DGI Adventure – 06-28-16 – Activity Summary

Well this sure is interesting. Mr. Market’s British cousin got him all worked up about something…

All the pundits are saying this is going to be bad for a while, and there’s time to wait for even better opportunities. Don’t get too aggressive. Etc….

I’m trying to not use up ALL my dry powder at once, but man is it tempting…

But anyway that’s the beauty of selling puts. The risk profile is the same as buying the stock, but the lower entry price is just part of the deal. I’ve been selling a lot of puts the last couple days.

On 6/21/16 I picked up some more closed end fund shares, and I said:

I’m going to hold off on any other kind of investing activities just in case everything goes bonkers Thursday after the UK referendum. If it does I certainly have plenty of cash.

Well everything sure did go bonkers.

Selling Puts

Of course, even after I said that, I couldn’t resist selling a put for HCP on Wednesday 6/22. Somebody had downgraded it that morning, and there was a lot of volatility. The REITs seem to be getting treated more like bonds in all of this brexit fallout, so there isn’t as much chaos in those names. I’m kind of glad I made my move on HCP when I did. I think I got a pretty good premium.

Anyway, I’ve been pretty active lately writing puts. I don’t think it’s too aggressive…if things keep going down I’ll still have some ammo left.

But I’m not just watching either. Here’s a summary of all the puts I’ve sold over the last few days:

This table represents $26,600 worth of capital put aside to secure these put contracts. Of course in exchange I collected nearly $600 in premiums. I like how I’m situated here.

I’ll need to do some catching up on the investment theses. Stay tuned.

I already did one for FAST back in October. The strike price would actually increase my cost basis, but I don’t care too much. I think FAST is a really great company, and the yield would still be pretty good at this stike.

BEN first popped up on my radar in my January watch list. CSCO appeared more recently in March’s watch list.

I already have HCP and WHG, but I bought them before the investment thesis structure was complete, so I should probably do one for them.

SPY and SCHB are index funds. I want the diversity that comes with owning some index funds, but I don’t just want to buy them. I want to use options to get attractive entry points and generate income. The SPY options are the “mini” contracts, which only represent 10 shares. For the income tracker etc. I just treat them as 0.1 contracts. Same same. 

Unfortunately the only strikes available for the mini options are December or January. Not a great annualized return on the SPY, but decent considering the downside protection.

Assignment

I didn’t document this, so there’s no proof, but I swear I thought about buying the put options back to close the contracts on VLO and MSFT on Thursday 6/23. The share prices were out of the money, but just barely. I thought to myself, if the UK votes to leave, everything is going to hit the fan, and those will get assigned (they expired 6/24). And then I thought to myself, “nah…they’re not going to vote to leave”. 

Oh well.

The shares got assigned over the weekend, so now I’m the proud owner of 100 shares of MSFT and 100 more shares of VLO (I already held 26 shares in the taxable account).

I’m going to wait for things to stabilize a bit before selling call options against these shares. Calls just don’t go for as much when everything’s going straight down. The prices will bounce back. I think these are pretty okay entry points for these stocks.

Closed End Funds

So even though they’re bond funds, my CEFs trade on the market with stocks. I was looking at their charts and a lot of them set lows recently with the rest of stocks in early February. They shouldn’t be correlated to stocks, but since they trade like stocks, on stock exchanges, I think there is a little bit of overlap. There hasn’t been as drastic of a reaction to the brexit mess in these funds. CIK is down a bit though, and it is the first in the monthly ex-div cycle (7/6), so I will be watching it closely this week.

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