This trade was actually executed on Thursday 12/15/16, and as you can tell from the title has already expired. The income from the trade was already reported in my December monthly summary, which was published last week.
I just didn’t get a chance to write about it until today. I’m running a little behind, but I promise to catch up. This will be a full week for posts…and they’ll be pretty good ones too, so stay tuned.
Anyway, I didn’t go through my investment thesis process this time. I already own 400 shares in the beneficiary IRA, and another 400 shares in the taxable account. Alert readers will recall from my November monthly summary that I picked up the last 200 shares in the beneficiary IRA on 11/4/16 as a result of a put assignment. Once 30 days passed after acquiring those shares, I could have theoretically sold the taxable shares whenever I wanted.
I stated in that monthly summary that I was going to wait:
I am trying to transfer my ownership of VER into tax-advantaged accounts, and this gives me an equal position in the beneficiary IRA as I have in the taxable. I will likely sell the 400 shares in the taxable account after the next ex-div date.
Well ex-div came and went on 12/28/16, but I didn’t sell the taxable shares because of this trade. My wash rule clock reset on 12/15/16 so I have to wait until 01/17/17 (01/16 is a holiday and 01/13 is too soon).
As discussed, ex-div was 12/28/16, and the trade expired two days later. The premium received is well in excess of the quarterly dividend payout and was only in force for a couple weeks.
SPL (Strike Price Logic)
This was kind of a middle finger to the market’s reaction to the interest rate hike. REITs were getting clobbered, and VER isn’t exactly beloved. The price action had the feeling of a washout to me. Like people that had been holding out for a long time were capitulating and just taking the tax loss. Of course that was kind of my plan too just not until after the ex-div date.
Instead I sold this put. At $8 the forward yield would be nearly 7%. If it stuck below $8 I would have had to double down, but considering the premium was too appealing.
Of course shares have since rallied 10%+, so my puts expired worthless, and my tax loss harvesting will not be as steep (albeit pushed out into 2017).
First law of taxes: it’s better to have more money than less.