $23 strike price (short puts), and Telus is comfortably above my July $60 strike (short puts) so next week I'll hope to sell another round of puts. Hopefully can get some value at $60 strike, but might be willing to go to $62 if not.


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## Dmoney

Word of advice. Don't ever use Credential Direct. Missed out on a perfect opportunity to sell another round of Telus puts this morning when Telus was down over 1% in the early morning. Could have sold September $60 strike for over $1.50, they're now trading at ~$1.00. Went to make the trade and they didn't have the option to trade any September options on Telus. Called, they said they'd have it fixed within 5 minutes, still wasn't fixed at the end of the day.

Between the 6 weeks it took to get the account transferred in, the high margin interest rate and the higher than average commissions (particularly options assignments and any large order of shares) I have no idea how they're in business. Unfortunately I'm stuck with them as long as I'm in my current job, so I've just got to suck it up.


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## Dmoney

I increased my net worth by 2.7% in July

* Assets*
Cash: $22,305(+14.7%: $2,857 increase) - Mostly just savings
TFSA: $22,756 (-2.4: $571 loss, TransAlta in the pits)
Unregistered account: $75,450 (+1.0%: $745 gain. Decent month, mostly dividend gains and option premiums.)
Employee share plan: $3,235 (+8.2% company stock looks like it has hit a floor. Dollar cost averaging down now.)


*Liabilities*
Margin: $0 (0%: no change)

* Net Worth*
$123,745 (+2.7%: $3,277)


July dividends were $636, pretty much the same as three months ago. Have over $20K sitting on the sidelines which hopefully will boost this in coming months.
Option premiums for June were $983. Strongest month of option writing to date, with the addition of Finning International.
Total portfolio income well over $1K (~$1,600) in July. 
Year to date my average monthly portfolio income is $1,068, so I am aiming for total portfolio income of $12,000 for the year.

Still looking for opportunities to deploy my cash. 
Will have a raise effective as of my next paycheque, so will be able to invest more, and will hopefully see my net worth increase faster.


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## GOB

Nice work. As my income generating portfolio grows I would also like to target $1000/month. That adds up pretty quick! 

Have you ever thought of getting into bull/bear spreads or LEAPs as another way to generate option income?


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## Dmoney

I'm looking into it, but the Canadian option market is nowhere near liquid enough to get into spreads. Also, I'm finding my commissions too expensive to be trading too frequently. To justify a trade, ideally I'd like $500+ of profit. ~$300 isn't too bad, but in a perfect world, I wouldn't trade for less than $1,000 per transaction. Unfortunately I'm stuck with my current brokerage, where if I get assigned, commission on 10 options works out to be over $70, and a spread would be over $80, just to initiate. (Assignment costs are extra).

My next step definitely needs to be to get into US options, because there isn't enough variety in the Canadian market. I want a steady stream of $1,000/ mo. CAD before I increase my US account though.


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## GOB

That's tough luck about the high commissions. IB is definitely making options trading much easier for me. Getting into US options opens up a vast amount of opportunities - I highly recommend it. Good luck to you.


----------



## Dmoney

Thanks. IB would be my broker of choice in a heartbeat if it was an option. Filthy cheap commissions plus margin at 2.5% means you can print money.

Considering selling puts on a few Canadian companies right now:

SNC-T: Figure it can't go below about $31, worst case, can get 20% annual premiums easily with a little bit of cushion below current price
ESI-T: Liked it at $14 a week ago. It has run up to $15 unfortunately, but I didn't want to do anything before earnings on August 13th. Will reconsider then.
ENB-T: Uneventful earnings, don't love it at $40, but don't see it falling to quickly.

T-T: Watched this one run up on me from $60 to $64. Strong earnings on August 3, will consider writing longer dated puts at $62 strike if it has a down day sometime soon.

FTT-T: Back comfortably above the $23 strike price on my September puts - hope it stays between $23 and $24 so I can keep writing
TLM-T: Comfortably above the $13 strike price on my September calls - will roll over options if it looks like I will get assigned. Can add another 3 months and still make a good chunk of cash with longer dated $14 strikes.
BNS-T: Trading pretty well below my $56 strike October calls, but can easily roll out another 3+ months for a good premium. Happy with my 4% yield + another 8%+ in options premiums.


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## HaroldCrump

Dmoney said:


> TLM-T: Comfortably above the $13 strike price on my September calls - will roll over options if it looks like I will get assigned.


Time value is eroding fast.
I think assignment risk is already there.
Stock closed at $13.50 today (on the TSX).
Bids on the call are around 45c. right now.



> Can add another 3 months and still make a good chunk of cash with longer dated $14 strikes.


$14 is too close, IMHO.
If this rally continues, stock will be north of $14 before you know it.
As a shareholder, I hope it does 

I have short TLM calls as well, but for higher strikes.


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## Dmoney

How far out are your TLM calls? At what strike? 

I haven't had any time in the past couple of weeks with earnings season taking up all my time, so I haven't had any time to look at my own portfolio.
Will be taking a look at my TLM position, my FTT puts and possibly ESI after they report tomorrow.

May not do anything until after August options expire in a week. 
Any other stocks you're writing covered calls/naked puts on?
Looking to get 5-10 still, and with Telus trading at $65, I probably need to switch it up a little.


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## Dmoney

Went a little crazy today, sold 20 ESI-T January 2013 $15 puts for $1.00 ($2,000 gross proceeds) and 10 TLM-T January 2013 $13 puts for $1.00 ($1,000 gross proceeds). 

ESI trade gives me a 15.6% annualized premium, was sold with $0.54 buffer. Wanted to buy ESI at $14, it ran up to $15.50, now I can get it back at $14, or collect an easy premium.

TLM trade gives me an 18.0% annualized premium, was sold with $0.20 buffer. Don't mind doubling up on my TLM at $13, worst case, if it finishes September above $13, I'll roll my covered calls forward.

Currently have short exposure to 20 ESI at $15, 10 TLM at $13 and 10 FTT at $23, so $66,000 of potential stock put to me. I have $32,000 of uninvested cash, so I'm not too worried.

I'm definitely at the high end of my risk tolerance, but definitely have the resources to get back in the black if the absolute worst case happens.


----------



## Dmoney

Strong month in August, though the markets definitely turned against me yesterday, turning what would have been an amazing month into a pretty decent one.
Overall net worth up $5,814 (4.7%), largely due to catch-up on a pay raise that took effect in June but wasn't fully processed until mid-August. Going forward I will be getting ~$700 more after tax each month, so that should help with the savings.

*Assets*
Cash: $26,091(+17%: $3,786 increase) - Regular savings and catch-up pay on my raise effective from June
TFSA: $22,688 (-0.2%: $67 loss, TransAlta as usual)
Unregistered account: $76,726 (+1.7%: $1,276 gain. Moderate month, some dividends, capital gains and option premiums, though I've taken a MTM loss on some of the options.)
Employee share plan: $4,054 (+25% Rebound in company stock, plus $500 contribution.) 


*Liabilities*
Margin: $0 (0%: no change)

Net Worth
$129,599 (+4.7%: $5,814)


July dividends were $116.72, pretty much the same as three months ago. Need to get some cash put to work. Have over $35K between bank accounts and brokerage sitting on the sidelines, so plenty of safety for my naked puts. 
Option premiums for August were $862. 
Total portfolio income just under $1K in August. 
Year to date my average monthly portfolio income is $1,057, so I am aiming for total portfolio income of $12,000 for the year.


----------



## GOB

Great job, keep it up!


----------



## Causalien

Hmmm $1000 per month is a bit low for a portfolio of 100k+, I didn't go through all the posts, but I am guessing you are only writing options on 60% of your net value?


----------



## Dmoney

Yes, TFSA ($20K+) is not generating any option income, I have another $15K that is in ETFs that don't have a liquid options market, and another $35K cash all told. 
Including naked puts, I'm writing options on ~$100K though, trying to get assigned to get my cash working for me. 
In August I wrote about $3,000 worth of options, but because they have January strike dates, I'm spreading the income over the months that the position will be open. 
Right now, based on my "straight line" accounting for my options income, I'll record ~$1,100 in options income for September (plus any new options I write this month, with FTT puts hopefully expiring out of the money, above $23). 
September should be my best month so far for options premiums, but as you can see from this chart, my options income is in a nice uptrend. As my portfolio grows, I'll add a few more stocks to the strategy and hit a consistent $1,000/month in total portfolio income.


----------



## Causalien

Dmoney said:


> Yes, TFSA ($20K+) is not generating any option income, I have another $15K that is in ETFs that don't have a liquid options market, and another $35K cash all told.
> Including naked puts, I'm writing options on ~$100K though, trying to get assigned to get my cash working for me.
> In August I wrote about $3,000 worth of options, but because they have January strike dates, I'm spreading the income over the months that the position will be open.
> Right now, based on my "straight line" accounting for my options income, I'll record ~$1,100 in options income for September (plus any new options I write this month, with FTT puts hopefully expiring out of the money, above $23).
> September should be my best month so far for options premiums, but as you can see from this chart, my options income is in a nice uptrend. As my portfolio grows, I'll add a few more stocks to the strategy and hit a consistent $1,000/month in total portfolio income.


Y-axis need numbers. XD

GJ nonetheless, I am interested in seeing what the peak earning % is for your portfolio once you get more comfortable with gauging risk and time.


----------



## Dmoney

Thanks, I find it extremely interesting and a good learning experience. 
Also is motivating me to learn as much as possible about options, though I have a ways to go.



Causalien said:


> Y-axis need numbers. XD


Yes, it does... I always seem to forget numbers  updating now.

What do you think is a reasonable % return to expect? 
So far I've had a total return of ~16% YTD on the unregistered account where I'm writing options. There's ~$72K in that account now, ~$9K in cash. I'm extremely happy with how it's doing, but the time period is still way too short to be conclusive.
If I could maintain long term returns anywhere in the 10% range (ideally after inflation), I'd be ecstatic, but we'll see how realistic a target that is.


----------



## Causalien

Telling you would defeat the purpose won't it? But I think we have similar s shaped ramp up that's how I recognized that you still can't believe you are printing money out of thin air.


----------



## Dmoney

I hate having to figure things out for myself!

It does feel fantastic earning significantly more from options premiums than would be possible from a straight dividend portfolio.

Looks like TLM calls will be assigned this Friday at $13 strike, will likely sell puts at $14, maybe $13 strike next week.
FTT puts will expire worthless, though I would have been better off being long the stock over the holding period. Thinking of writing more puts at $25 or $26, I think the stock is worth north of $30, so I'm okay being assigned in this range.


----------



## cash

Are you convinced that your option strategy will still pay more than a simple dividend portfolio even if you account for capital gains? This sounds like you having your cake while eating it too. If you're using a covered call strategy, you may have a higher income now, but lower capital gains later. Could the time you allocate to options writing be more lucrative if you instead used it to advance your professional career?


----------



## Dmoney

cash said:


> Are you convinced that your option strategy will still pay more than a simple dividend portfolio even if you account for capital gains? This sounds like you having your cake while eating it too. If you're using a covered call strategy, you may have a higher income now, but lower capital gains later. Could the time you allocate to options writing be more lucrative if you instead used it to advance your professional career?


I'm not at all sure that my portfolio will do better than a straight long strategy, but hopefully after a longer period of running this portfolio, I'll have a better idea. Since I've started, I've given up capital gains on a few stocks, but so far, only on naked put writing (ie I've yet to have a long position called away - though tomorrow unless TLM closes below $13 I will have my first call assignment). Telus has run up faster than I could write puts, and so has Finning, though in both cases, I'm happy with the income they've generated for me. 

Luckily, markets have been mostly sideways since I started this strategy, which is the optimal time to use the strategy. I expect I will underperform in a bull run, though I'm hoping I will still achieve decent returns in bull periods. At year-end I will do a more comprehensive re-cap and figure out where the strategy worked, and where it did not, and adjust accordingly. I expect that over the longer term, as my portfolio grows in size, I will limit my option writing to a portion of my portfolio, while stowing the rest away conservatively in blue chips. 

As for the time spent on this portfolio vs. my professional career... I work in finance, specifically equity research, so it's actually extremely complementary to my investing. I apply what I learn at work to analyzing companies I invest in personally, and vice versa. I spend a huge amount of time at work daily following the stock market and macro events, which also helps with my personal investing. I spend a minimal amount of time at work monitoring the companies I invest in, and if I see a significant move (for example FTT today) I might make a trade accordingly. 

You do have an extremely valid point though, my professional career has the potential to be significantly more lucrative than anything I'm doing with respect to personal investment, so if I ever felt like one was interfering with the other, investing would have to take the back seat. A pay raise or increased bonus has the potential to outdo a full year of investing, so career definitely has to come first. However, for the time being, both career and investments get along together well, so I'm hoping to keep learning and improving at both.


----------



## Dmoney

My FTT puts should expire worthless after close tomorrow, provided FTT doesn't fall below $23 (wish me luck).
Under the assumption that it doesn't tank in the next 24 hours, I took advantage of today's weakness to sell 20 December puts with a $25 strike price. Still think this thing is worth $30 or more. 

Sold for $1.05 each, gross proceeds of $2,100. Annualized premium yield is 16.5%. 
Roughly $1,350 in options premiums so far in September, and I might do something about TLM tomorrow or early next week as well.
Looking at $1,700+ when dividends are added into the mix.
I definitely want to work on increasing dividend income which hasn't been increasing lately as my puts aren't being assigned, so I may have to just flat out buy something soon.


----------



## humble_pie

Dmoney said:


> ooks like TLM calls will be assigned this Friday at $13 strike


but why oh why let em go ? of all the mid-size-to-big canadian energy companies, talisman is the one with the hottest breaking news from the middle east ...

i did look at montreal sep 13s, not sure if these are your short, but they were being offered at a penny or 2 above intrinsic value which is unheard-of bargain for montreal, it couldn't have been the dealer, it must have been an outside seller, if U are lucky he'll be back this am.


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## HaroldCrump

Did I, or did I not, tell you over a month ago that the $13 would get assigned? 
You were too aggressive with the strike price.
Even if QE-III had not happened, TLM would probably still have coasted above $13.

I agree with humble - do not let this stock be ripped out of your hands so cheaply.
Buy the calls back, roll the options forward, rob a bank - do whatever is necessary to protect your position.


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## humble_pie

harold i suppose you heard that a senior tlm vp has just joined Taqa North, canadian HQ for the abu dhabi energy authority.

http://www.calgaryherald.com/business/Talisman+named+Taqa+president/7261656/story.html

hot & hotter.
doan.no.boddy.sell.dat.talisman.


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## humble_pie

even farther out ...

the next oil/mining frontier has opened
afghanistan


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## Dmoney

humble_pie said:


> but why oh why let em go ? of all the mid-size-to-big canadian energy companies, talisman is the one with the hottest breaking news from the middle east ...
> 
> i did look at montreal sep 13s, not sure if these are your short, but they were being offered at a penny or 2 above intrinsic value which is unheard-of bargain for montreal, it couldn't have been the dealer, it must have been an outside seller, if U are lucky he'll be back this am.


He was back yesterday in the AM, but I didn't end up taking him up on his offer. I'll likely sell another round of puts at $13, maybe $14, as at those prices I'm okay with being assigned. I know these calls were saving an earlier position, though I rolled them at $13, when I probably should have rolled them at $14. The $13's were profitable, but the $14's would have lost me money at the time. 

Live and learn.


----------



## Dmoney

HaroldCrump said:


> Did I, or did I not, tell you over a month ago that the $13 would get assigned?
> You were too aggressive with the strike price.
> Even if QE-III had not happened, TLM would probably still have coasted above $13.
> 
> I agree with humble - do not let this stock be ripped out of your hands so cheaply.
> Buy the calls back, roll the options forward, rob a bank - do whatever is necessary to protect your position.


You told me 
At the time I sold the $13's it was trading at $13.75 though, I sold the calls for $1.80 each. Probably not the best option at the time, but I had to buy back the previous $13 calls I had written. 
Looking back, my total return on TLM has been 11.6% since December 2011, or 15.3% annualized. 
Not thrilled with this, although it is significantly more than I would have earned had I just been long the stock.

Rough early morning calculation, but here goes:

Bought at $13.19
Sold calls for $0.40, $0.71, $1.80
Bought back calls for $0.09, $1.1
Selling stock at $0.19 loss

$1.53 net gain on premiums
$1.53/$13.19 = 11.6% return
11.6%/(holdingperiod/365)= 15.3% annualized
Vs. long only return $13.62/$13.19 = only 3.3%

Ignores divs and commissions in both cases due to laziness :uncomfortableness:
Figure they're about a wash for options but would boost long only by ~2%.

I'm definitely happy with my return vs. long only, though had I gotten in at the $10 lows, it would have been a significantly better long-only play.


----------



## Dmoney

Well, looks like TLM didn't turn out as badly as initially thought. 
Took advantage of a significant drop today and sold 20 November $13 puts for $0.58.

Looking at the options writing strategy vs. straight buy and hold looks even better now. Only would have received returns from dividends had I held since purchase at $13.19.

Decided to go with shorter dated options this time around, let me get my annualized premium yield up over 30%. 
Pricing today couldn't have been better to maximize options premiums as it hovered slightly above $13 for a good chunk of the day.
If I get assigned, I'll get the December dividend and write calls, if not, I'll keep writing the puts hoping TLM doesn't move from $13 ever...


----------



## Dmoney

Another good month in September. Got a little bit of a hurting from FTT at the end of this week, lost about $2,000 in market value due to my short puts getting hit by Finning's big drop over the week. Other than that, more smooth sailing. 
Overall net worth up $4,587 (3.5%), combination of the usual saving, ESPP, and mediocre markets. 

Assets
Cash: $28,382(+9%: $2,291 increase) - Regular savings, increase in pay now helps with an extra $700/month. 
TFSA: $23,107 (+1.8%: $419 gain, TransAlta up a little month over month)
Unregistered account: $77,563 (+1.1%: $837 gain. Moderate month, some dividends, capital gains and option premiums, big loss on MTM of FTT options, down by $2,000. Expire in December with a $25 strike, sold for around a buck, trading just under $24. Obviously wish I waited before selling the puts, but will see how it shakes out over the next few months before I panic.)
Employee share plan: $5,094 (+26%: Rebound in company stock, plus $500 contribution. Stock trading close to my average cost now, so I'm well ahead here finally.) 


Liabilities
Margin: $0 (0%: no change)

Net Worth
$134,146 (+3.5%: $4,587)


September dividends were $255, down from three months ago but well up from a year ago. TLM switched to quarterly divs from semi-annual, so instead of Dec/June, I now get half the div in each of Mar/Jun/Sep/Dec. Currently not long any TLM, but if I get assigned in November, I will get the usual div in Dec (I will have doubled my position to 2,000 shares from 1,000 previously).

With TLM calls assigned, I now have over $50,000 sitting in cash (between bank and brokerage) that needs to do more than just act as collateral for my puts. 
Option premiums for September were the highest yet at $1,528, though the next 4 months should all be over $1,500. 
Total portfolio income just under $1,800 in September. 
Year to date my average monthly portfolio income is $1,138, keeping target for portfolio income at $12,000 for the year though it will likely be well surpassed ($10,242 YTD so less than $2K more needed). 

YTD net worth up $39K, or 41%. I need another $16K to meet my goal set at the beginning of the year to end the year with $150K net worth. My average monthly increase in net worth has been slightly more than $4K/month since I began tracking it in December 2011. But, I have a bonus coming in November (I hope), and last month I had a bonus, my net worth increased by $11K. Looks like I will end up in the $150K neighbourhood at the end of the year, markets willing.


----------



## My Own Advisor

Nice work 

"YTD net worth up $39K, or 41%."

Nice work on September dividends. I continue to track mine monthly as well. TA isn't looking so hot, I own it too. I expect a dividend haircut soon.


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## Dmoney

My Own Advisor said:


> Nice work
> 
> "YTD net worth up $39K, or 41%."
> 
> Nice work on September dividends. I continue to track mine monthly as well. TA isn't looking so hot, I own it too. I expect a dividend haircut soon.


Thanks, a bit of luck and a lot of savings seems to be the key early in the game. While I like that at this stage I can control changes in net worth (since saving my paycheque accounts for the vast majority), I'm looking forward to the time when I make more from dividends, options and capital gains than I do from working. 

TA has been a fantastic disappointment, and it does look like a div cut is priced in, but I think the downside at this point is minor, and the upside is relatively attractive. It's unfortunate that it's in my TFSA or I'd consider selling to take advantage of the tax loss, but as is, I think I'm going to hold for now. It does teach the value of diversification, since it's one of only two holdings in my TFSA. Luckily BPF.UN is the other holding, and has gained as much as TA has lost.


----------



## GOB

Great job. Wish I got a bonus that I could put to good use, but I can't complain with nice annual raises.


----------



## Dmoney

Thanks! GOB, what do you do for a living? Where did you pick up your options knowledge?
What field do you work in/how long have you been working there? Pretty sweet that you get annual raises... do you expect them to continue?
I would much prefer the stability of base pay rather than have to hope for a bonus that can be extremely volatile. 
It's great when it comes, but the waiting kills me  and it's harder to budget when paycheques are only a part of my yearly comp.


----------



## GOB

I'm an engineer - nothing at all related to interest in finance. That's strictly separate from my day job, unlike yours. Options knowledge has been entirely self-taught, from reading and listening to what more experienced people have to say. Fundamentally, options are very simple, though at the same time there is an endless amount you can learn about them. 

I've been working for about three years. I do expect the substantial raises to continue for a few more years before they start levelling off. People get paid quite well in my industry.


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## Dmoney

Lot of engineers working in finance. Similar minds, understand the math side of things without much effort and most can grasp the business side without too much of a struggle. Especially easy transfer for those already working in oil/gas or mining etc. to switch over to the research/analytical side.

Awesome expected trajectory. I'm hoping that I get annual raises for the next few years, but it's too early to tell. Also the industry is so volatile that I'm almost as likely to lose my job as I am to get a raise.


----------



## Dmoney

Looking like the month may not end too badly, as long as we can hold on to where we are at the moment.
Began to look a little hairy with FTT down to ~$23, TLM nearing $12 and ESI in the low $14s, but all my puts are looking strong with the exception of FTT December $25 strikes. Don't mind buying FTT at $25, but would much rather have sold the puts earlier this month and made 2-3x more premium .

BNS $56 strike calls expired worthless,  will roll the position over sometime this coming week. I was assigned the shares at $56 in August of last year, and have since received $1,284 in divs (3.8% yield on my $56 cost) and $2,245 in options premiums (6.7% yield on cost). Total 10.5% income from the position, though BNS is still trading ~$54 so I am only ahead by ~7.4% all considered. Definitely better than just holding the stock, but not an incredible performance by any means.

Nice to see, almost a year in, the results of the strategy panning out. So far, it's doing what it's supposed to be doing: generating additional income in a sideways market and outperforming straight holding the stock. It will be interesting to see what happens in a strong bull market, or strong bear market.


----------



## Dmoney

Sold 6 BNS April 2013 $56 strike covered calls today for $1.12 each.
Annualized return of ~15% all in

Little bit far out for my liking, so BNS may run up and it might look like a poor trade in the end, but that's life.

FTT, and TLM are both down quite a bit meaning my puts have taken a pretty big hit.
Net worth was up for the month, but only slightly.
Will provide full update later.


----------



## Dmoney

Bad month in October for the most part. FTT is down, TLM is down, ESI is hovering close to my $15 strike price.
Looks like I'll get assigned 2,000 TLM shares in November at $13. I have the cash sitting in my account to cover the purchase.
Come December I may get assigned 2,000 shares of FTT at $25, and in January 2,000 ESI at $15 and another 1,000 TLM at $13.
I have over $55K in cash to cover assignment, and by November's end, I expect ~$10K more, so approximately $65K total.

All told, I have short puts which if assigned represent $119K, so I could be on the hook for ~$55K of margin, worst case. 
Easily covered by writing calls against my long positions, provided they don't keep falling and drive down call premiums. 
Will have to decide between awaiting assignment or rolling positions forward in the coming weeks.



Overall net worth up $872 (0.7%), savings offset by weak markets. 

Assets
Cash: $30,553(+8%: $2,171 increase). 
TFSA: $23,787 (+2.9%: $680 gain, TransAlta up)
Unregistered account: $75,705 (-2.4%: $1,859 loss. Short puts dropped a bunch in value. FTT, TLM)
Employee share plan: $4,974 (-2.4%: Stock back down.) 


Liabilities
Margin: $0 (0%: no change)

Net Worth
$135,018 (+0.7%: $872)


October dividends were $648, BNS div increase kicked in this quarter. 
Option premiums keep growing, $2,081 for October. 
Total portfolio income over $2,700 in October.


----------



## leviathan

Dmoney said:


> Bad month in October for the most part. FTT is down, TLM is down, ESI is hovering close to my $15 strike price.
> Looks like I'll get assigned 2,000 TLM shares in November at $13. I have the cash sitting in my account to cover the purchase.
> Come December I may get assigned 2,000 shares of FTT at $25, and in January 2,000 ESI at $15 and another 1,000 TLM at $13.
> I have over $55K in cash to cover assignment, and by November's end, I expect ~$10K more, so approximately $65K total.
> 
> All told, I have short puts which if assigned represent $119K, so I could be on the hook for ~$55K of margin, worst case.
> Easily covered by writing calls against my long positions, provided they don't keep falling and drive down call premiums.
> Will have to decide between awaiting assignment or rolling positions forward in the coming weeks.
> 
> 
> 
> Overall net worth up $872 (0.7%), savings offset by weak markets.
> 
> Assets
> Cash: $30,553(+8%: $2,171 increase).
> TFSA: $23,787 (+2.9%: $680 gain, TransAlta up)
> Unregistered account: $75,705 (-2.4%: $1,859 loss. Short puts dropped a bunch in value. FTT, TLM)
> Employee share plan: $4,974 (-2.4%: Stock back down.)
> 
> 
> Liabilities
> Margin: $0 (0%: no change)
> 
> Net Worth
> $135,018 (+0.7%: $872)
> 
> 
> October dividends were $648, BNS div increase kicked in this quarter.
> Option premiums keep growing, $2,081 for October.
> Total portfolio income over $2,700 in October.


Just started going through this ,where is your cash sitting at 8%


----------



## HaroldCrump

leviathan said:


> Just started going through this ,where is your cash sitting at 8%


The cash balance increased by 8%, not that it is earning 8%.


----------



## Dmoney

leviathan said:


> Just started going through this ,where is your cash sitting at 8%


I've set up a very lucrative loan shark business.
8% a month, gives a great annualized return.

Any change in cash balance is savings for the month.


----------



## Dmoney

TLM puts will be assigned. Going to have 2,000 shares at $13, now trading at $11. Trying to figure out my play now. Any suggestions?

Looking to sell $13 strike calls, can get 7-8% annualized yield at the moment. Am wondering if I should wait a little to see how market and stock price play out, or sell as soon as possible. 

$26K will be paid from cash I have, but I also have to keep in mind that I have 20 FTT puts, 20 ESI puts and another 10 TLM puts that are currently in the money. Expiries in December and January on those, and will be fully covered by margin.


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## Dmoney

Strong day from TLM today, sold 20 covered calls. Unfortunately didn't time it perfectly, missed an opportunity early in the day, and then got impatient in the middle of the day and lowered my ask. Left ~$80-120 on the table unfortunately, but that's life. Sold for $0.36, $13 March strike. Premium is roughly 10% annualized (slightly less) plus a quarterly dividend brings it up to ~12%. 39% annualized capital gain if exercised so not a horrible trade. Of course I was assigned the shares at $13, so the capital gain isn't really applicable here.

Bonus should be coming at the end of the month, fingers crossed, and ESI isn't looking too bad at the moment.

Might have to save my FTT position when the time comes. Will have more time to look at my options in coming weeks luckily.


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## Dmoney

So, crazy couple of weeks, a little delayed with the monthly net worth update. 

Since my last post I closed on a house and moved in, got my semi-annual bonus and grew a year older but definitely no wiser. Internet hasn't yet been set up so I haven't managed to stay up to date, but here goes...

Cracked $150K net worth, which was my goal for year-end. Hopefully no pullback between now and the new year and I will finish ahead of my target.

I'd been looking at houses for a little while now, found a place that seems to be pretty fantastic, and more than I was looking for in my price range, so decided to pull the trigger. Hopefully will live here for the next 10+ years provided all goes well with work etc. More than big enough, right now the basement is completely empty so I may rent it out once I'm settled in. 

Bonus at work was at the top end of what I was hoping for, haven't made any reckless purchases as a result, but will probably be looking at some new clothes in the next couple of months. Need to update the wardrobe a little bit. 

Overall net worth up 12% ($16,155) $151,174

Assets:
Cash: +54% ($16,498) - After tax bonus makes up most of this. Will get a few thousand back once I file taxes as the bonus is overtaxed initially.
Unregistered: -0.4% (-$356) - Some up some down, nothing overly eventful
TFSA: -2.7% (-$637) - TransAlta... I guess I really should sell this dog.
ESPP: +13% ($650) - Stock up a little, $500 contribution

House: $603,000 - (This includes all closing costs, will carry it at this value going forward, I only want to record equity paid down, no price appreciation. I know closing costs shouldn't be a part of the asset value.... but I don't care, I do what I want!  .... Scotiabank... I'm not as rich as I think)

Liabilities:

Mortgage: $603,000 - 100% LTV, bring on the housing crash, I'm so ready for you!!! I got a fantastic interest rate near 2% so I'm not in any hurry to pay it back. I don't care what Carney or Flaherty says, I'm in no way overlevered. Plus, I get to keep my soon-to-be overlevered investment account this way. What could possibly go wrong?

Monthly payment is only a few hundred more than my current rent, and less than half of my take home base salary. Worst case I rent out the basement, best case I put in a 90 inch TV.


----------



## Argonaut

How old are you Dmoney, if you don't mind me asking?


----------



## Dmoney

Just turned 24


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## ddkay

Nice update, and you didn't pay much at all.. where did you buy?


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## Dmoney

A little bit north of Danforth, in the east end. 

Not a huge price for Toronto, but takes a little getting used to these prices when compared to elsewhere. Could probably have bought a 3,500 square foot behemoth in Ottawa for the same price.


----------



## humble_pie

mille félicitations ! The best part of the house story is that you find it "pretty fantastic" & you're looking forward to this home for the next 10 years or more. There's no price tag on contentment.

another nice touch - or so it seemed to me, without diving into your diary - is that you didn't need to touch your investment savings but instead are able to finance the low-rate mortgage with your salary alone.

i wonder whether you can rent the basement space as is for storage purposes, at least for a year or 2. This would put off the costs of constructing a dwelling that would be up to municipal code, not to speak of all the hassle involved in finding a tenant, etc.


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## Dmoney

Thanks Humble. I'm excited now, was a little hesitant in the week leading up to the close and the move, but now that I'm mostly settled in, I love the place. I had considered buying a condo, or a smaller place closer to the city, but figured that in the long run I'd be further ahead if I can avoid multiple purchases and sales over the next 10-30 years. I've also got more faith in the single family housing market than the condo market, which was a factor. 

The ability to keep my investment account intact was huge for me. If I can't beat a 2% nominal return with my investments, I need to find myself a new job. Right now I should be able to pay more than half of my mortgage payment with just income from investments. Will also hopefully be able to put down ~$30K lump sum annually when my bonuses come in. 

My goal is to pay the whole thing off in under 10 years, although i may not if rates stay where they are. I've still got a large cash balance in my savings account that I can either pay into the mortgage right away, or invest. Right now I'm likely to get assigned ~$93K of stock in December and January, so I'd rather pay down my margin which will be at 5%. 

I never though about renting space as storage. I'll have to look into that. I've also got a massive garage and no car or plans for a car, so there's a ton of storage space... Will have to look at how well that pays. Reading KaeJS's issues with tenants is making me carefully consider the basement apartment option.

My situation is that I really don't NEED the income, but $9,600/year is extremely hard to pass up, especially considering that all the place needs is fridge/oven/sink. The return on investment would be insanely high. If I could find a perfect tenant, I'd do it in a heartbeat.


----------



## My Own Advisor

Congrats on the place Dmoney. At 24, you seem to be doing quite well. If you're going to pay off this house, any house, in 10 years, you'll be well on your way to financial freedom. We've got 9 more years to pay off our house, but we just bought it 2 years ago.


----------



## humble_pie

Dmoney said:


> ... $9,600/year is extremely hard to pass up, especially considering that all the place needs is fridge/oven/sink. The return on investment would be insanely high. If I could find a perfect tenant, I'd do it in a heartbeat.


i didn't realize that a basement suite had already been constructed. Does it meet the muni building code with respect to grade level, windows, fire exit, separate self-contained dwelling, etc ? only needs plumbing & kitchen ? does it have a working bathroom ? 

that lack of a working kitchen suggests to me that a permit for a separate basement rental suite has not been obtained yet ... if not, is why i thought of plain & simple rented storage space for a while.


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## Dmoney

My Own Advisor said:


> Congrats on the place Dmoney. At 24, you seem to be doing quite well. If you're going to pay off this house, any house, in 10 years, you'll be well on your way to financial freedom. We've got 9 more years to pay off our house, but we just bought it 2 years ago.


Thanks, I think 10 years is probably quite ambitious, but I'm hoping as time goes on my salary/bonus goes up a little, and my investment returns will compound. It will definitely be a bit of a challenge, and I may opt to just increase my investment account if interest rates stay here for the next few years. 

I don't think it's ever a bad idea to pay down a mortgage, but with rates where they are, investing is a pretty good alternative.

I'd also love to be able to say I'm debt free at 35 with a house fully paid for. A little bit of psychology at play here too I'm sure.


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## Dmoney

humble_pie said:


> i didn't realize that a basement suite had already been constructed. Does it meet the muni building code with respect to grade level, windows, fire exit, separate self-contained dwelling, etc ? only needs plumbing & kitchen ? does it have a working bathroom ?
> 
> that lack of a working kitchen suggests to me that a permit for a separate basement rental suite has not been obtained yet ... if not, is why i thought of plain & simple rented storage space for a while.



I'm not sure the exact laws, and how my place stacks up, but it is something I'll look into. Has a separate exit, plus internal stairs (which could be left in or removed depending on preference). Full bath downstairs (bath/shower/sink/toilet), ceiling is 7 or so feet, windows might be up to code... fat person couldn't fit out though... It's all one big room, so would be a bachelor of some sort. 

I don't know how a basement suite works in terms of permit and legality, but I'm pretty sure 99% of existing basement suites don't have permits etc. Not sure the repercussions there. Will definitely look into it more if I ever actually decide to go through with it.


----------



## Young&Ambitious

I've heard that insurance won't cover you if you have an illegal basement suite, but that likley varies so maybe check out that angle too.


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## Dmoney

Insurance issues are always pretty serious... Would be a concern... Something else to look into if I decide to go ahead with it.


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## Dmoney

Positive sentiment following FTT`s investor day. All guidance was in line or above expectations, brought stock back above $24 in the past couple of days. Timing could not have been better, as I have 20 short puts expiring next Friday with $25 strike price. Hopefully between now and then the stock price stays stable or rises a little. 
My choice now is to allow assignment and write the call (likely the June $26 strike for around $1.00) or buy back my put ($1.20) and sell $25 puts in June ($2.60). One option will draw down my margin by $10K at 5% interest, and will let me deploy $40K that is currently doing nothing. I also get dividends (2.5% annual yield with the covered call strategy). Selling the put will mean no margin needed, savings of a little under $50 per month. The commission is roughly the same for both alternatives.

Any input?

ESI has also landed itself comfortably above my Jan $15 short puts, so hopefully it doesn't climb too much or fall again. Not going to deal with it until after FTT is sorted out. Looking like December will end my year on a positive note.


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## Dmoney

FTT puts assigned at $25, stock closed at $24.50 Friday. In a pretty solid position right now, will probably sell the covered calls on Monday. March $25 strikes or June $26 strikes both look decent. Will spend some time looking at payoffs on Monday. 

$50,000 of margin used for FTT shares, have put $40,000 into the account, so margin will be $10,000 for now, minus probably $2,000 when I sell FTT calls, and will hopefully have another couple thousand to put down after mortgage payment goes through at month-end, and I get paid the following day. 

Big gains so far in December in my unregistered account, recovery of FTT, ESI and BNS all positives. Good to end 2012 on a positive note. Looks like I'll be well above my $150K target by year end, close to $155K I think.


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## humble_pie

dear boy here's my input. It's christmas, you've just bought a smashing house. I don't want to hear how you are sitting in the root cellar counting the beans at the end of the month. I want to hear how you are whooping it up riotously on The Property.

i want to hear how you put up coloured lights, some real cedar boughs, overtipped the movers, got drunk on eggnog, invited the parents to come admire the new dwelling.

i want to hear how the parents fell over themselves & got all choked up with pride in their wonderful, talented young son. I want to hear how the friends came by like wise men bearing frankincense, fruitcakes soaked in brandy, a feathery light new duvet for the bed, a reel lawnmower for the backyard next summer, a giant Norfolk pine hung with a few xmas decorations in a flowerpot.

just once, i want to hear you doing insane, cuckoo, joyous things. Then on new year's eve, on the stroke of midnight, you can of course turn back into the bean counter.

ps c'est du tonnerre. Mille félicitations.


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## Dmoney

Back in the old hometown for Christmas, left the new home in the care of the lovely new neighbours. The coloured lights are up on a timer, and the whooping and insane cuckoo joyous revelry is all taking place in my old stomping grounds.

Thank you for the congratulations, we'll spend a little more time showing off the new place to friends and family in the New Year. Calls for a hearty housewarming celebration to break it in. I don't think there'll be any counting after we get to 0 on the stroke of midnight... I don't plan to be in counting shape at that point of the night.

Merry Christmas to all...


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## Dmoney

Sold 20 FTT calls. $26 strike, June expiry for $1.15, gross proceeds of $2,300. 

Annualized 9.5% premium yield, 11.5% potential capital gain from $24.60 at time of trade. 8.1% capital gain based on $25 assignment price.


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## Dmoney

Wow... starting the new year off with a bang...

Get back to the new house after visiting the folks for the holidays and the place is freezing... furnace died while I was away. The fan on the motor blower needs to be replaced, got it running temporarily but having the serviceman coming tonight to replace it so this doesn't become a recurring problem. Will set me back ~$200-400, the joys of home ownership. 

Was 40 degrees when we got home, which was a lovely surprise. Up to 50 now, and climbing, so all is not lost.

Will post a full update later, see what kind of damage the holidays caused.


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## Dmoney

Great month, excited to see months in which I make more from investing than income.

*Overall net worth up 8% ($12,139) $163,312*

*Assets:*
Cash: -80% (-$37,667) - Put excess cash into investment account to cover margin
Unregistered: +61.5% (+$46,331) - $40,000 cash contribution, $6,331 in gains. Great month, mostly up across the board.
TFSA: +1.7% (+$389) - Not much movement
ESPP: +41% (+$2,333) - Stock up quite a bit, $500 contribution

House: $603,000 - (Acquisition cost)

*Liabilities:*

Mortgage: $602,250 - (-$750)

$6,620 of margin is included in my calculation of unregistered account. 

2012 was a great year financially, and overall. Got a raise, bought a house, girlfriend graduated and got a job, career progressing well. 
Achieved my goals for the most part, CFA didn't happen... laziness happened instead.

Net worth target: $150,000 - Ambitious but a few things should hopefully get me there. - *Exceeded target by $13K, now at $163,312*
-I will hopefully get a raise sometime in the first half of 2012 - *Got a raise, as I had hoped for, helped net worth*
-Two semi-annual bonuses, which if the past is a good indicator should sum up to roughly my base pay - *Bonuses were as expected*
-The girlfriend, who I live with, hopefully finishes school and gets a job, should let me save more - *Girlfriend got a job, working towards paying off her student debt. Looking for better work in the new year, will hopefully have some luck. *

Savings targets:
-50% of after-tax base pay (~3,700/month, so save $1,850) - *After tax base pay has increased - earned about $47K base pay - saved about $27,600 or 59% *
-100% of bonus pay - *Saved full after-tax amount of bonuses*

Other goals:
-Might look into getting my CFA designation - *Lazy this time around - didn't get around to it*
-Will keep myself open to buying a house or condo in the New Year, but no desire to rush it - *Guess I rushed it... bought a house late 2012*
-Get back into shape - hit the gym a minimum of 3 times a week, no excuses *On and off for much of the year, for the past month and a half have been going 4-5 times a week. Not quite where I want to be, but getting there.*

2013 goals to come...
Happy new year


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## Dmoney

Will set out some 2012 stats and 2013 financial goals.

2012 dividend income - ~$4,100
2012 option writing income - ~$12,500
2012 portfolio income - ~$16,600

2013 portfolio income target - $21,000 ($1,750/month average) - Would love to hit $24,000 but that may be a little lofty. I don't really care whether it comes from dividends or options, as long as it comes.

Year-end net worth - $163,312 up $68,450 or 72% for the year. 
2013 target - $235,000 - a $71,700 or 44% increase - Manageable assuming salary/bonus remain the same and portfolio income is stable. Relies on decent investment returns as well.


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## Dmoney

20 ESI puts expired worthless, was put 1000 TLM shares at $13.00

Sold 20 more ESI puts, $16 strike, July, for $0.95, gross proceeds $1900
Waiting for a good day out of TLM to sell another 10 covered calls.

Got about $14,000 on margin right now, after assignment of the TLM puts.


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## humble_pie

Dmoney said:


> ... was put 1000 TLM shares at $13.00



dmoney i am wondering why you didn't skip out of the way before those puts were assigned 

in late dec/12, it was transparently clear that talisman jan 13P were at risk. Would not a good treatment have been to buy them back in late december for a 2012 tax loss - always useful when one has gains - then resume selling em again in 2013 ?


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## Dmoney

I probably should have rolled over the puts, no question they were going to get assigned as December wore on. I'm still new enough to options, and this strategy that there are kinks to work out, and as time goes on, I'll try and optimize trades with a more complete view to their impact (tax implications, commissions, interest expense if it will force me on margin etc.)

Once I do my taxes this year, I'm sure I'll find a number of trades that could have been better executed from a tax perspective.

From a tax point of view would the idea be that I close all losing positions to get a 2012 tax loss, then re-enter the position, or a similar position, immediately?

For my losing positions, I find myself trying to salvage with ever-longer term options, rather than closing for a loss. Might have to reexamine this approach


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## humble_pie

Dmoney said:


> From a tax point of view would the idea be that I close all losing positions to get a 2012 tax loss, then re-enter the position, or a similar position, immediately?


i'm glad u will be thinking about the tax implications ! because you will have very good insights, i'm sure.

i don't believe one can categorically say "close all losing positions" to realize a tax loss. I think better to examine each option on a case-by-case basis. In late december each year, it will inevitably turn out that some can be bought back without rolling over at that very same moment, in order to realize tax losses.

the issue of when to sell the next rollover position in the sequence is a bit opaque i think. It's black-&-white clear that one does not sell until the following taxation year. In options, from a technical point of view, some might do this as quickly as 24 hours later, as long as one straddles the new year date. That is, theoretically speaking, one could sell an option on 31 dec for settlement on 2 jan of the following year.

we come now to a clouded issue, which is taxation of options trading in general. Dmoney an option trader can consult 5 distinguished national accounting firms & each will have slightly different advice - along with possible bills of 5-10k for their expert research & conclusions. At the end of the day, each option trader should follow a scrupulously consistent & reasonable procedure. I do. Could i underline those words scrupulous & consistent.

this is why i'm careful to capitalize - ie wind up & close out - just about every option position.




> For my losing positions, I find myself trying to salvage with ever-longer term options, rather than closing for a loss. Might have to reexamine this approach


there are always so many tiny little decisions to be made. One trend that makes buying-back-for-a-loss in late december together with selling-new-position-for-a-new-gain in january or february work out well is the well-known january bull market phenom. But one must keep in mind that there are years when this phenom does not materialize.


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## Dmoney

Will be doing my own taxes this year, so will be a bit of a learning experience. Should allow me to see where I could have made more money, where I did well. 
I'll probably find that I could have closed several positions with better outcomes from a tax point of view, which should allow me to tweak my strategy going forward.

Either way 2012 was a good year, no use sweating over results that can't be undone. Learn from mistakes and move on.


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## My Own Advisor

Well said Dmoney. "Learn from mistakes and move on." We're all human.

How is the passive income coming along?


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## Dmoney

Another good month, a little surprising as I had a few house related expenses... joys of homeownership.
Switched to bi-weekly mortgage payments, nice to see the principal slowly working its way down. 

Overall net worth up 6.7% (+$10,092) $173,404

*Assets:* 
Cash: $8,336 (-$1,048, -11.2%)
Unregistered: $129,547 (+$7,868, +6.5%) Another great month, everything was up, including TLM and FTT which were assigned to me
TFSA: $24,658 (+$1,119, +4.8%) TransAlta posted a bit of a recovery
ESPP: $9,306 (+$1,349, +17%) Company's stock is recovering, plus the standard $500 contribution

House: $603,000 - (Acquisition cost)

Liabilities:

Mortgage: $601,450 

$16,795 of margin is included in my calculation of unregistered account.


Also sold another 10 covered calls (June $13 strike) on TLM for $0.58... really need to do a better job with my timing as the stock ran up by a further 2% today after I sold options.


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## Dmoney

My Own Advisor said:


> Well said Dmoney. "Learn from mistakes and move on." We're all human.
> 
> How is the passive income coming along?


Very well so far, though the options I don't quite consider as passive as the dividends. 
$632 of dividend income in January, though I'm averaging about $360/month for the full year at the moment. 
Total for 2012 was $4,132, looks like it will be more in 2013, depending on what I hold onto, and what gets called away. I think I'll likely try and roll over most of my covered calls though, so hopefully hold most of them.

Total portfolio income for 2012 was $13,700 factoring in options, but I don't consider that income as clean as the dividend income.


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## HaroldCrump

Dmoney said:


> *Assets:*
> Cash: $8,336 (-$1,048, -11.2%)
> Unregistered: $129,547 (+$7,868, +6.5%) Another great month, everything was up, including TLM and FTT which were assigned to me
> TFSA: $24,658 (+$1,119, +4.8%) TransAlta posted a bit of a recovery
> ESPP: $9,306 (+$1,349, +17%) Company's stock is recovering, plus the standard $500 contribution


Dmoney, it seems you don't have an RRSP.
Any reason why?
esp. since you seem to be selling so many covered calls, which are allowed inside RRSPs.
That will shelter the option sales income from taxes, in addition to the usual benefits of an RRSP.


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## Dmoney

Haven't been earning enough income to date to make it worthwhile. I expect to be in top tax bracket in retirement, and am just scraping the bottom of the top bracket now.
Also didn't have enough contribution room until this year to justify setting up another account.

The tax-free growth is appealing though, and I may contribute this year.


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## Dmoney

Overall net worth up 2.3% (+$3,976) $177,380

*Assets:* 
Cash: $8,38 (Flat)
Unregistered: $132,233 (+$2,686, +2.1%) Weak dividend income as February I only receive monthly payments. For the most part good gains in underlying stocks were offset by my covered calls option positions. Starting to see the only pitfall of my options strategy play out on a few positions. Got BNS covered calls at $56, stock is trading at $61. Still came out slightly ahead of a buy-only strategy, but not by much. Will see about rolling the position over and trying for some additional gains.

FTT and TLM are also both trading near my covered call options, will see how it plays out, but worst case I can pay off margin and start writing puts again.

TFSA: $24,557 (-$102) Need to contribute $5,500 to TFSA, but still waiting for some sort of brilliant idea.
ESPP: $9,886 (+$580, +6.2%) Company's stock flat, $500 contributed.

House: $603,000 - (Acquisition cost)

*Liabilities:*

Mortgage: $600,603 (-$839) Woohoo... Look at this thing come down!!! 

$16,751 of margin is included in my calculation of unregistered account.


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## mind_business

Nice Net Worth at your age Dmoney! 

Just a question ... do you have a plan if/when interest rates start to go up? Can your finances handle a bit of additional strain? I didn't go through all of your posts to see what current interest rate, and whether it's locked in or not?


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## Dmoney

Thanks, a lot of work goes into growing it.

As for interest rates, my view is that there is nowhere for them to go but up, but I think it will be a slow crawl up and won't start until the US and Canadian economies are on more solid footing. I'm currently in a one-year fixed mortgage, which I intend to roll over until we see interest rates start to increase. A 100 bp increase in interest rates would cost me an additional $300/month, which wouldn't put a huge dent in my monthly net income. I'll lock in five-year financing at some point, but figure in the short term that I'm better off with the short term mortgage and a much lower rate.


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## humble_pie

i know what you mean in bns calls. This is the obverse of the put elephants in aapl. Things get pushed to the lifeboat muster station. It's the reason why i practice a fairly conservative cc strategy, selling calls & puts that are well otm & always hunting for underlyings with enough volatility & liquidity to generate decent premium even at otm strike levels.

bns is not one of these, its options are noticeably less liquid than td, bmo or ry. So in bns i strictly sell puts.

you mention you are short bns 56, although u didn't specify which month. I'm assuming these are aprils or julys. Alas rollover opportunities seem to be disappointing.

i see a couple weak opportunities. You could roll forward to a jan 56 of 2014 (5.40-5.75.) This has the weak benefit of protecting the dividend for a while longer - although not necessarily all the way to jan/14 because the strike is still considerably itm - & could be beneficial if you believe that bns would start dropping by summer/13.

& the others? ok you know about them ... i still think that bns is good for selling puts only, they will roughly track a share price higher, meanwhile seek dividends by holding a canadian bank w more liquid options each:


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## Dmoney

BNS calls are April. Rollover options are nearly non-existent :upset:

BNS was my first foray into put selling, got assigned at $56 a while back, and was selling calls on the way down into the low $50's. I liked BNS as a long but it turned down shortly after I bought so had been selling further out of the money calls, not wanting to take a loss. In hindsight options volume should have been a bigger consideration for ease of rolling out of positions. 
I'm weighing my options between rolling for very little gain and just letting the call get assigned and going back to selling the puts.

If I'm assigned I pay down $17K of margin at 5% interest and can sell conservative puts for pretty good returns, but I miss out on the dividend.

Do you sell BNS puts? I'm guessing you just roll forward and down as needed if assignment looks likely?
This time around I may do the same... Though I like the dividends, I prefer the options income which is significantly higher...


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## humble_pie

yes i mentioned that i only sell puts in bns, the calls are not liquid enough to manoeuvre easily & do not justify tying up capital in the stock itself imho.

we are coming up to the end-march record date for the dividend. You'll note that with stk at 61.13 & april 56 call at 5.15-5.30, you're only 2 pennies away from risk of early assignment? ie a dividend grab from a counterparty.

you'll also see a large number of sellers offering this option at 5.30, at friday's close.

assuming everything the same monday morning, with same no of sellers back in the april 56, i think it might be possible to buy that back at 5.20. Again assuming the same, one could sell the 2014 for 5.40 or better ... i for one would offer it at 5.50. One could receive a credit of 20-30 pennies per share, although the natural was only .10. Notice there were no "extra" players in this 2014 series at friday's close, only the dealer., which makes it harder.

all this hoo-ha would serve to protect the upcoming dividend, although the downside is that it will tie down capital & margin until jan 2014 or until assignment ...


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## Dmoney

I think I'm going to let it get assigned and sell the puts again. I can roll out $56 puts to July for ~$0.60-$0.70 or to October for ~$1.20-$1.30. Provided I don't initiate any other positions, I'm comfortable going up to 10 contracts, from 6.

More imminent now are the 20 TLM March $13 strike call options I have expiring this Friday. I have a lot of options here, might go for the April $13 ~$0.30, gives a nice annualized return, or roll out further to June or September, maybe up to $14 strike. 

Everything else is looking in decent shape, no blowups at the moment *knock on wood.


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## Dmoney

Sold 20 TLM calls today, May $13 strike for $0.30
Unfortunately, by being conservative I missed an opportunity to sell the April $13's for $0.40 when TLM was trading at $12.70 late last week. 
Also got a little greedy earlier in the week and didn't settle for $0.39 on the May calls. 
You'd think with all these learning opportunities I'd stop screwing up :tongue-new:

Also went a little crazy this month... setting up a home theater in the basement which will probably run me $2-3K when it's all said and done... but I'll have a 100" screen with massive sound, so totally worth it. On the bright side, I think my tax refund will more than cover the full cost, so once I get my taxes wrapped up it should even out.


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## My Own Advisor

That basement setup sounds amazing.


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## Dmoney

I was torn between renting it out or putting in a sweet man cave... You can see which won out.
Gradually putting it together, have the audio, just need to settle on a projector and finish the setup.
Eager to get it wrapped up, but not looking forward to the final bill.
Will have to throw up some pictures when it's done.


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## Dmoney

humble_pie said:


> yes i mentioned that i only sell puts in bns, the calls are not liquid enough to manoeuvre easily & do not justify tying up capital in the stock itself imho.
> 
> we are coming up to the end-march record date for the dividend. You'll note that with stk at 61.13 & april 56 call at 5.15-5.30, you're only 2 pennies away from risk of early assignment? ie a dividend grab from a counterparty.
> 
> you'll also see a large number of sellers offering this option at 5.30, at friday's close.
> 
> assuming everything the same monday morning, with same no of sellers back in the april 56, i think it might be possible to buy that back at 5.20. Again assuming the same, one could sell the 2014 for 5.40 or better ... i for one would offer it at 5.50. One could receive a credit of 20-30 pennies per share, although the natural was only .10. Notice there were no "extra" players in this 2014 series at friday's close, only the dealer., which makes it harder.
> 
> all this hoo-ha would serve to protect the upcoming dividend, although the downside is that it will tie down capital & margin until jan 2014 or until assignment ...


Humble, survived with my position intact up until earlier yesterday (or Wednesday, think there was just a delay in my broker letting me know). Got assigned my 6 BNS calls, so the dividend was sniped. 

The options were actually looking a lot better in the weeks leading up to the exercise as the stock had taken quite a hit and I was thinking of rolling my calls further down the road, but decided that I could pay off $17,000 in margin and switch back to put writing if I got assigned.

So, got assigned my 6 BNS calls at $56, sold 10 BNS puts ($56 strike, October 2013) for $1.55. 

March looks like it will be my best month yet for dividends... ~$750 for the month. Added $280 from new FTT position, TLM another ~$200 with 3,000 shares, dividend from my company stock, and then the usual monthly guys.
Next month will be light without my BNS dividend, but I won't have to pay margin interest, plus other positions make up for it so it should roughly even out.

Will put up some more numbers later on this weekend.
Dreading it, I think it'll be my first negative month


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## Dmoney

NOOOOOOOO first negative month so far

Overall net worth down 1.85% (+$3,288) $174,092

*Assets: *
Cash: $5,078 (-$3,230: spending quite a bit putting my home theater together, some bigger ticket items for the house )
Unregistered: $130,695 (-$1,538, -1.2%) 
TFSA: $25,590 (+$1,034) 
ESPP: $9,489 (+$580, -4.0%) 

House: $603,000 - (Acquisition cost)

Liabilities:

Mortgage: $599,760 (-$843) 

Margin back at $0, got a big cash balance now in my investment account waiting to deploy. 
Got most of my tax stuff together, should be getting `$4,500 - 5,000 back when I finally get around to filing.
April should look good with my tax refund, and May is bonus time so I'll make up some lost ground.

More importantly, once I get my home theater set up, I won't be leaving the house for the rest of the year, so I'll save some money on entertainment and meals out and what not.


----------



## Dmoney

As promised, a couple pics of the home theatre in action


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## Dmoney

Unfortunately pictures using my phone really don't do it justice.
Finished setting it up last night, watched a little Scarface at 1 in the AM.
Safe to say the neighbours hate me.

Projecting onto a 100 inch screen, feels like I'm at the movies.
Speakers and sub shake the whole room.

Projector $1,250
Screen $250
Speakers/sub/receiver ~$1,200 all in
Couch $800

Filed my taxes, getting ~$4,800 back... that cheque can't come soon enough :hopelessness:


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## Spudd

My husband says you should get a little thing (we use a stool from IKEA) to raise your centre speaker off the floor. Ideally you should angle it upwards a bit, otherwise the sound is shooting along the floor. You want it to be aimed at the height of your head.


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## Dmoney

True, I may get some sort of stand for the three fronts to raise them all.
There isn't enough room to put them behind the screen, which would have been ideal.

The center isn't actually connected yet, I had enough speaker wire to either do the two rears or the center, so went with the rears.

I'm still waiting for the couch to arrive, at which point I'll finalize speaker placement and come up with some sort of solution for speaker height and angle of the center.

For now I'm just enjoying shaking the house


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## Cal

The flooring is nice, perhaps you can make something for the floor speaker with some leftover sections from that.


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## Dmoney

Previous owners put the floor down 
I think that for now I'll likely do what Spudd said and put it on some sort of stool and angle it slightly upwards until I can come up with a permanent solution. 
Got the wiring for center now, so I'm going to let 'er rip soon... 
Figure it's late enough in the day everyone's already awake


----------



## mind_business

An entertainment centre is only as good as the chair you're sitting in. No pressure :biggrin:


----------



## Dmoney

Best week ever!
Got the couch, got my tax refund and got a raise at work!!!

Refund pays for the entire basement/home theater setup, with some left over.
Hopefully the raise will make up for the horrible markets over the past couple of weeks.


----------



## Dmoney

Overall net worth up 0.75% (+$1,305) $175,397

Assets: 
Cash: $10,681 (+$5,604: got my tax refund of ~$4,800)
Unregistered: $125,593 (-$5,101, -3.9%) another forgettable month  
TFSA: $26,498 (+$907) 
ESPP: $8,537 (-$951, -10.0%) 

House: $603,000 - (Acquisition cost)

Liabilities:

Mortgage: $598,913 (-$847) 

Barely scraped through with a net worth increase thanks to my tax refund. 

Portfolio income of slightly more than $1,700 in April 
Options income of ~$1,400
Dividend income of $310 - definitely missed the BNS dividend from my covered calls which were assigned earlier.
Overall portfolio income is trending upwards again, though it will probably be a few more months before I'm comfortable opening another big option position to get option income back over $2,000/month. 










Looking forward to a good update in May, expecting to get my bonus at the end of the month, which should wipe out any CPP/EI deductions for the rest of the year. That plus my raise which I expect to get beginning at the end of June should increase my monthly net income ~$800-1,000 for the rest of the year. 

20 TLM calls likely to expire worthless in May, will likely roll over once expired.


----------



## Dmoney

May calls expired worthless over the weekend, rolled them over today.
Sold 20 September 2013 calls, $13 strike price for $0.53. 
Premium produces a ~13% annualized yield, plus dividend. 

May's looking like it'll be a good month, all investment accounts are up for the month, bonus should be coming next paycheque and got a raise coming either beginning in June or July. 
Will run through the regular update at the end of the month.


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## Dmoney

Overall net worth up 4.4% (+$7,734) $183,131

*Assets: *
Cash: $7,954 (-$2,728: finally contributed $5,500 to TFSA for 2013)
Unregistered: $128,438 (+$2,845, +2.3%) 
TFSA: $31,980 (+$5,482 - Contributed $5,500 mostly flat otherwise) 
ESPP: $9,822 (+$1,284, +15.0%) 
House: $603,000 - (Acquisition cost)

Liabilities:

Mortgage: $598,063 (-$851) 

Great month in May, decent performance from investment accounts, few options expired worthless, sold some more.
Unfortunately my bonus is late this year... Now will apparently be getting it midway through June, so looks like June will be another good month.
No word on my raise yet, should be a $12,500 increase, but not sure when it kicks in.

Initiated a couple of new positions in my TFSA with my new contribution.
Sirius XM Canada (XSR on the TSX) - good dividend yield, potential to increase it, gaining some traction with auto manufacturers, getting into more cars. Retention rate not bad, some threat from internet radio/smartphone alternatives.

Liquor Stores NA (LIQ on the TSX) - good dividend yield, and everybody drinks... recession or not.


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## humble_pie

this looks great. In fact, better than great. It's magnificent, there is no other word for a young person who has accomplished so much. Dmoney your diary is a fine role model for many of your peers imho.

there are other young & youngish persons posting here with similar tales of hard work, conscientious care & significant success as well. They should get you guys twittering together. Ontario securities commission - which has a mandate & a budget to educate investors esp young people - should pay for Twittering by the role models. Since kids aren't taught finance in school, this might be a way to reach them ...


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## Dmoney

Thanks Humble, I enjoy keeping track of my progress and I find the monthly - or more frequent - updates keep me motivated. 
I don't know if there's any good way to reach out to people who aren't receptive or seeking the info on their own. I was blessed with parents that taught me the value of a dollar, a good work ethic, and frugal living, all from a very young age. I think if it's not ingrained early, it's tough to pick up good habits without a very concerted effort. 

I would love to get paid for regular Twitter updates, the more income streams the better.

Thanks for the kind words, hopefully there is some interest in the thread. I hope to keep this going for a number of years, since that's when it gets more interesting when there's some history behind it.


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## Dmoney

Sold 10 covered calls on Talisman yesterday.
$13 strike, August expiry, $0.40 each.
Looks like June and July options income is going to take a hit since Finning is a little low to be writing covered calls at the moment. Hope to see it recover in the near term, as I don't want to write anything below $25.
Had been contemplating selling puts on Telus, very glad I didn't. Will reconsider now once the dust from the Verizon news settles.


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## My Own Advisor

You're doing very well Dmoney, keep up the great work.


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## Dmoney

Thanks, going to have a good update at the end of June, though choppy markets have taken some of the shine off.


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## humble_pie

i know what you mean about XYZ stock being too low to write calls. These are truly troughy periods. Just think of the zero call-selling opportunities for most barrick shareholders these days, brrr.


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## Dmoney

I've only got a couple positions that are too low to sell calls on, but each one hurts a little. Obviously the ideal situation would be for stocks to fall a penny short of exercise every time, but the market will do what the market will do.

Sold 10 Telus puts on Thursday, figured the Verizon action had been priced in, and don't expect much more news in the interim.
July $29 strike for $0.45, so a quick $450 in less than a month if all goes well. Pushes July option income well north of $1,000, even without new Finning calls, or rolling over ESI puts.
Yesterday Telus was up, would have been better off just buying the underlying, but will stick to my guns and see how it all turns out.


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## Dmoney

*June update +$15,104 (8.25%)*

Overall net worth up 8.25% (+$15,104) $195,235

Assets: 
Cash: $9,406 (+$1,452: got my bonus, all in investment account)
Unregistered: $142,429 (+$13,991, +10.9% - put bonus into investment account as my naked puts are looking close to exercise price, otherwise, pretty poor performance) 
TFSA: $31,102 (-$878 - down in June, mostly across the board) 
ESPP: $9,507 (-$315, -3.2%) 
House: $603,000 - (Acquisition cost)

Liabilities:

Mortgage: $597,208 (-$854) 

June was weak in the market, but I got my bonus and my raise. Also, CPP/EI maxed out for the year, so no more contributions now... combined with my raise, monthly net paycheque is up ~$1,000 give or take a little for the rest of the year.
New record for dividend income in June: $796.98 ... up from $4.60 in June 2010, quite pleased with that 
$2,680 in the first half of the year, up from $1,846 in the first half of 2012
$1,140 in income from options, so a total of $1,940 of portfolio income in June.
$9,825 total portfolio income in first half of 2013, from $5,860 in first half of 2013, so on the right track overall. 

Will probably add a little here later today.


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## My Own Advisor

Wow, +15 K in one month! Congrats on bonus and raise. "New record for dividend income in June: $796.98" Killer work.


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## Dmoney

My Own Advisor said:


> Wow, +15 K in one month! Congrats on bonus and raise. "New record for dividend income in June: $796.98" Killer work.


Thanks, the bonuses tend to make the hours worthwhile, something to look forward to at the end of a grueling day. I always save 100% of my bonuses, ends up being ~$30,000 after tax each year that goes right into my investment accounts.

In decent shape to reach my net worth and portfolio income targets, though I will likely need some luck in the rest of the year for each.
Target for portfolio income was $21,000 for 2013 - need a little more than $11,000 more to reach this target
Net worth target was $235,000 at year-end - Another $37,000 to go. Up $35,000 so far this year.

I think if I really try, I can reach both targets. I don't want to overstretch myself to hit the portfolio income target though, as it might require taking on too much risk.
The net worth should be attainable unless markets really take a turn for the worse. I expect another bonus of $10-15,000 net, and should be able to save another $10K in the remainder of the year. Need my portfolio to do the rest :rolleyes2:


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## Dmoney

Bit of a run-up for Finning in the last week or so, gave me an opportunity to sell some covered calls with halfway decent returns. Sold 20 December call options, $25 strike (same price I initially bought stock at) for $0.80. 
Roughly 10% annualized yield combined with dividend, though no upside to my initial purchase price. 
I may end up regretting not waiting a little as FTT looks to be building a little momentum and the market appears to have stabilized somewhat as the end of QE doesn't appear imminent.


