Oct 18, 2015 was option expiration date for the month of October. I wrote recently on the two companies that I recently sold put options on, which you can read about here and here. My put option in Roger's Communications Class B stock with a $42.00 strike price was not assigned.
When I sell a put option in company "A", I am obligated to BUY 100 shares of Company "A" before or at option expiration. The buyer of a put option is the choice to sell 100 shares of Company "A" at the strike price on or before expiration day.
My naked put option was assigned for TD Bank, which has ticker symbol TD on the Toronto Stock Exchange. The premium I received for the put option was $71.05 after commissions. My broker has an option assignment fee of $24.95.
Adjusted Cost Base = 100 shares *strike price - (option premium with commission ) + option assignment fee
= 100*$56.00 - $71.05 + $24.95
= $5553.90
Yield on Cost = annual dividend / ACB =$1.88/55.5390 = 3.385%
As of writing this post, TD trades at $53.67 a share. The option assignment adds $188.00 to my annual dividend income.
TD Bank has grown its dividend at a CAGR 6.5 % over the 5 years between 2008 to 2013. In 2009 and 2010, TD Bank did not increase its dividend due to the financial meltdown and the recession that happened. The other 5 major banks did not raise there dividend during this time as well. TD Bank also increased its dividend in 2014 already. The other Canadian banks have a CAGR of only 3.3% over the same 5 year span.
Disclosure: Long TD
EDIT: Feb 16, 2015 My option premium is now correct above. The premium was $0.82 per contract and not $1.00 per contract. So with commissions the premium including commissions is $71.05.
DISCLAIMER:
Monday, October 20, 2014
Sunday, October 19, 2014
Weekend Reading - October 19, 2014
Dividend Mantra recently published a post titled Create Your Own Miniature Berkshire Hathaway. Berkshire Hathaway is the investment holding company that is run by Warren Buffett as CEO and business partner Charlie Munger. Dividend Mantra currently has partial ownership in over 50 companies through the stock market.
Liquid Independence, over at Freedom Thirty Five Blog recently published a post about averaging down his position in Avigilon Corporation during the recent market pull back.
Mark, over at My Own Advisor, posted about it catching up with Canada's "youngest retiree" Derek Foster. Derek Foster left the rat race at the age of 34. A lot of people say Derek is not retired because he writes books and does speaker engagements. He is financially free and can choose to write books, do speaking engagements, or do whatever he wants with his time. That is what we are all after in the long run in having the CHOICE to do what we want with our time.
Aileron recently posted a video on his You Tube page titled, "It's Never Enough of a Good Fight". Aileron discusses why he loves the capital markets and the challenge of why things happen in the markets. Please note that Aileron is a dividend investor and trader.
Photo Credit : www.cafepress.com
Saturday, October 11, 2014
Recent Option Trades - Part 2
This is a follow up post on my two recent naked put option trades that I recently did. You can read about the 2 trades here.
For the TD put, there are 3 outcomes.
Option Premium : $82.00
Commission : $10.95
Net Option Received = $71.05
If the stock goes up, I make money with the option premium of $71.05.
If the stock goes sideways, I still make money with the option premium if $71.05
If stock goes down and put is assigned.
Adjusted Cost basis = $56.00*100+$24.95-$71.05
= $5553.90
ACB per share = $55.5390 / per share
Yield = annual dividend rate / ACB = 1.88/55.5390 = 3.385%
Buying the stock with no option
Cost = $5600+$4.95=$5604.95
Yield = annual dividend rate / ACB =$1.88/$56.0495 = 3.354%
I currently do not own this stock, but with the recent chaos in the market this option will likely be assigned as the price of the stock is less than the strike price. I also have the choice to buy back the put for a loss to close the transaction. As is shown above, the yield with the put option is higher than just buying the stock at $56.00. The option assignment fee is $24.95.
For RCI.B put option
Option premium = $70.00
Commission = $10.95
Net Option premium = $59.05
I can make this money regardless if the money goes up, down or sideways.
If stock goes up, I keep the $59.05/
If stock goes sideways, I keep the $59.05.
If the stock goes down:
Adjusted Cost basis = $42.00*100+$24.95-59.05
= $4165.90
ACB per share = $41.6590 / per share
Yield = annual dividend rate / ACB = 1.83/41.6590 = 4.393%
Buying the stock with no option
Cost = 4200+4.95=4204.95
Yield = annual dividend rate / ACB =1.83/42.0495 = 4.352%
I currently own 100 shares of RCI.B, so if this put is assigned it will lower my cost basis for this stock. Currently, RCI.B is trading higher than the strike price so there is a chance the put will not be assigned at expiration.
Note: Selling puts can be risky as the stock can fall a lot in value. As I plan on holding these stocks for the long term, I did not have insurance on these transactions.
Disclosure : Long TD, RCI.B
DISCLAIMER:
For the TD put, there are 3 outcomes.
Option Premium : $82.00
Commission : $10.95
Net Option Received = $71.05
If the stock goes up, I make money with the option premium of $71.05.
If the stock goes sideways, I still make money with the option premium if $71.05
If stock goes down and put is assigned.
Adjusted Cost basis = $56.00*100+$24.95-$71.05
= $5553.90
ACB per share = $55.5390 / per share
Yield = annual dividend rate / ACB = 1.88/55.5390 = 3.385%
Buying the stock with no option
Cost = $5600+$4.95=$5604.95
Yield = annual dividend rate / ACB =$1.88/$56.0495 = 3.354%
I currently do not own this stock, but with the recent chaos in the market this option will likely be assigned as the price of the stock is less than the strike price. I also have the choice to buy back the put for a loss to close the transaction. As is shown above, the yield with the put option is higher than just buying the stock at $56.00. The option assignment fee is $24.95.
