Collecting Option Premiums

      How do you collect money besides dividends and interest on stocks you own or on stocks you want to buy?  The way is buy selling option contracts.  For example, if you own 100 shares of stock ABC at $48.25 a share and you are willing to sell at $49.00. To receive money besides a possible dividend, an investor would write a covered call. When an investor writes a covered call, he or she is paid an option premium for the obligation to sell their 100 shares of stock at $42.00 ( which is the strike price) on or before expiration day.  If the stock price goes lower and sideways, the option seller gets to keep the premium and the option expires worthless.  If the price of the stock goes above the strike price, the option may be exercised by the option buyer.
  
     What can you do to collect income while waiting for a stock to go down in value? What if  stock XYZ is currently trading a $50.00 and you are willing to buy at $49.00?  To collect option premium, an investor would sell a put option contract.  When you sell a put option contract, you are obligation to BUY 100 shares of XYZ at $49.00 (the strike price) on or before expiration. So if the price of the stock stays above $49.00 on or at expiration, the put seller gets to keep the option premium and the option expires worthless.  If the value of XYZ falls below $49.00 on or at expiration, the option may be exercised by the option buyer and the option seller is assigned 100 shares of stock at $49.00.

     On April 19, I wrote a covered called on my 100 shares of Royal Bank for a premium of $59.05 after commissions.  The expiration date is June 17 , 2016 with a strike price of $80.00.  I wrote a covered call on 100 shares on TD Bank stock on April 19 for a premium of $59.05 after commissions.  For the covered call on TD Bank stock, the expiration date is May 20 with a strike price of $56.00.

     On April 22, a sold a put option contract in Telus Corporation.  The strike price is $40.00 with a May 20 expiration date.  I collected a premium of $84.05 after commissions.

 Summary:

    I collected $202.05 in option premiums on the 3 trades. If the put option is assigned in T.TO,  I might write a covered call or just keep the shares.  For the covered calls are not assigned,  I will look to write covered calls if the option premium is sufficient.

Please note:  Selling options is risky and you have to have permission from your broker in order to sell them.   Selling a call without owning the underlying shares, is referred to ask writing a naked call.  You have to have permission from the broker to be able to do this, as there shares would have to be bought on assignment at the market price and then immediately sold at the strike price if option is assigned.

Disclosure:  Long RY.TO, TD.TO

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.

Trading Account Update

      As previously stated on this blog, that I have started a trading account with a balance below $1000.00.   I started to add $50.00 every two weeks but that has stopped due to a recent job loss.  The following table shows my stats from the start of 2016:

                                # of trades :                 8   
                               Total Capital added:    $250.00
                               Trading Acct Balance:  $ 1457.44
                               Average Drawdown:   $33.85
                               Average Loss:             $25.01
                               Average Accuracy:     87.50%
                               Average Risk:              $33.40
                               Average Reward:         $65.27
                               Average R/R :             1: 1.954

      My average accuracy is 87.50%.  What does this mean? Do it mean that I am a super trader?  I am definitely no super trader.  As I complete more trades this number will come down.  The profitability of a trader is more reflected in the risk to reward ratio.  My current risk to reward ratio states that for ever dollar I am risking, the reward is $1.95.
       I have been trading penny stocks, stocks and options.  Any dividends that will be received from this account with stay within the account.  As of right now, no dividends have been received in this account.

Note:  The trades are listed under the Trading Tab above with all the trades listed as of April 23, 2016.

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 - March 2016

      The month of March 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.

       There is not much change in the price of crude oil.  This has had a drastic effect on the economy in western Canada.  Massive amount of layoffs in the energy sector had started to show ripple effects right across the country. People moving to lower cost of living areas but there are no jobs there to even come close to what they made before.  On top of that, those employers have the attitude "Why hire you, as I know you will go back when the economy picks up".

      One thing for sure, is that I was paid dividends and distributions for being a shareholder or unit holder in  various companies or funds.

 Non-registered Account

• Canadian National Railway - $14.25
• Enerplus (ERF)  -$ 16.65
• Enbridge  (ENB) - $8.12
• Shaw Communications (SJR.B)    - $19.75
• iShares Canadian Select Dividend ETF (XDV)- $25.39

TFSA

• Boston Pizza  Royalties Fund (BPF.UN)   - $26.91
• Claymore 1-5 yr Laddered Corporate Bond ETF (CBO)  - $0.69
• Cominar REIT (CUF.UN ) - $5.39
• Dream Office REIT   (D.UN)  - $ 17.50
• Enbridge  (ENB) - $17.49
• Killam Properties REIT (KMP.UN) - $  15.05

Total = $167.19

        This total represents a 10.45 % increase from 3 months ago and 31% decrease year over year. The decrease year over year was so large as I no longer hold Just Energy, which paid me a large quarterly dividend.

      I also received another distribution payment of $37.50 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 $1808.97 in distributions so far on this trade.  Dream REIT has reduced the amount of distribution they pay monthly which was announced in February.

     Due to the ongoing low oil prices, Enerplus has reduced there dividend to $0.12 per year, or $0.01 monthly.  I will continue to drip this stock, an get one new share a month.  Hopefully the company can survive the low oil prices and then begin to pick up some steam. 

 
      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 March?

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 - March 2016

The month of March has come and gone.  There continues to be lots of layoffs in Western Canada due to the low oil prices.  Lots of companies are closing down and the workers are losing their houses as the mortgage payment in a lot of cases is higher than what they would get from employment insurance.  A lot of oilfield workers do not prepare themselves as they take a lot of trips and buy a lot of toys.

    I wrote a covered call in Toronto Dominion Bank with a $56.00 strike price and an April 15, 2016 expiration date.  I was paid a premium $42.05 after commissions.  As my purchase price is high on this stock with an average price around $55.30, the covered call allows me to collect some money via a premium being paid to me.  If the option is assigned, I will sell a put option with a lower strike price when it is reasonable to do so.  If the option is expires worthless, than I will attempt to write another covered call.

    On March 11, I sold 3 covered calls in the iShares Canadian Dividend Select ETF with a $21.00 strike price and an April 15, 2016 expiration date.  The stock was trading above $21 when I sold the calls.  I was paid a premium of $212.05 after commissions.  These options will look like it will be assigned unless there is a severe market correction in the next 10 days.

 Shares Acquired Though Drip

              3 shares of Enerplus @$4.58 for a total of $13.74
              1 unit of Killam Properties REIT @ $11.25 for a total of $11.25
               0.185 shares of Enbridge @ $43.8919  for a total of $8.12

      I turned off the drips for KMP.UN and Dream REIT inside TFSA.

     As of  April 5,  the value of my portfolio stands at $83552.68. This is an increase of  3.05% over last month. I will update my investing account tab above.

Disclosure: Long  all mentioned securities.

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