Account Activity

      In recent weeks, the market has been going up and down a lot it seems with any major news story.  On top of that, Canada is in the middle of a federal election where there is no front runner and the prospects of a minority government, liberal or conservative, are high.
      
Account Activity

    I had no active trades in my trading account the past several weeks.  I also had around $1400 in my margin account.  So I decided to make another trade in the margin account by using the positive margin account balance, "borrowing" the balance of the trading account and using some margin to make a purchase.

    I purchased 200 shares of TFI International (TFII.TO) on the Toronto Stock Exchange.  TFI International is a large trucking company that operates under various subsidiaries in Canada, United States and Mexico.  

    I purchased 200 shares at $39.20 for a total cost of $7844.95 including commissions.  The reason that I used some margin to purchase a board lot of shares is to sell covered calls against the position.  

   On Sept 26, I sold 2 covered call contracts with October 18, 2019, expiration date and a strike price of $40.00.  I collected a net premium of $88.05 on this transaction for being the seller of the option.

   I purchased the 200 shares of TFI International prior to the ex-dividend date.  TFI International currently pays a quarterly dividend of $0.24 per share, or $0.96 per share annually.  So I will receive the quarterly dividend payment of $48.00 in the middle of October.  

   My plan is to use the premium collected, dividends and capital gain to help pay down debt. I will hold back around $5.00 to more than cover the margin interest per month.  Therefore, the dividend is not going to show up in my dividend tabs for the month.   If option expires than I will sell another covered call or place a limit order to sell at a higher price.

Disclosure: Long 50 shares of TFII.TO inside TFSA

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 Portfolio Activity

It has been a crazy couple weeks on the the stock markets across the world. Are we in a recession? Are the trade wars between US and China causing investors to pull out for the market? I believe some investors fear that we are in a recession at this time. I do believe the impact of the US-China trade wars are having the most impact on the markets at this time.

Margin Account Activities

Sales

On August 7, I mentioned that I made a trade inside my margin account involving Telus Corporation (T.TO).

After making the purchase at $47.10 per share, I put in a stop limit order at $48.10 per share. The stock has been under a little pressure over the last week as the stock recently missed earning expectations.

On August 14, I decided to cancel the stop limit order around noon and replace it with a trailing stop limit order at a lower price. By using a trailing stop limit order, I get to lock in some gains and at the same time possibly gain some more if the stock rises in value.

The stock seemed to go sideways for over a week, which is normal. The sell order was filled at $47.60 per share. The profit from the trade was immediately sent to my line of credit. I was looking for a larger gain but decided to lower the sell price due to the falling stock prices. As I was only taking the profit out, I could use the capital from the sale towards investments.

The money "borrowed" from the trading account was returned.

This sale decreases my annual dividend income by $675.00.

For disclosure, I am long Telus Corporation (T.TO) in my TFSA.

Purchases

The markets went down a lot over a couple of days. I wanted to take advantage of this by buying stocks at a lower price. Buying a stock at a lower price, results in a higher starting yield as price and yield are inversely correlated. The higher the starting yield means money working harder for you.

On August 15, I put in limit orders on 2 stocks I was looking to increase my position size and further grow my dividend income.

First Purchase

On August 15, I purchased 50 shares of Bank of Montreal (BMO.TO) at $92.00 per share for a total cost of $4605.12 including commissions.

Currently, Bank of Montreal pays a dividend of $1.03 per share quarterly, or $4.12 per share annually. This purchase adds $206.00 to my annual dividend income. The yield on cost for this purchase is 4.47%.

This purchase is not eligible for Bank of Montreal's next dividend on Aug 27, 2019, as the record date is August 1, 2019.

This purchase brings total number of shares in Bank of Montreal to 85 shares.

Second Purchase

On August 15, I purchased 45 shares of Canadian Imperial Bank of Commerce "C.I.B.C" (CM.TO) at $98.00 per share for a total cost of $4415.11 including commissions.

