Recent Trades

      During the last week, I noticed a stock went up by a large amount after the market opened on September 24. The price of the stock kept going up. The company is Agnico Eagle Mines Limited, whose ticker symbol is AEM. The stock trades on both the TSX in Toronto and the NYSE in New York.
 
  I decided to place a trade. I initiated a short position by placing a limit order at $34.05 for 100 shares.  The order was filled at $34.11. When shorting, you borrow shares from the broker and sell the stock. This money gets deposited into your brokerage account. The goal is to buy back the stock at a lower price. This action of buying back the stock is known as buy to cover.  The investor or trader pockets the difference after the commissions are accounted for.  When the buy to cover order is executed, then the shares are returned to the broker.
 
 On September 28, my buy to cover limit order was filled at $33.28.

Summary of First Trade

Selling Proceeds including commissions = $34.11*100-$5.30
                                                                  = $3405.70

Shares bought back = $33.28*100+$5.30
                                = $3333.30

Profit= $3405.70-$3333.30
         = $72.40


      On September 29, I placed a limit order to short 100 shares of stock at $33.80 per share of Agnico Eagle Mines Limited on the Toronto Stock Exchange. I closed this position (buy to cover ) at $33.19 per share.


Summary of Trade #2:

Selling Proceeds including commissions = $33.80*100-$4.95
                                                                  = $3375.05

Shares bought back = $33.19*100+$4.95
                                = $3323.95
                             
Profit = $3375.05-$3323.95
          = $51.10

 

Click to Enlarge

Conclusion: 

       I was profitable on both of these trades. I started with none of my own money.  Does this mean my rate of return is infinity? I came across the following formula on the internet (Source: http://thismatter.com/money/stocks/selling-short.htm)

Rate of Return on short sale = (Stock Sale Price - Dividends Paid - Stock Purchase Price) / (initial margin requirement)

The initial margin requirement is 1/2 the stock sale price. An initial margin requirement is required as a short seller must buy back the shares at some point and return them to the broker.

Rate of Return  For Trade #1 =( $3405.70-$0-$3333.30) / (0.5*3405.70)
                                                =  4.252%

Rate of Return For Trade #2 = ($3375.05 -$0 -$3323.95)/(0.5*3323.95)
                                              = 3.075%

The risk on a short position is infinity as the price of the stock can keep going up and up. With this in mind, I used bracket orders for both of these trades. These bracket orders consist of a stop limit order and a limit order to sell the position.  The stop limit orders caps my potential losses if the stock price keeps going higher. 

PLEASE NOTE:  Short selling as infinite risk as the stock price can go higher and higher. When in a short position, the short seller pays any dividends that are required to be paid. These dividends get paid to the broker and then the broker pays them to the required actual owner of the shares.

DISCLAIMER

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Recent Buy

     The REITs have been beaten down over the past several months. The price of a barrel of crude oil these days reeks havoc on economies that depend on oil.  In western Canada, oil plays a major role in the economies of Alberta, Saskatchewan and north eastern British Columbia. Some major oil players have there headquarters in Calgary. Some oil companies has been acquired or completely shut down as it is difficult for small companies to survive.
   
      Interest rates are really low right now. As it is cheaper to borrow money, REITs have been borrowing money to increase the size of their portfolios. I own units in 2 REITs (Dream Office REIT and Cominar REIT) and own shares in a real estate corporation Killam Properties. The low interest rates cause people to fear these REITs as interest rates will eventually rise. When mortgages come up for renewal, their interest rates will be higher for the mortgages that currently have low rates due to the present day rates.     
  
     On September 24, I purchased 47 units of Dream Office REIT (D.UN.TO) at $20.60 inside my TFSA. The total cost of the purchase is $973.31 including commissions. I averaged down on this position. The average cost basis of this new purchase is $20.71 per unit.  I turned the DRIP on for this position inside my TFSA as I can still lower my cost basis with each additional unit purchased.

Click to Enlarge

     The chart immediately above shows the share price has fallen 24.10% over the last year. As an investor, I try to be greedy when others are fearful. This chart also says Dundee REIT instead of Dream Office REIT. Dundee REIT is the old name of the REIT that was changed to Dream Office REIT during the last year. 

      Currently, Dream Office REIT is paying a  $2.24004 per unit annual distribution.  The yield on this new purchase is 10.82%.  This purchase adds $105.28 to my annual dividend income.  

     I will update my investment tab spreadsheet in early October to reflect this new purchase.

