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Discussion Starter #1
My main investment goal is to boost my "passive" income over time, so I'm going to try to post monthly charts showing the growth in my portfolio income.

My strategy includes long positions in dividend paying stocks, covered call writing and cash secured (or margin secured) put writing. Going forward I'll adjust my strategy as I see what works and what doesn't, and as I learn more about options and the market in general.

For record keeping, I record dividends when they appear in my account, and I record income from option sales on a straight line basis over the life of the option (If I sell an option on November 30 with a January expiry, the income is proportionally attributed to December and January).

If I sell an option or it is exercised for a loss, I'll count it against income if and when the loss is realized (ie if I sell a put and it gets assigned for a loss, I hold and sell calls so income continues to flow. If a call is assigned below the strike price of the assigned put, the difference will count as negative income).

I've been recording dividends since March 2010 and Option writing since June 2011. Hope this gets some interest and generates some discussion.




Here's where I stand currently. I'm looking to grow both my option and dividend income substantially over time.

Also, what's the best way to get charts/graphs from excel into a post?
 

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You are missing the Y-axis, Dmoney :p

Also, what's the best way to get charts/graphs from excel into a post?
Whenever I have posted something from Excel on the forum, I have done screen print > Save as JPG > Upload to flickr or similar site > paste link.
Not sure if this is the best way...takes about 2 - 3 mins. I think
 

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Discussion Starter #3
You are missing the Y-axis, Dmoney :p
Musta slipped my mind ;). It starts from a VERY low level though so the first months are misleading. When I get a bit more history behind me I'll cut them off so it doesn't make me look like Buffett.

Whenever I have posted something from Excel on the forum, I have done screen print > Save as JPG > Upload to flickr or similar site > paste link.
Not sure if this is the best way...takes about 2 - 3 mins. I think
I did the same and it's a little bit of a pain. Oh well, that's life.
 

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Discussion Starter #4


Updated with a Y-axis, just for you Harold ;). That and I guess it's always more interesting with numbers. I also included my latest trade.

Sold 5 puts on Telus today. Jan 54 strike price. Want to buy Telus for yield and some growth opportunity, but figure that by selling puts until I get assigned I can maximize my yield. I'll miss the December dividend ($0.58) but instead got $0.93 per share for the puts.


Based on today's close of $55.67, my annualized yield is 13%. Will roll over the put in January if I don't get assigned, or write the covered call if I do.
 

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I have a similar strategy in my portfolio that has been running for longer to verify the outcome.

Though we might differ in our buy in point. I have some TA to determine the strike price. Don't know about you.
 

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Discussion Starter #8
I wouldn't quite call it TA, but I consider general market dynamics, a given stocks gyrations relative to the market, timing of dividend dates, sensitivity to global events (oil prices/euro crisis/CAD$ etc.). I give the charts some consideration, but don't feel like they are going to tell me too much.

I mostly look to options that give me a potential return with enough premium to be happy with only the premium, but enough room for capital gains to not be disappointed if the stock runs up. I don't yet have a strategy for rolling ITM options over, and am debating whether I should look into it more.

How successful have you been over what period of time? What strategies do you use and how do they differ from what I've laid out? Any recommendations or pointers?
 

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This is from a basic two sigma deviation bolinger band. + Avoidance of selling when the price is near a channel top or historic resistance level.

20%

I managed to reach 25% this year with some added TA. Theoretically, the new one should give me 50% return per year, but my other half of the portfolio is not currently online. i.e. it is waiting for a long term option to expire.

My accounting is also different from you. I only book profit on the month when the option expires and I mark to market everything. It is important not to disillusion yourself especially with derivatives. It is the difference between GS and Lehman.
 

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Discussion Starter #10
I'll likely include MTM for my full portfolio at the end of each month. I want to highlight my realized income from the portfolio, so would only include losses that are realized in this analysis. I'll be doing net worth or portfolio performance updates that will fully reflect everything that's going on. So far have only had one losing option position which I haven't solidified and I continue to earn income on. If/when I sell for a loss, I'll offset it against income in the applicable months (likely spread the loss over the period since being assigned).
 

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I've been recording dividends since March 2010 and Option writing since June 2011. Hope this gets some interest and generates some discussion.
I think it would garner more attention in the more active investment forum, and since it touches on dividends and options it would be appropriate to post it there.
 

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Discussion Starter #13
I took advantage of a strong day for TLM, buying back my Jan 14 calls for $0.09 and selling March 13 calls for $0.71. I removed the $0.09 plus commissions from December and January income then spread the income from the $0.71 across Dec, Jan, Feb and March.

