DGI Adventure 07-02-16 Sold Cash Secured Put – Schwab US Broad Market ETF (SCHB) – $47.00 strike – July 15 Expiration

This trade was actually executed on Friday 06/24/16. I didn’t get a chance to write about it until today.

Please visit the core philosophies article on my investment thesis process for a deeper explanation of the components of this article.

Dividend Cycle

SCHB just recently went ex-dividend, so it likely won’t be till late September when it goes again. The dividend payment seems to be just under $0.25/share, but who knows how they come up with the amount. This is an index fund. I’m more interested in this investment as a way to diversify my holdings. I’m using options to try to improve my entry price and generate income in the process. This contract will expire before the ex-dividend date.

Investment

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The QC (Quantitative Case)

It’s an index fund. There’s no payout ratio, or EPS, or whatever. There is no quantitative case.

SPL (Strike Price Logic)

There is not a lot of options activity on this ETF compared to say SPY. So I kind of was looking for anything that had a bit of downside and a decent annualized yield. Shit was so crazy on Brexit day…this was available. So I went for it.

QWaF (Qualitative Warm and Fuzzy)

I would like to have some of my equity exposure through a low cost, broad market ETF like this. It provides diversification compared to picking individual stocks. If you really want to drink the buy and hold index investing kool aid, it doesn’t matter what price you get it at. I don’t completely buy that, so I’d rather get it at a slightly lower price or at least get paid for taking the risk. Options allow that.

CPR (Cold and Prickly Risks)

Maybe the US market is about to enter a prolonged bear market, where equities will lose value. Maybe it is, maybe it isn’t. Index investing ya’ll. Comes with the territory.

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