Disclosure: Long D-UN

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Recent Sale

       During the last little bit, I decided to sell a position. I sold the position for some small profit taking and to get my out of being on margin. I was heading out of the city on Friday and I didn't want to have any surprises such as the market tanking. Although the major crash happening this past Friday was real unlikely, I did not want to worry about.
     
       On September 21, my limit order was filled. I sold 50 shares of Restaurant Brands International at $50/per share for 50 shares.

    I initiated this position on May 26, that you can read about here. Restaurants Brands International is the parent company of Tim Hortons and Burger King. As most of us know Burger King is a worldwide fast food restaurant chain that competes with McDonalds in this space.  Tim Hortons is a fast food chain with most of their restaurants in Canada.

Summary:

Initial Cost with commissions: $2430.12
Proceeds of sale including commissions: $2494.88
Dividends Received :  $6.19

Profit = $2494.88-$2430.12
          = $64.76

Total Return without dividends = $64.76/($2430.12)
                                                   =  2.665%

Total Returns with dividends = ($64.76+ $6.19 )/$2430.12
                                                = 2.920%

    QSR will pay another dividend in the first week of October. I am not able to know for sure what the dividend will be as dividends are paid in US Dollars and would have to convert to Canadian dollars. As from my summary above, dividends increase the return on investment.


DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Cashflow From The Stock Market

      An investor can make in different ways from the stock market.  The most common ways are through dividends and interest.  Dividends are more tax efficient for Canadian investors than interest. Dividends from a foreign country and interest are taxed at the marginal tax rate.

     Is there another way?  Another way that an investor can get cashflow from the stock market is though selling a covered call.  A covered call is when an investor sells an option and is obligated to sell the 100 shares before or at expiration.  As the investor is the seller in this transaction, he or she is paid a premium up front.

      The investor can make money whether the market goes up, down or sideways.  If the market goes down or sideways, the investor gets to keep the premium.  If the price of the stock goes above the strike price, the option can be assigned and the investor will have a bigger gain or smaller loss on the selling of his or her shares.

      Today, I sold a call option in Royal Bank, which I currently own 100 shares.

Summary:
# of contracts = 1
strike price = $80.00
Premium including commissions = $64.05
Expiration date: Jan 16, 2016

EDIT : the premium was $0.75 per contract
            commission = $10.95

 Disclosure: Long RY

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Recent Buy

     During the month of August I decided to add to my Enbridge Inc shares directly through the transfer agent. When purchasing shares this way, I have no control over the purchase price of the shares. I also only have to pay the price of a stamp to mail the check to purchase the shares. There are no commissions.

We transport energy, operating the world's longest, most sophisticated crude oil and liquids transportation system. We have a significant and growing presence in the natural gas transmission and midstream businesses, and an increasing involvement in power transmission.
We generate energy, expanding our interests in renewable and green energy technologies including wind and solar energy and geothermal.
We distribute energy, owning and operating Canada's largest natural gas distribution company, and provide distribution services in Ontario, Quebec, New Brunswick and New York State. (Source : www.enbridge.com)

   On September 1,  I purchased  5.066 shares at a price of $52.31 for a total of $265.00. The dividend is also paid on September 1 also. I owned 7.143 shares prior to the dividend date and was paid a dividend of $3.33. These dividends were reinvested back into the same company. I acquired 0.065 shares at a price of $51.26.

   The price of the DRIP shares is 2% discounted for shares acquired with reinvested dividends. Some brokers do pass this 2% discounted price on to investors while others do not. Other companies have bigger discounts through the transfer agent than this. My shares of Bank of Nova Scotia (BNS) is directly through the transfer agent. BNS use to have the a 2% discount on shares purchased with reinvested dividends but have stopped the discount within the last 2 years.

Conclusion:

       Enbridge is not an energy producer in terms of crude oil and natural gas. They are involved in the transportation of crude oil and natural gas.  When someone's thermostat kicks in, the company is making money provided the house or building uses energy provided by their pipelines or renewable energy sources. ENB is currently paying a $1.862 per share annual dividend. So the 5.131 shares add $9.55 to my annual divided income.

I also own 33 shares of Enbridge (ENB) in my TFSA.

Disclosure: Long BNS and ENB (all accounts)

Photo credit: www.ecofitt.ca 

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Dividend Update - August 2015

      The month of August 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.