Currently, C.I.B.C pays a dividend of $1.40 per share quarterly, or $5.60 per share annually. This purchase adds $252.00 to my annual dividend income. The yield on cost for this purchase is 5.71%.

This purchase will be eligible for C.I.B.C's next dividend payment which is expected October 28, 2019, to shareholders on record of September 26, 2019. This is listed on their investor relations page as future notice that is subject to approval of board of directors.

This purchase brings total number of shares in C.I.B.C to 110 shares. I recently added shares of C.I.B.C twice with in they past 3 or 4 months.

TFSA Account Activities

Sales

Continuing with markets going down over the period as per above, I decided to take action in this account as well. I noticed Dream Office REIT (D.UN.TO) was trading close to my adjusted cost base per share. Dream Office REIT has reduced their distribution a few times over the past 4 years. The distribution as remained at $0.083333 per unit monthly, or $1.00 per unit annually.

So, I sold my 168 units of Dream Office REIT at $26.41 per unit for a total net proceeds of $4431.69 from the sale. My adjusted cost base was $4489.30. Therefore, the net loss is $57.61 excluding distributions.

This sale decreases my annual dividend income by $168.00.

Purchase

On August 15, I purchased 25 shares of TD Bank (TD.TO) at $71.57 per share for a total cost of $1794.29 including commissions.

Currently, TD Bank pays a dividend of $0.74 per share quarterly, or $2.96 per share annually. This purchase adds $74.00 to my annual dividend income. The yield on cost for this purchase is 4.124%.

This purchase is eligible for TD Bank's next dividend which is expected to be declared on August 29, 2019.

This purchase brings total number of shares in TD Bank to 45 shares.

Conclusion

My plan with the Telus trade in my margin account was to not to hold for very long and take the profit and put on line of credit. I took a smaller profit than I was looking for due to the prices of stocks falling in value that I wanted to purchase.

These 3 purchases are all Canadian Banks.

The yield on cost on all 3 purchases is north of 4%. The starting yields are all higher than the yield of the broader market.

I have invested a lot of money in Canadian banks the past several months. Canadian banks are known to be some of the best and financially banks in the world. Then banks are traded on both the Toronto Stock Exchange and New York Stock Exchange. My purchases were all done on the Toronto Stock Exchange. 

I will update my investing spreadsheet in earlier September with these transactions. 

Disclosure: Long T.TO, BMO.TO, CM.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.

Recent Buys

On Monday, the Canadian markets were closed as the first Monday of August is a civic holiday pretty much across the whole country.  Our neighbors to the south did not fare to well on Monday.  The Dow Jones closed on Monday down over 700 points.  When the markets fall by a few hundred points, a lot of investors sell as their fears start to get the better of them.

Like most Canadian investors, I do not have US funds in my brokerage account on hand.

On Tuesday morning, when the markets opened there was a sell off.  At the end of the trading day on Tuesday, the Dow Jones Industrial Average closed up around 325 points from the close on the previous trading day.  

First Purchase

I decided to put the cash sitting in my TFSA to work.  I placed a limit order for shares of Royal Bank of Canada (RY.TO).

I purchased 9 shares of Royal Bank at $100.40 per share for a total cost of $908.58 including commissions.

Currently, Royal Bank pays a quarter dividend of $1.02 per share, or $4.08 per share annually.  This purchase adds $36.72 to my annual dividend income.  The yield on cost for this purchase is 4.04%. This purchase will not be eligible for the dividend paid out on August 23 as the record date has passed.

This purchase brings my total shares in Royal Bank to 29 shares.  

Second Purchase

Unlike the first purchase, the second purchase was to initiate a trade within my margin account.  As I do not have any trades going on within my trading account, I decided to "borrow" the balance of my trading account and use the cash in my margin account to purchase 300 shares of Telus Corporation (T.TO).  I had to borrow about $550.00 on margin to have a multiple of a hundred shares.

I purchased 300 shares of Telus at $47.10 per share for a total cost of $14134.95 including commissions.