For RCI.B put option
Option premium = $70.00
Commission = $10.95
Net Option premium = $59.05
I can make this money regardless if the money goes up, down or sideways.
If stock goes up, I keep the $59.05/
If stock goes sideways, I keep the $59.05.
If the stock goes down:
Adjusted Cost basis = $42.00*100+$24.95-59.05
= $4165.90
ACB per share = $41.6590 / per share
Yield = annual dividend rate / ACB = 1.83/41.6590 = 4.393%
Buying the stock with no option
Cost = 4200+4.95=4204.95
Yield = annual dividend rate / ACB =1.83/42.0495 = 4.352%
I currently own 100 shares of RCI.B, so if this put is assigned it will lower my cost basis for this stock. Currently, RCI.B is trading higher than the strike price so there is a chance the put will not be assigned at expiration.
Note: Selling puts can be risky as the stock can fall a lot in value. As I plan on holding these stocks for the long term, I did not have insurance on these transactions.
Disclosure : Long TD, RCI.B
DISCLAIMER:
Friday, October 3, 2014
Dividend Income - September 2014
The month of September 2014 is another month of dividend income landing in my accounts. This money is used to help pay my expenses if it is needed. If the money is not needed, it is ALL used to purchase new investments to further increase my cash flow.
Non-registered Account
- Killam Properties (KMP) - $5.75
- Shaw Communications (SJR.B) - $18.33
- Enerplus (ERF) -$ 45.63
- Just Energy (JE) - $86.38
- Tim Horton's (THI) 's $32.00
- Enbridge (ENB) - $2.43
- Killam Properties (KMP) - $ 14.20
- Dundee REIT (D.UN) - $ 16.61
- Cominar REIT (C.UN) - $5.39
- Boston Pizza Royalties Fund (BPF.UN) - $23.87
- Enbridge (ENB) - $11.55
- Claymore 1-5 yr Laddered Corporate Bond ETF (CBO) - $0.73
This total represents a 17.69% increase from 3 months ago and 48.05% increase year over year. Just Energy used to pay a monthly dividend. It was since reduced the dividend and switched to a quarterly dividend. This past month of September was the first time they paid there dividend quarterly. Some of my stocks I DRIP, so these companies paid slightly larger amount of dividends than before.
I also received another distribution payment of $56.00 for my swing trade in Dundee REIT in my non-registered account. This is not listed above since it is a trade, so I keep the money in the account and do not pay myself first with this payment. I have received $819.47 in distributions so far on this trade.
Another form of income I received was in the form of option premiums. I sold put options in Rogers Communications Class B stock and TD Bank. The net premium paid from these two put options is $130.10.
I will update my dividend income tab with the new amount.
Disclosure : Long all securities above.
Photo Credit: www.mipaq,co.za
DISCLAIMER:
Thursday, October 2, 2014
Portfolio Update - September 2014
The month of Sept 2014 is now behind us. The stock market keeps shown a bit of a pullback. The TSX composite index is down 5.50% over the last month as compared to the S&P 500 which was down
going higher and the S&P 500 which decreased 2.81 %. During the month I did a few transactions.
I sold my shares in Tim Horton's Inc after the news of the leveraged buyout by Burger King. Although this acquisition has not occurred as of today, the likelihood of it in the future is very high. I recently wrote a post on this sale. I also purchased shares in Bombardier Inc. Class B stock .
I sold 2 put options this past month of September. The first one was in Toronto Dominion Bank and the second one in Rogers Communications Class B stock. I currently own 100 shares of RCI.B. You can read about these put options here.
I made a small purchase in my TFSA with the small amount of cash that was sitting in the account. I decide to put it too work and took advantage of free commission ETF offered by my broker. I purchased 3 shares of Claymore 1-5 Yr Laddered Corporation Bond ETF on the Toronto Stock Exchange.
I also acquired 1 more share of Killam properties in my TFSA via DRIP at a cost of $10.41. Just Energy paid its first-time quarter dividend at the end of September. I acquired 16 shares at $5.23 of Just Energy though DRIP. Both of these DRIPs lowers my cost basis.
As of Oct 2, 2014, the value of my portfolio stands at $71885.58. This is an decrease of 4.376% over last month.
I have updated my investment account tab above.
Disclosure: Long KMP.TO, CBO.TO, RCI.B.TO, BBD.TO
DISCLAIMER:
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| Click to enlarge |
I sold my shares in Tim Horton's Inc after the news of the leveraged buyout by Burger King. Although this acquisition has not occurred as of today, the likelihood of it in the future is very high. I recently wrote a post on this sale. I also purchased shares in Bombardier Inc. Class B stock .
I sold 2 put options this past month of September. The first one was in Toronto Dominion Bank and the second one in Rogers Communications Class B stock. I currently own 100 shares of RCI.B. You can read about these put options here.
I made a small purchase in my TFSA with the small amount of cash that was sitting in the account. I decide to put it too work and took advantage of free commission ETF offered by my broker. I purchased 3 shares of Claymore 1-5 Yr Laddered Corporation Bond ETF on the Toronto Stock Exchange.
I also acquired 1 more share of Killam properties in my TFSA via DRIP at a cost of $10.41. Just Energy paid its first-time quarter dividend at the end of September. I acquired 16 shares at $5.23 of Just Energy though DRIP. Both of these DRIPs lowers my cost basis.
As of Oct 2, 2014, the value of my portfolio stands at $71885.58. This is an decrease of 4.376% over last month.
I have updated my investment account tab above.
Disclosure: Long KMP.TO, CBO.TO, RCI.B.TO, BBD.TO
DISCLAIMER:
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