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## Dmoney

T and ESI puts expired worthless, rolled over the T puts today. Unfortunately I wrote the puts a little early in the day, and the stock ended up losing another 2% after I'd written.
Also didn't roll ESI puts over since the stock was up for the day, and at ~$18 is a little rich for my liking. 
Looking to get another short put position going when I think something up.
Sitting on more than $40,000 cash currently, though I've got short puts that could potentially cost me $86K if BNS or T tank. 

Sold 10 T puts, August strike date, $30 strike price for $0.39


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## james4beach

Yeah many of us are engineers... in this Greenspan & Bernanke world, money games and paper shuffling are rewarded... not R&D/manufacturing ... so it's not a big surprise so many of us work in finance. Often I think about the implications of this (I think it's misallocation of capital and brainpower).

By the way I haven't read the whole thread, but you may want to use XIRR to calculate your internal rate of return. With those cashflows coming in all the time it's very hard to calculate rate of return without using the XIRR spreadsheet formula. This will become important to watch as you do this longer term. You obviously will want to see a rate of return that exceeds what plain old index ETFs would do for you.


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## humble_pie

james4 you. should. read. the. whole. thread. before. launching. sarcasm.

this thread is not about money games & paper shuffling. It's an excellent teaching module for investors who wish to use simple one-sided option sales to push otherwise standstill index returns somewhat higher.

index portfs have not performed particularly well over the past decade. Many well-optioned portfolios have outstripped indexes. The value of this thread, precisely, is that it shows how, in baby steps.

yes, there is big growth in this portf that can be attributed to healthy contribution of bonuses. But equally healthy growth is coming from option sales. At one point upthread Dmoney points out that option sales revenue is outstripping dividend revenue. I'd like to add that it's more favourably taxed, as well each:


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## james4beach

It sounds like the OP is doing great, I was just suggesting the XIRR tool to help better track his returns.

I know the thread isn't about money shuffling. As an aside, I was just observing that current economic/market incentives turn us (engineers & scientists) into paper wealth shufflers, instead of focusing our talents on what we "should" be doing which is designing, creating, and fixing tangible things. The money isn't in R&D... the money is in money. At other times in history the opposite has been true. All this is an aside.


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## Dmoney

james4beach said:


> Yeah many of us are engineers... in this Greenspan & Bernanke world, money games and paper shuffling are rewarded... not R&D/manufacturing ... so it's not a big surprise so many of us work in finance. Often I think about the implications of this (I think it's misallocation of capital and brainpower).


Couldn't agree more. Reminds me of a scene from Margin Call
http://www.youtube.com/watch?v=sIQ-_yOhMXk
Former engineer working in finance talking about how he once built a bridge, and the value that the bridge represented in a real sense (X thousand years saved for the people of so and so small town, by not having to drive around to the next bridge).
That's the new reality.
Don't hate the player, hate the game. 

I personally make my entire living from the financial markets (day job and investments) and can see the huge number of exceptionally smart people that would be more valuable to society elsewhere. But the framework as it exists today rewards good brains exceptionally well in the financial market, so that's where the bright minds go. 



james4beach said:


> By the way I haven't read the whole thread, but you may want to use XIRR to calculate your internal rate of return. With those cashflows coming in all the time it's very hard to calculate rate of return without using the XIRR spreadsheet formula. This will become important to watch as you do this longer term. You obviously will want to see a rate of return that exceeds what plain old index ETFs would do for you.


I would only use XIRR for contributions into the account, not each option sale. This is to get an apples to apples comparison with an ETF or benchmark. Calculation ETF returns, you wouldn't consider each dividend a cash injection, so I'm doing the same for option sales.
My brokerage does the calculation for me on a monthly basis, but I keep pretty meticulous records of every transaction, so it wouldn't be hard to do it myself.
I also usually only add to the account a couple times a year in large lump sums.


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## Dmoney

humble_pie said:


> yes, there is big growth in this portf that can be attributed to healthy contribution of bonuses. But equally healthy growth is coming from option sales. At one point upthread Dmoney points out that option sales revenue is outstripping dividend revenue. I'd like to add that it's more favourably taxed, as well each:


I'm just looking forward to the time when my options+dividend income outstrips my earned income. I think earlier in the thread I may have set a long-term income target, will have to review what it was :hopelessness:
I know I set a series of shorter-term goals ($1,500 income /month average) that will hopefully get me to a much bigger ultimate goal. Like I said, I'd love to replace earned income with investment income, but ideally, my earned income will keep growing, and be a hard target to catch.
My initial starting salary was $60,000/year, so that's something to reach for, but each $10,000 increment is a hurdle.


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## Dmoney

Sold a round of ESI puts on weakness today. 20x$17 September puts for $0.35


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## humble_pie

i like the drillers & am thinking overall that the downturn in the energy sector has been so unbelievably short, surely it cannot be over already. 

in drillers & equipment i have esi plus short calls, precision drilling plus short calls & trican well service only as short puts although i like it best of all. I believe i avoided long trican stock only because its dividend was lower than the others. But it is a well-run & appealing company, i need to refresh knowledge of the dividend.


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## peterk

Amazing! So you are making about 7% annual from those options then, based on your networth? I will certainly have to start looking into how this all works next year. What percentage of your networth is exposed to options, if I may be so bold?


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## Dmoney

Well, I have options on more or less my entire portfolio, but there's no downside to the covered call options (well, technically foregone opportunity could be considered the cost) that isn't already present from long-only ownership of the stock.
The naked puts are what I consider "exposure" to options as I would need to come up with the cash if they are exercised. I currently have:

10 T puts @ $30 ($30,000 cash required)
20 ESI puts @ $17 ($34,000 cash required)
10 BNS puts @ $56 ($56,000 cash required)
Total cash requirement of $120,000 if all are exercised

I've also got $42,000 in cash on hand in my account, and another ~$10,000 in my chequeing/savings, so if all goes to hell, I would be on margin for ~$68,000.
This equates to about 35% of my liquid net worth (excluding any built up home equity), which is pretty much at my maximum threshold as far as margin debt goes (roughly one third). 
For a bit of perspective, if everything I hold crashed by 50%, here's what my net worth would look like:

TFSA: $15,550
ESPP: $4,753
Unregistered (current holdings): $51,660
Unregistered (new holdings): $60,000
Home equity (assuming house prices don't also drop by 50% :upset: $5,791

Margin: ($68,000)

Net worth: ~$70,000 :hopelessness:

Now, that's a market-wide crash, with all my stocks falling 50%, so while the leverage inherent in options exacerbates the drop, without the options my net worth would have dropped to ~$95,000 anyways in that scenario. The incremental risk from my options exposure is not, in my opinion, too significant. An extra $25,000 exposure in a catastrophic market melt-down, or absolute worst case (the whole world goes to zero), I'll owe my broker $68,000 and my net worth will be negative :cower:

Now like I said, I'm at the high range of leverage I'm willing to play with in the 30-40% range, and ideally, at any given time, only a few of my short puts are in-the-money, forcing me to consider rolling down and out (avoid any margin exposure) or allowing the exercise and selling the calls.

The other thing I have to consider is that if the market moves far enough against me, the income from writing covered calls will dry up entirely (see TransAlta... bought it with the hopes of writing calls, no chance of doing that profitably with a $20+ purchase price).


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## peterk

Thanks for the details!


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## Dmoney

Another awesome month in July. Firing on all cylinders, all investment accounts up for the month, some decent savings, and slow and steady debt paydown. 

Overall net worth up 5.4% (+$10,646) to $208,881 (woohoo, past $200K mark)

Assets: 
Cash: $11,781 (+$2,376: mostly savings for the month)
Unregistered: $146,924 (+$4,495, +3.2%) - good month across the board with exception of TLM which was down 
TFSA: $31,888 (+$786 - good gain from XSR, not so much from TA) 
ESPP: $11,207 (+$1,700, +18%) - the usual $500 contribution plus a good month
House: $603,000 - (Acquisition cost)

Liabilities:

Mortgage: $595,920 (-$1,289) 

Great month in July, all investment accounts were up, sold some options, had some options expire worthless. 
Awesome to get past the $200,000 mark this month, looks like I should be able to hit my $235,000 goal by the end of the year. 
Great portfolio income in July, just a couple buck short of $2,000 for the month.
As usual, mostly from options.
Enrolled TA in DRIP, so got 13 extra shares instead of dividend. Not sure if I should just be giving up on the stock at this point, but holding on for now.
Portfolio income picking back up as option income back close to peak level.


----------



## Dmoney

Sold 5 Telus September puts, $30 strike price, for $0.31.
Got a partial fill on an order for 10, wasn't thrilled with it. 
Commissions on these small trades kill me, almost not worth it. 
But still, ~$130 for doing nothing, not a horrible day.
Figure a good chunk of VZ's Canadian entry is priced in, I don't mind $30 as an entry price even if they come to Canada.
Also not expecting any significant news until January spectrum auction.


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## My Own Advisor

Great work!

Seems we have the same investments. Still own TA, taking the cash on this one. I continue to hold Telus.


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## Dmoney

My Own Advisor said:


> Still own TA, taking the cash on this one.


My condolences ... 
Really wish I could have a do-over on that one. 
Telus on the other hand has been great to me. It all evens out in the end.


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## GalacticPineapple

Fascinating thread.

What's the best broker for writing covered calls in registered accounts?


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## Dmoney

I _think_ probably Interactive Brokers, at least in terms of extremely competitive pricing.
A few of the other brokers may have reduced their pricing, but when I was looking into IB was the best.
Unfortunately because of my work I'm stuck with an overpriced useless online broker...


----------



## GoldStone

GalacticPineapple said:


> What's the best broker for writing covered calls in registered accounts?





Dmoney said:


> I _think_ probably Interactive Brokers


IB doesn't offer registered accounts.


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## humble_pie

alas there aren't any good brokers for option strategies in registered accounts.

as dmoney says, they are all overpriced, useless or both.

td is probably the best of the lot, i think scotia might come in 2nd, but really if a person wants to sell calls in registered account he should learn to work an online buy-write by himself, as 2 individual online trades.

i always work the more difficult side first, which would nearly always be the option side. Never sell options against an illiquid stock, though. This is a big danger in canada.


----------



## GalacticPineapple

humble_pie said:


> ... if a person wants to sell calls in registered account he should learn to work an online buy-write by himself, as 2 individual online trades.


Pardon my ignorance (I know nothing about options) - how would you _not_ do it as two trades? I picture buying the stock and then writing the call...


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## humble_pie

often a buy-writer must indeed buy the stock first, before the broker will let him sell the call.

an order can be given - usually to a licensed representative - as a contingent order. As in buy bce, sell bce january 45 call, for a net debit of a particular dollar & cent value.

problems associated with this approach are cost & difficulty of execution if the buy-write is canadian.

cost - trades handled by licensed representatives usually have significantly higher commish. Some brokers are worse than others in charging a base charge twice in a contingent order. TD, on the other hand, will charge the base charge once.

it's true that online platforms such as interactive brokers & think or swim can handle automated option spreads & buy-write orders, with concomitant low online commissions. However, these 2 firms do not offer registered accounts. 

execution - if the trade is canadian, to be carried out on the montreal exchange, there can be difficulties in execution unless the underlying stock is highly liquid & its options market is brisk.


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## GalacticPineapple

@humble_pie: thank you for the thorough response.

OP - say you get into a spot where your naked puts are called and most of your capital gets tied up. Let's also assume that the stocks drop in price enough that you can't write calls on them. What's your move at this point? Do you hold them? Sell some at a loss?


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## humble_pie

GalacticPineapple said:


> ... your naked puts are called and most of your capital gets tied up. Let's also assume that the stocks drop in price enough that you can't write calls on them. What's your move at this point?



puts are never called each:

a counter-party can exercise a long put position ... a short put seller can say his puts were exercised or assigned, so the stock got put to him ...

in general a good option trader will not find himself in these calamitous circumstances, since they did not occur overnight & in fact he would have had plenty of time to make adjustments beforehand.

a novice option trader or an extreme market might result in a situation where stock was not only assigned through put exercise but stock also continued to plunge mercilessly. Usually in such a case the investor's margin will be impacted. In some bad cases margin deterioration can force an immediate sale, at a loss, of the offending stocks.


----------



## peterk

humble_pie said:


> In some bad cases margin deterioration can force an immediate sale, at a loss, of the offending stocks.


This would only be the case if your margin was maxed, and you just couldn't by any other means come up with the cash to cover the shares right? Selling another holding (that isn't plunging) to cover the position would be a fine solution, wouldn't it?


----------



## humble_pie

peterk said:


> This would only be the case if your margin was maxed, and you just couldn't by any other means come up with the cash to cover the shares right? Selling another holding (that isn't plunging) to cover the position would be a fine solution, wouldn't it?



peter u are right, that's why i said "in general a good option trader will not find himself in these calamitous circumstances since they did not occur overnight & in fact he would have had plenty of time to make adjustments beforehand."

this part of the discussion is not even remotely realistic, so let's not continue. A new option trader won't be permitted to sell naked puts, period.

stocks & their derivatives don't normally turn bad overnight with no warning whatsoever. Even in the extreme case of Sino Forest, there was a long warning period during which the media trumpeted noisily that the mysterious corporation did not, in fact, own the timber it was claiming in china. The story was front page news. Anybody crazy enough to stick to sino forest options in the middle of the tumult would have known their interests could go to zero. These are not normal options stories.

i've never had a margin call, but afaik most brokers allow a day or 2 for a margin-called investor to work out the best arrangement he can. Keep in mind that assignment of an option to settlement of the stock is 2 days anyhow. Plus every single short option trader ought to know, like the back of his hand, exactly what assignments might be looming.


----------



## peterk

My post was only to verify if I understood correctly anything that was said (yay), rather than try and offer up any useful comment. All this options talk is still much too complicated for this bitumen barreler.


----------



## Dmoney

GalacticPineapple said:


> @humble_pie: thank you for the thorough response.
> 
> OP - say you get into a spot where your naked puts are called and most of your capital gets tied up. Let's also assume that the stocks drop in price enough that you can't write calls on them. What's your move at this point? Do you hold them? Sell some at a loss?


Depends if my thoughts on the stock have changed. If not, I'll hold until it recovers. Otherwise I'll sell out of the position.
I have enough margin available to more than cover any option assignments, so I would never end up in a situation where I was forced to sell (unless there was a complete meltdown).


----------



## Dmoney

GoldStone said:


> IB doesn't offer registered accounts.


Woops... Didn't read the question properly:stupid:
IB may be best for unregistered... but that wasn't the question.


----------



## Dmoney

August was weak, just barely squeaked by a net worth increase. 

Overall net worth up 0.4% (+$787) to $209,668 

*Assets: *
Cash: $13,140 (+$1,358: spent a little more than usual in August so savings wasn't great, bit too much partying, good times though)
Unregistered: $145,367 (-$1,557, -1.1%) - I think everything was down... except options, which expired worthless, or lost time value
TFSA: $31,806 (-$82 - XSR was up, everything else down) 
ESPP: $11,411 (+$204, +1.8%) - the usual $500 contribution, though stock was down
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $595,056 (-$864)

Market was weak in August, though portfolio income was just slightly shy of $1,800, so was happy on that front. 
Longer term I'm taking the approach that as long as portfolio income is growing, month-to-month value changes are not too concerning.
Of course, with options representing the majority of my portfolio income, big price changes can hurt my monthly income as covered calls may not be profitable at certain levels. 
Need another ~$25,000 in net worth to reach $235,000 target by year-end. Will be a little challenging, but if market shows any strength, and my bonus is in line with usual level, it should be achievable.


----------



## Dmoney

Sold 10 Telus puts on Thursday. $33 strike, $0.30, September expiry. Obviously Telus drops like a rock the next day . Still out of the money but a little closer than I would like. 

Also sold 10 Talisman covered call, $13 strike, $0.35, December expiry.


----------



## My Own Advisor

Always doing puts Dmoney? Not buying and holding Telus or other stocks for dividends?


----------



## Dmoney

I have a very small long position in Telus (40 shares) that I've had for a few years.
Other than that I'm long TLM, FTT, TA, LIQ, BPF.un, KEG.un, XSR and a handful of ETFs.
My strategy for now is to sell short term puts in stocks I'd like to buy, and if exercised, sell covered calls until exercised. The income is great, and over a medium period of time (3-5yrs) I want to see if I outperform the broader market, or a simple buy/hold on the stocks I've been working with.

The other advantage of selling puts rather than buying the stock is that I can make trades that are backed by margin without paying interest.
For example, at the moment I have puts which, if exercised, would require ~$100,000 to settle. I've only got about $45,000 of cash on hand, so the other $55,000 is backed by margin. Except, until actually exercised, the margin isn't being used, so I don't need to pay any interest.


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## Dmoney

Sold a few more puts yesterday.
Sold 10 Telus puts, $34 strike price, October expiry, $0.38 each. After the Verizon scare, had a good opportunity to make a little money, though I would have been substantially better off going long the stock at ~$29. Obviously selling puts is not a great way to make money if you have a strong conviction that a stock will run up (unless you're selling deep in the money puts), but in this instance it wasn't clear whether foreign players were coming to Canada. 

Sold 20 Ensign puts, $17 strike price, January expiry, $0.60 each. This one I've made a bit more money on the short puts than had I held a long position. It's another stock I wouldn't mind owning, but am comfortable writing puts until it drops a little more.

Portfolio is looking good, almost recovered to March highs, a little unhappy that I'm essentially flat for the past 6 months, but that's life. Up a decent amount for the year, so no all is lost.


----------



## Dmoney

Sold 20 TLM October strike covered calls last week (internet's been down for a bit so couldn't post).
Unfortunately I thought it would be a good time to roll my expectations down a little, so sold at $12 strike (initially had bought at $13 through exercise of a naked put). 
Needless to say, TLM is now trading north of $12, so it looks like I may have to realize my first loss. Of course I can kick the can down the road and keep extending the maturity, which I think I may do. I can get $0.15-0.20 per month, so that adds up to $300-400 monthly income, not half bad as long as the stock doesn't run away on me. 
Other alternative is get my stock called away, and start fresh writing puts. My fear here is that if the stock runs up, the $12 puts won't go for much.

Monthly update to come - very strong month, up nearly $10K which is awesome (4.7%), net worth just shy of $220K, $15K away from my year-end target of $235K. 

Looks like I can do it, assuming the market doesn't tank. I need to increase NW by $5K on average each month, I'm currently averaging ~$5,700. Also should have a bonus coming up in November which will hopefully put me over the edge.


----------



## Dmoney

Another trade update - Bought back my TLM calls for $0.70 (sold initially for $0.20) for a loss of $1,400, sold the December $12 strike calls for $1.03.
Net net I essentially sold December puts for $0.53
The stock is trading ~$12.80, so needless to say I would have been much better off not writing the calls, or writing them today (after the 10%+ gain within a week) instead of when I did. 
The December roll forward gives me some time to figure out what I want to do. 
I can continue writing calls and roll it up to $13 if the opportunity presents itself, or I can let it get exercised.
With Telus trading below $34, it might not be so bad. I'd be replacing the dividend income with Telus, and could always turn around and write more puts on TLM.

Monthly update:

Great month in September, option income of nearly $1,700 and dividend income of more than $800. $2,500 total portfolio income, which is my second highest month ever. Market performed well too, making up for a bit of reckless spending once again :hopelessness:


Overall net worth up 4.7% (+$9,772) to $219,440 

*Assets: *
Cash: $12,273 (-$867: bought a new bike for the commute, couple charitable donations, a bit of excessive partying)
Unregistered: $145,367 ($8,370, +5.8%) - Some options expired, sold some more, most stocks up
TFSA: $31,976 (+$170 - nothing special, XSR still doing well) 
ESPP: $12,646 (+$1,235, +11%) - the usual $500 contribution, plus stock was up. Current price is above my average purchase price. Given 100% match, I've more than doubled my money in the ESPP - WOOOHOOO
House: $603,000 - (Acquisition cost)

Liabilities:
Mortgage: $594,188 (-$868)

Best month of dividends so far at $833. FTT and TLM were the big hitters, though if TLM gets called away it will hurt my div income. 
Total portfolio income of $2,502, pretty sweet number, though $1,500 is likely a more realistic average.


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## Dmoney

BNS and T options expired last week, a little slow with the update.
Sold 10 BNS $60 strike, January 2014 puts for $0.95.
Telus ran away from me a little, trading at ~$37, a little rich for my liking.


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## Dmoney

Monthly update:

Another great month in October. Option income wasn't quite as strong, only $1,100 as Talisman and Telus both got a little carried away to the upside. Dividend income was 333. Big market performance this month, up 3.9% in unregistered account. 


Overall net worth up 4.3% (+$9,499) to $228,939 

*Assets: *
Cash: $14,418 (+$2,145: decent month of savings)
Unregistered: $159,745 ($6,008, +3.9%)
TFSA: $31,941 (-$40 - nothing special) 
ESPP: $13,151 (+$506, +4%) - the usual $500 contribution
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $593,317 (-$874)

Another great month, only need $6,000 more to reach my year-end goal of $235,000. Looking good, with bonus coming up in November (hopefully) it shouldn't be too hard to reach.


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## GalacticPineapple

Dmoney said:


> Sold 10 BNS $60 strike, January 2014 puts for $0.95.


Would be interested in hearing how you choose your short puts.


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## Dmoney

No real hard and fast rule, but I generally write the puts on stocks that I wouldn't mind owning at the strike price.
I aim for 10%+ annualized return based on the premium, but like to get substantially more if the underlying is riskier.
I also try not to chase stocks higher with the puts that I write, so if I look at a stock and say I like it at $60, I try and avoid chasing it upwards.
For example, I've been selling puts on Telus off and on, but if it's overvalued in my opinion, I stop selling. 
Unfortunately in the case of Telus, I would have been much better off buying the stock at $29 when it looked like Verizon was coming in. It's now over $37, far more than the upside I realized from selling puts.

But that's life, and my strategy will never be perfect, and is still very much in the early/trial stages. 

Overall strategy is sell puts until I get assigned at a price that I like, then sell calls until I get stock called away at price that I like. Some bumps along the way, but hopefully over time it pays off.


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## james4beach

I'm still concerned about your personal leverage. Institutional investors gamble like this too, but the difference is that (unlike you) they don't put their own money, nor their homes on the line.

Obviously I'm oversimplifying here as I don't know the equity composition of your investment accounts, but I strongly suggest you model your risk carefully so that you can input 'what if' scenarios of index declines, and see the worst case effect on your portfolio.

Assuming your investments are 100% exposed to the stock index, I calculate that -29% drop in the market and your home would wipe you out and destroy your life. These are feasible numbers for actual declines, in fact 29% decline for both is more optimistic than what actually happened in the USA.



Code:


	Current   Stress test:
                  -29% decline

cash	$14,418        $14,418
stocks	$204,837      $145,434
house	$603,000      $428,130
		
debt	-$593,317    -$593,317

Net	$228,938       -$5,335

In the 2007-2009 period, the stock index fell -54%. American home prices fell 35%. Some other countries saw worse declines; home prices in Spain and Ireland fell more like 50%.

At the very least, I think you should build an accurate stress test model using American declines from recent history (stocks -54%, homes -35%). I would _hate_ to see someone with nearly a quarter million$ in net worth, have it all wiped out due to excessive leverage.


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## Dmoney

Have to agree with you James. Leverage is extremely high, though my only concern is with the house.
My investment account is pretty well positioned, though a 50% decline across the board would force some assignments and leave me exposed to some margin requirements (nothing excessive, but still concerning). 

Despite the significant leverage on the house (mortgage $400K, HELOC $200K), I'm not overly concerned about this debt, as even in the event of a housing crash, as long as I maintain my employment, it is well affordable. Because the cost of debt is so low (just re-fi'd at 2.3%, HELOC at 3%) I have not put much effort into paying down house, and in fact have maxed out leverage on it. However, if it came down to it, in a pinch I could put about $200K down in one shot and $50-60K/year just from savings.

My much bigger overall concern is job security, of which there is very little relatively speaking. If I were to lose my job, payments would be close to covered by portfolio income, and I could cover the rest with any sort of entry level job (<$45K/year). If I were to lose my job at the same time as the market tanks, I would be in a rough position. No doubt the worst case scenario could wipe me out, and as such my focus is to plow all my savings into my investment account, reduce leverage in that account and maximize income from investments so as to counteract the impact of any income loss. 

Overall, my approach is to take a bit more risk while young, to hopefully position myself well financially by ~30 yrs of age. Ideally, by 30 I will have either the house close to paid off, or the capacity to do it with a substantial investment portfolio. 

Appreciate the concern, and the risk is definitely lingering in my mind.


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## james4beach

Dmoney, glad to see you are considering these factors


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## Dmoney

Couple other factors that give me a bit of comfort... girlfriend contributes more than a quarter of total monthly housing costs (mortgage+LoC+tax+utilities+maintenance+misc.= <$3,000) and if needed, I could easily rent out the basement, which was originally the intention. All plumbing etc. is present for a rental suite, would need about $5,000 investment to make $800-1,000 monthly rent.

So worst case I still think I scrape by intact and wait for a recovery.


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## techcrium

Dmoney, you are doing very well. I thought I was doing well with just under 100k at 26 but you've blown me away.

Can I ask, with your quarter mil networth, how much was principle and how much was gain?

Also, what is your income if I may ask such that you are able to afford a 600K home? It must be in the high five figures for both you and your gf?


----------



## Causalien

Dmoney said:


> Couple other factors that give me a bit of comfort... girlfriend contributes more than a quarter of total monthly housing costs (mortgage+LoC+tax+utilities+maintenance+misc.= <$3,000) and if needed, I could easily rent out the basement, which was originally the intention. All plumbing etc. is present for a rental suite, would need about $5,000 investment to make $800-1,000 monthly rent.
> 
> So worst case I still think I scrape by intact and wait for a recovery.


Just want to point out that it takes time as well. 

In my experience and on average, for any new venture targeting about $2000 per month income, it takes 6 months to build. So for a $800~$1000, I'd factor in 3 months of time. Just a rule of thumb used for estimation.


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## Dmoney

techcrium said:


> Can I ask, with your quarter mil networth, how much was principle and how much was gain?
> 
> Also, what is your income if I may ask such that you are able to afford a 600K home? It must be in the high five figures for both you and your gf?


I'm not actually sure how much was gain vs. savings. I would have to take a pretty detailed look at all transactions completed over the past three or four years to get a perfect picture.

Looking at what's easily available in my excel file:
~$31,000 from option writing (net - reflects impact of any options I've had to buy back)
~$10,000 from dividends (net - income offset by any margin interest)
~$7,500 capital gains (this one not positive on - didn't look through all transactions)

That's only about $50K which leaves $180K - I think there must be some transactions that I'm not accounting for.

My current income is $125-135K, girlfriend makes ~$45K (I think)
We keep finances mostly separate, with the exception of ~$800/month for rent/expenses that she forks over.
House was bought on just my salary... shows you how willing banks are to lend.


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## Dmoney

Causalien said:


> Just want to point out that it takes time as well.
> 
> In my experience and on average, for any new venture targeting about $2000 per month income, it takes 6 months to build. So for a $800~$1000, I'd factor in 3 months of time. Just a rule of thumb used for estimation.


Definitely would figure it would take a few months to get it all set up. Not to mention that it would take a lot out of me to give up my man cave.


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## Dmoney

Monthly update:

Three great months in a row!!!! Net worth at $246K, beat my year-end goal of $235K. Up $17K this month as I received my bonus which was a little higher than I had been expecting. +7.5% for the month.


Overall net worth up 7.5% (+$17,229) to $246,168 

*Assets: *
Cash: $6,500 (-$7,900: put nearly full cash balance on mortgage)
Unregistered: $160,000 (+$275, +0.2%: some ups some downs)
TFSA: $31,500 (-$426 - XSR and LIQ down a little) 
ESPP: $12,600 (-$576, -4.4%) - the usual $500 contribution but stock down quite a bit
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $567,400 (-$25,875 - had a lot of cash from savings and bonus over the last little while. Decided to pay down a lump sum as I don't have any brilliant investing ideas and I have a lot of cash already sitting idle in brokerage account)

Awesome month, thanks to bonus, but otherwise mostly forgettable. Passed my year-end NW goal of $235K which is awesome, though didn't get any help from the markets. Awful month of divs ($142) due to timing, saved by option income of $1,700+. 

Some of my options positions are in the money in December, so I will need to decide what to do (TLM covered calls). I can probably roll the TLM calls down the road, which may be most profitable, or I can allow exercise and sell the puts. Trading at $12.43 and calls are at $12 and $13, so I may yet dodge that bullet. Will probably stay the course for now but monitoring closely.


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## peterk

Wow that's awesome! In the future when I get into options I'm going to have to read over your posts very carefully.


Dmoney said:


> Monthly update:
> House: $603,000 - (Acquisition cost)
> 
> *Liabilities:*
> Mortgage: $567,400 (-$25,875 - had a lot of cash from savings and bonus over the last little while. Decided to pay down a lump sum as I don't have any brilliant investing ideas


Maybe it was explained in an earlier post, but I'm confused by this. It sounds like your mortgages was $593,000 just before the lump sum payment. Did you only have <10k down on a 600k house?? Am I misinterpreting this?


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## My Own Advisor

"Awesome month, thanks to bonus, but otherwise mostly forgettable. Passed my year-end NW goal of $235K which is awesome, though didn't get any help from the markets."

You're doing great to have NW >$200k for a young professional. You're well on your way to financial freedom, especially if you keep up that rate.


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## Dmoney

peterk said:


> Maybe it was explained in an earlier post, but I'm confused by this. It sounds like your mortgages was $593,000 just before the lump sum payment. Did you only have <10k down on a 600k house?? Am I misinterpreting this?


Essentially 0 down :hopelessness:
Was able to use savings/investments as collateral on a line of credit ($200K) which was counted as a downpayment with the balance on a mortgage.
Figured that I was able to do much better investing the downpayment than the 2.1-2.3% interest rate on my mortgage.
So far, so good, but I want to lower risk over time as well, so paying it down a little faster now.


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## Dmoney

My Own Advisor said:


> You're doing great to have NW >$200k for a young professional. You're well on your way to financial freedom, especially if you keep up that rate.


Thanks. Got to keep the rate while I still have the energy to make money, and have very few expenses.


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## techcrium

Dmoney said:


> Essentially 0 down :hopelessness:
> Was able to use savings/investments as collateral on a line of credit ($200K) which was counted as a downpayment with the balance on a mortgage.
> Figured that I was able to do much better investing the downpayment than the 2.1-2.3% interest rate on my mortgage.
> So far, so good, but I want to lower risk over time as well, so paying it down a little faster now.



DMoney, correct me if I am wrong but

You have a 200K line of credit against your stocks/etfs which probably has interest of 2-3%.

And then you are using that 200K to secure another 400K loan (600K house) which probably has interest of 2.1-2.3%

So your total interest is 4-5% right?


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## Dmoney

$200K @ 3.5%
$400K @ 2.3%

Total all-in cost of debt ~3% roughly on ~$600K

The $200K is secured by equity, so the interest rate doesn't stack on that. 

The one thing I have to explore is if I can deduct the interest on the LoC. Is it an investment loan? If it's backed by an investment portfolio, would it be considered borrowing to invest?
Could save an extra few thousand a year.


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## Dmoney

A few trades to ring in the new year:

Few options expired in the money so I had 2000 FTT called at $25 ($25 purchase price) and 2000 TLM called at $12 ($13 purchase price).

FTT is currently trading at $27.00 - so I gave up $4,000 of profit while holding the stock. However, looking back at all my option income ($6,800) it turns out that the call/put writing came out ahead.
For TLM, I bought at $13 and sold at $12, for a $2000 loss. Total income from TLM put/call writing has been $8,500 to date, though that is on 3,000 shares, of which I still have 1,000.

Overall on these two positions, I seem to have come out slightly ahead of a straight buy/hold approach, but it's still a short timeframe.

Today I sold 20 TLM puts ($12 strike) for $0.35
10 TLM covered call ($13 strike) for $0.40
20 FTT puts ($26 strike) for $0.65
All March strike dates.

Next update to come in 2014. Happy New Year!


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## Canadian

Dmoney said:


> The one thing I have to explore is if I can deduct the interest on the LoC. Is it an investment loan? If it's backed by an investment portfolio, would it be considered borrowing to invest?
> Could save an extra few thousand a year.


If all your stocks pay dividends then you can deduct the interest charged on funds used to purchase the stocks [direct use]. If only some do then it gets a bit trickier because the question comes down to what stocks were purchased for dividend income vs what stocks were purchased for the purpose of capital appreciation - only the former can have interest deducted against the income produced.


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## Dmoney

Monthly update:

Another good month, net worth at $257K, up nearly $11K or 4.4% to wrap up the year.


Overall net worth up 4.4% (+$10,739) to $256,907 

*Assets: *
Cash: $9,800 (+$3,700)
Unregistered: $163,724 (+$3,703, +2.3%, good month for dividends and closed some options positions)
TFSA: $31,749 (+$235 - XSR back up a bit) 
ESPP: $15,029 (+$2,454, +19.5%) - Company stock up a good bit, plus the usual $500 contribution
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $566,411 (-$1,030)

New record month for dividends ($1,014) and overall portfolio income was pretty strong ($2,365). Dividends won't be repeating as FTT and TLM contributed over $500 this month and both have been sold.

Total annual dividend income was $5,540 in 2013, option income was $15,930. Total portfolio income was just shy of $21,500.
Nice uptrend in overall portfolio income as time goes on, hopefully I can keep that going. 
After TLM and FTT shares got called, I have a substantial cash balance, and dividends will be taking a hit. Over time I think I want to increase dividend income, which may mean allocating part of the portfolio to buy/hold rather than the covered call strategy.
Will wait and see as thus far the options have been working out really well for me.


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## nobleea

Canadian said:


> If all your stocks pay dividends then you can deduct the interest charged on funds used to purchase the stocks [direct use]. If only some do then it gets a bit trickier because the question comes down to what stocks were purchased for dividend income vs what stocks were purchased for the purpose of capital appreciation - only the former can have interest deducted against the income produced.


Not true. There is only the requirement that the stock COULD pay dividends in the future. They don't have to pay it now. So unless the stock structure is set up that it forbids dividend payments, then any stock is eligible.


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## Canadian

If the stock does not pay dividends then there is no property income from which the interest can be deducted.


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## Dmoney

Sold 10 puts on CPG - $40 strike price, February expiry - $0.75 premium
Will likely have BNS January puts expire worthless and ESI is likely to be exercised (20x$17 puts) for $34K.
I have a little over $120K cash in my brokerage account so I'm okay turning risk up a little bit.


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## nobleea

Canadian said:


> If the stock does not pay dividends then there is no property income from which the interest can be deducted.


The interest is deducted from his normal income. Dividends are not required.

However, it sounds like the loans were taken in the wrong order to be deductible.
As I understand it, the stocks were purchased with cash, then a LOC was taken against the stocks and used as a downpayment on a home. Since the purpose of the LOC was the purchase of a home, and not stocks, then the interest is not tax deductible. For it to be deductible, the proper course would have been to sell all the stocks, use the cash as downpayment on the home, then take out a LOC against the home equity and reinvest in stocks.


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## Dmoney

nobleea said:


> The interest is deducted from his normal income. Dividends are not required.
> 
> However, it sounds like the loans were taken in the wrong order to be deductible.
> As I understand it, the stocks were purchased with cash, then a LOC was taken against the stocks and used as a downpayment on a home. Since the purpose of the LOC was the purchase of a home, and not stocks, then the interest is not tax deductible. For it to be deductible, the proper course would have been to sell all the stocks, use the cash as downpayment on the home, then take out a LOC against the home equity and reinvest in stocks.


I think you're right, and I screwed up on the order. Had the stocks been purchased w/ proceeds of LOC it would for sure be tax deductible, but because the stocks were already owned I don't think it is. 
I wonder if at this point I can repay LOC w/ cash on hand and then withdraw again to brokerage account to get tax benefit?
Would save about $3K/year if I can figure out a way to deduct it, so worth it if it can be done.


----------



## Canadian

nobleea said:


> The interest is deducted from his normal income. Dividends are not required.


Can you be more specific about "normal income?" Interest cannot be deducted from employment income. Putting aside the fact that the loans were taken in the wrong order, interest is only deductible against the specific business or property income that was earned by taking on the debt. To do this any other way violates the direct use principle and will be disallowed by CRA upon being audited. The following is an excerpt from http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/221/menu-eng.html:



> most interest you pay on money you borrow for investment purposes, but generally only if you use it to try to earn investment income, including interest and dividends. However, if the only earnings your investment can produce are capital gains, you cannot claim the interest you paid.


Anyway, I don't want to take over Dmoney's thread about this topic. I am happy to discuss any tax matters somewhere else.


----------



## Canadian

Dmoney said:


> I wonder if at this point I can repay LOC w/ cash on hand and then withdraw again to brokerage account to get tax benefit?
> Would save about $3K/year if I can figure out a way to deduct it, so worth it if it can be done.


You can do that on a go-forward basis. I.e., you can start doing that to have the 2014 deduction, but from the sounds of it, you won't have the 2013 deduction. If you use your LOC to buy income earning stocks then I suggest you keep track of the stocks (#, etc.) purchased with LOC funds and the income earned from those stocks. Interest will be deductible from only that income.

Careful of the interest rate though. You don't want the interest to exceed the income from the equities, otherwise there is little point in doing this.


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## nobleea

Canadian said:


> Can you be more specific about "normal income?" Interest cannot be deducted from employment income. Putting aside the fact that the loans were taken in the wrong order, interest is only deductible against the specific business or property income that was earned by taking on the debt. To do this any other way violates the direct use principle and will be disallowed by CRA upon being audited. The following is an excerpt from http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/221/menu-eng.html:


Yes, you can deduct it against normal employment income. You enter it on line 221 of your tax return. Using a HELOC on your personal home is a good example, as this is not a business or property that creates income. But the deduction of the interest is the main basis for the Smith Maneuver. 
You may read more here:
http://canadianmoneyforum.com/showthread.php/14-How-Investment-Taxes-Work


----------



## Canadian

The link you have provided confirms my statements. The following are excerpts from *Key Tax Considerations on an Investment Loan*:



> Although CRA only expects income from your investment portfolio, in 2003, the finance department declared that in order for investment loans to remain deductible, the interest/dividends must produce a profit. That is, the dividends must EXCEED the interest that you are paying on the loan.





> Once you use a loan/line of credit to invest, do NOT withdraw from it unless it is from dividends/interest that the investment produces.


Very few things can be *deducted* from employment income. If you don't believe that I suggest you contact the CRA inquiries department before filing your 2013 return if you plan on trying to do this. It will save you the hassle upon an audit. I am done with the back and forth on this topic. I apologize to Dmoney for derailing his thread. I am happy to continue a tax discussion in another thread.


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## Dmoney

Monthly update:

Decent month, net worth at $259K, up $2,100 or 0.8% for the month.

*Assets: *
Cash: $10,700 (+$875)
Unregistered: $162,900 (-$800, -0.5%, bit of a rough month for a few stocks)
TFSA: $32,574 (+$600 - XSR got hit pretty hard, but rest of my positions were up - another 13 shares from TransAlta DRIP, at 639 now - 39 total from DRIP) 
ESPP: $15,270 (+$250, +1.7%) - Company stock down a little, the usual $500 contribution
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $565,200 (-$1,190, putting down an extra $250/payment for lack of anything better to do with it)


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## Dmoney

Monthly update:

Another great month, net worth at $269K, up $10,000 or 3.9% for the month.

*Assets: *
Cash: $14,600 (+$3,900)
Unregistered: $166,200 (+$3,300, +2.0%, had some good gains, specifically, Ensign was up decently, Finning up strong)
TFSA: $30,700 (-$1,700 -5.2%, Brutal month for LIQ and TA - good old government intervention in liquor laws and dividend cut from TA) 
ESPP: $18,600 (+$3,300, +21.7%) - Run up in company stock + the usual $500 contribution
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $564,000 (-$1,190, putting down an extra $250/payment for lack of anything better to do with it)

Good gains across most accounts. Weak results from TFSA due to LIQ and TA dropping like rocks, but them's the breaks. 
Cash balance increased - good month for savings - got some money back for work expenses I had paid out of pocket, also got some cash back from insurance claims. 

Portfolio income for the month was decent - $1,200 from writing options (could have been higher, I was pretty inactive for the last month as work was very busy - I can write calls on CPG which I was assigned recently, can also write calls on ESI which has risen above my purchase price), $210 dividend income


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## Dmoney

Monthly update:

Just barely had a positive net worth increase in March. Total net worth $270,500 up 0.6% from $269,000. 


*Assets: *
Cash: $15,700 (+$1,000)
Unregistered: $165,400 (-$800, -0.5%, not a great month, some names down)
TFSA: $29,900 (-$800, -2.6%, another bad month in the TFSA, mostly KEG.un this time around) 
ESPP: $19,400 (+$850, +4.6%) - the usual $500 contribution, slight increase in company stock
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $562,800 (-$1,200, putting down an extra $250/payment for lack of anything better to do with it)

Decent dividend income of $644, though below usual amount as FTT and TLM were called away.
Options income even worse at just $580 - been very inactive in selling options as stock prices are all moving in the wrong direction.
Will likely try and be a bit more active in April.


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## Dmoney

Back on the option writing wagon.
Sold 20 September FTT puts on Thursday for $0.85. Strike price $27.00.
Have a number of positions at decent prices for writing covered calls, so may be a little more active in the next couple of weeks.
CPG trading near $42 (bought at $40), but options premiums aren't great.
TLM I can sell $13 strike calls, decent premiums.

Looking for some more opportunity to sell naked puts, but market's looking pricey


----------



## Dmoney

*Net worth $282,100 (+11,500, +4.3%)*

Great month in April, despite a bit of a tax bill... I had expected a refund given the structure of my bonus at work, but no such luck. 
Big contributions from Employee stock purchase plan, and CPG and ESI in my unregistered account.

*Assets:*
Cash: $14,800 (-$865, ended up owing about $3,500 in tax which I paid during month)
Unregistered: $172,850 (+$7,400, +4.5%, great month, made about $4K on CPG, rest on ESI and a couple other names)
TFSA: $30,100 (+$200, +0.6%, pretty much flat) 
ESPP: $23,000 (+$3,560, +18.3%) - the usual $500 contribution, big jump in company stock
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $561,600 (-$1,200, putting down an extra $250/payment for lack of anything better to do with it)

Decent dividend income of $501, CPG's monthly dividend is at $230 which is a nice boost. TA dividend cut hit this quarter, so less income there. Still DRIPing TA, have to decide if I want to dump it or not. Don't see it going much lower at this point, but it's definitely been the dog of my portfolio to date.
Not much income from options during the month, sold FTT puts for $1,656 during the month, but will be holding til maturity in September.


----------



## humble_pie

wondering why the tfsa is so low, if i may ask.

did u withdraw to help buy the house?
but if so, why not contribute the WD amount back in, as soon as possible.

oh dear, perhaps it was ouch ouch going down.


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## Dmoney

Haven't put in the 2014 TFSA contribution, so have $5,500 of room, but also bought TA and LIQ, which have both tanked on me.
Will contribute the 2014 amount when I have an idea of something to buy.

Also need to consider an RRSP sometime soon. Annual employment income is around $130K, and I should have ~$70k of room built up now.
Would mean a huge refund if I decide to transfer some $$$ from unregistered to registered.

I'm not completely sold on merits of RRSP though. Does tax free growth for 40 years + taxable growth on the refundable amount outweigh the benefit of dividend/capital gains treatment if invested outside of the RRSP?

Hoping to be in highest bracket for pretty much all of my career, and retirement, so have to take a good hard look at the numbers.

Any high earners with high expectations of retirement income have any input?


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## HaroldCrump

Dmoney, I think an RRSP makes a lot of sense for you.
And it is not just for the tax refund - the tax refund is immaterial in the long run.
It is the sheltering from dividend and capital gains taxes.
Dividend taxes can be quite punitive at high income levels.

The only downside of an RRSP if you start moving part of your non reg. account is that you might lose the ability to implement certain option strategies against your portfolio.
Inside RRSP, all you are allowed to do are covered calls.
But since it seems you do a lot of covered calls, perhaps it won't be a big downside.

The other thing you can do is start up a new RRSP account in 2014 with fresh contributions.
Don't move your non reg. inside an RRSP.
Just put new contributions.


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## humble_pie

HaroldCrump said:


> Dmoney, I think an RRSP makes a lot of sense for you ... It is the sheltering from dividend and capital gains taxes. Dividend taxes can be quite punitive at high income levels.resh contributions


3 suggestions, though.

1) he's still far from any "punitive" AMT tax triggered by high dividend income;

2) tax benefits from dividend & capital gains income are lost forever when securities offering these are locked inside rrsp;

3) in the end, 100% of the principal of the rrsp will be taxed as straight income when finally withdrawn from the rrsp or the replacement rrif.

for decades, american actuaries have questioned whether IRA Roth accounts really benefit US taxpayers all that much. 

taxpayers are going to build up important non-registered wealth over their lifetimes, they argue. Taxpayers are going to inherit substantial blocks of money, they add. In some cases employers' pension income will be equal to salary at the time of retirement, they suggest. So why bother with the registered retirement account?

here in canada, one reads that expert opinion is divided as to whether an RRSP or a TFSA most benefits those who are positive they are going to retire rich.

but most people cannot be positive. At the age of 30, modest or average salary, young family w small kids, high mortgage to deal with, no guarantee that they'll be filthy rich at age 71, a working taxpayer is probably going to opt for RRSP.

in dmoney's specific case, though, me i would go for the TFSA first. I'd take careful warning from the loss history. I'd stick to conservative investments. Dmoney is young enough that mere compounding over his lifetime will favour a TFSA excellently well, no need with one so young to take extra risks with potential big gainers/losers. Those i'd keep for the non-registered account.


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## peterk

Generally it seems that RRSP is better. The only situation where the unregistered is slightly better is when your investment pays practically no dividend (paying dividend taxes on several % of your portfolio each year really kills your gains over the long haul) and you have to hold most of your portfolio for decades, selling very little to keep the capital gains tax low.

I have made a crude spreadsheet that compares these returns (also the TFSA) but I don't know how to upload it here. Can someone show me?


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## humble_pie

peterk said:


> Generally it seems that RRSP is better.


a spreadsheet would have to include 20 years from age 71-91 where a $1M or higher RRSP-into-RRIF will be 100% taxed on the mandatory withdrawals plus taxpayer will also have large pension plus large investment income from different types of non-registered investments ... there's no way it can be said that "generally" an RRSP is better ...

afaik there's no definitive answer on the RRSP vs TFSA issue


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## HaroldCrump

humble_pie said:


> 1) he's still far from any "punitive" AMT tax triggered by high dividend income;


I didn't mean the AMT.
I meant the tax on eligible dividends.
I believe in Ontario dividend taxes are approx. 33% i.e. 1/3rd.

There was also a recent tweak in the taxation of dividends, which reduced the dividend taxes for lower income earners, and raised it for higher income earners.

My point is that at higher income levels, dividend tax credits are not as attractive as at lower levels.
Also, the bang-for-buck for RRSP contributions gets better at higher income levels.



> 2) tax benefits from dividend & capital gains income are lost forever when securities offering these are locked inside rrsp;


True, but no taxes due is better than the dividend tax credit, no?



> 3) in the end, 100% of the principal of the rrsp will be taxed as straight income when finally withdrawn from the rrsp or the replacement rrif.


Sure, but at what tax rate?
I believe most people over-estimate the income they will have in retirement.
Between now and ~ 30 years hence, there will be ample opportunities to re-arrange one's affairs to minimize (or perhaps even eliminate) income taxation from RRSP withdrawals.

RRSP meltdown strategies can be put into place.
An advanced DIY investor like Dmoney can easily set up RRSP meltdown strategies without the help of an advisor.

The RRSP can be converted into a RRIF long before 71.
If the RRSP is large enough, only the annual returns can be withdrawn as income, leaving the bulk of the capital inside the RRIF as estate.

If that income does turn out to be substantial (a good problem to have), it can be offset by an equal amount of leveraged non reg. investing _at that time_.

There are many possibilities....



> for decades, american actuaries have questioned whether IRA Roth accounts really benefit US taxpayers all that much.


Aren't withdrawals from Roth IRAs tax-free?
Or did you mean 401(k)?


----------



## humble_pie

> I believe most people over-estimate the income they will have in retirement.


but we're speaking to one who sincerely believes he'll have a high retirement income! do u think dmoney is over-estimating?




> Between now and ~ 30 years hence, there will be ample opportunities to re-arrange one's affairs to minimize (or perhaps even eliminate) income taxation from RRSP withdrawals


wonderful! tell on, i'm all ears. Actually i don't know of any strategies to eliminate income taxation from RRSP withdrawals, i only know of tricky-sounding theoretical suggestions each:




> RRSP meltdown strategies can be put into place. An advanced DIY investor like Dmoney can easily set up RRSP meltdown strategies without the help of an advis


i only know of one meltdown strategy & i've always failed to see its beauty. Yea taxpayer takes out a deductible loan that equals the RRSP/RRIF withdrawal amount, thereby more or less offsetting its taxable income component.

but bingo, our taxpayer is taking on a a boatload of taxable extra income from the extra investments made possible by that loan.

problem is, it was a big loan in our hypothetical case. This is the taxpayer with the $1 million RRSP, remember.

there are some creative possibilities but they are perhaps not suitable for this forum. Give most $$ to the poor, like saint Francis, keeping only enough to retire to cultivate an olive orchard in Tuscany. Or give most $$ to the poor, weave a personal loincloth & retire to a himalayan monastery.

Eleanor of aquitaine, twice a queen, got farthest by endowing an abbey in her name at fontevrault. A thousand years on, they still make movies about her. Movies about herself as a queen, as a musician, as a poet, as a teacher of young women in an era of illiteracy. They don't make any movies about her money.


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## HaroldCrump

humble_pie said:


> do u think dmoney is over-estimating?


Possibly.
By the time Dmoney reaches retirement age, OAS benefits may not be as generous.
He may also want to retire early, thereby reducing his future CPP income.
Income from DIY investing (inside or outside RRSP) can be "managed" (at least before you reach RRIF mandatory withdrawals at 71).

My point is that avoiding RRSP accounts 30 years in advance, with the fear of having too much income in retirement, is too much speculation with too many unknowns.
As you yourself said above, a lot can happen in 30 years - kids, mortgages, market corrections, changes in tax rates, and so on.
Having part of your portfolio tucked away inside the RRSP shelter for 30 years is not a bad idea.

Why give up so much potential tax sheltering with the fear that maybe, somehow, what-if, could-be, you might have large retirement income in 30 years.
Deal with it if/when that happens.

As the lovely Scarlett O'Hara used to say : _I'll think about that tomorrow_.



> wonderful! tell on, i'm all ears. Actually i don't know of any strategies to eliminate income taxation from RRSP withdrawals, i only know of tricky-sounding theoretical suggestions


No complex, fancy strategies necessary.
Leveraged investing is one way.
The other way is to retire a few years early and withdraw only enough income from RRSP as needed, keeping the bulk of the capital inside.
Mandatory withdrawals are not that bad in the early years.
I don't have the table here right now, but it's only after age 80 or so that the mandatory withdrawals start escalating at a rapid rate.

If, at 80, one finds oneself with a multi-million $$ in RRIF, oh well, there will be plenty of time to fantasize about all the fun you could have had in your younger days, while lounging on the deck at the seniors' home.
It's not a bad problem to have.

Anyhow, if one is in one's early/mid-50s and realizes he/she is going to have the problem of a large RRSP at retirement, the solution is simple - _stop working_
Stop putting more capital into the RRSP, and start living off it.


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## Dmoney

HaroldCrump said:


> Why give up so much potential tax sheltering with the fear that maybe, somehow, what-if, could-be, you might have large retirement income in 30 years.
> Deal with it if/when that happens.


This to me is the big reason I would lean towards an RRSP. 
Sure, if all goes as planned, and I progress in my career as I hope, and the markets perform as they have the past 200 years, I'll have significant investment income, and the RRSP may not be the best investment. But like you've said, it's a good problem to have.

I would be interested in a good comparison between RRSP and unregistered (I do think that TFSA is the best vehicle in my situation) for someone in the top tax bracket throughout an entire 40 year career and 20+ year retirement, but I wonder if there are just too many variables for accurate comparison.


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## Dmoney

humble_pie said:


> 3 suggestions, though.
> 
> 1) he's still far from any "punitive" AMT tax triggered by high dividend income;
> 
> 2) tax benefits from dividend & capital gains income are lost forever when securities offering these are locked inside rrsp;
> 
> 3) in the end, 100% of the principal of the rrsp will be taxed as straight income when finally withdrawn from the rrsp or the replacement rrif.
> 
> for decades, american actuaries have questioned whether IRA Roth accounts really benefit US taxpayers all that much.
> 
> taxpayers are going to build up important non-registered wealth over their lifetimes, they argue. Taxpayers are going to inherit substantial blocks of money, they add. In some cases employers' pension income will be equal to salary at the time of retirement, they suggest. So why bother with the registered retirement account?
> 
> here in canada, one reads that expert opinion is divided as to whether an RRSP or a TFSA most benefits those who are positive they are going to retire rich.
> 
> but most people cannot be positive. At the age of 30, modest or average salary, young family w small kids, high mortgage to deal with, no guarantee that they'll be filthy rich at age 71, a working taxpayer is probably going to opt for RRSP.
> 
> in dmoney's specific case, though, me i would go for the TFSA first. I'd take careful warning from the loss history. I'd stick to conservative investments. Dmoney is young enough that mere compounding over his lifetime will favour a TFSA excellently well, no need with one so young to take extra risks with potential big gainers/losers. Those i'd keep for the non-registered account.


Agree on the TFSA for the reasons you've mentioned. 
As for RRSP vs. unregistered, I'm most concerned about 2) and 3) on your list. 
Does the tax deferral on divs/capital gains over the course of 40 years (assuming retire at 65 - again too many assumptions as I could see myself retiring well before then if fed up with work or sitting on a comfortable stash) outweigh the punitive taxation on withdrawals?

I do intend to max out TFSA each year, and I've tried to take a less risky approach (didn't think TransAlta could blow up as spectacularly as that, and who knew Liquor stores would ever perform poorly - thanks BC liberals), but may lean towards broad-based ETFs until it gets sizeable enough to diversify properly in individual securities. 

Thanks for all the input, and I welcome any more.


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## Dmoney

HaroldCrump said:


> The only downside of an RRSP if you start moving part of your non reg. account is that you might lose the ability to implement certain option strategies against your portfolio.
> Inside RRSP, all you are allowed to do are covered calls.
> But since it seems you do a lot of covered calls, perhaps it won't be a big downside.


This may be biggest downside to RRSP in my view. 
I have found that writing naked puts backed by my margin limits is a great money-making (and high risk) strategy for me, and I couldn't do that in an RRSP. 
However, a more passive approach to an RRSP could be another option with a couch-potato style of investing. 
Like you said, I could just put new money into the RRSP and keep the option-writing account intact.


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## humble_pie

Dmoney said:


> [re RRSP] Does the tax deferral on divs/capital gains over the course of 40 years (assuming retire at 65 - again too many assumptions as I could see myself retiring well before then if fed up with work or sitting on a comfortable stash) outweigh the punitive taxation on withdrawals?



idk, this is a heavy question, one needs an actuarial approach & stupendous maths i think to come up with any kind of answer.

one also has to compute the tax savings from a hypothetical RRSP contribution each year, then carry that notional amount forward for 40 years, compounding & adding a new notional rrsp contribution amount each & every year ... the mind boggles (after all, what exactly is one's salary plus bonus going to be in 20 years, so how to compute the notional contribution is a logarithm in itself.)

i'm only acquainted with 2 canadian families that ended up with large rrsps - at least $3M for each couple since the wife worked as well. As things happily turned out, they succeeded financially & did not need the rrsps at retirement. However the mandatory withdrawals would be taxed at 100% when the time came.

they both differed from yourself in that, at ages 30-35, they had absolutely no clue that they might eventually be wealthy at retirement age.

aged 30-35 some 40 years ago, both were earning relatively low pay but doing work they loved, both had young children plus a mortgage on a newly purchased house. Saving in an rrsp seemed like a prudent thing to do at the time.

flash forward 40 years & they are both hi or ultra-hi net worth families whose rrsps became a tax burden.

one family solved the problem by moving legally to costa rica for 10 years, during which period of time the couple withdrew & collapsed their rrsps. In many offshore tax jurisdictions, canadian rrsps are viewed as ordinary capital investment accounts & withdrawal of capital is not taxed. They eventually returned to canada minus RRIFs & they are happy.

the other family solved the problem by staying here & paying maximum bracket high taxes in old age but not worrying or even thinking about it. They are also happy.

ps nothing would stop you from continuing to sell naked puts in margin account while maintaining some investments in registered account(s). Unless your margin would be impaired by diversion of some capital to reg'd account.


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## steve41

humble_pie said:


> idk, this is a heavy question, one needs an actuarial approach & stupendous maths i think to come up with any kind of answer.
> 
> one also has to compute the tax savings from a hypothetical RRSP contribution each year, then carry that notional amount forward for 40 years, compounding & adding a new notional rrsp contribution amount each & every year ... the mind boggles (after all, what exactly is one's salary plus bonus going to be in 20 years, so how to compute the notional contribution is a logarithm in itself.)


Yes it is a non-trivial math problem..... remember, the fed&prov income tax thresholds are no longer constant.... they are indexed to inflation. As well, it is not the amount of tax you will pay. It is the present value of those future tax pmts. It took me a year before I had the basic math worked out. Also, you have to take into account the situation where you die earlier than expected. If you choose one strategy (max/shelter your RRSP) your estate will benefit if you make it out to 90-95, whereas if you die prematurely your estate will suffer.


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## Dmoney

Monthly update:

Good month in May, net worth up 4.8%, or $13,500 

*Assets: *
Cash: $25,800 (+$11,000 - got my bonus, but spent quite a bit on a few trips)
Unregistered: $170,700 (-$2,200, -1.3%, ESI/CPG down)
TFSA: $29,900 (-$300, -1.1%, LIQ/TA down) 
ESPP: $26,900 (+$3,900, +16.8%) - the usual $500 contribution, another big jump in company stock
House: $603,000 - (Acquisition cost)

Liabilities:
Mortgage: $561,600 (-$1,200, putting down an extra $250/payment for lack of anything better to do with it)

Big driver of May increase was bonus, though I did book and pay for a few upcoming trips to Europe and NYC which ended up draining a chunk of the bonus $$$ I received.
$440 of divs in May, option income just $310. Getting away from my goal of building income from options/divvys as I don't have the time lately to be paying as much attention to my portfolio.


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## Dmoney

Bought 1,000 shares of Exchange Income Corp at $21.40 and 750 shares of Alaris Royalty corp at $27.25
Both pay a good yield, and have additional capital upside/div growth potential over time.
Transferred $5,500 cash to TFSA, and $4,500 cash to unregistered account.


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## Dmoney

Monthly update:

Great month in June, net worth up 5.5%, or $16,100 to $311,700

*Assets:* 
Cash: $16,600 (-$9,200 - Put $10,000 into investment accounts, three mortgage payments fell this month)
Unregistered: $183,6380 (+$13,300, +7.8%, -contributed $4,500, but portfolio was firing on all cylinders - CPG up big, newly purchased EIF/AD did quite well)
TFSA: $36,100 (+$6,400 +21.6%, $5,500 contribution, some purchased some AD in TFSA, that went up) 
ESPP: $31,000 (+$4,100, +15.2%) - the usual $500 contribution, another big jump in company stock - don't see much more growth but this has been a huge winner for me
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $558,600 (-$1,800, three payments in June as extra bi-weekly fell in this month)

June's gains were entirely driven by my portfolio. Great to see the portfolio reaching a size that it can counter my spending... Spent quite a bit this month, including a few new suits, and a trip to NYC with all the restaurants/bars/touristy things that NYC is known for. Hopefully I can save a bit more of my pay in July/August, but then off to Europe in September. 
Biggest single month for dividends at $1,175, though option writing is still lackluster. Big driver of dividend was the special divvy from XSR, though I'd much rather have sold the stock at $10, than be holding it still. Looking to get out of TLM when I have the chance to write some calls at $12/$13, but will wait for now. Also waiting on CPG to see how far the oil rally can take them.


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## My Own Advisor

Assets, including almost $200k non-reg. is very impressive.

Once your registered and non-registered assets are worth more than your home, with no debt, you'll be laughing all the way to the bank DMoney.

Off to Europe in September sounds awesome. You gotta live  

Considering some EIF as well if the price drops more. EIF pays all dividends as eligible don't they?


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## Dmoney

Yup, still a long way to go, but well on the way.
Would love to have a mortgage free home, but there's no good reason for it given the current interest rate.
EIF is fully eligible dividends now, so you get the divvy tax credit.


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## Dmoney

Bought 1,500 Dream Hard Asset Alternatives Trust at $7.00
Trading below NAV which is nearly $10.00, though the underlying assets are a bit of a mixed bag.
Good yield at current levels, though while the funds were managed by ROI capital there were some issues with expected distribution cuts.
New structure, new management team in place. Hopefully a little friendlier and more transparent to investors this time around.


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## humble_pie

Dmoney said:


> Bought 1,500 Dream Hard Asset Alternatives Trust at $7.00




wondering why you bought this ... troubled history of properties & previous managers.

this was a complicated deal that i don't fully understand. DREAM did not buy the ROI assets, they only assumed management, is what i read? somehow, though, three-quarters of a billion dollars worth of properties got transferred to DREAM?

why did DRA.UN plummet from $10 in the IPO only 20 days ago, to $7 today?

idk there seems to be too much under the hood here ...

EDIT: just a hunch: assuming the market is being "not wrong" for the nth time but is in fact being correct & prescient, there would have to be something wrong with that $10 NAV ...


----------



## Dmoney

Essentially ROI funds had a number of issues which the new structure tries to address.
Management fees are more transparent and lower now.
No more redemptions, so no issues of liquidity with the actual fund (previously too many investors were redeeming, but assets were not liquid enough to meed redemptions)
The assets are the same, Dream just bought the rights to manage them - the $10 NAV is IFRS, so should in theory be accurate, but if it is not accurate, you've got a ~30% buffer, and are getting paid 6% while waiting.

DRA didn't actually IPO in the traditional sense (ie. raise money at $10 to buy the assets). The assets were transferred from the ROI funds in exchange for units of DRA issued at NAV. Obviously, ROI never traded at NAV, so DRA is settling into a similar pattern at the moment.

I don't see huge downside, given that market had already punished DRA before I bought it.

Still a lot of selling going on, but all happening around $6.90-$7

Could be wrong, but main thesis is that Dream will manage it much better than ROI ever did.


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## Dmoney

July was a pretty soft month, eked out a 0.5% increase in net worth to $313,300, up $1,600 

*Assets:*
Cash: $11,000 (-$5,600 - put $7,000 into investment account)
Unregistered: $187,300 (+$3,700, contributed $7,000, though most stocks down, particularly EIF)
TFSA: $36,800 (+$700, +1.8%) 
ESPP: $32,600 (+$1,600, +5.2%) - the usual $500 contribution, stock still running up
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $557,400 (-$1,200, putting down an extra $250/payment for lack of anything better to do with it)

On top of weak market performance, my spending over the last few months has been a little higher than I would like. Comes with the territory in summer I guess, but at least I'm having a good time. Dividend income is ramping up really well, though I haven't written any options lately, so that side of the portfolio is suffering.

And now for a couple snazzy graphs.

Dividend income









Options income









Total portfolio income









Total net worth


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## humble_pie

Dmoney said:


> ... I haven't written any options lately, so that side of the portfolio is suffering



the thing is, there are no puts worth selling at these lofty share price levels.

all my calls are sold already, so there's not very much to play with these days.

except GPRO, lately the light of my eye & the little love of my life


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## Dmoney

humble_pie said:


> the thing is, there are no puts worth selling at these lofty share price levels.
> 
> all my calls are sold already, so there's not very much to play with these days.
> 
> except GPRO, lately the light of my eye & the little love of my life


Exactly - a little nervous to sell any puts at the moment, and also fully invested.
I am looking to exit TLM - but somewhat hesitant to sell the calls as there could be a buyout coming in the next few months.

I could also write profitable calls on CPG and a few others, but I would rather hold for divvy/capital appreciation at this point.

Almost hoping for a nice 10-20% haircut to get into a few of the blue chip names in a bigger way. Wish I had just held onto BNS from $56 on up instead of getting fancy with the covered calls.