       The price of a barrel of crude oil is still a major focus of the markets and the economy. Some analysts are predicting the WTI price of a barrel of crude oil to remain between $40 to $55 for the next year. At the same time, other analyst are predicting the WTI price for a barrel of crude oil to be around $80.00 a barrel. None of us are able to say where the price of oil is going to be by the end of this year or at the end of the next few years.

       The price of stocks has fallen by large amounts recently. This is due to things such as the sell off in China which usually carries over to the North American markets, the price of oil, and the possibility of a interest rate increase in the United States.


 Non-registered Account

• Bank of Montreal (BMO) - $28.70 
• Emera Inc. (EMA)   - $40.00
• Enerplus (ERF)  -$ 26.55
• Killam Properties (KMP)  - $5.75
• Royal Bank (RY) - $77.00
• Shaw Communications (SJR.B)    - $19.75

TFSA

• Boston Pizza  Royalties Fund (BPF.UN)   - $25.34
• Claymore 1-5 yr Laddered Corporate Bond (ETF) - $0.77
• Cominar REIT (CUF.UN ) - $5.39 
• Dream Office REIT   (D.UN)  - $ 16.61
• Killam Properties (KMP) - $  14.75 

Total = $260.61

 This total represents a 12.53% increase from 3 months ago and 57.12% increase  year over year. 

      I also received another distribution payment of $56.00 for my swing trade in Dream Office 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 $1435.47 in distributions so far on this trade.

      During the month, 3 companies that I own shares in have announced dividend increases which you can read about here and here. What did I have to do to receive these raises? Did I have to work for these companies? Nope.  I am a shareholder of these companies who share their profits with their investors. As the profits increase from year to year, these wonderful companies pay out more and more of the profits to their investors.

      I will update my dividend income tab with the new amount. It is great to see money from passive income sources deposited into my brokerage account every single month.

How was your dividend income for August?

Disclosure : Long all securities above.

Photo Credit: www.mipaq,co.za

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Portfolio Update - August 2015

       The month of August is now behind us. One major issue of the month continues  to be the low price per barrel of crude oil. There seems to be no hurry by OPEC to cut production. As Saudi Arabia is a very low cost producer, they are able to stomach these low prices. In western Canada, it costs a lot to drill a well due to the mountains and therefore have to drill deeper in hopes of finding oil or natural gas.
     
       The sell off in China is taking its toll on the market as well.  This can be advantageous to an investor in the accumulation stage as lower purchase prices means higher yield. A higher yield means your money is working harder for you. An investor has to believe in the company in order to stomach the falling prices.

     Three companies that I own shares in have raised their dividends.  First off was Emera Inc, who raised the annual dividend to $1.90 a share. This was followed by Royal Bank who raised their annual dividend to $3.16 a share. Shortly after Royal Bank raised their dividend, the Bank of Nova Scotia raised their annual dividend to $2.80 per share.  You can read about the dividend raises for Bank Of Nova and Royal Bank here.
  
     I own units in CBO, which is the I-shares Claymore 1-5 year Laddered Corporate Bond ETF.  This ETF pays monthly and the distribution is variable.  This past month I was paid $0.055 per share which is a decrease of about $0.01 per unit per month.
  
      I was not active in the accounts this month very much. I initiated an options trade on August 13 by purchasing call options in  Toronto Dominion Bank (TD) on a Canadian Exchange. I closed this trade on August 24 as my limit order was filled. The stock started to fall along with the rest of the market in a large amount so I decided to sell to cap my loss.  I still own 100 shares of TD in my margin account which I purchased months ago.

  I did acquire more shares through DRIPs.

Shares added due to drip

3 shares of ERF @ $8.29 for a total of $24.87
1 share of KMP @ $10.32 for a total of  $10.32
.325358 shares of BNS @  $63.62 for a total of $20.70.

      On July 29, Scotia Bank paid a dividend. I hold my BNS shares directly with the transfer agent. The entire dividend gets reinvested.  I received the dividend  but there is a delay in which the amount of shares purchased is known to the investor. I found out how much new shares were required in the first week of August.

     As of  Sept 4, 2015, the value of my portfolio stands at $75356.20 . This is an decrease of  4.933 % over last month. I will update my investing account tab above.

I adjusted the dividend rates on my investment tab spreadsheet including the distribution rate of CBO. For CBO, I took the distribution rate for August and pro-rated it for 12 months.

Disclosure: Long KMP,  ERF, RY,  BNS,  EMA, CBO, TD

DISCLAIMER

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should be NOT taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk