Option Trade - Royal Bank

    From time to time, I like to sell covered calls on stocks.  A covered call involves owning the shares first then selling a call option to be paid a premium up front.  Usually you sell an out of the money call option.  The investor or trader gets paid up front for be obligated to sell 100 shares of stock XYZ at the strike price on or prior to expiration day.
    On Jun 20, I wrote a cover call for Royal Bank with an $80.00 strike price and an expiration date of Jul 15, 2016.  I received a premium of $50.05 after commissions.

Summary:

Scenario #1:  Option Not Assigned

Strike Price : $80.00
Option premium received :  $50.05 after commissions
days to expiration : 25

Return  for 25 days= $50.05/$8000
                               =  0.626%

For 25 days, I am getting a return of 0.626%.  The interest on my high interest savings account is 0.80% per year.  So, I definitely do not mind a return of 0.626% for 25 days.

Return Annualized = 0.626%/25*365
                               = 9.140%


Scenario #2: Option Assigned 

If the option gets assigned, then I get to sell my shares for a greater capital gain as the option premium received is added to the proceeds of sale for calculating taxes.

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.

Option Expiration Day - Update

     June 17 was an option expiration day for 2 options that I sold in the past.  When selling an option,  if the option in not "in the money" then the option will expire worthless on expiration day.  When selling options, a premium is paid up front to the seller of the option.
      I recently sold a put option in Telus Communications with a $41.00 strike price with a premium of $45.05 after commissions. With the option expiring worthless, I will look at the option chain and try to sell another put option if the premium that will be received will be adequate.
      A few months ago, I sold a covered call in  Royal Bank with a strike price of $80.00.  I received a premium of $59.05 after commissions.  With a covered call, the option will expire worthless when the price of the stock is below the strike price. With the option expiring worthless, I will look at the option chain for Royal Bank and see if there is a good option premium that can be paid to me.

    Selling options can be risky.   Selling options allows an investor or trader to get paid a premium up front.  This option premium increases your returns besides collect dividends and interest.  When you sell a put option you can hedge yourself by buying a put option.  The goal is pay less in option premium when buying the put option than the premium you receive for selling the put option.  Buying a put option, the buyer has the choice to sell his or her shares at the strike price on or prior to option expiration.  Buying the put option, as mentioned here, is an insurance.

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.

Option Trades

     This month I did a few option trades.   When you sell options you collect a premium upfront for be obligated to BUY ( selling a put option) the stock if the stock trades below the strike price or to SELL (selling a call option ) the stock if the stock trades above the strike price on or before expiration.
      This month I put in a order to SELL a put option in TD.TO with a Jun 30, 2016 expiration  and a $56.00 strike price.  At least, I thought it was selling a put option.  Looking at my brokerage account on the weekend, I realized that I bought a put option for a premium of $31.00 without commissions.  That means the value of the stock has to drop in order for the price of the option to trade higher.  So, make sure you do not rush when putting in orders as it could be a lot worse result than this.  So decided to put in a sell order for try to reduce the loss.  My fill price was $0.47 per contract, or
$36.05 after commissions.  I recorded a loss of $5.90 for this trade.
       After completing the trade in TD, as decribed above, I sold a put option in TD for June 30 2016 expiration at a strike price of $56.00.  I collected a premium upfront of $37.05 after commissions.  This stock is showing strength as of late.  I have owned this stock in the past and it is one the the Canadian Banks, so the company is rock solid.

Disclosure:  Long 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 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 - May 2016

      The month of May 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 marched higher this month to roughly $48US a barrel  for WTI Crude Oil.  There has been a massive wildfire in the Fort McMurray area of Alberta, Canada.  This area is where the oilsands are located. The town of Fort McMurray has nearly been completely destroyed.  Residents started returning back to Fort McMurray on June 1, to see what is left of there homes.  The oilsands plants have started to come back on line. 

      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

• Bank of Montreal  (BMO) - $29.40
• Enerplus (ERF)  -$ 5.58
• Emera (EMA) - $47.50 
• Royal Bank (RY) - $81.00
• Shaw Communications (SJR.B)    - $19.75
• TD Bank (TD) - $55.00

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
• Killam Properties REIT (KMP.UN) - $  15.10

Total = $303.82

        This total represents a 2.20% increase  from 3 months ago and 31.18 % increase year over year.

      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 $1883.97 in distributions so far on this trade.  Dream REIT has reduced the amount of distribution they pay monthly which was announced in February.

     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 May?

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 - May 2016

      The month of May 2016 is now behind us.  During the month, Canada had some major wildfires in the Fort McMurray area.  This is wear the Alberta oilsands are located.  The town had mass evacuation and businesses along with houses were burnt to the ground.  This might of sent the price of a barrel of WTI crude oil up towards $50.00 a barrel.   The price of oil has fallen slightly due to an OPEC meeting and the oilsands plants getting back on stream. 

     On May 2, I purchased 100 shares of Potash Corporation as an investment, which you can ad about here.   To get some more cashflow from this investment, I then sold a covered call on May 17 with a Jun 17th expiration date. .  I collected a premium of $45.05 after commissions.  If the price of the stock stays below $22.00, I get to keep the stock and the premium. If the price of the stock goes sideways I get to keep the premium.  If the price of the stock goes above $22 at or before expiration, the shares can be called away resulting in a bigger capital gain.


    On May 20,  my covered call option in TD Bank was assigned as the price of the stock  was greater than the strike price at expiration.  I do plan on buying this stock again in the future. 

On May 24, I purchased 27 units of HNY.TO.  This is the Horizon Natural Gas Yield ETF.  The summary of the ETF, as per Yahoo Finance, is described below. 

      The investment seeks to achieve its investment objectives by gaining exposure to a portfolio of securities and other instruments that provide exposure to the price of natural gas futures contracts, or exchange traded funds that are directly or indirectly only exposed to natural gas and/or natural gas options, forwards and futures contracts on natural gas by entering into a forward purchase and sale agreement with the Bank Counter party pursuant to which it will gain exposure to the Natural Gas Portfolio. The Natural Gas Portfolio is comprised primarily of exchange-traded funds, which may or may not be managed by the Manager or its affiliates, that are directly, or indirectly, and only, exposed to natural gas or natural gas futures，and will include natural gas futures, financial swaps and total return swaps - Yahoo Finance

   As of 4 Jun 2016, the value of the portfolio is $88467.91. This is a 2.73% increase over last month's total.  The spreadsheet in the investment tab above has been updated.

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