Currently, Telus pays a $0.5625 per share quarterly dividend, or $2.25 per share annually.  This purchase adds $675.00 to my annual dividend income.  The yield on cost for this purchase is 4.76%.

I do not plan on holding on to these 300 shares.  The plan is to collect some profits in a reasonable amount of time.  In fact, I placed a limit order to sell these shares.  If I receive any dividends from this purchase they will be counted has dividend income for the reports.  The profits on the sale will go towards savings or paying down my debt.   

For full disclosure, I am long shares of Telus within my TFSA. 

I will update my portfolio spreadsheet in early August to reflect both of these transactions if the Telus one is not sold by the time of the portfolio update.

Did you put money to work over the last couple of days?

Disclosure:  Long T.TO, RY.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.

Option Trade - Covered Call

       The markets have dropped during the early morning today over rising fears of the fallout from Brexit.   Britain voted in favor of exiting the European Union recently.  Investors and traders have to consider how this will affect businesses, international trade, commodities, and economies around the world.

       On July 6, I wrote a covered call in TD Bank with a strike price of $56.50 and collected a premium of $12.05 after commissions.  This is not a large sum but is income none the less. The amount of days to expiration is 23.  Sure, I could of collected a larger premium if the stock price rose after falling.

       The stock goes ex-dividend July 6  and a dividend payment date of July 31.  Since I already own the stock, I receive this dividend.  The annual dividend rate is $2.20 per share.  So since I own 100 shares of stock I will receive a dividend payment of $55.00.

Summary:

Strike Price:  $56.50
Days to Expiration = 23
Premium Received = $12.05 after commissions

Return for 23 days = $12.05/$5600
                               =  0.215%

Return Annualized = ($12.05/$5600) *(365/23)
                                = 3.415%

An annualized return of 3.415% is definitely higher than a interest received on a high interest savings account.

Note: For my broker, there is an option assignment fee for an option to be assigned or exercised.  This option assignment fee is $24.95


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.

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 Expiration Day - May 20, 2016

    For the most part, options expire on the 3rd Friday of the month.  For the month of May, this 3rd Friday of the month occurred on May 20.  I recently wrote about some option trades that I made which involved covered calls and a naked put.
  
    Two of these options were set to expire on May 20, involving TD Bank and Telus Corporation.  TD  Bank closed higher than $56.00, which is the strike price.  Therefore, my shares of TD Bank were called away.  What is my plan going forward.  I am looking to purchase this stock at a lower price then my previous adjusted cost basis of around $55.30 per share.  I might sell a put option to collect income while I wait for the price to go down.

 

Covered Call on TD at $56 Strike Price

      I previously sold a put option for Telus Corporation with a $40 strike price.  I sold the put option when the price was below $40, which resulted in a higher premium.  The option was not assigned prior to expiration.  On May 20, the price of the stock remained above $40.00 so the option expired worthless.  I get to keep the premium as I was the option seller. 

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.

Averaging Down

     I recently wrote about purchasing  200 units of an ETF.  The name of this ETF is the iShares Dow Jones Canadian  Select  Dividend ETF.  As per google finance, so information as to what the ETF consists of is shown below:

iShares Dow Jones Canada Select Dividend Index Fund, formerly iShares CDN Dow Jones Canada Select Dividend Index Fund, seeks to provide long-term capital growth by replicating, to the extent possible, the performance of the Dow Jones Canada Select Dividend Index (the Index) through investments in the constituent issuers of such Index. The Index consists of 30 of the highest yielding, dividend-paying companies in the Dow Jones Canada Total Market Index, as selected by Dow Jones using a rules-based methodology, including an analysis of dividend growth, yield and average payout ratio. In the Index, the weight of any one company, in terms of market capitalization, is limited to 10%. The Fund is managed by BlackRock Asset Management Canada Limited.            ( Source: Google Finance)

   I purchased 19 more units of XDV. The 19 units were purchased at $22.05.  There was no commissions as my broker has commissioned free ETFs.  However, I had to pay some ECN fees as it was not a round lot of units.  XDV pays a monthly distribution.

   EDIT:   I will update my investing tab spreadsheet in early December.

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 trade - Update

     I recently wrote about writing a covered call in QSR, which you can read about here. The strike price of this call option was $48.00.  While holding this position, the price of the stock went up and up, which means the option premium went up as well.
     I  decided to buy this option back and then sell a new call option with a $52.00 strike price with a Dec 18 expiration date. The price of the stock has fallen back down to just over $47 a share.  So I plan to hold this option until expiration.  If it is not assigned I will attempt to write another covered call. As I have to pay an assignment fee of $24.95, I look for collecting premiums of $0.46 per contract before commissions.

Disclosure: Long QSR

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 Trade - Entry Point

    On Monday, I purchased 200 units of XDV on the Toronto Stock Exchange.  This is an exchange traded fund, or ETF.  ETFs is like a fund but trades as a stock.
 
     XDV is known as the iShares Dow Jones Canadian Select Dividend Fund.  The current yield of the ETF is approximately 4.78%.  The fund has a lot of financials in the top 10 of their fund. Canada is known for its financial sector,  and in particular, the big 5 banks.  Below is a  table, as of October 26,  showing the top 10 stocks of the fund by weight.

Name	Ticker	Weight
Canadian Imperial Bank of Commerce	CM	9.75%
Bank of Montreal	BMO	6.92%
Royal Bank of Canada	RY	6.40%
Bell Canada Enterprises	BCE	5.98%
Bank of Nova Scotia	BNS	5.50%
Rogers Communications Class B	RCI.B	5.08%
Laurentian Bank of Canada	LB	4.97%
Toronto Dominion Bank	TD	4.34%
Manitoba Telecom Services	MBT	4.29%
IGM Financial Inc.	IGM	4.19%

    I own shares in 6 out of these top 10 holdings.  My brokerage has zero commission ETFs which I took advantage of here.  I purchased 200 units at $22.49 on October 26.   I put in a good to cancel order to sell these units.  I will hold this ETF until my order gets filled. In the mean time, I will collect any dividends that this ETF will pay me.  There will be a commission on the sale.

Click to Enlarge

    An individual could use commission free ETFs, such as this, to get a higher yield than a savings account.  The yield on savings accounts today is so small these days and non-existent for regular day to day savings accounts.  Of course, the higher yield brings more risk such as the price of the ETF could go down below your cost basis.

 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 Trade

   I recently wrote about a stock purchase in Restaurant Brands International, that you can read about here.  The yield on this stock is low, so I was looking for a way to gain some cash flow from this investment.

   One of the ways to receive cash flow from a position that you own is to write a covered call.  With a covered call, the seller receives a premium for the promise to sell his or her shares at the strike price  on or before expiration.  A covered call is sort of like "renting" you stock.

    If the price of the stock goes down or sideways, the option seller stills get to keep the premium.  The option seller can sell another covered call on the stock if he or she chooses to. Another benefit of actually owning the shares is that the option seller still receives the dividend if they own it on the dividend record date.

     If the price of the stock goes up and the option is assigned,  the shares are "called" away.  If the strike price is about your purchase price, then the capital gain is higher do to the option premium is added to the proceeds of sale for tax purposes.  Depending on which broker you use, there might be an option assignment fee.  In my case, my brokerage as an option assignment fee of $24.95.

CONCLUSION

     On October 19, Restaurants Brands International (RBI) was trading around $47.00 a share.  I looked at the option tables and saw the bid price was around $1.05 per contract for Nov 20 expiration and strike price of $48.00. So I watched if for about 5 minutes and saw it change to $1.10 per contract. So I placed a market order for 1 contract.

   RBI just paid a dividend at the beginning of October, so there will be no dividend paid between now and expiration as the dividend is quarterly.

Two Possible Outcomes

Scenario #1 - Option assigned

Option assignment fee = $24.95
Option commission = $10.95
Premium = $1.10
Number of contracts = 1
Initial Price = $4700+ $4.95 =$4704.95
Strike Price = $48.00

Profit = $4800-4704.95-$24.95-$10.95+$110.00
          =  $169.15

Total Return = $169.15/$4704.95
                      = 3.60%

Scenario #2 - Option Not Assigned

Premium received including commissions = $99.05
# of days until expiration = 32

Still get to be the owner of the 100 shares.

Return = $99.05 / ($4704.95 -$99.05 )
             = 2.15%

Annualized return = 2.15%/32*365
                              = 24.52%

     A covered call limits the profit that an investor can make but allows the investor to collect some more income from the position.  The price of the stock has risen a lot today since the option was sold. The stock currently trades at $49.28 as of this writing.  The option has not been assigned as of right now.

Note: The shares were purchased on the Toronto Exchange.

Disclosure: Long RBI

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 Trade - Trade #2

   On September 30 after exiting my position of Cominar REIT inside the margin account I went shopping. I was looking for a possible position instead of trading. So I ended up in the "middle of the road"

    I sold a put option for $0.54 for October 16, 2015 in Telus Communications. The strike price is $42.00. When you sell a put option, you are paid a premium for the obligation to BUY 100 shares of the stock on or before expiration. The option seller gets to keep the premium regardless if the market goes up, down, or sideways.

Two scenarios can occur  when selling a put option:

Scenario #1   Option not assigned.

# of days to expiration = 16
Option Commission = $10.95
Premium paid to me = $0.54
# of contracts = 1
Strike Price = $42.00

Premium including commissions = 1*100*$0.54 - $10.95
                                                      = $43.05

Return = $43.05/($4200-$43.05)
            = 1.036%

So my return for 16 days is 1.036%

Annualized Return = 1.036% / 16 *365
                                 = 23.62%

Return on capital is the amount of capital required in your account to put on the trade.  Return on capital is usually 20% of break even. 

Return on Capital = $43.05/ (.20*($4200-$43.05))
                             = $43.05 / $831.39
                             =  5.178%

Annualized Return on capital = 5.178% /16 *365
                                                 =118%

Scenario #2   Option is assigned

Annual Dividend Rate = $1.68
Option Assignment Fee = $24.95

Adjusted cost basis =  $4200 -(1*100*$0.54 - $10.95) +$24.95
                                = $4181.90

Yield with option assignment = $1.68/(4181.90/100 shares)
                                                = 4.017%

I will now calculated the yield if I purchased the stock without an option at $42.00.

Adjusted Cost Basis including commission = $4200+ $4.95
                                                                      =  $4204.95

Yield = $1.68 /($4204.95/100 shares)
          = 3.995%

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 Trade - Trade 1

    The REIT sector has been beaten down later as a result of the economy. The low price for a barrel of crude oil is starting to show its effects right across Canada. Thousands of Alberta workers live in other parts of Canada on their days off. With these people not working very much, means they are spending less in their own communities.

     Another factor in why REITs are not performing well is due to the interest rate situation.  Interest rates have been low for quite a while. This means the price of borrowing is cheaper for new mortgages and renewals.  But interest rates will eventually rise, so this future possibility could be already factored into the current price of the REIT.

     I currently own units in Cominar REIT (CUF.UN) and Dream REIT (D.UN).  I just recently purchased more units of Dream REIT, which you can read about here. For disclosure, I also own shares in Killam Properties (KMP), which trade as a corporation.

    I looked to this sector to place a trade.  On September 28, I purchased 150 units of Cominar REIT inside my margin account at a price of $15.98 per unit.  I immediately placed a limit order to sell the units.  On September 30, their volume of shares traded was low, so I lowered my limit order to get filled. I am still long Cominar REIT in my tax free savings account.

Summary:

Initial Cost=  150*15.98+$5.47
                  = $2402.47

Proceeds of Sale (including commissions) = $150*16.11-$5.47
                                                                     = $2411.03

Profit = $2411.03 - $2402.47
          = $8.56

The profit was real small.  This trade used some margin of around $600.00.  As of right now, my cash in my margin account is positive.

Disclosure: Long CUF.UN in TFSA.

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 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 Trade Update

A few weeks ago, I initiated a trade involving Toronto Dominion Bank.  I purchased 3 call option contracts with a September 18 expiration date. You can read about this purchase here.

When the big drop that happened in the markets,  I decided to exit my position. So on Aug 24, I placed a limit order $0.03 higher than the bid price to sell my 3 contracts. This trade took place inside my TFSA.

Summary:

Initial Investment including commissions = 3*100*1.15+$12.95
                                                                   = $357.95

Proceeds of Sale = 3*100*$.38-$12.95
                            = $101.05

Return on Investment = ($101.05-$357.95)/$357.95
                                    = -71.77%
                                 

Click to Enlarge

In full disclosure, I still own 100 shares of TD in my margin account which I owned for months now.

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.

Recent Trade

    Last month, I wrote about an option trade in Toronto Dominion Bank. I purchased 3 contracts on July 14 and quickly sold these in less than 48 hours on July 16. I got a good return on this investment.

    On Aug 13, I decided to try a trade again in Toronto Dominion Bank.  I bought 3 Sept 18, 2015 call option contracts for a $52.00 strike for a premium of $345.00 excluding commissions inside my TFSA.

Summary:

Initial Investment including commissions = 3*100*$1.15+ $12.95
                                                                    = $357.95

Currently, Toronto Dominion Bank is trading at $52.05 on the Toronto Stock Exchange.

Disclosure: own 100 shares of TD in margin account
 
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 Trade - Update

    I recently wrote about a trade involving call options in TD, which you can read about here. Well the following day,  the Bank of Canada decided they had to take action as it was a scheduled day for the announcement on what it will decide to do with the overnight interest rate.  The rate can be lowered, stay the same or be increased.  The Bank of Canada cut the overnight rate by 0.25% on July 15, which means the current rate is 0.50%.  This is the second time in 2015, that the Bank of Canada has cut the interest rate.

    I purchased the 3 call options in TD on July 14. As a result of the rate cut, TD bank reduced its rate by 0.10%.  This help to lift the stock price higher, as the reduction in the rate means its cheaper to borrow money which means more people or businesses will likely borrow more money and therefore the banks make more money. On July 16, the upward movement in the stock price meant the price of the option went up. My limit order was filled on July 16 at $1.70 per contract.

Summary:

Initial cost:  $1.20*3contracts*100shares/contract + $12.95
                   = $372.95

Proceeds of Sale: $1.70*3contracts*100shares/contract - $12.95
                            = $497.05

Profit = $497.05-$372.95
           = $124.10

Total Return = $124.10/$372.95*100%
                      = 33.28%

Click to Enlarge

So I made a 33.28% return in less than 48 hours.

Disclosure: own 100 shares of 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.

Recent Trade

The markets have lost some momentum as the issue with Greece is upon us. We saw a decline in the WTI oil prices over the past while by around $8.00 a barrel.  There is mention of areas of Canada to be in a recession or close to being in a recession. The prices of stocks have fallen over the last month.

   In my two brokerage accounts, I didn't have enough money to warrant buying a long term position. Once money is in my TFSA is is not advantageous to take it out. This is because any individual cannot put that money he or she takes out until the following year.

I decided do buy call options.

On July 14, I purchased 3 call options of TD with Aug 21, 2015 expiration with a $52.00 strike price. The premium paid was $1.20 per contract excluding commissions.

Total Cost with commissions =  3*100*1.20+$12.95
                                               = $372.95

This trade is on the Canadian exchanges.

Disclosure: own 100 shares of 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.

Recent Trade

During the past couple of months, a stock that I trade from time to time decreased in value. Over the last 3 months the stock hit a high on May 8th and closed at $3.10 per share. The stock has fallen dramatically since May 8, and is currently trading at $2.10 a share. There continues to be weakness in the commodities and investors have ongoing concerns about Greece.