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## humble_pie

Dmoney said:


> Wish I had just held onto BNS from $56 on up instead of getting fancy with the covered calls.



the banks are so surprisingly much stronger than i'd ever thought possible. It must be that flight to quality that they all say is happening.

my bank calls are all ITM & even DITM now. I don't want to realize the capital gains if assigned so i'm bailing them out for losses on the rollover trade. This is OK - anyone who does options is automatically going to have plenty taxable gains plus plenty tax-deductible losses.


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## Dmoney

August update:
Net worth up 0.6% to $3153,300, up $2,000 

*Assets:*
Cash: $11,000 (flat - spending was up in August - couple of weddings, booking Europe accommodation)
Unregistered: $187,900 (+$600, pretty much flat)
TFSA: $38,130 (+$1,300, +3.6%) 
ESPP: $31,5600 (-$1,100, -3.3%) - the usual $500 contribution, stock took a bit of a hit
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $556,200 (-$1,200, putting down an extra $250/payment for lack of anything better to do with it)

$603 dividend income, however option income is all but dried up. Not trying to sell any puts with the market looking quite highly valued, need to get around to selling covered calls on certain holdings though.


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## techcrium

Dmoney how come you don't have any RRSP?

The tax free compounding nature of RRSP makes it worthwhile to have, no matter what income level. Especially when comparing against a non-registered account.


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## Dmoney

techcrium said:


> Dmoney how come you don't have any RRSP?
> 
> The tax free compounding nature of RRSP makes it worthwhile to have, no matter what income level. Especially when comparing against a non-registered account.


Was on the fence about setting up an RRSP, given that with an RRSP one loses the benefit of favourable dividend/capital gains tax treatment. I then figured that the combination of the tax break today, the tax-free compounding over 30-40+ years, and the possibility of being in a lower tax bracket down the road outweighs this downside.
I will be setting up an RRSP in the next few months, and hopefully maxing it out each year going forward.

I have ~$60K of contribution room, so just have to figure how to optimize the tax break.


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## steve41

Dmoney said:


> Was on the fence about setting up an RRSP, given that with an RRSP one loses the benefit of favourable dividend/capital gains tax treatment. I then figured that the combination of the tax break today, the tax-free compounding over 30-40+ years, and the possibility of being in a lower tax bracket down the road outweighs this downside.
> I will be setting up an RRSP in the next few months, and hopefully maxing it out each year going forward.


 Sigh.....


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## GalacticPineapple

D$: Have you compared your returns against any indexes?


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## Dmoney

GalacticPineapple said:


> D$: Have you compared your returns against any indexes?


I haven't really looked at my returns vs. the index, but will include it in next month-end update.
I have a U.S. account made up of ETFs that I would benchmark against the S&P or a small-cap index, the rest would stack up against the TSX


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## GalacticPineapple

Dmoney said:


> I haven't really looked at my returns vs. the index, but will include it in next month-end update.
> I have a U.S. account made up of ETFs that I would benchmark against the S&P or a small-cap index, the rest would stack up against the TSX


Would be cool to see how you've stacked up since the start.


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## MPL2014

> Would be cool to see how you've stacked up since the start.


+1 :encouragement:


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## Dmoney

A little slow on the September update. Too painful 

Market tanked, hit some of my names particularly hard. Net worth at month end was $299,900, down 4.9% from August. 

*Assets:*
Cash: $9,500 (-$1,500 - lot of spending in September, with travel to Europe, and a few other pricey outings)
Unregistered: $175,600 (-$11,800, -6.3%, CHAOS!!! Pretty much everything down, TLM, EIF, CPG in particular)
TFSA: $36,900 (-$1,200, -3.2%, more chaos!) 
ESPP: $29,800 (-$1,700, -5.3%) - the usual $500 contribution, stock took a hit
House: $603,000 - (Acquisition cost - praying there's no real estate crash at this point)

*Liabilities:*
Mortgage: $555,000 (-$1,200, putting down an extra $250/payment for lack of anything better to do with it)

Wow! First experience of a real market correction since I started investing, hoping this isn't a 2008/2009 type crash. I would look at this as a buying opportunity, but not a whole lot of cash on hand. Might be an opportunity to start up on the options again, as I had scaled back thinking that the market was getting a little overheated.


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## james4beach

You mentioned september was painful. Sorry to hear that. It's important to force yourself to become mechanical and objective about gains and losses. This leads to clearer analysis and optimization long-term.

The benchmarking / index comparison is important. From experience, I've seen that many people put together elaborate portfolios with various stock picks etc, but in the end they end up under-performing the index (usually by a significant amount). So it's important to start tracking metrics of how your portfolio performs, like in an annualized % term -- see the spreadsheet function XIRR.

If the losses cause you significant distress, you should consider lightening your % stock exposure. The greatest losses you showed there are -6.3% in unregistered, and in the big picture, -6.3% is a tiny drop in stocks.


----------



## techcrium

If a 8% drop was painful, can you handle a potential 40% drop?


----------



## Dmoney

james4beach said:


> You mentioned september was painful. Sorry to hear that. It's important to force yourself to become mechanical and objective about gains and losses. This leads to clearer analysis and optimization long-term.
> 
> The benchmarking / index comparison is important. From experience, I've seen that many people put together elaborate portfolios with various stock picks etc, but in the end they end up under-performing the index (usually by a significant amount). So it's important to start tracking metrics of how your portfolio performs, like in an annualized % term -- see the spreadsheet function XIRR.
> 
> If the losses cause you significant distress, you should consider lightening your % stock exposure. The greatest losses you showed there are -6.3% in unregistered, and in the big picture, -6.3% is a tiny drop in stocks.





techcrium said:


> If a 8% drop was painful, can you handle a potential 40% drop?


The most painful part is that I didn't have enough cash to buy in at the bottom 
I have a 30-40+ year investment horizon so even a 40% or 50% drop wouldn't bother me, unless I lost my job at the same time (my job is tied to capital markets so could be an unfortunate double whammy).
I will definitely be monitoring my progress vs. the markets over the long term. 


To date I've outperformed the TSX:
2012: 20.9% vs. 7.2%
2013: 18.2% vs. 13.0%

But that's a big element of luck, and two years is not nearly long enough to brag.


----------



## gardner

Dmoney said:


> The most painful part is that I didn't have enough cash to buy in at the bottom


When do you suppose we'll see the bottom? Maybe you'll have a couple months' income to put in when we get there.


----------



## Dmoney

Depends if we see another drop or market recovers now.
So far this week has been quite good, we'll see if the rally has legs.
I wouldn't try too hard to time the market personally, would rather just save a chunk of money and put it into the market when there's an opportunity.


----------



## Dmoney

Another rough month in October, net worth at month end was $284,000, down 5.3% 

Assets:
Cash: 10,100 (+$600)
Unregistered: $162,200 (-$13,500, -7.7%, another rough month for oil/gas names and some others)
TFSA: $36,600 (-$300, -0.8%) 
ESPP: $25,900 (-$3,900, -13.1%) - the usual $500 contribution, stock took another big hit
House: $603,000 - (Acquisition cost - praying there's no real estate crash at this point)

Liabilities:
Mortgage: $553,800 (-$1,200, putting down an extra $250/payment for lack of anything better to do with it)

Another rough month, down more than $30K over the past two months. Hopefully the market doesn't recover just yet, as I get my bonus at the end of November, and would like to take advantage of the dip. 
On the bright side of things, I received dividends of $1,015 during November, and the trend is obviously up over the long term.
I've really gotten away from writing options, but this dip could be an opportunity to start again. Will take a look at some of my old favourites and see what the outlook is like.


----------



## Dmoney

The slide continues - luckily November is bonus time, so net worth was up 3.5% to $293,900

*Assets:*
Cash: $30,700 (+$20,600)
Unregistered: $149,800 (-$12,400, -7.6%, oil/gas names keep dropping)
TFSA: $37,600 (+$900, +2.5%) 
ESPP: $25,300 (-$600, -2.2%) - the usual $500 contribution, stock down again
House: $603,000 - (Acquisition cost - praying there's no real estate crash at this point)

*Liabilities:*
Mortgage: $552,600 (-$1,200, putting down an extra $250/payment for lack of anything better to do with it)

Oil and gas stocks still getting hammered.
Got bonus at work, saved what would have been an otherwise miserable month.


----------



## Dmoney

Well, after a little more than a year off, figured I'd start up again right where I left this!
Started a new job at the end of 2014, and as a result CMF status updates fell by the wayside.
Sold out of the Employee Stock Purchase Plan after taking the new gig. Have a defined benefit pension now instead, which kicks in starting in 2016. 
Have continued to pay down mortgage debt at a half-decent pace, though given a rate of 1.7%, it's definitely not a priority.
Toronto house prices are skyrocketing, which I'm mostly ambivalent about. Though the value of my place is up significantly since buying it, the prices of any alternative accommodation are also up significantly. No intention of moving in the next 5-10 years though, so does not really affect me.

Since my last update, my oil and gas stocks hit bottom and have rebounded somewhat. Still down significantly on most of those positions from purchase price. 
Sold out of TLM around the deal at C$9.49. Had bought in at $12 and $13 through the sale of naked puts. When all was said and done, after all the covered calls/put selling, I made a grand total profit of *drum roll* $643.50. Hardly worth the effort. Though another $1,927 of dividends sweetened the pot. 

Though my options selling has slowed down over the past year, a few of the trades I've made since last update:

Sold puts on Royal Bank, ended up purchasing 600 shares at $74
Sold puts on Sunlife, ended up purchasing 1,000 shares at $42
Bought 1,000 shares of Algonquin Power at $10.80

Net worth update as of March 30, 2015: $357,000 +11% vs February, 2015 (March is a bonus month), and +22% since my last update (November 2014)

*Assets:*
Cash: $32,100 (+$8,900, bonus less $10,000 moved to investment account)
Unregistered: $206,700 (+$24,000, oil names recovering, along with rest of market having a good month, +$10,000 cash added)
TFSA: $41,500 (+$1,200) 
ESPP: $0 - new job has defined benefit plan instead
Defined benefit pension: Not yet including in NW calculation - minimum value is 175% of my contributions (that's the bear minimum I would get on withdrawal)
House: $603,000 - (Acquisition cost - similar houses in my area are going for $800,000-900,000 but I need to live somewhere)

*Liabilities:*
Mortgage: $531,100 (-$1,250, still putting down an extra $250/payment for lack of anything better to do with it). Nice to see $20k+ of debt paid down in the background. Obviously not in a hurry to get this to $0 at the moment, but still nice to chip away at it as time goes on. 

Long term goal is still to generate passive income from the investment portfolio over time. 
Last month's income was $955, and trailing twelve month average is $930 ($11,180 over the past year).
Income definitely trending in the right direction, and hoping to continue the growth as I keep investing excess cash.


----------



## Dmoney

Net worth update as of April 30, 2016: $357,000 +4.5% vs March 

*Assets:*
Cash: $36,500 (-$500, spending a little higher than usual - couple weekend trips and restocking the wardrobe)
Unregistered: $217,500 (+$10,800, +5.2%, good month across the board)
TFSA: $42,600 (+$1,100, +2.7%) 
Defined benefit pension: $3,400 (new entry - I am calculating this based on (my contribution x 1.75 x 0.65) which reflects the minimum I will get on withdrawal, less a 35% tax hit if I were to pull out. I may refine this over time)
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $529,800 (-$1,250, still putting down an extra $250/payment for lack of anything better to do with it). 

Dividend income: $972 - a few divvy cuts in my portfolio hit this month, though I got the payout from AQN as a partial offset.


----------



## Dmoney

Bought another 1,000 AQN - $11.24
Wanted to get in ahead of earnings - possible dividend hike, and I'm sure management will be talking up the EDE acquisition.


----------



## Dmoney

Sold covered calls against my CPG position. Rode the oil crash the whole way down, just about ready to throw in the towel.
10 June $23 calls sold at $0.45.


----------



## Nerd Investor

Were you able to roll your old work savings plan into your new defined benefit plan to buy up some years of service?


----------



## Dmoney

Nerd Investor said:


> Were you able to roll your old work savings plan into your new defined benefit plan to buy up some years of service?


No, the old plan was a share purchase plan with company match. I held it in an unregistered account. At my new job, they just instituted a defined benefit pension. I believe that I can buy back one year of service (was there a year before DB pension was put in place), so that is an option I will look into.


----------



## Dmoney

Net worth update as of May 31, 2016: $388,800 +4.2% vs April

*Assets:*
Cash: $15,600 (-$17,000, $20,000 transferred to investment account, so saved about $3,000 for the month)
Unregistered: $246,800 (+$29,200, $20,000 contributed, decent month out of a few key names)
TFSA: $43,300 (+$750, +2%) 
Defined benefit pension: $4,200 (Calculating this based on (my contribution x 1.75 x 0.65) which reflects the minimum I will get on withdrawal, less a 35% tax hit)
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $527,900 (-$1,900, three payments this month, so paid down a little more than usual. Also still putting down an extra $250/payment for lack of anything better to do with it). 

Dividend income: $1,036 - Royal Bank hike is marginally offsetting a couple of divvy cuts. 
Options income: $438 - not as active as I have been in the past, but wrote covered call on CPG this month


----------



## Dmoney

Sold 10 puts on BAM.A today.
$40 strike price
$0.40 premium

Happy to own the stock, have enough cash to cover half the purchase, would end up on margin by ~$20k if exercised.
Will likely have some cash coming into the account in the next little while so no concern on the margin amount.

In other news, got the dreaded MPAC assessment in the mail this week.
The good news is that my house went up more than $200k vs my purchase price in 4 years... the bad news is that the city of Toronto will want their cut


----------



## Dmoney

Sold another round of covered calls against my CPG holdings.
10 calls, $0.41 premium, $400 net proceeds, $23 strike
Happy rolling these over every month or two - pays a hell of a lot more than the reduced yield.


----------



## Dmoney

Net worth update as of June 30, 2016: $388,800 completely flat vs May

*Assets:*
Cash: $16,960 (+$1,300)
Unregistered: $242,000 (-$4,750)
TFSA: $44,800 (+$1,400) 
Defined benefit pension: $4,950 (Calculating this based on (my contribution x 1.75 x 0.65) which reflects the minimum I will get on withdrawal, less a 35% tax hit)
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $526,400 (-$1,300). 

Dividend income: $990 - ($6,150 YTD - averaging just over $1k/month) 
Options income: $633 - picking up a little bit, but will probably back off with markets near all-time highs


----------



## humble_pie

Dmoney said:


> Options income: $633 - picking up a little bit, but will probably back off with markets near all-time highs



the way i see it, all-time market highs = best time to sell calls .each:


----------



## Dmoney

Agreed - I'm going to pull back a little on the put selling, but might pick up the call selling a little.
Have a few long positions that I'd be willing to exit in and around current prices.


----------



## Steve Divi

Dmoney said:


> Agreed - I'm going to pull back a little on the put selling, but might pick up the call selling a little.
> Have a few long positions that I'd be willing to exit in and around current prices.



Great Job Dmoney. How old are you? I'm going through your older posts and you seem to be on a great path. Keep up the savings !


----------



## Dmoney

Steve Divi said:


> Great Job Dmoney. How old are you? I'm going through your older posts and you seem to be on a great path. Keep up the savings !


Thanks! I'm 27 - started tracking my progress at 22, several months after starting my first real job after graduating from university.
Trying to be consistent with monthly updates, but go dark at times when work or life gets busy.


----------



## Dmoney

Net worth update as of July 31, 2016: $392,000 up 0.8% vs June 

*Assets:*
Cash: $18,500 (+$1,500)
Unregistered: $242,300 (+$300)
TFSA: $44,500 (-$300) 
Defined benefit pension: $5,600 (Calculating this based on (my contribution x 1.75 x 0.65) which reflects the minimum I will get on withdrawal, less a 35% tax hit)
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $525,400 (-$1,000). 

Dividend income: $1,030 
Options income: $460 

Quiet month across the board in July. Not much in the way of savings as patios and cottages have an impact in the summer months. 
Bonus should be coming in August which should put me over $400,000 NW at month-end!!! Assuming no market crash.


----------



## scorpion_ca

I was wondering what is your profession. Have you mentioned your income in any of the previous posts? I read page 1 & 2 quickly but did not find that info. The reason I am asking is to get an idea such as if you make $50k yearly and your NW is $392k; it's a healthy NW but if you make $250k yearly then your NW isn't healthy compare to your income.


----------



## Dmoney

I might have mentioned it somewhere upthread in the early stages of my journal. I work in the financial industry, at a broker/dealer on the sell-side. I've been working for five years, started year one at $105,000 (salary + bonus), and year 5 made a little over $155,000.
My approach to building net worth is to limit my spending to my base salary, and aim to save my entire bonus every year (~$25,000-40,000 after tax). 
In a typical year, I would save a little more than my bonus (after tax), but I don't really keep track of my savings rate. Probably should, but I'd likely be too shocked at how much I spend on a regular basis. 
I tend to do a lot of weekend trips, nights on the patio or at the bar and steak dinners. On the flip side, as long as I can sock my bonus away, the NW tends to grow. 
That, and a bit of forced savings on paying down the mortgage, which also comes out of my base salary.


----------



## My Own Advisor

Saving bonus every year (~$25,000-40,000 after tax) is great.

Then living a great life after that...re: weekend trips, nights on the patio or at the bar and steak dinners....a nice balanced life.

Well done


----------



## humble_pie

scorpion_ca said:


> The reason I am asking is to get an idea such as if you make $50k yearly and your NW is $392k; it's a healthy NW but if you make $250k yearly then your NW isn't healthy compare to your income.



each person's financial health is so highly individuated though.

obviously a working 27-year-old whose net worth is $400k is in the pink of health, regardless of his salary.

at the same time a 27-year-old working single mother earning $50k a year, who has no debt & whose net worth might be $20k, could also be described as being in the pink of health. Her finances might be precarious, but she's healthy.

.


----------



## Dmoney

My Own Advisor said:


> Saving bonus every year (~$25,000-40,000 after tax) is great.
> 
> Then living a great life after that...re: weekend trips, nights on the patio or at the bar and steak dinners....a nice balanced life.
> 
> Well done


Thanks! Hope to get out of the rat race at some point, but until then, the weekends/nights out are needed for personal mental health!
Only so many 12-18 hour days you can put in without burning out if you have nothing to look forward to on Friday.


----------



## My Own Advisor

You gotta live too!!


----------



## janus10

My Own Advisor said:


> ...re: weekend trips, nights on the patio or at the bar and steak dinners....
> 
> Well done


Just a WAG but I'm thinking the OP never orders a steak well done.


----------



## Dmoney

janus10 said:


> Just a WAG but I'm thinking the OP never orders a steak well done.


Do they even make steak well done?!?!?


----------



## Dmoney

Sold another round of covered calls on CPG - 10x October $23 strike, $0.41, ~$400 net after commission


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## Dmoney

Net worth update as of August 31, 2016: $419,000 up $27,000 or 6.8% vs July 

*Assets:*
Cash: $20,400 
Unregistered: $269,000 (+$27,000 - deposited $20,000 from bonus, $7,000 in gains)
TFSA: $44,200 (-$300) 
Defined benefit pension: $6,300 (Calculating this based on (my contribution x 1.75 x 0.65) which reflects the minimum I will get on withdrawal, less a 35% tax hit)
House: $603,000 - (Acquisition cost)

*Liabilities:*
Mortgage: $524,200 (-$1,200). 

Dividend income: $983 
Options income: $133 

Good month as work bonus came in. Cracked $400,000 - woohoo!
Sold BAM puts earlier this week. $42 strike, October expiry, $0.55 premium.

Wouldn't mind a little pull back here, have a decent amount of cash in the investment account that can be deployed.


----------



## Dmoney

Sold a round of puts on Telus, $42 strike, November expiry, $0.56 premium, ~$550 net


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## Dmoney

Net worth update as of Sept. 30: $426,000 up $7,000 or 1.6% vs August 

*Assets:*
Cash: $24,000 
Unregistered: $270,000 
TFSA: $44,500 
Defined benefit pension: $7,000 
House: $603,000 

*Liabilities:*
Mortgage: $523,000 

Dividend income: $1,002 
Options income: $613


----------



## Walksing

Hi Dmoney, I really like your option trade approach for income , wondering if you van share your trade plan or strategies such as :
1) how can you pick stocks for option trading every month?
2) any protection in case your stock called away or your obligation to buy stocks?
3) how can you do to ensure selling naked put without high risk?

I would like to model your approach and gain more option trading experiences. I have all ears for your answers.


----------



## Dmoney

Walksing said:


> Hi Dmoney, I really like your option trade approach for income , wondering if you van share your trade plan or strategies such as :
> 1) how can you pick stocks for option trading every month?
> 2) any protection in case your stock called away or your obligation to buy stocks?
> 3) how can you do to ensure selling naked put without high risk?
> 
> I would like to model your approach and gain more option trading experiences. I have all ears for your answers.


1) I try to focus on stocks that I would like to own, and write the puts at a price that I would be happy to buy them at. When I started out, I probably got a bit aggressive with both a) my stock selection (I was picking stocks that I didn't necessarily love) and b) my strike selection (I was going closer to the money to get higher premiums)
2) My protection at the moment would be a) a large cash position ($40-50k at the moment) and b) significant available margin
3) I try and avoid overextending myself. While I don't necessarily have any hard and fast rule limiting my downside exposure, I wouldn't be comfortable going more than say ~25% on margin. As my portfolio grows, this number would probably be even lower, as right now 25% of margin is relatively small vs my annual income.


----------



## Walksing

thank you Dmoney, I am starting to trade option and will share my experience soon.


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## Dmoney

Net worth update as of Oct 31: $435,000 up $9,000 or 2.1% vs September

*Assets:*
Cash: $26,000 (+$2,000)
Unregistered: $275,000 (+$5,000)
TFSA: $44,500 (-$200)
Defined benefit pension: $7,700 (+$700) 
House: $603,000 

*Liabilities:*
Mortgage: $521,000 (-$2,000)

Dividend income: $1,072 (+11% vs last October) - Dividend income for the last 12 months was >$12,000 for the first time - decent little milestone. Hoping to build on this and see it compound over time.
Options income: $621 - will get a little more active once more post-US election when the market jitters calm down a little


----------



## Dmoney

Great results out of SLF, took the opportunity to sell the covered calls. $52 strike, $0.60 premium, $600 - ok capping my gains here. Originally bought in at $42 I think.
Also sold another round of puts on BAM. $42 strike, $0.30 premium, $300.


----------



## Walksing

just wondering if you can share the expiration days for your covered call and puts. also how did you determine the BAM price ($0.30) that you are willing to sell. thanks a lot.


----------



## Dmoney

The Telus puts I have outstanding expire this week, assuming stock stays under $42, I will be assigned and end up with the shares
BAM/SLF are both December expiry
I don't get too technical when selling the options. I typically pick a price at which I like a stock, or in the case of covered calls, an exit price. Then I aim to sell options with premiums that get me decent annualized returns. I'll look at the total annualized return (capital gain + premium, or downside protection + premium) and will aim for 20%+ total return at a minimum (in most cases).


----------



## Dmoney

Ended up with 1,000 Telus shares at $42. Happy with the purchase, and since buying, the stock is actually up above $42.
On the flipside, it looks like I was a little premature on the SLF call selling.
Stock has kept running. That 20-20 hindsight strikes again!


----------



## humble_pie

^^


Dmoney are u happy with telus options? me i regard them as one of the worst nightmares on the montreal exchange. Spreads on the near months may be OK but once one gets out to LEAPs options it's Look out below.

US options in TU - both TU stateside & T on toronto have the same CUSIP number so the shares are interlisted - US TU options are no better. It's a phenom i've seen many times with thinly-traded US options on canadian interlisted stocks. The US option arbs keep referencing back to canadian B/As on montreal because both markets are so thin. IE US options in telus are as hopelessly illiquid as canadian options in telus.

there is actually an entertaining workaround to big yawning B/As in telus. If you like i'll send you a pm-mail with details, i don't believe the workaround is widely known. It's available to the institutions though.
. 
for myself, telus is a stock i refuse to top up by buying more, because even with the workaround i find the options are too much of a pain to bother with. The workaround itself takes at least one whole day to set up, one would think they were communicating by carrier pigeon.

.


----------



## Dmoney

humble_pie said:


> ^^
> 
> 
> Dmoney are u happy with telus options?


I actually like the stock more than the options. The premiums aren't too juicy, and while I do tend to go short term rather than the LEAPS, the spreads aren't great. But that said, at $42 I don't mind owning the stock. I tend to play the options more as a mechanism to earn a little money while getting in/out at a better price, rather than as my main profit centre. 

Overall, I want to build my dividend-paying holdings, but get paid on the puts while waiting for the right entry price. As such, I lean towards holding rather than covered call writing, unless I'm okay with crystallizing a large gain. Case in point, post SLF's earnings I sold the covered calls; though in hindsight, this was premature as the stock has run past the $52 strike.


----------



## humble_pie

Dmoney said:


> I actually like the stock more than the options. The premiums aren't too juicy, and while I do tend to go short term rather than the LEAPS, the spreads aren't great. But that said, at $42 I don't mind owning the stock. I tend to play the options more as a mechanism to earn a little money while getting in/out at a better price, rather than as my main profit centre.
> 
> Overall, I want to build my dividend-paying holdings, but get paid on the puts while waiting for the right entry price. As such, I lean towards holding rather than covered call writing, unless I'm okay with crystallizing a large gain.



interesting strategy. Makes excellent sense.

here's what i see: young person with regular cash savings from salary builds sensible portfolio wish list. Then sells puts in the stocks he most wants to acquire. Meaning he will earn $$ from put sales as he goes, plus he will acquire the stocks he desires at cheap prices as time goes by.

once the stocks are assigned to him, he doesn't sell many calls because he's a young person with a long life outlook & he doesn't want to cap the upside. This also makes sense in a low interest environment where put premiums are higher than call premiums.

a few stages farther on & YP has built a thrifty diversified portfolio. Now sells puts to top up existing positions or acquire new names. 

altogether, a bravura performance.

there are strong resemblances to what londoncalling is trying to do in another thread. I think i will scoot over there & post a suggestion to london that he come browse here.

london's put-selling strategy includes a sharp Lepht Turn at the end, when he intends to flip any shares assigned to him in a put assignment into his RRSP as a contribution, although there is a tax-loss complication connected to that strategy.

the complication has workarounds, so it does not mean that Lepht Turns into RRSP are totally blocked. It just means Proceed on Green Arrow only.

left turns on green arrow should work out OK for london, just as your strong history of put sales has worked out fine for you. 

PS you are probably OK withi assignment commissions, but other readers who might be considering put sales should be aware that some brokers are robbing clients with full-service commission assignment holdups. At the other extreme is Interactive Brokers, which reportedly does not charge for put assignments at all. 


.


----------



## Dmoney

humble_pie said:


> interesting strategy. Makes excellent sense.
> 
> here's what i see: young person with regular cash savings from salary builds sensible portfolio wish list. Then sells puts in the stocks he most wants to acquire. Meaning he will earn $$ from put sales as he goes, plus he will acquire the stocks he desires at cheap prices as time goes by.
> 
> once the stocks are assigned to him, he doesn't sell many calls because he's a young person with a long life outlook & he doesn't want to cap the upside. This also makes sense in a low interest environment where put premiums are higher than call premiums.
> 
> a few stages farther on & YP has built a thrifty diversified portfolio. Now sells puts to top up existing positions or acquire new names.
> 
> altogether, a bravura performance.
> .


In a nutshell, Exactly!
I'm refining my approach over time as I find out what works or does not, what level of risk I can tolerate or cannot, and what fits my current lifestyle.
I've had missteps that have been educational, and as I learn more through direct investing, and interacting with a slew of mutual fund/pension fund/hedge fund managers, I'm getting new ideas and honing my investing skills. 
What I've realized is I don't mind writing the naked puts against margin, as long as the worst case (ie. everything gets exercised in a down market) would not stretch me too thin (ie dividends cover the interest handily by several multiples, and my salary easily pays debt off within 1yr). 

I will definitely be hopping over the check out londoncalling's thread that you mentioned, for inspiration or reassurance.

Also, thanks for pointing out the fee on assignment. I just took at look at my recent Telus assignment and realize that I was overcharged by $70. Should only have been a $30 fee, and on my last option assignment (RBC) I was charged the correct amount, so I'll be following up on Monday to have that fixed. Owe you a beer!


----------



## Dmoney

Net worth update as of Nov 30: $459,000 up $25,000 or 5.7% vs October

*Assets:*
Cash: $29,000 (+$3,000)
Unregistered: $293,000 (+$18,000)
TFSA: $45,700 (+$1,200)
Defined benefit pension: $8,400 (+$700) 
House: $603,000 

*Liabilities:*
Mortgage: $520,000 (-$1,000)

$1,010 of dividend income
$610 of option income

Surprisingly good month in terms of performance.
Beyond the Trump trade filtering through across the board, had several names do quite well. SLF posted great results, Transalta got a favourable settlement on coal plant decommissioning, OPEC production cut helped a few of my downtrodden O&G names.


----------



## Steve Divi

Dmoney said:


> Net worth update as of Nov 30: $459,000 up $25,000 or 5.7% vs October
> 
> *Assets:*
> Cash: $29,000 (+$3,000)
> Unregistered: $293,000 (+$18,000)
> TFSA: $45,700 (+$1,200)
> Defined benefit pension: $8,400 (+$700)
> House: $603,000
> 
> *Liabilities:*
> Mortgage: $520,000 (-$1,000)
> 
> $1,010 of dividend income
> $610 of option income
> 
> Surprisingly good month in terms of performance.
> Beyond the Trump trade filtering through across the board, had several names do quite well. SLF posted great results, Transalta got a favourable settlement on coal plant decommissioning, OPEC production cut helped a few of my downtrodden O&G names.


Great work with your Divi's and options Dmoney!

You're crushing it.


----------



## Dmoney

Steve Divi said:


> Great work with your Divi's and options Dmoney!
> 
> You're crushing it.


Thx, it's a work in progress!
Always nice to see Mr. Market cooperating!


----------



## Dmoney

Sold SLF covered calls (x10), $54 strike, January expiry for $0.30
Sold CPG covered calls (x10), $20 strike, February expiry for $0.46

Still looking to sell the BAM naked puts in and around ~$42 if the premiums make sense.
May also sell the RY covered calls to juice returns on that position which has run quite well for me

Option income is coming in at a relatively consistent level now, ~$600/month for the last few months
Wouldn't be surprised to see a somewhat sideways market for a bit now


----------



## My Own Advisor

"Option income is coming in at a relatively consistent level now, ~$600/month for the last few months"

Well done!

More guts than I do


----------



## Dmoney

My Own Advisor said:


> Well done!
> 
> More guts than I do


Thanks. Though I have to say as I'm refining my strategy, I've actually reduced my overall risk.
I'm putting much more weight into the underlying stock rather than focusing on the options premium when selling naked puts.
I've also scaled back the amount of margin (absolute and relative %) that my naked puts would put met out if exercised. 
Overall, strategy is working fairly well in my books; always room to improve.

Sold a round of 10 BAM puts last week; $42, February strike, $0.48 sale price.


----------



## humble_pie

Dmoney said:


> 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 ... each:

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.


.


----------



## Dmoney

humble_pie said:


> 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.



humble_pie said:


> 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. 



humble_pie said:


> puts are so alluring to sell ... all that free money ... oh, my ... each:



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


----------



## Dmoney

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


----------



## Dmoney

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.


----------



## Dmoney

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


----------



## Dmoney

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.


----------



## Dmoney

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.


----------



## Dmoney

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


----------



## Dmoney

Net worth update as of March 31: $513,300 up $37,000 or 7.7% vs February

*Assets:*
Cash: $44,400 (+$28,200)
Unregistered: $308,500 (+$4,400)
TFSA: $60,100 (+$1,500)
Defined benefit pension: $11,800 (+$1,400) 
House: $603,000 

*Liabilities:*
Mortgage: $514,600 (-$1,300)

$982 of dividend income
$439 of option income

Big month overall.
Bonus at work was the main driver.
Some market gains in the TFSA and unregistered as well.
Pension continues to tick up.
Cracked the $500K mark which is a nice number.

Dividend and option income continues to flow in steadily. Definitely the more important number in my opinion, vs net worth.
The goal is still to grow passive income over time. 
I'll likely be selling my house in the coming few months, which will provide a (hopefully) substantial boost to net worth (immediately) and passive income (over time). 
The Toronto real estate market has gone insane, and I'm looking to take some chips off the table.