I've also added in my expected Dec. dividend income.
I will update actual dividend income as well as a net worth update closer to Jan 1.



 

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Update for the New Year

So another year come and gone, a good one overall, quite eventful.

Graduated university with a degree in finance, got a contract job and two months in got a job offer in Toronto with much better prospects so I made the move in July.

Somewhat expensive starting up in a new city and making the transition from living at home (rent free) and going to school, to working crazy hours and living in downtown Toronto paying exorbitant rent.

I have tracked my finances in quite some detail from early June, and one goal for 2012 is to have everything tracked in even more detail, some of which I will be posting here.

For December I increased my net worth by 2.13%

Assets
Cash: $11,593 ($5k primed for TFSA in Jan)
TFSA: $17,309
Unregistered account: $70,432
Employee share plan: $1,500 (It's actually slightly lower but I don't have online access yet to get the accurate number so I'm recording at book value at the moment)


Liabilities
Margin: $5,975

Net Worth
$94,859

I've been working and saving since I was extremely young (mowing lawns, raking leaves, shovelling snow), got my first 'job' as a camp counsellor when I was 12 and never looked back. Had all my savings in mutual funds for about 10 years and have learnt my lesson there.

I now have a job in equity research and love that I am connected to the financial markets more or less 24/7.

Going forward - goals for 2012:

Net worth target: $150,000 - Ambitious but a few things should hopefully get me there.
-I will hopefully get a raise sometime in the first half of 2012
-Two semi-annual bonuses, which if the past is a good indicator should sum up to roughly my base pay
-The girlfriend, who I live with, hopefully finishes school and gets a job, should let me save more

Savings targets:
-50% of after-tax base pay (~3,700/month, so save $1,850)
-100% of bonus pay - ????? haven't been here long enough to know how much I should reasonably expect

Other goals:
-Might look into getting my CFA designation
-Will keep myself open to buying a house or condo in the New Year, but no desire to rush it
-Get back into shape - hit the gym a minimum of 3 times a week, no excuses


Hopefully tracking myself here will keep me honest. I think the most challenging will be saving 50% of after-tax pay, so here's hoping I get a raise :).

Happy new year to all.
 

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Discussion Starter #15
With January options nearing expiry, I took the opportunity to roll over some of my positions today.

BNS had a great day, so I thought I'd take advantage of the euphoria and replace my January $56 calls with April $56 calls.

BNS was trading ~$53.74 when I initiated the position, sold 6 calls for $0.72.
I stand to make:
Capital gains of 16.5% annualized
Premiums of 5.3% annualized
Dividend of 4% annualized

Optimal total return of 25.6%

Telus was up in early trading, but fell later in the day, and I sold 5 February $56 puts for $0.94.
The annualized premium yield on this particular option is 20.4%.
I'm willing to buy the stock at $56, and will turn around and write covered calls if I am exercised, while collecting my dividend.

Here's where I stand with portfolio income after today's option trades. I broke through $900 in option income for January and will break $1,000 in "passive" income after dividends.
My next target is $1,500 which I will hopefully get sometime in 2012.
Also aiming to register at least 4 months of income over $1,000 for the year, particularly when my big dividend payments come in.




I will be updating again in early February with my monthly results. January dividends should be good with ~$312 in dividends from BNS and just under $100 from the rest of my portfolio.
 

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A little bit of a tangent. I'm just starting out in options trading. Can you recommend 1-2 good books for a beginner? I'm a pretty knowledgeable investor having managed my own 'coach potato' account for a few years, but I want to start adding options to the mix to increase my returns.
 

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Discussion Starter #17
I haven't read nearly as many as I should have but here's a good start:

http://www.rotman.utoronto.ca/~hull/
Hull's books are very widely renowned and are used in most Canadian University level options courses.

There's lots of good websites (including Wikipedia) that can give you a breakdown of all the strategies available and when it's ideal to use them. Beware that most of these websites are trying to sell you on how easy options are and how you can't lose.

Keep in mind that there is a big downside to most of the strategies that appear to be the best.
 

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Thanks for your input. What are a few low risk, modest return strategies commonly employed by retail investors to generate income?
 

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Discussion Starter #19
Thanks for your input. What are a few low risk, modest return strategies commonly employed by retail investors to generate income?
It seems like the most common is writing covered calls. Buy the stock, write calls on the same stock. You limit your upside, but you have the full downside.

There are various spreads that you can use, I'll leave you to look them up yourself, as I'm no expert and don't use them myself.

More in depth options discussion in this thread
http://canadianmoneyforum.com/showthread.php?t=8232&highlight=options
 
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