Sherritt is a mining company that is headquartered in Canada. They have mining operations in Canada, Cuba and Madagascar. A major issue with the company was the possible strike action of union workers at their Madagascar operations.

The two main trade unions at Sherritt International Corp's Ambatovy nickel mine in Madagascar will not call a new strike over job layoffs for now and are still seeking dialogue, union officials said on Friday.  (source: Reuters ).

On Jun 25, 2015, I purchased 350 shares of Sherritt International Corporation ( ticker symbol S.TO) at $2.12 a share for a total cost of  $747.12 including commissions. This trade is in my margin account.  This entry point is the lowest entry point for me when it comes to purchasing shares of Sherritt International corporation.

Sherritt International is scheduled to pay a dividend on July 14, and the ex-dividend date is June 26. So I am eligible to receive this dividend as I purchased my shares on June 25.

The stock is down approximately 26% since Nov 25, 2014.  This stock position is a trade, and therefore will not be holding for the long term.

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 Trade Update - Part #2

This post is a follow up to my post, Option Trades Update - Part #1 for Jun 21, 2015.

     My put option in Rogers Communications Class B stock was assigned. I checked my broker account last night the option was not assigned. I work up this morning and checked my brokerage account and the option was assigned.  I was expecting the assignment to show up this morning first thing as the last time an option was assigned to me, I found out Monday night.

     I owned 100 shares of Rogers Communications Class B stock since June 2014 when a put option was assigned with a $44.00 strike price, which you can read about here. My average cost base as a result of the first option assignment was $4366.90.

     This new option assignment had a $42.00 strike price.

Summary of Latest Trade

Investment : 100 shares * $42.00 = $4200
Option premium including commissions : $27-$10.95 = $16.05
Assignment fee : $24.95
Current annual dividend : $1.92 / share

Total Cost = $4200- $16.05- $24.95
                  = $4208.90

Yield = 1.92 /(4208.90/100)
          = 4.56%

Conclusion:

     With this latest put option assignment, I now own 200 shares of RCI.B.

number of shares = 200
Total cost  = $4366.90 +$4208.90 = $8575.80

ACB/share = $8575.80 /200 =$42.88

Yield = $1.92 / $42.88
          = 4.478%

    Although the premium received after commissions was less than the option assignment fee, the overall cost basis is reduced on my overall position.  This purchase adds $192.00 to my annual dividend income based on the current annual dividend.  RCI.B is scheduled to pay a dividend in early July, so these 100 shares will not be eligible for the dividend as the record date as now passed.  My initial purchase in 2014 in which I missed the July dividend payment of 2014 as well.

I will update my investing portfolio spreadsheet in early July to reflect this new purchase.

Disclosure : Long RCI.B

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 Update - Part #1

     On May 13, I sold a put option in Telus Corporation that trades in Canada. The put option had 06/19/2015 for expiration and the strike price was $40.00.  The option was not assigned as the price of the stock remained above the strike price including at expiration.  You can read about the selling of the put option here, which is the option trade #1 in the link.

  Recap:   Premium collected after commissions : $35.05
                Return on Capital : 4.420%
                Return on Capital Annualized : 43.6%
                Days to Expiration : 37

We can also calculate the return:

Return =  premium collected / (cost of investment - option premium collected)
Return = $35.05 /($4000-$35.05)
Return = 0.884%

Return annualized = Return/37*365
Return annualized = 8.286%

       The second option trade was selling a put option in Rogers Communications Class B stock at a strike price of $42.00.  The price of the stock was trading lower on the day of the expiration and remained below the strike price the entire day of Jun 19, 2015.  For my broker, usually the option stays in the account until Monday evening, as that is the day the trade is updated. But the put position does not show in my account and the balance as not been changed. According to my brokerage account, the stock last traded at $41.83.  So will have to wait until Monday evening to find out if the option was assigned.

For disclosure, I own 100 shares of RCI.B prior to making this trade. 

To be continued in Part #2.

Disclosure: Long RCI.B

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.