----------



## Dmoney

Rolled my Royal Bank covered calls earlier this week. 6 contracts, $96 strike.
Repurchased the May expiries for $1.58 and sold a round of July calls for $2.71. 
Net proceeds of ~$670.
Getting a decent income stream from the covered calls, as the stock is bouncing around the $96 range. Assuming it trades sideways, I should be able to juice the dividend yield for a little while.


----------



## Dmoney

Net worth update as of April 30: $536,200 up $22,900 or 4.5% vs March

*Assets:*
Cash: $28,200 (-$16,200) Transferred $40k to investment account, received sizeable tax refund
Unregistered: $345,200 (+$36,700) $40k transferred in 
TFSA: $60,400 (+$300) 
Defined benefit pension: $12,700 (+$900) 
House: $603,000 

*Liabilities:*
Mortgage: $513,400 (-$1,300)

$1,652 of dividend income - a new record
$510 of option income

Another solid month in April. Got my taxes done early and had a large one-time refund.
Market wasn't much help this month, mostly sideways.

Hopefully getting close to selling the house. Listed last week, have had a bunch of showings/open houses, holding offers this coming week.
Assuming the market holds up, I should have a firm offer in hand in a couple days, which will (fingers crossed), be significantly higher than what I paid five years back.

Portfolio income is growing nicely. Seeing some dividend growth within the portfolio which is always nice. Hit a new record this month on the dividend front. Comfortably over the $1,000/month average dividend income now ($12,000/year), next step $1,500 ($18,000/year). No real hard target, but I'm definitely on the right track.
On the option side, I have been rolling in-the-money calls to enhance yield where possible. Working out quite well on Royal Bank at the moment given the volatility surrounding Canadian financials.


----------



## My Own Advisor

Looking solid Dmoney 

FWIW I've done some math for us and we believe, as I write about on the site, $1 M invested should easily churn about $30K per year for the rest of our lives. Maybe closer to $40K, so $30K net.

Like you, feels good to be averaging over $1K per month in dividend income without "doing anything" but holding existing assets and like time in the market do their thing.

What is your ultimate income goal? $30K per year like us? Less to retire on? More? You also have a DB pension which will be excellent fixed income. Is that annual pension income you are reporting or just commuted value?


----------



## Dmoney

Thanks MOA! It's great to see my money starting to work as hard as I do!

I think five or six years back when I started tracking NW and my portfolio income, I had a goal of replacing my base salary with portfolio income ($60k/yr). If I had to put a number on it, I'd still likely aim for this figure, give or take. 

To date, progress on net worth has been very good as my pay has grown rapidly, and my spending has not kept up (tailwind of a massive bull market might have helped a little too...). That being said, a change of employment and huge pay cut is in the cards somewhere down the road (could be 50%+ cut). The ball is in my court with respect to timing, but I'm looking forward to shifting priorities from career/money to all the other great things life has to offer! 

Luckily, this career change includes leaving Toronto, and therefore trading a very expensive market for a significantly cheaper market. Read: selling a tiny 100yr-old semi in TO for more than the price of a custom-built, 5bed/5bath, mansion on 3 acres. The plan would initially be to rent or buy a small condo (~$1,500-2,000/month rent, or <$400k total cost), leaving a good chunk to invest.

The pension figure I'm quoting is the minimum amount that will be paid out if I exit the plan. Essentially the math is: [my contribution * 1.75 * 0.65] (accounts for a 35% tax rate as it will ultimately get taxed). I've only been in the plan a little over a year, so it's not really a large amount one way or another. Would most likely take the commuted value upfront, and invest myself.


----------



## My Own Advisor

"Read: selling a tiny 100yr-old semi in TO for more than the price of a custom-built, 5bed/5bath, mansion on 3 acres. The plan would initially be to rent or buy a small condo (~$1,500-2,000/month rent, or <$400k total cost), leaving a good chunk to invest."

Nuts.

I have no idea why more folks in Toronto aren't doing what you are doing. Exit the RE market there. It makes no sense and you can start setting up yourself, your family, for life if you do.

Ok, re: pension value if left and sent to LIRA, other.


----------



## humble_pie

Dmoney said:


> To date, progress on net worth has been very good as my pay has grown rapidly, and my spending has not kept up (tailwind of a massive bull market might have helped a little too...). That being said, a change of employment and huge pay cut is in the cards somewhere down the road (could be 50%+ cut) ...
> 
> Luckily, this career change includes leaving Toronto, and therefore trading a very expensive market for a significantly cheaper market. Read: selling a tiny 100yr-old semi in TO for more than the price of a custom-built, 5bed/5bath, mansion on 3 acres. The plan would initially be to rent or buy a small condo (~$1,500-2,000/month rent, or <$400k total cost), leaving a good chunk to invest.




super progress on the investment account, regardless of whether it's due to brilliant management, disciplined savings, prolonged bull market, selling puts to acquire cheap stock, or whatever. Mille félicitations.


just one tiny detail query though. If memory serves, did you really buy a "tiny 100-year-old semi in TO" a few years ago?

IIRC you had purchased a large detached home on a big lot in NE toronto, but still within the tto transit system so getting to work was not a long commute? IIRC this house was so spacious it had a basement you were thinking to turn into a rentable apartment or else a man cave? IIRC the build was less than 100 years, maybe something like 1940s or 1950s? IIRC at the time of purchase you posted links to the RE listings for the short list of homes you were considering, so this one was a brown or dark red structure? IIRC the backyard was so big you were thinking BBQ parties? & i remember thinking that if you married & had children in that house, they would have a giant fenced playground right outside the kitchen door ...

if the above is truly your house, your initial house investment should pretty near have doubled by now.


.


----------



## Dmoney

My Own Advisor said:


> Nuts.
> 
> I have no idea why more folks in Toronto aren't doing what you are doing. Exit the RE market there. It makes no sense and you can start setting up yourself, your family, for life if you do.


I agree. Two main reasons I see: 1) Family/friends/social network and 2) Career opportunities
I understand the first reason. Regardless of the economics, if you've established a life here, it's tough to pick up and leave it all behind. Friends, kids' friends, schools etc.

In terms of career opportunities, it blows my mind that there are any teachers, fast food workers, plumbers, retail workers etc. left. Outside of finance, law and tech (and various successful businesses), there is absolutely no financial reason to live in a market with real estate this expensive. 

If you're starting off with a six-figure salary and rising rapidly, sure, Toronto is the place to be, that job doesn't exist elsewhere. But for 95% of workers in the city, finances would improve materially elsewhere.


----------



## Dmoney

humble_pie said:


> just one tiny detail query though. If memory serves, did you really buy a "tiny 100-year-old semi in TO" a few years ago?
> 
> IIRC you had purchased a large detached home on a big lot in NE toronto, but still within the tto transit system so getting to work was not a long commute? IIRC this house was so spacious it had a basement you were thinking to turn into a rentable apartment or else a man cave? IIRC the build was less than 100 years, maybe something like 1940s or 1950s? IIRC at the time of purchase you posted links to the RE listings for the short list of homes you were considering, so this one was a brown or dark red structure? IIRC the backyard was so big you were thinking BBQ parties? & i remember thinking that if you married & had children in that house, they would have a giant fenced playground right outside the kitchen door ...
> 
> if the above is truly your house, your initial house investment should pretty near have doubled by now.
> 
> 
> .


Memory serves you almost entirely correctly. NE Toronto (along the subway line), turned the basement into a man cave (not big enough to turn into a cavern though, just a modest cave), I think the build was the 1920s (not 100% sure - definitely rounds to 100yrs old though, at least if we're rounding to the nearest 20), brownish-red brick, great backyard that has hosted many a BBQ party (including a full-fledged pig roast), also correct on the plan for a big fenced playground. But, definitely a semi-detached :tongue-new:

I don't want to count my chickens until they hatch, but if recent comparable sales are any indication, then it has more or less doubled over the past five years.


----------



## humble_pie

dMoney you are such a modest person that i don't suppose the record you are about to set has even occurred to you. 

but here it is. Still only barely past your mid-20s, you are far & away the youngest millionnaire cmf forum has ever seen.

there was no luck, no lottery winning, no big inheritance, no rich uncle or fairy godmother in your story. Instead you started from scratch. You moved to toronto, landed a good job, rolled up your sleeves, worked hard & made a string of extraordinarily smart decisions.

champagne for when you sell the house!

.


----------



## Steve Divi

Great progress Dmoney.


----------



## Dmoney

humble_pie said:


> dMoney you are such a modest person that i don't suppose the record you are about to set has even occurred to you.
> 
> but here it is. Still only barely past your mid-20s, you are far & away the youngest millionnaire cmf forum has ever seen.
> 
> there was no luck, no lottery winning, no big inheritance, no rich uncle or fairy godmother in your story. Instead you started from scratch. You moved to toronto, landed a good job, rolled up your sleeves, worked hard & made a string of extraordinarily smart decisions.
> 
> champagne for when you sell the house!
> 
> .


And here I was thinking you were the humble_pie among us!
Thanks for the kind words!

Definitely a lot of hard work involved in the first $500k, but for the next leg up, the record run-up in TO house prices definitely didn't hurt! Somewhat depressing that my house has made nearly as much after-tax money as I have over the same stretch of time... and it just sat there!

Listed a couple weeks ago, got a handful of offers, but none that blew me away. Well over ask, but not as high as some of the recent area comps. Going to hold off on selling it a little while as the Ontario housing measures have definitely had a bit of a cooling effect. Buyers are taking a wait-and-see approach.


----------



## Dmoney

Steve Divi said:


> Great progress Dmoney.


Thanks!

I've been keeping tabs on your journal and you're doing quite well yourself! Great monthly gains


----------



## james4beach

You seem to be doing great, congrats! I add the following, not to downplay your achievements here but to provide new ideas to consider.

You're investing in the stock market with leverage, since you have loans (a mortgage). This amplifies the gains/losses in stocks. Overall, you benefited from a very strong period in the stock market -- this is quite lucky. I know you're shooting for income but you still have a basket of stocks... whether they are dividend stocks or not, their value fluctuates with the broad market and it's a huge part of your net worth.

What's really telling, actually, is your gap posting your updates. You posted an update for Nov 2014 and then you didn't post an update again until March 2016. This is important... that period corresponds precisely with the weak period in the TSX
http://stockcharts.com/h-sc/ui?s=XIU.TO&p=D&st=2014-01-01&en=2017-01-01&id=p82081518997

Here's what I read into this: your losses in stocks were painful. You saw some big declines in your net worth and it probably didn't feel great. We've all been there.

I suggest you think about what happens when we get into a prolonged bear market in stocks. Down periods in stocks can easily last 2-3 years, and at times in history have lasted for much longer, even 10+ years.

My concern for you is that, because of your leverage, you have amplified your exposure to stocks and might feel some serious pain if we have a bear market. You've already experienced a 20% decline in stocks and you probably saw how badly it hit your net worth.

Maybe now, at these all time stock highs, is a good time to consider how much exposure you want to stocks.


----------



## Dmoney

james4beach said:


> What's really telling, actually, is your gap posting your updates. You posted an update for Nov 2014 and then you didn't post an update again until March 2016. This is important... that period corresponds precisely with the weak period in the TSX
> http://stockcharts.com/h-sc/ui?s=XIU.TO&p=D&st=2014-01-01&en=2017-01-01&id=p82081518997
> 
> Here's what I read into this: your losses in stocks were painful. You saw some big declines in your net worth and it probably didn't feel great. We've all been there.


You could be right... This period followed on two back-to-back $15k NW declines, which definitely didn't feel great!
I also started a new job in Dec. 2014, which was my main focus at the time, but also conveniently let me ignore the NW progress for a period of time. 
There really was a dead period of more than a year where NW was pretty much flat... If I remember correctly, I think I was recording it but not posting here.



james4beach said:


> I suggest you think about what happens when we get into a prolonged bear market in stocks. Down periods in stocks can easily last 2-3 years, and at times in history have lasted for much longer, even 10+ years.
> 
> My concern for you is that, because of your leverage, you have amplified your exposure to stocks and might feel some serious pain if we have a bear market. You've already experienced a 20% decline in stocks and you probably saw how badly it hit your net worth.
> 
> Maybe now, at these all time stock highs, is a good time to consider how much exposure you want to stocks.


I think I've got the temperament and long-term view to stick with stock exposure... maybe just not to post the carnage here :highly_amused:
I'll definitely try to stick with it and avoid any suspiciously timed gaps in the future!

If/when I sell the house, that'll be a huge cash infusion, and will eliminate all leverage. I'm pretty comfortable with my leverage for a couple of reasons. 
Mainly, it's backed by an asset that is worth twice the debt, based on firm offers I've received. 
Second, my cost of ownership, all-in (mortgage, taxes, utilities, maintenance etc.) is only ~$1,000/month more than if I were to rent a 1br downtown (my preferred alternative if I sell). 
Third, my mortgage rate is sub-2% - in my mind, it would be a huge mistake to pay off this debt when the alternative is to invest it in market with expected returns of ~7% over the long run. 

The 2014 pull-back definitely taught me a number of lessons in terms of diversification across stocks, sectors and geographies, which I've been putting into practice since. Interestingly enough, over that entire period (September 2014 - Jan 2016, which includes those two -$15k months and the most recent negative month), my NW was essentially flat all-told. There were ups and downs along the way, but over 17 months, NW increased by 1,800. 
See NW chart below with entire history.


----------



## humble_pie

james4beach said:


> You seem to be doing great, congrats! I add the following, not to downplay your achievements here but to provide new ideas to consider.
> 
> You're investing in the stock market with leverage, since you have loans (a mortgage). This amplifies the gains/losses in stocks. Overall, you benefited from a very strong period in the stock market -- this is quite lucky. I know you're shooting for income but you still have a basket of stocks... whether they are dividend stocks or not, their value fluctuates with the broad market and it's a huge part of your net worth.
> 
> What's really telling, actually, is your gap posting your updates. You posted an update for Nov 2014 and then you didn't post an update again until March 2016. This is important... that period corresponds precisely with the weak period in the TSX
> http://stockcharts.com/h-sc/ui?s=XIU.TO&p=D&st=2014-01-01&en=2017-01-01&id=p82081518997
> 
> Here's what I read into this: your losses in stocks were painful. You saw some big declines in your net worth and it probably didn't feel great. We've all been there.
> 
> I suggest you think about what happens when we get into a prolonged bear market in stocks. Down periods in stocks can easily last 2-3 years, and at times in history have lasted for much longer, even 10+ years.
> 
> My concern for you is that, because of your leverage, you have amplified your exposure to stocks and might feel some serious pain if we have a bear market. You've already experienced a 20% decline in stocks and you probably saw how badly it hit your net worth.
> 
> Maybe now, at these all time stock highs, is a good time to consider how much exposure you want to stocks.





what a pompous preachy message. Damning-with-faint-praise it is. Rooted in jealousy it is. Wrongfully stalking posters with twisted personal chart interpretations it is.

it's obvious that the diary poster here is already taking down his sails & preparing ship for a squall. Me i am confident dMoney's yacht will be a winner at the end of the race. It wlll be fun, if dMoney continues to post, to look on & see what clever things he will decide to do next.

jas4 it would be more mature on your part to accept the fact that your penchant for low-return fixed income plus an obsession with laddering interest-bearing paper ever since you joined this forum several years ago, has left you far behind the successful equity investors. 

another way to look at the situation is that it could be time for james4beach to learn a lesson, not the other way around.

.


----------



## james4beach

humble_pie said:


> jas4 it would be more mature on your part to accept the fact that your penchant for low-return fixed income plus an obsession with laddering interest-bearing paper ever since you joined this forum several years ago, has left you far behind the successful equity investors.


I just asked him (as I ask others) if he is positioned in a way that he would be fine during a bear market. It's a valid question to consider.


----------



## james4beach

Dmoney: sorry, I didn't mean to make it sound like you should avoid posting gaps. Everyone gets busy with one thing or another. The important thing is that you are sticking to your plans, not that you're posting on the forum regularly. (The posts don't matter).

The gap made me wonder if you were in danger of abandoning your plans during a weak phase in the market.



Dmoney said:


> There really was a dead period of more than a year where NW was pretty much flat... If I remember correctly, I think I was recording it but not posting here. . . I think I've got the temperament and long-term view to stick with stock exposure... maybe just not to post the carnage here :highly_amused:


Great, that's the important part -- do you think you will be able to stick with your exposures, and it sounds like you will. Just to simulate how a bear market might affect you, I suggest running a "what if" scenario on something like a 40% to 50% stock market decline and see how it impacts your NW. It could be that you already did that a long time ago and are already prepared for the resulting swings in your NW.

You have great results here and you're doing very well!

humble_pie, as for your comment: Dmoney is using leverage, which is a risk factor. If a young investor came on here and said they were using leverage with large investments, we'd obviously point them to the dangers. When people with _mortgages_ do the same, often nobody warns them. I don't think there's anything wrong with me pointing out warnings to a young investor. I have invested through two bear markets and have encountered many people who wished that they understood just how exposed they were to stock market declines.


----------



## Dmoney

Sold 10x ENB puts this past week. $54 strike, July expiry, C$0.86 per contract. ~8.5% annualized premium yield. Happy to own the stock at $54 or keep rolling the puts.

Looks like my SLF covered calls will expire worthless ($52 strike), so will roll those out again. Maybe a $50 or $52 strike.

Considering writing the covered calls on Telus... Premiums have been pretty thin to date, but with the stock just shy of $46, I don't mind writing them right at $46 and getting called.


----------



## GalacticPineapple

humble_pie said:


> what a pompous preachy message. Damning-with-faint-praise it is. Rooted in jealousy it is. Wrongfully stalking posters with twisted personal chart interpretations it is.


Sounds to me like you're calling out another poster for a preachy and pompous message by being preachy and pompous yourself.


----------



## CalgaryPotato

I don't think we need the name calling, but I also don't agree that equating anyone that has a mortgage and does investing as being the same thing as doing leveraged investing.

If the idea is that your house should be paid off before you start putting any money away, doesn't that make pensions a bad thing (they are forcing a 10+% savings regardless of your financial situation)


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## mordko

I think the idea is that one shouldn't buy a house unless he can pay cash (which I don't agree with either).


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## houska

CalgaryPotato said:


> I ... don't agree that equating anyone that has a mortgage and does investing as being the same thing as doing leveraged investing.
> 
> If the idea is that your house should be paid off before you start putting any money away, doesn't that make pensions a bad thing (they are forcing a 10+% savings regardless of your financial situation)


If the shoe fits...  
I think it's fruitful to think of it, periodically, as leveraged investing, and see if that adds a useful perspective. Of course, leveraged investing is not bad per se...it's only bad if you aren't self-aware about it or don't have the stomach for it. (I say this as someone who has kept a mortgage around for close to a decade after not needing it, and while hardly significant now, it helped accelerate me to financial independence faster. Am I a leveraged investor? You bet. Is that necessarily bad - no.)


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## Nerd Investor

Just got caught up a little bit on this one, nice thread and great concept. I also track what I call "potentially sustainable portfolio income". 
Rather than actual income earned, I update the current annual dividend payouts of all my holdings, so it's a bit more forward looking. Basically, what could I expect to earn in a year with what I currently have. 

I also factor in the prior calendar year's option income (since that's a bit more volatile). In theory when that total income number is high enough, I should be able to call it quits!

Good luck on your journey, I'll be following more regularly from now on


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## canew90

Haven't followed the entire post, but did read several replys. Going back to your initial statement:
"My main investment goal is to boost my "passive" income over time, so I'm going to try to post monthly charts showing the growth in my portfolio income. My strategy includes long positions in dividend paying stocks, covered call writing and cash secured (or margin secured) put writing. Going forward I'll adjust my strategy as I see what works and what doesn't, and as I learn more about options and the market in general."

Like your overall goal, but why not simplify the process as you are young, busy, have changed jobs, etc.
- Establish a set of criteria for the type of stocks which will help to achieve your long term goal
- Research and make a list of stocks meeting your criteria
- Invest regularly in those stocks over time
- Try to buy when they are value priced (as you've already done with your calls to buy)
- Re-invest the dividends, unless you would prefer to let the accumulate and buy at your choice
- Don't sell any of your holdings, unless a stock falls off your initial criteria of a good stock, hold for the rising income
- You don't need to look at other stocks, just the ones you've identified
- Ignore market adjustments, as in 2014, which just create buying opportunities


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## Dmoney

houska said:


> If the shoe fits...
> I think it's fruitful to think of it, periodically, as leveraged investing, and see if that adds a useful perspective. Of course, leveraged investing is not bad per se...it's only bad if you aren't self-aware about it or don't have the stomach for it. (I say this as someone who has kept a mortgage around for close to a decade after not needing it, and while hardly significant now, it helped accelerate me to financial independence faster. Am I a leveraged investor? You bet. Is that necessarily bad - no.)


I see where some people are coming from in terms of looking at holding mortgage debt while growing an investment portfolio as leveraged investing. On my part, it was definitely a conscious decision to take on as much debt as possible on the housing side, as it allowed me to maintain and grow my existing investment portfolio. Hindsight being 20/20, I can say I made the right decision, but to the risk-averse, it's never a bad idea to pay off any and all debt, for general peace of mind. My goal was to accelerate the wealth-building phase, which leverage has definitely assisted.

In my view, mortgage debt is significantly less risky than alternative options for investing. Terms can be locked in for 1-10yr periods, which means highly predictable cash flow over the term. The odds of a bank calling a mortgage (even if underwater) are slim to nil if payments keep coming in. Depending on the terms, payments can be very flexible, allowing for accelerated payment if so desired.

As long as rates stay where they are, I don't see any reason not to have a mortgage.


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## Dmoney

Nerd Investor said:


> In theory when that total income number is high enough, I should be able to call it quits!
> 
> Good luck on your journey, I'll be following more regularly from now on


That's the plan!
Or at least, have the ability to call it quits, and make my decision from a position of strength.

Thanks!


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## Dmoney

canew90 said:


> Haven't followed the entire post, but did read several replys. Going back to your initial statement:
> "My main investment goal is to boost my "passive" income over time, so I'm going to try to post monthly charts showing the growth in my portfolio income. My strategy includes long positions in dividend paying stocks, covered call writing and cash secured (or margin secured) put writing. Going forward I'll adjust my strategy as I see what works and what doesn't, and as I learn more about options and the market in general."
> 
> Like your overall goal, but why not simplify the process as you are young, busy, have changed jobs, etc.
> - Establish a set of criteria for the type of stocks which will help to achieve your long term goal
> - Research and make a list of stocks meeting your criteria
> - Invest regularly in those stocks over time
> - Try to buy when they are value priced (as you've already done with your calls to buy)
> - Re-invest the dividends, unless you would prefer to let the accumulate and buy at your choice
> - Don't sell any of your holdings, unless a stock falls off your initial criteria of a good stock, hold for the rising income
> - You don't need to look at other stocks, just the ones you've identified
> - Ignore market adjustments, as in 2014, which just create buying opportunities


I'm definitely working towards streamlining my portfolio somewhat over time. But in the near term, I enjoy paying regular attention. My job still revolves around capital markets, so I'm knee-deep in this stuff 24/7 and I find it interesting and educational. 

To create a true "Passive" strategy, ideally I'd like to have enough $$$ to throw it all into a few ETFs that give me a global "couch-potato" type portfolio that generates enough income without regular maintenance. But in the growth-stage, I definitely want to try a more active approach. I find the options juice my returns by a couple % each trade, which makes a big difference in the long run. 

I'd like to create a portfolio, similar to your suggestion, of 10-20 stocks that make up the core of my portfolio, based on stability, staying power, growth potential, which I can add to regularly. I'm a fan of financials, telecoms, utilities, power producers - anything with a regulatory buffer, pricing power and/or long-term contractual cash flows. I aim to add positions in these sectors over time, which will be core "forever" holdings.


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## canew90

Dmoney said:


> I'd like to create a portfolio, similar to your suggestion, of 10-20 stocks that make up the core of my portfolio, based on stability, staying power, growth potential, which I can add to regularly. I'm a fan of financials, telecoms, utilities, power producers - anything with a regulatory buffer, pricing power and/or long-term contractual cash flows. I aim to add positions in these sectors over time, which will be core "forever" holdings.


By building and adding to just those above, the safest and most reliable DG stocks, I believe that in the long run you'll not only achieve your goal, but have created your own income generating etf without having to carry all the other stocks which don't add much, regardless how low the fees are. I'd avoid the cyclical, high yield, and over-diversifying and in the long term you'll be way ahead.


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## Walksing

Hi canew90, you had a very good insight on long term wealthy building from investment. do you have an example of safest and most reliable DG stock list?
Dmoney , I am inspired by your posts and your option strategy. looking forward to watching your progress and learning from it.


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## millmillmillion

Don't want be a A**hole but with that portfolio and income to back it up you are doing very poorly .
At 450k you should be pulling in atleast 5k a month realized gains from divided and option trading ( 7k would be an okay monthly return).


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## canew90

Walksing said:


> Hi canew90, you had a very good insight on long term wealthy building from investment. do you have an example of safest and most reliable DG stock list?


For good Ave yields, 6 Major banks, 3 utilities, 3 pipeline, 3 comm. Those would be a good starting point.
For lower yield but LT growth CNR and Metro


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## canew90

millmillmillion said:


> Don't want be a A**hole but with that portfolio and income to back it up you are doing very poorly .
> At 450k you should be pulling in atleast 5k a month realized gains from divided and option trading ( 7k would be an okay monthly return).


If you are suggesting $5K/mo or $60k/yr on $450k that would be 13% yield. Not likely even if all his holding were purchased Mar 2009.


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## millmillmillion

If he had bought spy since 2012 (when he started the diary )kept adding to it he would have outperformed his current portfolio by atleast 30%.
13% return isn't hard to achieve using dividend/ options 
If you look at his portfolio not only he is holding cash but he isn't using his margin to boost his return. A 0.5% a month on a million dollar would give him 5k a month .


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## Dmoney

millmillmillion said:


> Don't want be a A**hole but with that portfolio and income to back it up you are doing very poorly .
> At 450k you should be pulling in atleast 5k a month realized gains from divided and option trading ( 7k would be an okay monthly return).


Tell you what... I'll give you 2 and 20 to manage my $450k if you hit your 5k/mo hurdle. Hell, make it 4 and 40, I'm still getting a bargain with your rock star returns.
Kind of you to grace us with your presence Mr. Buffett - shocked Berkshire can get by without you.


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## Dmoney

Net worth update as of May 30: $533,500 down $2,700 or 0.5% vs April

*Assets:*
Cash: $30,900 (+$2,700) 
Unregistered: $335,700 (-$9,500) 
TFSA: $61,200 (+$800) 
Defined benefit pension: $14,100 (+$1,400) 
House: $603,000 

*Liabilities:*
Mortgage: $511,400 (-$2,000)

$1,493 of dividend income - +23% on a trailing 12m basis
$860 of option income - running over $6k over the past year - probably a decent level based on my current holdings

Tough tape in May, but savings rate offsetting the market losses.

Consistent dividend/option income is nice to see.


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## humble_pie

Dmoney said:


> Tell you what... I'll give you 2 and 20 to manage my $450k if you hit your 5k/mo hurdle. Hell, make it 4 and 40, I'm still getting a bargain with your rock star returns.
> Kind of you to grace us with your presence Mr. Buffett - shocked Berkshire can get by without you.



it's interesting how they wash up onshore here. There was the guy who said he was from IB, he could easy get 10% from covered writes, year after year after year after year.

now this guy looking for 14.66% per annum, also sustainably, from options & dividends .each:

me i think a key to dMoney's success with options - long-term success - year after year after year after year success - is the relaxed attitude. Everything is under control. If perchance dMoney is going to be super-busy at work for a few months, he can dial down the option trading. No harm done.



.


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## damaaster

Dmoney said:


> Net worth update as of May 30: $533,500 down $2,700 or 0.5% vs April
> 
> *Assets:*
> Cash: $30,900 (+$2,700)
> Unregistered: $335,700 (-$9,500)
> TFSA: $61,200 (+$800)
> Defined benefit pension: $14,100 (+$1,400)
> House: $603,000
> 
> *Liabilities:*
> Mortgage: $511,400 (-$2,000)
> 
> $1,493 of dividend income - +23% on a trailing 12m basis
> $860 of option income - running over $6k over the past year - probably a decent level based on my current holdings
> 
> Tough tape in May, but savings rate offsetting the market losses.
> 
> Consistent dividend/option income is nice to see.


Hey just curious- why do you have 335k in an unregistered account but nothing in a registered account? I may have missed an earlier post about your age/situation - but struck me as odd.


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## Dmoney

damaaster said:


> Hey just curious- why do you have 335k in an unregistered account but nothing in a registered account? I may have missed an earlier post about your age/situation - but struck me as odd.


In a nutshell: flexibility and expectation that tax rates will go up

I have a TFSA because I like the idea of tax free growth, and never having to pay tax on withdrawals

I don't have an RRSP currently, because an RRSP is less flexible than an unregistered account, and I expect that taxation will be much more punitive on withdrawal than the up-front savings.


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## hboy54

Dmoney said:


> I don't have an RRSP currently, because an RRSP is less flexible than an unregistered account, and I expect that taxation will be much more punitive on withdrawal than the up-front savings.


I think I am falling into this trap in hindsight. My MTR the past 2 years was 31.x%. I don't think my MTR was often higher than that while working and putting money into my RRSP.

hboy54


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## Dmoney

hboy54 said:


> I think I am falling into this trap in hindsight. My MTR the past 2 years was 31.x%. I don't think my MTR was often higher than that while working and putting money into my RRSP.
> 
> hboy54


$30b/y in Federal deficit spending, over a decade of Liberals pissing away tax revenue, and increasingly socialist governments as time goes on, I don't see tax rates declining anytime soon. 

Wouldn't be surprised if they come for TFSA money next somehow


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## Dmoney

Sold the house for ~$1m, so will be seeing a big jump in NW in coming months. Will wait until the deal closes and money is in the bank before counting it in NW.
Decent outcome, though had I listed a few weeks earlier, it likely would have sold for far more. Definitely a big win either way.

Should nearly double size of my investment portfolio, so as a result, portfolio income should double as well. 

Next step is relocating to a cheaper R/E market, possibly buying a place for 1/3 the price.


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## Dmoney

Net worth update as of June 30: $540,100 up $6,600 or 1.2% vs May

*Assets:*
Cash: $32,100 (+$1,200) 
Unregistered: $337,300 (+$1,500) 
TFSA: $62,300 (+$1,100) 
Defined benefit pension: $15,500 (+$1,400) 
House: $603,000 (have actually sold it now for >$1m, but leaving at cost until the deal actually closes)

*Liabilities:*
Mortgage: $510,100 (-$1,300)

$1,260 of dividend income - +24% on a trailing 12m basis
$600 of option income - options activity down a little. I still have a few positions that I'm writing against off and on. Will likely step up a little when I get the proceeds from the house.

I'll be getting a significant cash injection in the next couple of months, assuming the house closes without any issues. Will mean a big one-time bump in net worth, which is nice to get. I plan to invest the entire proceeds, which should mean a big bump in monthly income as well. 
Right now I'm running at ~18-20k of annual portfolio income (give or take, depending on options activity); proceeds of house sale should double it. 

I'm looking at some places in a much cheaper market where I plan to move, hopefully by year-end. Likely spend something in the ~$400k range.


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## humble_pie

by extremely rough ottoh calculation, you'll have something like an extra $500M once the mortgage is closed, no?

are you truly planning to dump all that cold-turkey-lock-stock-&-barrel-no-holds-barred into duplicates of the existing portfolio?

gosh, it would take me a year to invest an extra 500k. One of the reasons i don't invest on margin is that i already have so much trouble investing the cash that accumulates anyhow, it would overwhelm to be borrowing on margin as well ...

btw the 18-20k includes actual dividends, not taxable dividends, i imagine? so when the deal settles you might anticipate 35-40k, which might translate to 50-60k taxable income. Of course less if you buy a new dwelling. Still, that is serious taxes when combined with earned income.


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## Dmoney

Roughly $500k, less transaction costs, which reduce that figure pretty handily. Should be closer to $450k when it's all said and done. 
I'll be taking my time putting the money to work, and will likely invest gradually over several months or more as opportunities arise. Likely will increase my put selling to get into positions as time goes on. Composition of portfolio likely won't change significantly, but I will probably add new positions, and maybe some index ETFs for broad market exposure. 

18-20k is actual dividends/option premiums, so yes, investment income tax will become a consideration. I should be ok for the coming year if I move for work, as I can write off all costs associated with selling the house and moving (well in excess of 60k when the dust settles), but will be a factor going forward (particularly if my employment income takes a hit post-move). I suppose as far as problems go, it's a good problem to have. 

Unfortunately, there's not a whole lot I can do. Even an RRSP would only protect ~10% of my portfolio based on the existing room. I'll have to hop over to the "Taxation" thread and get some pointers on minimizing my tax burden going forward...


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## humble_pie

.

glad to hear you're moving slowly.

you'll have good dividend tax credits & i don't believe you are near the AMT trigger point yet, even if you were to invest all the new funds, so all seems well on the dividend front.

on 2nd thought the tax consequences appear to be less heavy than a first glance might suggest.

you mention you'll have substantial moving deductions for the first year.

if it were myself, i think i might move to an intense put-selling strategy for something like a couple of years, while keeping the new funds mostly liquid to cover most of the puts (there are ugly pitfalls to depending on margin to bail out a put-seller if markets collapse, as you probably know) (it's more prudent to keep cash to cover)

they say that returns from short puts = returns from covered calls. Meanwhile, taxation of the option writes (the puts) will be the most favourable of all, ie capital gains taxable at 50% only.

another thing that would ease the tax situation will be the anticipated purchase of a new home. Investing $400-500k in a tax-free vehicle such as another personal residence will reduce taxable investment income from that capital (alternatively, you could mortgage, keeping the capital as stock market invested securities, then paying the increased taxes) (or any combination, such as large down payment plus smaller mortgage)

i can think of a couple of tax strategies, one tame, the others on the wild siide.

tame: make sure your TFSA is maxed, i believe the maximum contribution to date is $52,000.

wild: do both your parents have maxed TFSAs? is your relationship sound enough that you know you will eventually inherit, beyond a shadow of a doubt? if a) no & b) yes, you could give your parents sufficient funds to set up/max out their personal TFSAs. For you, it would be a way of increasing TFSA capability beyond the personal max limit today of $52,000.

however there would be cautions. You & presumably the 'rents are still young, so it's impossible to know what their senior years might bring. You might find yourself, 20 or 25 years hence, choosing to lose your TFSA "inheritance" by supporting withdrawals by the 'rents that would provide them with better medical care or better housing.

wildest of all: i certainly don't mean to intrude or ask any questions, but if there might be wedding bells in your future, you might gift an amount to the gf's TFSA ... 

.


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## Dmoney

humble_pie said:


> if it were myself, i think i might move to an intense put-selling strategy for something like a couple of years, while keeping the new funds mostly liquid to cover most of the puts (there are ugly pitfalls to depending on margin to bail out a put-seller if markets collapse, as you probably know) (it's more prudent to keep cash to cover)


This is my most likely course of action to invest the funds; write the "cash-secured" puts, and as they are assigned, build the portfolio



humble_pie said:


> another thing that would ease the tax situation will be the anticipated purchase of a new home. Investing $400-500k in a tax-free vehicle such as another personal residence will reduce taxable investment income from that capital (alternatively, you could mortgage, keeping the capital as stock market invested securities, then paying the increased taxes) (or any combination, such as large down payment plus smaller mortgage)


On the new home front, I'm juggling two options. 1) put down 5% and remain fully invested, or 2) pay 100% cash and pull 80% out to invest 
Option 1 means more capital invested, option 2 means the 80% borrowed is tax deductible
I'm comfortable with $400k of debt, given a) current rates, and b) my current asset base




humble_pie said:


> i can think of a couple of tax strategies, one tame, the others on the wild siide.
> 
> tame: make sure your TFSA is maxed, i believe the maximum contribution to date is $52,000.
> 
> wild: do both your parents have maxed TFSAs? is your relationship sound enough that you know you will eventually inherit, beyond a shadow of a doubt? if a) no & b) yes, you could give your parents sufficient funds to set up/max out their personal TFSAs. For you, it would be a way of increasing TFSA capability beyond the personal max limit today of $52,000.
> 
> however there would be cautions. You & presumably the 'rents are still young, so it's impossible to know what their senior years might bring. You might find yourself, 20 or 25 years hence, choosing to lose your TFSA "inheritance" by supporting withdrawals by the 'rents that would provide them with better medical care or better housing.
> 
> wildest of all: i certainly don't mean to intrude or ask any questions, but if there might be wedding bells in your future, you might gift an amount to the gf's TFSA ...
> 
> .


I think the folks have maxed out TFSAs, and both are still working and will have bullet-proof DB pensions in retirement, so not much to be gained there as far as I know.
My TFSA is also maxed, so no wiggle room (RRSP is empty, but I don't like the tax on withdrawal)

The "wildest of all" is actually the best opportunity, and one I'm reading up on extensively. We are common-law already, and the bells will be tolling soon, so looking at the ins and outs of joint finances is top of mind.

I just have to wrap my head around all the rules with respect to attribution etc.


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## humble_pie

Dmoney said:


> The "wildest of all" is actually the best opportunity, and one I'm reading up on extensively. We are common-law already, and the bells will be tolling soon, so looking at the ins and outs of joint finances is top of mind.
> 
> I just have to wrap my head around all the rules with respect to attribution etc.




re the bells, what wonderful news. Mille félicitations!

re attribution, it was my uninformed belief that gifts to persons of major age have no attribution strings attached. One gives, the funds & all income derived from the funds become immediately taxable in the donee's hands.

loans are a different story, a lender needs to declare interest income at the prescribed CRA rate i believe. There may be more complications. For example, if one "gives" a sizable amount of money to a mate but has a pre-nup specifying that one will get all the funds back in the event of divorce, would that really be an outright gift or would it be a gift with strings attached? 

perhaps one should text Eclectic - cmf's resident tax wizard - for enlightenment.


.


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## nobleea

I think it's fantastic the position you are in, after many years of hard work and dedication. You're in an enviable position.

But a massive windfall and huge jump in your NW really shows a lack of proper forecasting on your house value. To me, this is like being happy when you get a massive tax return. In my mind, there should never be a large step change jump in a net worth, unless you win the lottery, which would be a true windfall. Or maybe an inheritance. One of the previous owners of this site tracked his net worth and shared it on his blog on his goal to a million dollars. A few months before his target date, he was quite short and then revealed that he had a 200K corporate account that was never mentioned. Tracking networth seems a pointless excercise unless everything is marked to market and everything is included.
Having a proper value on the house would have meant all the questions and research you are doing now would have already been done.


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## humble_pie

nobleea said:


> I think it's fantastic the position you are in, after many years of hard work and dedication. You're in an enviable position.
> 
> But a massive windfall and huge jump in your NW really shows a lack of proper forecasting on your house value. To me, this is like being happy when you get a massive tax return. In my mind, there should never be a large step change jump in a net worth, unless you win the lottery, which would be a true windfall. Or maybe an inheritance. One of the previous owners of this site tracked his net worth and shared it on his blog on his goal to a million dollars. A few months before his target date, he was quite short and then revealed that he had a 200K corporate account that was never mentioned. Tracking networth seems a pointless excercise unless everything is marked to market and everything is included.
> Having a proper value on the house would have meant all the questions and research you are doing now would have already been done.




there are many authorized & authentic methods of calculating net worth. The supreme court has not ruled on this one yet.

some parties do not include residences, vehicles or personal property in net worth at all. As best i can recall, dMoney was including his house at purchase price. That is a most reasonable & prudent approach imho.

it is not true that doing things *your way* would have prepared answers to the questions & research that is going on at present. On the contrary, earlier fantasy plans for the investment of cash that had not even materialized yet - might, in fact, never materialize - would have been a waste of time.

i'm rallying here because the forum attracts a fair number of serious & intelligent young people who want to set up their lifetime financial plans. DMoney's thread is a near-perfect role model example for young newcomers here.

a significant part of the appeal is that this young person never anticipated, never swaggered, never bragged, in fact seemed almost surprised by his success.

noblea, your own successful diary thread is also an excellent role model for young new investors. Surely you wouldn't be hesitant to share the spotlight & the laurel crown with dMoney?

.


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## Dmoney

humble_pie said:


> re the bells, what wonderful news. Mille félicitations!


Thanks! Couldn't be happier!



humble_pie said:


> re attribution, it was my uninformed belief that gifts to persons of major age have no attribution strings attached. One gives, the funds & all income derived from the funds become immediately taxable in the donee's hands.


As far as I know, this is the case, the only exception being spousal gifts (ie. gifts to adult children, siblings, friends etc. are not subject to attribution). Apparently the objective is to avoid a form of income splitting. 



humble_pie said:


> loans are a different story, a lender needs to declare interest income at the prescribed CRA rate i believe.


This will ultimately be a path we likely explore once we get our financial house in order. One spouse lends to the other at the prescribed rate (1% currently), declaring the interest income; the borrowing spouse can write off the interest expense against investment income, which should exceed the prescribed rate.


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## Dmoney

nobleea said:


> I think it's fantastic the position you are in, after many years of hard work and dedication. You're in an enviable position.
> 
> But a massive windfall and huge jump in your NW really shows a lack of proper forecasting on your house value. To me, this is like being happy when you get a massive tax return. In my mind, there should never be a large step change jump in a net worth, unless you win the lottery, which would be a true windfall. Or maybe an inheritance. One of the previous owners of this site tracked his net worth and shared it on his blog on his goal to a million dollars. A few months before his target date, he was quite short and then revealed that he had a 200K corporate account that was never mentioned. Tracking networth seems a pointless excercise unless everything is marked to market and everything is included.
> Having a proper value on the house would have meant all the questions and research you are doing now would have already been done.


It's been no secret that Toronto house prices have been rising rapidly since I bought (late 2012), but there are a few reasons I didn't "mark to market" each month (or at all for that matter):
1) *Difficult to do* - An illiquid asset that is only worth what someone is willing to pay, each house has significantly different attributes, so comparables are difficult to find.
2) *More than just market value needs to be factored in* - If I'm marking to market, then I should be reflecting potential selling costs (realtor fees, legal etc.), forecasting whether I buy another place and reducing MV by those costs (LTT costs, legal fees on purchase, moving costs, storage etc.). This is similar to the way I account for my pension contribution, factoring in future tax obligation on the market value. Too much work!
3) *Value changes drastically month to month and year to year* - With a single asset of this value marked to market each month, my NW journey would pretty much just be tracking the TO housing market. If you had asked me what the value was in March, pre-Ontario Fair Housing Act, I would have told you >$1.2m vs. actual sale price of ~$1m. That kind of delta over a one or two month period doesn't make sense to me in the context of tracking my progress. 
4) *I never viewed the house as an investment* - I had intended to stay put for a long time, which means the equity would have been locked in for years, and irrelevant to my overall financial health unless I refinanced. 
5) *I like to be conservative* - There are many views on how to calculate NW. Some exclude principal residence entirely. I disagree with this, as equity in a home is a real asset. But, on the flip side, I didn't want to get too aggressive projecting the potential equity in my home beyond the paydown of mortgage principal. 

That said, over the years, I've commented about data points on the way up (relatively comparable sales in the area, higher appraised value, overall market), but at that stage I never had any intention of selling, so carried simply at cost. Now that I'm close to finalizing a sale, I'll be crystalizing the gain once it's actually realized. Once it's actually cold hard cash, I can't ignore the value.

Given my compensation structure, my monthly NW changes are often lumpy, as roughly half of my total pay comes in two chunks, skewing the numbers materially. I also often end up with decent sized tax refunds, once more due to the compensation structure, and inefficient (over)taxation of large lump sums. This year or next, I may be able to claim back a significant amount of moving expenses against my taxable income, resulting in another large refund, but until I'm certain of the magnitude, I won't be counting any amount.


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## nobleea

hp, Dmoney, honestly, I think you're doing great. Way better than I was when I was in your position.

In regards to your 5 pts above, I think almost all those reasons are why one should have a market based house value in the net worth. I mean we input our investments in the net worth down to the dollar - primarily because it's easy to access. You mentioned the value changes drastically month to month and year to year. This is true of equities as well. It doesn't matter whether you view your house as an investment - I don't either. But it is an asset. And now that you have unlocked the equity - it did turn out to be an investment (even if it was just luck).
I believe that if you have large jumps in your NW (due to compensation structure), then you should change the frequency at which you report/track your net worth, not the way it is measured.
Net worth is essentially the book value of your 'company'.


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## LXG

Nobleea, how do you find a market value for your house? I had my house appraised a couple of years ago for a separation, but it may or may not be worth the same amount today. Do you use your property tax assessment? Or some other data?


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## nobleea

LXG said:


> Nobleea, how do you find a market value for your house? I had my house appraised a couple of years ago for a separation, but it may or may not be worth the same amount today. Do you use your property tax assessment? Or some other data?


Almost any realtor will let you sign up for a 'new listings' email blast. I do that for our neighbourhood, plus some of the surrounding ones. I keep track of comparable houses that come up and note when they get a price drop or a relist. I look at the average list to sales percentage. Local RE blogs will publish this. You can figure out a pretty close amount based on that. If you have a realtor friend, they can pull a list of offer amounts and selling prices on a house that you think is a comparable. I've used property tax assessments for basing a starting offer for when I buy tear downs. It's usually 10% over that, at least that's what it takes an ambivalent owner to consider selling.
I just find it odd (general comment) that some people will know their bank and CC balances to the dollar, but couldn't come up with a number for their house value that's within 100K of it's actual value. People move and sell far more often than they think they will, so knowing the value is not a trivial pursuit.


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## LXG

That makes sense. A local realtor puts a blurb in our monthly neighbourhood newspaper with some stats, so I have a rough idea of what a house like mine would sell for, probably within $100k.


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## nobleea

LXG said:


> That makes sense. A local realtor puts a blurb in our monthly neighbourhood newspaper with some stats, so I have a rough idea of what a house like mine would sell for, probably within $100k.


I would hope people would know the value within 5% or better.


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## Dmoney

nobleea said:


> I mean we input our investments in the net worth down to the dollar - primarily because it's easy to access. You mentioned the value changes drastically month to month and year to year. This is true of equities as well. It doesn't matter whether you view your house as an investment - I don't either. But it is an asset. And now that you have unlocked the equity - it did turn out to be an investment (even if it was just luck).


Difference is stock market investments have an active, liquid market, with a clear market value at the end of each day, and minimal frictional transaction costs. Property, not so.
Either way, I have been tracking my NW the same way since the beginning, so I'm comfortable with the way it's done. My preference is monthly data points based on existing holdings, rather than too much guesswork.
Ultimately, my goal is to grow passive income, so actual NW is really secondary.


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## humble_pie

nobleea said:


> I've used property tax assessments for basing a starting offer for when I buy tear downs. It's usually 10% over that, at least that's what it takes an ambivalent owner to consider selling ...
> 
> knowing the value [of a house] is not a trivial pursuit.




noblea there's a big difference between a person whose investments consist of market-traded securities plus a home & a person such as yourself who is a part-time or full-time real estate builder/contractor/entrepreneur.

we didn't realize you had branched out into buying tear-down properties, then constructing new homes. Or if you mentioned this already, i missed it. 

congratulations on the new business. I think you'd be very successful at it & the quality of the homes you build is no doubt far superior to the quality of similar-appearing dwellings. I remember the long saga, in your own thread, of how you built your own present house, everything from choosing an especially attractive lot to designing the garage-with-loft, etc.

i'm sure a lot of folks like myself read your thread with awe. You've mentioned you're an engineer in real life. Every step of the way, as you researched & designed your home, you were showing your engineering talents. This kind of heating system vs that kind of heating system, these windows vs those windows, etc.

it was all a big education for us! thankx for posting!

it doesn't surprise me that you're repeating the performance as a business. Lucky edmonton. As i say, the noblea homes are likely to be superior, intelligent homes.

the above being said, your accounting would be vastly different from that of an ordinary investor with an RRSP, some non-registered securities plus a dwelling. You would want market prices for your business inventory of properties under development.

myself i'm only an ordinary investor with anxiety about hammers, screwdrivers & saws. I don't include any dwelling among assets, although i have a vague idea of its value & i include the same in net worth.

noblea if you feel inclined, perhaps you'd consider starting a new thread about this new business venture, the buying of tear-downs? 

last & most importantly of all, to dMoney, please be kind enough to accept a thousand apologies for intruding on your thread.

.


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## Dmoney

humble_pie said:


> last & most importantly of all, to dMoney, please be kind enough to accept a thousand apologies for intruding on your thread.
> 
> .


That's quite alright!
Keeps things interesting between monthly updates!


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## Dmoney

A few trades this past week:

Was assigned 1,000 ENB shares from the puts I had written. $54 entry point.
Turned around and sold 10 covered calls for $0.80, $54 strike - $800 in proceeds. Not ideal, but still gives me a potential low double-digit annualized return if exercised.
Rode EIF from $21.40, all the way up to $45, then back down to sub-$30 under pressure from shorts and increased competition and other issues. Got lucky enough to get out at $32.50, so ultimately made some money, but could have been much better.

RY covered calls expired out of the money, so I'll roll those out sometime next week most likely. Most likely the $96 strikes, decent premiums and I'm happy with that exit point.


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## humble_pie

dMoney i think you've got the germ of a great idea for a hedge fund for new millionnaires wondering what to do with all their cash. The only catch is that they require low-income partners or low-income adult children.

high net worth HNW lends a big chunk of cash to low net worth partner LNW, who pays the prescribed 1% interest to HNW but gets to deduct it. LNW then invests the cash in a HISA at 2%.

LNW will likely pay no income tax on that net 1% income. After all, on $500k the taxable income after deducting carrying charge will be only $5,000.

meanwhile HNW proceeds to sell OTM puts. On the theoretical $500k, he should realize 5-8% per annum. His put income is favourably taxed, only half is actually taxable.

taxwise, the other neat thing is that HNW is not being taxed on interest income from the cash, because the cash is being held in the partner's hand.

it's the short put aspect that requires the LNW partner to invest in HISA only. If any puts are exercised, enough cash to cover has to be quickly available.

it's all good. HNW gets richer & saves on taxes. LNW gets richer too.

.


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## Dmoney

Would it not be better to have the LNW (under the assumption that they are also lower income) individual writing the puts?
Even taxed at just 50%, is it not better to have the income generated by the LNW/lower income individual?

Would the ideal setup not be to have the HNW individual's only investment income be in the form of a loan at 1% (taxed at 50%), while the LNW individual's investment income comes in at 5-8% and is taxed favourably (50% inclusion), at 30% vs 50%?

I'm trying to iron out all the ins and outs as this will be my situation shortly. 
I have a higher net worth relative to partner, but I'm also usually in or close to the highest tax bracket.


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## humble_pie

^^

i shall have to think about this overnight but my first reaction is _Wow u are brilliant_


ps (small question) if HNW lends to LNW & receives 1% interest, why would this be taxed at only 50%? isn't all interest taxed at 100%

_edit: i think i got it ... you are referring to HNW's marginal tax rate? but the int income itself is fully taxable at MTR i believe ..._


pps one drawback i see for the hedge fund concept - which has to have broad appeal - is that not all spice desire to enrich their partners so lavishly


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## Dmoney

humble_pie said:


> ps (small question) if HNW lends to LNW & receives 1% interest, why would this be taxed at only 50%? isn't all interest taxed at 100%
> 
> _edit: i think i got it ... you are referring to HNW's marginal tax rate? but the int income itself is fully taxable at MTR i believe ..._
> 
> 
> pps one drawback i see for the hedge fund concept - which has to have broad appeal - is that not all spice desire to enrich their partners so lavishly


Correct - ~50% is the HNW's marginal tax rate - not to be confused with the 50% inclusion rate on capital gains.

I suppose that any loan would remain an asset on the HNW's "balance sheet" so the enrichment is only coming by way of higher investment returns earned by LNW at the expense of the HNW who receives just 1%.

Still, would prevent the HNW from growing NW over time. You'd really want to be taking a family approach to wealth and not concerned with who gets what as long as the sum of the parts is optimal.


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## humble_pie

Dmoney said:


> Still, would prevent the HNW from growing NW over time. You'd really want to be taking a family approach to wealth and not concerned with who gets what as long as the sum of the parts is optimal.



it is indeed the "family approach to wealth" that is the most exciting thing here. Ignoring the nickel & dime aspects, over time the net worths & incomes of the 2 partners would grow towards parity. As would their financial knowledge.

by that time presumably there would be children in the family. Kids = gigantic expenses. Whopping.

but as financial equality drew closer, either parent would be able to contribute equally to the kids' upkeep. Either parent would be able to pay for the summer music camp, the new roof, the last-minute weekend escape to paris ... the freedom & the flexibility would be dynamite.

dMoney it might be early days yet as you thrash out your details, but this is such a strong & healthy idea that i'd love to see it get more publicity. It could be part of every financial planners' repertoire. How are we going to get you a profile in the globe & mail.


.


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## Dmoney

humble_pie said:


> it is indeed the "family approach to wealth" that is the most exciting thing here. Ignoring the nickel & dime aspects, over time the net worths & incomes of the 2 partners would grow towards parity. As would their financial knowledge.


At the end of the day this is the number that matters once lives/finances are merged.
All about optimizing family net income/net worth.



humble_pie said:


> dMoney it might be early days yet as you thrash out your details, but this is such a strong & healthy idea that i'd love to see it get more publicity. It could be part of every financial planners' repertoire. How are we going to get you a profile in the globe & mail.


God no!
The CMF regulars is one thing, getting picked apart by the good folks on the G&M comment section I can do without!!


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## Dmoney

Couple options trades this week:

Sold 6x RY covered calls; October $96 strike for $1.30
Sold 10x SLF covered calls; October $50 strike for $0.41

Option revenue is tracking around $700/month at the moment which is a decent sustainable level.
Will likely trend higher once house sale closes and my portfolio grows.


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## Dmoney

Net worth update as of July 31: $539,800 down $400 or 0.1% vs June

*Assets:*
Cash: $30,800 (-$1,300) a lot of expenses related to selling house/moving/temporary accommodation
Unregistered: $337,000 (-$300) 
TFSA: $60,900 (-$1,400) 
Defined benefit pension: $17,000 (+$1,500) 
House: $603,000 (last monthly update before the deal is scheduled to close; fingers crossed it all goes as planned!)

*Liabilities:*
Mortgage: $508,900 (-$1,300)

$1,790 of dividend income - a new monthly record, and +31% on a trailing 12m basis
$730 of option income - options running at a steady clip; have room to sell a put to get into a new position. I'm considering BAM but the options market is not very deep on the name.

Great to see the dividend income growing steadily. I'll be losing out on monthly income of $175 from sale of EIF earlier this month. Will look to replace that income with a stock with less hair on it. Might not replace all of the cash flow, but will sleep better at night.

House is scheduled to close in August. Hopefully it goes off without a hitch and the next NW update is a big one!


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## humble_pie

Dmoney said:


> $730 of option income - options running at a steady clip; have room to sell a put to get into a new position. I'm considering BAM but the options market is not very deep on the name ...
> 
> House is scheduled to close in August. Hopefully it goes off without a hitch and the next NW update is a big one!




alas there is no other word for BAM options, they ess you see kay. I usually sell em in US market but they only go up by $5 increments (market not liquid) (a $5 increment makes it difficult to roll options forward & either up or down)

be careful with the numbered irregular BAM options. BAM1s in the US, BAM4s in canada. These are carrying extra cash-in-lieu as part of the deliverable. CAD $12.54 per contract in the case of the BAM4s.

last i looked, all montreal exchange was opening (aprils for example) were BAM4s. Nobody is going to trade BAM4s so this suggests to me that m-x is perhaps looking to delist BAM options.

US exchanges have introduced regular BAM options, ie without the cash-in-lieu deliverable.

always trouble, administratively speaking, with BAM shares/options. Meanwhile stock dawdles along, not doing much. I put up with it all because the company looks sound as a dollar, well-managed, alternative investments, global positioning.

.


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## Dmoney

I do love the stock for the global real asset exposure it provides, and the growing income stream.
Seem to have missed the uptick over the last little while, and was hoping to get in with a put assignment in the low to mid $40s (C$)
I've been looking at BIP for a little while now, but I seem to have missed the boat there as well.

A little busy with work at the moment, but with the cash from the house now in the account, I'm going to be looking to put some money to work over the next few months.


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## Dmoney

Net worth update as of August 31: $943,000 up $403,000 or 74.7% vs July

*Assets:*
Cash: $79,100 (+$48,300) some of proceeds of house sale
Unregistered: $785,000 (+$448,000) rest of the proceeds from the house sale - majority is sitting as cash in my brokerage account
TFSA: $60,400 (-$500) 
Defined benefit pension: $18,400 (+$1,400) 
House: $0!!! Sale closed as expected

*Liabilities:*
Mortgage: $0!!! (-$508,900)

$1,088 of dividend income - trending well, and this figure will grow in the coming few months as I put the proceeds from the house sale to work
$701 of option income - continuing with the covered call strategy on some underlying positions, I'll be writing puts to get into some positions in the next few months, so the option figure should be quite a bit higher over the next little while

Huge net worth jump this month as I closed on the sale of my house and also got my bonus paid out. Big relief that the sale went through without a hitch given the way the Toronto housing market seems to be going recently. Lots of horror stories of buyers backing out of transactions and sellers left holding the bag. 

Next step is investing the proceeds. I'll likely focus on Canadian blue chips and probably also put a good chunk into an S&P500 ETF and maybe a global ETF to diversify my geographic exposure. Hard to pull the trigger at the moment with the market at or near all-time highs. Don't mind being a little patient here, and getting into positions through sale of put options.


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## peterk

Awesome! Glad it all got settled. Can you give us the realtime lowdown on "buyers backing out of transactions and sellers left holding the bag"? Did you get your asking? Were there low ball offers? How was your realtor's attitude towards entertaining offers and the urgency of selling or not?

For S&P 500 are you considering the HXS swap ETF? I'd perhaps like to start using it for further US investing since registered accounts are full. Savings on dividend tax would be significant in an unregistered account.


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## Dmoney

peterk said:


> Awesome! Glad it all got settled. Can you give us the realtime lowdown on "buyers backing out of transactions and sellers left holding the bag"? Did you get your asking? Were there low ball offers? How was your realtor's attitude towards entertaining offers and the urgency of selling or not?


I listed right around the peak - late April. I was a few weeks late for the absolute peak hysteria and FOMO that we saw at the very beginning of this year's buying season. At the time the strategy that was getting the best bids was to list well below market. Saw places going from anywhere between $0.9m and $1.3m depending on size, features, quality etc. I was hoping to get something around $1.1m, but listed at $0.8m which was consistent with most of the list prices in the area.

Market had started to cool with the fair housing nonsense from the Ontario government as well as federal and municipal level governments talking the market down. Offer night had a good handful of offers. All were above ask, but ranged from $0.85-1.0m. Held off and relisted at $1.1m, ended up getting an offer a little lower than that, went back and forth and in the end found some issues with the house and sold for a little over $1.0m - enough that I was happy that I held off and waited for better.

No lowball offers, and I didn't personally experience any issues with the closing or buyers backing out - had just heard the number of busted transactions was increasing so it was on my mind. I would definitely say that the realtor was getting increasingly urgent the longer I held out. Mostly because my main motivation to sell was price, not necessity, and the more it looked like prices were dropping, the more desperate the realtor was getting to close the deal. Didn't matter if I was out $100k, as long as the realtor got _something_ out of it. 




peterk said:


> For S&P 500 are you considering the HXS swap ETF? I'd perhaps like to start using it for further US investing since registered accounts are full. Savings on dividend tax would be significant in an unregistered account.


I was looking at the iShares unhedged ETF (XUS), but haven't decided yet. I definitely want something that's unhedged, and would be more than happy with a USD version as long as it was Canadian listed and considered a Canadian security for tax purposed. Have to do a bit more research. Any recommendation?


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## Dmoney

Wrote a couple of put options today:
SNC - December $52 strike for $1.25/ - $1,250 gross proceeds
MFC - October $22 strike, $0.18/ - $360 gross proceeds

Overall, a rough day in the market so took advantage of the tough tape and wrote out a few put positions
Looks like option income may run >$1,000/month for the next little while as I put the house proceeds to work
Combined with dividend income that is trending >$1,500/month for the last 6 months, my portfolio income is running at ~$30k annually
Should see the dividends pick up over the next year or so as I fully invest my cash, and the options will hopefully continue to the be icing on the cake


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## Dmoney

Wrote another round of puts today
10x BAM (C$ on TSX), $46 strike, $0.45/ - $450 gross proceeds


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## Dmoney

Active again this past week on the options front:
15x NPI puts, $23 strike, November for $0.35
10x SAP puts, $42 strike, November for $0.85

I've got outstanding options that would put ~$275k to work if all get assigned. 
At the moment, roughly $100k worth are in the money (BCE/NPI), so I'll keep rolling them over if they don't get assigned.
I've got ~$450k of cash in my brokerage account from the house sale, so I'll likely write put options on a few more stocks to put the majority of this cash to work. I'm still mulling the idea of an S&P500 ETF as well as ETFs representing global developed markets and maybe emerging markets.

It's still a little early to see the full impact of the major cash injection on my portfolio income, but I'm guessing that dividends will probably be ~$24k annually by the end of this year, and over $30k once the cash is fully deployed. Option income is running pretty high right now (in September alone I've sold over $4,000 worth) but that will likely shrink as I get assigned over time.


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## humble_pie

Dmoney said:


> I've got outstanding options that would put ~$275k to work if all get assigned.





:eek2:

i had roughly the same negative dollar exposure via puts in late 2008/09 as the market collapsed. At the time i had about 20 naked put positions. At least half, perhaps 2/3 of them, went ITM. Some of them very DITM.

in late '08 i phoned a friend with decades' experience in the option brokerage biz. What can i do _now_ i wailed. I mean i had short bmo $40 puts & stk was crashing in the high $20s & experts were saying going to cut the dividend aftert 125 years, canada's stuffiest stodgiest old bank is a goner now ...

friend said (we could hear the implosions & the crashings & the demolitions going on all around us), Well, you could start by buying a few puts back to close, you'll feel better.

then he gave me the formula that i've posted here enuf times that it's become a cmf classic for option traders: Look at your DITM put bid, if it's less than intrinsic value, that put is at risk of early assignment, he said.


* * * * * 

i promptly worked my friend's formula on my 20 positions & it turned out that only 3 of them were at any real risk. Only three! such good news, i bought them back. In the end, throughout the entire crash of 08/09, the only puts that got exercised delivered 1000 shares of ING bank to me @ a cost of $20, while stk was languishing in the low teens.

all this by way of saying something that dMoney knows perfectly well in his brain, although he probably doesn't feel it in the bones & the blood because he's too young to have experienced it ...

if we get a massive global financial collapse - nuclear war or something - a quarter-million-dollar high-strike put portfolio is going to look brutal

on the other hand if the planet doesn't collapse it's going to look like warren buffett Gen3



.


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## peterk

Dmoney said:


> I was looking at the iShares unhedged ETF (XUS), but haven't decided yet. I definitely want something that's unhedged, and would be more than happy with a USD version as long as it was Canadian listed and considered a Canadian security for tax purposed. Have to do a bit more research. Any recommendation?


HXS isn't hedged. I think maybe it was in the past at some point and they changed it? Conflicting info on the internet... Also Canadian domiciled so no T1135, if that's a worry (not for me, yet). Though with a 1.5% yield these days you're not looking at a huge tax bill anyways, and maybe the swap exoticness risk isn't worth it. At 100k invested and 40% tax the bill would be $600/year with XUS and $300/year with HXS.

Bonds on the other hand are a bit more compelling to look at HBB instead of XBB, with almost 3% interest payments.

Despite all time highs the S&P 500 is down ~7% in CAD cause of the crazy fast exchange rate, I think I'll buy a bit. Will probably also get rid of some of this 3% interest unregistered cash and buy HBB. I'm getting sick of these heavier T5s every year...


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## Dmoney

humble_pie said:


> if we get a massive global financial collapse - nuclear war or something - a quarter-million-dollar high-strike put portfolio is going to look brutal
> 
> on the other hand if the planet doesn't collapse it's going to look like warren buffett Gen3
> 
> .


The way I look at it, if I wasn't writing the puts, I'd have already bought the underlying stocks at market price.
Given I've got the large cash position to cover all the options (and more), I look at the puts no differently than I would if I were simply long the stock.

In almost every case, my ideal outcome would be for each stock to trade $0.01 below strike price on the strike date, which would result in assignment, and the best options premiums when I turn around and sell the covered calls. 

Though I also wouldn't mind $0.01 above strike price, which would allow me to continue selling the naked (cash-secured) puts, again with the highest possible premiums. 


Here's hoping for Warren Buffett 3.0!!


