Options Update – November 2018

I’m trying to get these updates out about every quarter.  Readers have asked that I share some of my activity. I continue selling puts against companies I want to own more of and using proceeds to purchase more shares of these companies.

Below are all my trades since July of 2017:Income/Profits:

The last update on trades had generated $70,212 in revenues, I’m now up to $82,894.55.  I’m approved for “naked” options trading meaning I can sell puts on companies I don’t own and without having the cash to purchase said security. My collateral is owning shares of companies as equity to cover.  Most of the revenue generated has already been used to purchase more dividend paying stocks.  The closeout column is what each call/put will cost to close out today.  Basically if I close out every single open position I’d have a  profit of $6,720.65, $21,518.80.  This is up significantly from last quarter.  This is an unrealized gain/loss.  The biggest gainers have been the MO puts I have, V still doing very well also.

I’ve already booked profits of $3,375.20 up from $1,671.60 on closed trades.  I plan to keep most of these winning puts going and roll forward any losing puts to offset some of my capital gains this year.

My net profits if I closed out all trades today would be $3,375.20 + $21,518.80 = $24,894 up from $8,392.25 in the last update.

Note: These profits won’t include dividends or capital gains which I do receive from investing in other dividend paying stocks with the revenue.

Recent Trades:

I sold 1 Jan 17 ’20 $85 XOM Put for $10.60
Revenue of $1060.

I sold 1 Jan 17 ’20 $65 WFC Put for $14.41
Revenue of $1441.

I sold 1 Jan 17 ’20 $60 WFC Put for $9.00
Revenue of $900.

I sold 1 June 21 ’19 $70 WFC Put for $7.07
Revenue of $707.

I sold 1 Dec 20 ’19 $175 V Put for $34
Revenue of $3400.

I bought to close 1 Jan 17 ’20 $75 CVS Put for $6.20
Profit of $934.10

I bought to close 1 Jan 18 ’19 $70 MO Put for $5.70
Profit of $621.10

I bought to close 1 June 21 ’19 $82.50 PG Put for $3.25
Profit of $694.10

What to do if a trade isn’t working out:

So what happens in the case that one of these companies is lower near expiration (in the money)? Well, I have a few options.

a. I can do nothing and I’ll be required to purchase 100 shares of said security at the strike price. It’s sort of like I’m buying the company right now at a discount.

b. I can decide to purchase back the put for more money at a loss of approximately (strike – current share value) x 100.

c. Third option is to “roll” the put forward. What this means is that I simultaneously purchase the put back and sell another longer dated put so that I haven’t lost any money.

Any profits will go directly into purchasing more shares of solid dividend-paying companies.

Example of a Roll Forward:

On 03/09/18 I sold 2 08/17/18 dated $75 Strike CVS Puts for $8.55 each, creating net revenue of $1,704.55.
On 06/04/18 I decided to buy back that same Put for $11.66 each, costing me $2,337.45 for a total net loss of $632.90.
I simultaneously sold a new Put on 06/04/18 for CVS with a $75 Strike expiring on 01/18/19 for $12.36 each, creating net revenues of $2,466.55.  So I show a realized loss of $632.90 but I’ve generated revenues of $2,466.55-$632.90 =  $1833.65.  Notice this is more total revenue than the original trade.  I was basically paid $.70 ($12.36-$11.66) x 200 (keep in mind each put/call is 100 shares) = $140 to push out the expiration date.  I hope that makes sense.

Looking ahead

I’m slowing the pace a little to deleverage some and exiting most all speculative companies.  I try to only trade puts on companies I want more of.

My largest holding and largest options positions are in Altria Group (MO).  MO has come back about 20% off their lows and this has helped my options positions a lot.  My V puts continue to rock and roll.  The markets are up and down but still doing well.  I’m not heavy into technology so the beta of my portfolio is quite a bit less than the market.  I’ve received a LOT of revenue that I’ve already put to work in the market in the meantime.  Recently I’ve bought more T, V, DIS, GIS and WFC to name a few.

This is just another avenue I’m using to earn additional profits so that I can get this dividend snowball moving faster.  I just broke the $12,000 forward dividends goal around March , I broke the $16,000 level in forward dividends around my last update and I’m close to $18,000 now.  I actually was over $18,000 but I decided to exit one of my REIT’s, OHI.  The extra options income is certainly helping speed up the process.  My forward dividends are currently $17,840 up from $16,236 from my last options update.  Just for reference, my forward income was $12,015 on 02/27/18.  I’ve already surpassed my goal for the year so I’m now shooting for $18,000 in forward dividends by year’s end.  I’ll have no problem hitting this mark without even contributing with dividend raises and the FOX purchase by DIS.

Best long ideas currently are V, BRK.B, DEO, DIS, WFC, T, BUD  and maybe IBM.