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## Dmoney

peterk said:


> HXS isn't hedged. I think maybe it was in the past at some point and they changed it? Conflicting info on the internet... Also Canadian domiciled so no T1135, if that's a worry (not for me, yet). Though with a 1.5% yield these days you're not looking at a huge tax bill anyways, and maybe the swap exoticness risk isn't worth it. At 100k invested and 40% tax the bill would be $600/year with XUS and $300/year with HXS.
> 
> Bonds on the other hand are a bit more compelling to look at HBB instead of XBB, with almost 3% interest payments.
> 
> Despite all time highs the S&P 500 is down ~7% in CAD cause of the crazy fast exchange rate, I think I'll buy a bit. Will probably also get rid of some of this 3% interest unregistered cash and buy HBB. I'm getting sick of these heavier T5s every year...


I'm definitely looking for 1) Canadian domiciled and 2) C$ listing for tax/simplicity. Despite the C$ pullback, I'm still a little hesitant to jump into the S&P500 at these levels, even unhedged. I know market timing isn't easy, but psychologically, these levels are scary!

On the bond front, my fixed income exposure is exceptionally low, which I'm fine with at this point. If rates keep rising though, I'll definitely be revisiting that philosophy!


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## humble_pie

Dmoney said:


> In almost every case, my ideal outcome would be for each stock to trade $0.01 below strike price on the strike date, which would result in assignment, and the best options premiums when I turn around and sell the covered calls.





but we are not talking about the same thing!

i believe you are talking about the classic textbook strategy. [email protected][email protected], etc.

this works fine in choppy sideways markets with sedate stocks like Telus, that trade within predictible bands.

but i am talking about black swan events, which happen oftener than one would think. Individual stocks crater by 50%. Markets plunge. Banks fail. The global financial system collapses. Bankruptcies explode. Retail investors panic to sell, so the bear momentum increases amid pandemonium.

in black swan scenarios, there are no call options to sell. Margins are destroyed. Even 100% cash-covered accounts collapse 40-50%.

dMoney surely you remember GOB's classic thread on your very same put-selling strategy. It would become the most entertaining, heaviest-viewed option thread cmf forum has ever seen. GOB's thread had another appealing characteristic, which was the camaraderie & the goodwill amongst all the thread members. All the best option traders flocked to GOB's thread.

the Gobster commenced selling AAPL puts in 2012, at a time when AAPL was nearing $700 pre-split. It would be a small pilot project in a separate account, with only one short put to begin with, he explained. For a while, GOB liked to swan around selling $680/690 puts.

dMoney you yourself took part in that thread so you should be able to remember the black swan event that happened. Soon, AAPL would plunge to $400 pre-split. GOB - who by that time had progressed to selling 2 puts at a vertigo-inducing $690 strike - even though poor pie tried to warn him as the crash commenced - GOB lost absolutely everything.

it was the most picturesque option thread north america had ever seen.


http://canadianmoneyforum.com/showt...come-Portfolio?p=138031&viewfull=1#post138031


.


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## Dmoney

humble_pie said:


> it was the most picturesque option thread north america had ever seen.
> 
> 
> http://canadianmoneyforum.com/showt...come-Portfolio?p=138031&viewfull=1#post138031
> 
> 
> .


That it was!

I do remember the thread, and at the time I followed it from start to finish, from lucrative beginning to spectacular flameout!

If I remember correctly, GOB was taking on a huge amount of risk because it was only a fraction of a larger investment portfolio and strategy. 

I think the two big differences (going from memory here) between the two approaches are (1) GOB's single-stock approach, and (2) willingness to have outstanding options positions that were massive relative to the underlying portfolio value.

You're 100% correct in that a portfolio loaded with cash-secured puts will drop by the same 40-50% as the rest of the market in the black swan situation. My challenge, which is the same challenge for any investor in that scenario, will be to hold on tight and avoid panic selling.


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## humble_pie

Dmoney said:


> I do remember the thread, and at the time I followed it from start to finish, from lucrative beginning to spectacular flameout!
> 
> ... My challenge, which is the same challenge for any investor in that scenario, will be to hold on tight and avoid panic selling.





ok teasing aside ... there's a huge difference between your put strategy & the Gobster's.

you will have cash on hand to pay for all stock if puts are assigned. I'm fairly sure that you won't become tempted by all that new margin (although some folks might) & you won't be one to start whittling down the cash too much, as you go along.

let's go back now & look at GOB's situation. He actually had hedged perfectly, in that he established his initial put position in a new account at a completely different broker. For safety reasons, GOB left his mother investment account intact at his original broker, then deposited (i'm recalling here & it's been 5 years, so a detail or 2 might be off) $20,000 in cash to secure the margin in a brand-new option account he opened at Interactive Brokers.

GOB then sold 1 put that was close-to-the-money. AAPL was in the high 600s, nearing $700. He would, GOB told us confidently, promptly start selling a call if he would be assigned 100 shares of AAPL under his short put contract. Voilà, the storybook prince-trapped-in-the-castle thread was launched.

as the narrative worsened, GOB got shaken up with his first margin call. He deposited another $20k at IB to improve his margin position, which meant that the most he ever had at risk was $40,000.

still, things went from bad to worse. As you say, a spectacular, flaming, crashing end.

btw we have witnessed a mini-version of the GOB story more recently here in the forum. One party whom i shall not identify (very nice guy but imho not quite enuf option experience yet) also set out with the sell-puts-turn-around-sell-calls scenario. He - also confidently - told the forum that he had researched & chosen a tiny list of quality stocks that had fallen upon hard times. If his puts got exercised, he would be delighted to own the underlying stocks that would be put to him, he assured cmf readers.

the stage now being set, he then sold $15 puts in RIG. At the time RIG was around 15, but the worst that would happen in the oil patch had not yet happened. RIG itself was to plunge to $8.

it was the same narrative as the Gobster, on a micro-scale. I can't remember whether i ever warned him - as oil stocks crashed - to roll down! roll down to a lower put strike! roll down to $12 puts!

it wouldn't have mattered anyhow. When did hothead option traders ever listen to an auld phart .each: 

what did our RIG friend in was selling $110 puts in AAPL just as the stock was plunging to the low 90s. Then he failed to roll his strike price down. Then the Apples were assigned @ $110. Oh dear, that was the end of our Rig/Apple put trader .each:

on a serious note, i for one do not believe that new option traders understand how *ghastly stricken* they are going to *feel* when stock plunges to $400 & they are short $690 puts. Or when stock plunges to $8 & they are short $15 puts.

myself, i could cheerfully tolerate holding a carefully-chosen stock that i'd paid $690 for, while a bear market would batter it down to $400. I'd also be calm & cheery if my equally-carefully-chosen $15 stock plunged to $8 in a bear market. In fact, in both cases, i might even top up my position by buying a few more shares while prices dragged in the trough.

where i would feel rattled would be to sell $690 puts in a bright & cheerful world, _then be forced to pay $690 while the stock itself had crashed & was trading at $400_. It's a purely psychological thing. It's all totally in the mind.

but do you see the difference? or rather, can you feel the difference?




.


----------



## Dmoney

humble_pie said:


> ok teasing aside ... there's a huge difference between your put strategy & the Gobster's.
> 
> you will have cash on hand to pay for all stock if puts are assigned. I'm fairly sure that you won't become tempted by all that new margin (although some folks might) & you won't be one to start whittling down the cash too much, as you go along.


This is probably the biggest risk to my strategy - I'm not averse to taking on leverage, but it's got to be prudent. Previously I was comfortable with my margin creeping up to 20-30%+ of portfolio value, when portfolio was significantly smaller, and I was confident in my ability to quickly repay the debt with employment cash flow. Now the idea of taking on $200-300k of margin debt is beyond my comfort level.

On the other hand, I would be less concerned about taking out another large mortgage with a longer fixed term in order to remain fully invested. The aspect of margin investing that I dislike is the potential for a margin call. 



humble_pie said:


> on a serious note, i for one do not believe that new option traders understand how *ghastly stricken* they are going to *feel* when stock plunges to $400 & they are short $690 puts. Or when stock plunges to $8 & they are short $15 puts.
> 
> myself, i could cheerfully tolerate holding a carefully-chosen stock that i'd paid $690 for, while a bear market would batter it down to $400. I'd also be calm & cheery if my equally-carefully-chosen $15 stock plunged to $8 in a bear market. In fact, in both cases, i might even top up my position by buying a few more shares while prices dragged in the trough.
> 
> where i would feel rattled would be to sell $690 puts in a bright & cheerful world, _then be forced to pay $690 while the stock itself had crashed & was trading at $400_. It's a purely psychological thing. It's all totally in the mind.
> 
> but do you see the difference? or rather, can you feel the difference?
> 
> .


Agreed. I can see the difference, but have yet to feel the difference. I would think the psychology of having an obligation to buy an asset at a materially higher price than current market value would be quite different than simply being long a stock, despite the economics being the same.


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## Dmoney

Net worth update as of September 30: $957,300 up $14,500 or 1.5% vs August

*Assets:*
Cash: $80,400 (+$1,300) will probably put $50k into my brokerage account, but for now I've still got excess cash from house sale lying around
Unregistered: $797,000 (+$12,100) 
TFSA: $60,000 (-$900) 
Defined benefit pension: $19,800 (+$1,400) 

*Liabilities:*
$0


$2,078 of dividend income - cracked the $2,000 mark for the first time in dividend income. The increase comes from some new positions as well as a big chunk of interest from extra cash sitting in my brokerage account. 
$2,190 of option income - a new record, and just the second time option income has passed the $2,000 mark. Very active on the writing front, and will probably be as active or more so over the next few months.


Good month from a net worth point of view, steadily closing in on the flashy million dollar mark. At this point, it all depends on the stock market, which was the big driver of this month's gains. 
The more exciting thing is the big jump in portfolio income (options + dividends) now that I've got more capital to work with. At more than $4,000 in income this month, I'm running at more than 80% of my initial goal of ~$60k in annual portfolio income. While I'd like to see the more stable and predictable dividend income grow, this is a good start. Over the next few months, I actually expect the options income will come in higher. I've got 6 positions expiring in October, which I'll hopefully roll over. Beyond that, my current naked puts (full cash secured) represent ~$410k of buying commitments (many of which are actually quite far from the money); I've got another ~$100k of cash that I can either invest or write cash-secured puts against. 

Two of my covered call positions (RY @ $96 and SLF @ $50) are expiring in October and will likely be in the money. I'll be looking at either rolling these positions forward/up this month, or turning around and writing the put after assignment.


----------



## Dmoney

Rolled forward two sets of covered calls today.
Royal Bank calls were set to expire in October, $96 strike, stock trading above $98. Bought the Octobers back for $2.47 and sold a round of January calls for $3.30.
SunLife calls were also set to expire in October, $50 strike, stock trading closer to $51. Bought the Octobers back for $0.67 and sold a round of December calls for $1.40.

Overall, relatively happy with the outcome. Obviously this is a situation where holding the stock without the covered calls would have been better, but that's the shortfall of the strategy. Rolling the calls out allows me to 1) protect the dividend, and 2) avoid realizing a taxable gain.


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## humble_pie

Dmoney said:


> Rolling the calls out allows me to 1) protect the dividend, and 2) avoid realizing a taxable gain.




these were, i take it, same strike calls? the above would essentially be a mildly bearish strategy, then?

i am always super sincere about avoiding taxable gains. It's a priority that ranks far higher than the few extra pennies i might pick up in the meantime from rolling same strike options. In calls i would roll to a higher strike, even though this would mean going farther out in time.

ITM options in a stock that pays a high dividend can mean risk of early assignment just prior to an X date, in addition to the usual concern over assignment at expiration. In these neverending bull markets i have enough of these pests to look after. Enough that, when a market offers a painlessly profitable way to roll up in strike price & thus rescue a stock from assignment, i usually jump at the opportunity.

imho in roybank the jump opportunity was the april 98s, not the jan 96s.


.


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## Dmoney

humble_pie said:


> imho in roybank the jump opportunity was the april 98s, not the jan 96s.
> 
> 
> .


You are more than likely correct 

I was most concerned with protecting divvy and avoiding capital gains, but probably should have given more consideration to increasing the strike and locking in the extra $2 by taking it up to $98

Depending where the stock goes, I'll look to do this next time around.


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## humble_pie

.

no ing necessary here

this is the good thing about options, they are quick n easy to repair. Unlike stock trades, nothing is writ on stone.

quite often a rising market means that rolling short calls to higher strikes have to be done as debit spreads. To avoid being taken to the cleaners requires all the skills a poor pie can muster. This is why, when i can find a simple roll-to-higher-strike as a credit spread, i tend to jump on it with real enthusiasm. Managing the debit spreads is a pain.

btw i have a nifty strategy to prevent early assignment of a DITM short call in the days immediately prior to an X date. I worked it - the strategy - up myself. Have not seen it written up anywhere. Tentatively i'm calling it the hubbity hop. I'll impart it to you if you have any seriously DITM with important dividends at stake.

.


----------



## Dmoney

humble_pie said:


> btw i have a nifty strategy to prevent early assignment of a DITM short call in the days immediately prior to an X date. I worked it - the strategy - up myself. Have not seen it written up anywhere. Tentatively i'm calling it the hubbity hop. I'll impart it to you if you have any seriously DITM with important dividends at stake.
> 
> .


Nothing DITM at the moment... but the name alone has me intrigued.

When you are rolling options positions, how do you balance the higher option premium vs. higher potential capital gain?

Using my RY roll as an example, how do you value the extra $2 of potential capital upside (by rolling from $96 to $98) vs. the higher premium on the $96s vs the $98s?


----------



## humble_pie

Dmoney said:


> Nothing DITM at the moment... but the name alone has me intrigued.
> 
> When you are rolling options positions, how do you balance the higher option premium vs. higher potential capital gain?
> 
> Using my RY roll as an example, how do you value the extra $2 of potential capital upside (by rolling from $96 to $98) vs. the higher premium on the $96s vs the $98s?




in terms of dollars & cents, the premiums on the jan 96s & the apr 98s were almost identical. Both were strong positive credit spreads. The difference was the longer time span, an additional 90 days, ie the principal gets tied up for an additional 90 days. However in today's ultra-low interest rate environment, the imputed interest is not enough to discount the april premium by more than a few pennies. 

april 98s were meanwhile adding close to $2 to the notional value of the stock being held under short call. Plus - most importantly for me - the aprils would stave off assignment & prevent taxable gains, quite likely for several more months. Ah, comfort zone!

i'm an option trader who looks to do fewer trades, not more trades. These years i'm averaging 225 trades per annum, not willing to increase these because it's a comfortable pace & i don't wish to take on any more per trade time/management costs. I'm also at an expensive options commission broker (not IB) so this adds to the inclination towards fewer, more strategic trades.

it means that whenever i can go out 6-9 months, or even a year, plus improve the position at the same time, i'm happy. Because a particular position goes off the intensive care unit, goes instead to a low-maintenance recovery ward.

as for the humble hop, it's a a further development of the simple formula used to detect when an ITM or DITM option is at risk of early enhancement.

you'll remember how that works. When an ITM or - more typically - a DITM option bid is less than intrinsic value, that option is at risk of early assignment. These profiles normally occur just prior to X dates - a counterparty could exercise to grab the dividend - or else during complicated reorgs of the underlying stock.

i'll write up the humble hop soon. It's not an urgent piece of literature since you say you have no DITMs at risk these days & for the moment, all my positions are snoozing comfortably in recovery ward. But i have at least 8 or 9 stocks with DITM options, which means at least 32 to 36 dividends per year, which means fairly constant monitoring.

.


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## james4beach

Apologies, I haven't followed this whole thread, but I understand that the aim is to use options to enhance retirement income.

Does this result in a higher total return, though? I ask this because BMO's options ETFs (using a similar strategy) consistently perform worse than their non-options versions. e.g. ZWB has lower total return than ZEB.

Is the strategy being used here different than what BMO does?


----------



## Dmoney

humble_pie said:


> i'm an option trader who looks to do fewer trades, not more trades. These years i'm averaging 225 trades per annum, not willing to increase these because it's a comfortable pace & i don't wish to take on any more per trade time/management costs. I'm also at an expensive options commission broker (not IB) so this adds to the inclination towards fewer, more strategic trades.
> 
> it means that whenever i can go out 6-9 months, or even a year, plus improve the position at the same time, i'm happy. Because a particular position goes off the intensive care unit, goes instead to a low-maintenance recovery ward.


I might have to take a page out of your book with respect to fewer trades and longer positions. The RY roll was defensive in nature and not exactly fully thought out. I saw an opportunity to take it off my plate for several months and pulled the trigger.

Next time around I'll probably follow your lead and aim for a 6+ month roll and put it on the back burner for a while. 

As you pointed out upthread, the beauty of options is that there will be an upside.


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## Dmoney

james4beach said:


> Apologies, I haven't followed this whole thread, but I understand that the aim is to use options to enhance retirement income.
> 
> Does this result in a higher total return, though? I ask this because BMO's options ETFs (using a similar strategy) consistently perform worse than their non-options versions. e.g. ZWB has lower total return than ZEB.
> 
> Is the strategy being used here different than what BMO does?


At this stage, I'm still in the growth phase, so I'm hoping to enhance overall returns with options rather than specifically trying to enhance income. It's hard to say conclusively how I've performed vs. buy/hold index investing. I've got to admit, my performance tracking has been sub-par, I've bounced around a few different brokers, and the majority of the growth in my net worth has been from contributions, not portfolio growth.

What I have been tracking pretty religiously is 1) every option trade that I have executed, and 2) every dividend I have received. Over the past ~7 years, interestingly enough, the amount of each is almost perfectly even at $57k, and the aggregate total comes to just shy of $114k. That's roughly 1/4 of my total portfolio value if I exclude the one-time windfall from selling my house in August.

In terms of my strategy vs. the ETF equivalent, the big difference is flexibility. I think the shortfall of the covered call ETFs is that they are locked in to their specific strategy and must keep selling calls when the underlying is on the way down, and likely have difficulty rolling the calls up and out on the way up. I can pick and choose when to buy/sell, I typically initiate positions by writing naked puts, I'm not afraid to buy on margin, and I can go a long time without writing any options if I don't like what I see. 

I do, however, definitely want to see how my performance stacks up vs. the index over time, and will be making a bigger effort to properly track my performance over time. The only metric I have off-hand is my 2016 performance (provided by my online broker), which was 28.20% in the option account, and 22.35% in the TFSA. I know 2014 and 2015 were weaker, but I'd have to dig up my old brokerage statements to see actual #s.


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## james4beach

I understand. Performance tracking is very difficult, especially if you span multiple accounts. But I think it's a great idea to track yourself to get an honest read on how you're doing. As I described in this thread on worst investment mistakes, I actively traded for several years. I was up at times, down at other times, but only after about 5 years I really looked at my performance figures and discovered that I was just hurting myself.

These days I still do some non-index investing, but now I'm tracking things meticulously.


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## humble_pie

james4beach said:


> Apologies, I haven't followed this whole thread, but I understand that the aim is to use options to enhance retirement income.
> 
> Does this result in a higher total return, though? I ask this because BMO's options ETFs (using a similar strategy) consistently perform worse than their non-options versions. e.g. ZWB has lower total return than ZEB.
> 
> Is the strategy being used here different than what BMO does?




jas4 it's too bad you haven't followed the whole thread because it's a classic. What a young investor should do to get everything right.

most young investors won't be able to replicate dMoney's performance precisely since a) they won't have as high an income out of which they can take substantial savings; & b) they won't have or be able to develop dMoney's options ability.

still, the basic model is exceptionally sound. Also simple. It will work for all young investors imho. Goes: create a regular, disciplined savings routine. Buy high quality stocks, not necessarily for their dividends. Always buy these stocks at a 10-20% discount to market price by first selling puts.

dMoney elaborates to also selling calls against stock he owns, but this is an add-on to the basic approach.

the above has nothing in common with the options strategy used by covered call fund managers at BMO, at horizons betaPro & at quadrant for their DFN & DFN clone series of products, which have a popular following in this forum. Repeat: absolutely nothing in common. 

i've posted many times about what these funds - the so-called pros in the business - are doing with options that keeps undermining their strategy. It's a complicated critique & i feel that i've totally paid my dues in posting full details plus illustrations in this forum, so many times. Jas4 i'm a bit surprised that you didn't get it already.

dMoney alludes to the reasons for the funds' poor performance when he says they are boxed into a too-narrow repertoire of option strategies. This is their problem in a nutshell. 

basically they are selling too short a time period, at strike prices only one increment away from market. In a rising market - which is all we've known since the CC funds came into existence - they are getting assigned every 30 or 60 days. 

by definition, being assigned means that market prices are higher than the call option assignment strike prices. Yet each fund's binding legal mandate requires them to reinvest the proceeds of every assignment, at a loss, into new purchases of the very same stocks at higher market prices. This means acquiring fewer stocks with each round. This in turn means fewer call contracts that can be sold.

(picture, if you would, those ancient chinese line drawings that show dragons whirling in a circle to devour their own tails)

recently, quadrant revised their DFN prospectus so that they could buy & sell options on stocks other than the 15 TSX heavyweights which they claim are in their portfolio. 

jas4 if you think the above paragraph sounds a mite skeptical, you could be right. I am a mite skeptical.


.


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## OnlyMyOpinion

I've tried to follow the options comments HP. 
I've concluded that tracking my non-registered ACB seems a simple task in comparison - don't ever let anyone tell you its difficult! :friendly_wink:


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## james4beach

Dmoney said:


> In terms of my strategy vs. the ETF equivalent, the big difference is flexibility. I think the shortfall of the covered call ETFs is that they are locked in to their specific strategy and must keep selling calls when the underlying is on the way down, and likely have difficulty rolling the calls up and out on the way up. I can pick and choose when to buy/sell, I typically initiate positions by writing naked puts, I'm not afraid to buy on margin, and I can go a long time without writing any options if I don't like what I see.





humble_pie said:


> dMoney alludes to the reasons for the funds' poor performance when he says they are boxed into a too-narrow repertoire of option strategies. This is their problem in a nutshell.


Thanks for explaining this. Very interesting, so although their traders are options experts, they don't have the freedom to use the range of options strategies that you and Dmoney can use.


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## Mukhang pera

humble_pie said:


> jas4 it's too bad you haven't followed the whole thread because it's a classic. What a young investor should do to get everything right.


Too bad some of us did not have this thread and the benefits of hp's wisdom about 30 years ago.:smile-new:


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## Dmoney

james4beach said:


> I understand. Performance tracking is very difficult, especially if you span multiple accounts. But I think it's a great idea to track yourself to get an honest read on how you're doing. As I described in this thread on worst investment mistakes, I actively traded for several years. I was up at times, down at other times, but only after about 5 years I really looked at my performance figures and discovered that I was just hurting myself.
> 
> These days I still do some non-index investing, but now I'm tracking things meticulously.


I think this might be my weekend task!
Apparently my last brokerage account is still open, despite $0 balance since early 2015...
The annual performance numbers are there for 2012-2015
2012: +21.09%
2013: +18.91%
2014: -9.59%
2015: +14.58% (this number is wonky as I transferred all $$ out in February - I have to assume that it's an annualized figure which is meaningless... will dig deeper)

2016: +28.2%/+22.35% margin/TFSA

My homework now is to piece together the 2015 #...

Trying to get into my first account to get a glimpse of 2010/2011 but no luck right now


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## humble_pie

Dmoney said:


> I think this might be my weekend task!
> Apparently my last brokerage account is still open, despite $0 balance since early 2015...
> The annual performance numbers are there for 2012-2015
> 2012: +21.09%
> 2013: +18.91%
> 2014: -9.59%
> 2015: +14.58% (this number is wonky as I transferred all $$ out in February - I have to assume that it's an annualized figure which is meaningless... will dig deeper)
> 
> 2016: +28.2%/+22.35% margin/TFSA
> 
> My homework now is to piece together the 2015 #...




here's a thought that could spare all that work ...

all broker "performance" calculations, for any account that holds options, are 99.999% likely to be wrong.

don't get me wrong, the live quotes during trading hours are fine. But the "market prices" we see on the holdings pages - these are the prices that are utilized after hours to calculate performance, also gains/losses, even margin - in options, these prices are usually cuckoo beyond belief. Hopelessly distorted & unreliable.

it's the options exchanges in both canada & the US that fix each day's final data. They distribute the data - for example those sketchy "last prices" - to the quote vendors, who in turn sell on to the brokers. Thus the brokers are trapped, they have no choice but to use the distorted data.

pricing - on holdings pages, in performance calculators - is somewhat more accurate during trading hours, but only if an option trades. For the millions of illiquid options that do not trade, even daytime pricing is wonky. Even brokers with real-time margin calculation will be wonky.

an exception might be IB. They among all brokers would be likeliest to have an accurate or close-to-accurate pricing model.

dMoney with your knowledge & experience, you should be able to spot wonky option pricing (remember, we are not talking about live quotes) (we are talking about all the entries in the broker system that calculate performance etc). You usually have telus options, for example. These are often wonky due to illiquidity. How do you find?

illiquid brookfield options in both canada & the US would be notorious examples of wonk.

.


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## Dmoney

humble_pie said:


> here's a thought that could spare all that work ...
> 
> all broker "performance" calculations, for any account that holds options, are 99.999% likely to be wrong.


Yup... I wouldn't rely on the broker calculations without doing the work myself.
And I don't plan on going beyond annual returns using basic IRR calculations, simply tracking the portfolio value at Dec 31, any contributions, and the value the following Dec 31. 




humble_pie said:


> dMoney with your knowledge & experience, you should be able to spot wonky option pricing (remember, we are not talking about live quotes) (we are talking about all the entries in the broker system that calculate performance etc). You usually have telus options, for example. These are often wonky due to illiquidity. How do you find?
> 
> illiquid brookfield options in both canada & the US would be notorious examples of wonk.
> 
> .


Without live quotes, the pricing for most Canadian options is beyond wonky. BAM/T definitely among the worst of my holdings. That being said, the total value of options outstanding generally doesn't represent more than 1-2% of total portfolio value, so I'm not overly fussed on the "market" value that the broker assigns to my options at year-end.


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## Dmoney

Wrote puts on AVB - January US$175 strike, $4.30/contract, 3x contracts, for proceeds of US$1,290 (~C$1,600)
I've got several positions expiring tomorrow, likely all worthless barring any major moves.
I'll hopefully roll several of the puts out a little further, though some of the underlying stocks have moved higher than I'm comfortable with.
Some missed opportunities, where the underlying did way better than the options strategy, but that's the shortcoming of what I'm doing.
Portfolio income is very high due to all the options activity - I hope to keep up this pace until I am assigned enough underlying stock to chew through my cash position.


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## humble_pie

Dmoney said:


> Wrote puts on AVB - January US$175 strike, $4.30/contract, 3x contracts, for proceeds of US$1,290 (~C$1,600)


really? might you be willing to share what's so alluring about avalon bay





> Some missed opportunities, where the underlying did way better than the options strategy, but that's the shortcoming of what I'm doing


true. What i find over the years is that options in a mixed option/common stock portf will have a smoothing effect. They do limit the super-novae but during a market crash or correction, the option income compensates.

add to that the flexibility due to the fact that options can be paired, hedged, offset, bought back, traded forward or otherwise spun round & stood on their heads; & one has the surprising result that a well-optioned portfolio is less risky than a plain stock portfolio.

.


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## Dmoney

humble_pie said:


> really? might you be willing to share what's so alluring about avalon bay


I wouldn't say there is anything specifically _alluring_ about it, but after selling my house, I wanted to have some real estate exposure. I like the large, high quality US names, with coastal exposure, strong balance sheets, experienced management teams and diversified portfolios. They are not cheap, but these are markets where rents are high and growing (NYC/D.C./Bay area/LA/San Diego/Seattle/Boston). There are some supply concerns, but at the end of the day, demand is insatiable!

I also wrote a round of puts on EQR, same overall thesis as above.
GGP is slightly more contrarian, but they do own some fantastic real estate that will either survive as retail, or be repurposed. At multi-year lows, the downside risk is worth the juicy premiums.


----------



## humble_pie

Dmoney said:


> I wouldn't say there is anything specifically _alluring_ about it, but after selling my house, I wanted to have some real estate exposure. I like the large, high quality US names, with coastal exposure, strong balance sheets, experienced management teams and diversified portfolios. They are not cheap, but these are markets where rents are high and growing (NYC/D.C./Bay area/LA/San Diego/Seattle/Boston). There are some supply concerns, but at the end of the day, demand is insatiable!
> 
> I also wrote a round of puts on EQR, same overall thesis as above.
> GGP is slightly more contrarian, but they do own some fantastic real estate that will either survive as retail, or be repurposed. At multi-year lows, the downside risk is worth the juicy premiums.



good idea(s) ...


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## Dmoney

Net worth update as of October 31: $965,500 up $8,200 or 0.9% vs September

*Assets:*
Cash: $80,500 (+$100) 
Unregistered: $802,100 (+$5,100) 
TFSA: $61,700 (+$1,700) 
Defined benefit pension: $21,200 (+$1,400) 

*Liabilities:*
$0


$2,053 of dividend income - another month above $2,000. No new long positions, but the interest on my cash balance is included in this amount, and contributing $450/month right now. 
$4,490 of option income - blowing the lid off on the options premiums right now. Very active writing puts, looking to put my cash to work. As I get assigned the underlying stock, this figure will likely come down considerably, and the dividend income figure will rise.

Decent month overall. Portfolio income is really ramping up, coming in over $6,500 for the month. I don't see this level as sustainable, but will likely have a few more months in the $6,000-8,000 range until more of the excess cash is deployed.


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## Dmoney

Net worth update as of November 30: $977,200 up $11,700 or 1.2% vs October

*Assets:*
Cash: $79,600 (-$900) 
Unregistered: $812,800 (+$10,700) 
TFSA: $62,100 (+$400) 
Defined benefit pension: $22,600 (+$1,400) 

*Liabilities:*
$0

$1,254 of dividend income. Relatively low as my RY was called away, which would have been >$500. Still expecting this will pick up considerably over time as I get assigned on some options positions, and put my cash to work. 

$19,150 of total options sold, though it was a very anomalous month on that front. A big chunk of this relates to deep in the money puts I wrote on GGP takeout rumours, which have mostly played out, and a few at/in the money puts I wrote that generate much higher premiums than my typical out of the money writes. I'm hoping that over the next few months, some of these positions get assigned. Despite the big number, I wouldn't look at it as clean income given that a number of these positions are still in the money, and have a carrying value (liability) of ~$14,000


----------



## Dmoney

Net worth update as of December 31: $960,800 down $16,400 or -1.7% vs November

*Assets:*
Cash: $68,600 (-$11,000) 
Unregistered: $806,200 (-$6,600) 
TFSA: $62,000 (-$100) 
Defined benefit pension: $24,100 (+$1,500) 

*Liabilities:*
$0

$1,904 of dividend income. Picking back up again with a few new positions added over the last couple of months. 

$7,300 of total options sold, though still running a little high on the options income given that I'm still looking to deploy excess cash.

A lot of big events around the holidays. Moved cities just before year-end, landed a new job, gave notice at my existing job.
Burned through a big chunk of cash this month, with the move and wedding expenses starting to hit. Will be able to recoup significant move-related expenses, but not until 2018 tax time (early 2019).
2018 will be an expensive year, and the new gig doesn't pay the big semi-annual bonuses that I'm used to. That said, cost of living is substantially lower, which should be a partial offset.


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## Thal81

Hi DMoney, I'm wondering how you count your DB pension in your total assets. What does the 24.1k represent? The yearly annuity or buyback value?

To be honest, I'm in the same boat... I've got lots of liquid asset with a fat DB pension, but I don't count it towards my networth because it's not mathematically right, since the assets are an accumulated value, and the DB pension is a cash flow. My thinking is a DB pension reduces your safe withdrawal rate at retirement. Unless you take the cash back value and invest it, then it becomes part of your networth.

Anyways, I'm curious to know your thinking, cheers


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## Dmoney

Right now, I'm accounting for it based on the cash value I would (will) receive, multiplied by an anticipated tax rate.
Minimum cash value is 175% of my contribution, so my calculation is (contribution X 1.75 X 0.65)
Given that I am starting a new job at the end of the month, I will likely take the cash value and put it into an RRSP, at which point I will run the calculation as (actual cash value X 0.65)
I might change my thinking if I were to remain with the same employer for the long run, but given that I am actually leaving at the end of the month, I'll adjust my calc accordingly.


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## Thal81

I see, in that case it makes sense. Thanks


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