DGI Adventure 02-03-17 – Catching Up – Part II

I started this blog in 2015, and generally speaking I’ve tried to keep my trade to post ratio around 1:1. In other words every trade I make gets documented with its own post. The last month has gotten away from me.

As I mentioned last week, Mrs Wizard and I are in the process of moving to Denver CO. Rather than sell our home in California, we’re going to rent it out, which means lots of little (and some big) construction projects to get it “renter ready”. It also means we have to pack up all our stuff and make a point to spend quality time with friends and family before we go.

All in all it is a very exciting time in our lives, but it is also extremely busy. It’s been hard enough to find time to make trades much less document them with their own individual posts.

So last month I lumped a few of them together. It looks like I have to lump a few more together today.

I can’t promise this will be the last time either. There is still a lot to do for the move, and I’m not going to stop making trades.

I can promise that I will continue to document every trade, one way or another. Also savvy readers who closely follow the dividend income tracker back at the mothership will note that there is still one position that hasn’t been posted yet. It is a new position, so I need to write up my investment thesis, and I’m not going to cut that particular corner.

So here you go. Here’s another table of trades that I’ve made recently that I don’t have time to work up into individual posts. All of them are repeats of previous positions, so do not warrant investment theses.

That’s not a typo. That is one full contract for 100 shares of SPY with a strike price of $224, which means I’ve got $22,400 on the line. Granted it’s only “on the line” for three days, and by “on the line” it just means I have to buy shares of SPY if the market goes down.

I mentioned that part of how the move to Denver came about was that my previous employer was acquired by a competitor. It was acquired as an asset sale, which means the employees all had to be terminated and then rehired by the new company. There are two significant financial consequences of that detail: 1) My PTO got paid out and 2) The 401K was eligible to roll over into my self-directed, traditional IRA.

Previously, the traditional IRA (account #2 on the portfolio page back at the mothership) only had $10K in it, so I kept it at Charles Schwab and was planning to fill it with index funds and not pay attention to it.

Well it just got a $31K boost from the 401K rollover, which means there’s now enough capital to justify playing with options in an Interactive Brokers account. I transferred the account from Schwab to IB, and am off and running.

I’ve decided to keep with the spirit of my original plan for this account (i.e. index investing rather than individual stock picking), albeit with an options twist. I’m going to dedicate this account to three trades:

  1. Cash secured puts and covered calls on VNQ, which is Vanguard’s REIT index fund. This should tie up around $8-9K of capital.
  2. Cash secured puts and covered calls on SPY, which is THE S&P500 index fund (at least in terms of the derivatives market liquidity. This should tie up between $20-$25K in capital.
  3. Shorting UVXY, the worst ETF ever. I short it by buying long dated puts so there’s no margin trading involved. The amount available for this trade will depend on the share price of VNQ and SPY, but as it currently stands, there should be about $10K-11K of capital available for this.

We’ll see what happens. I’d sold puts against SPY before, but they were mini contracts. The trades worked out okay, but there just isn’t enough liquidity in the mini-contracts.

If you’re not scared to sit at the table with the big boys, you have gobs of liquidity at lots of different strike prices, with tons of different expirations.

The problem is that it kind of feels like picking up pennies in front of a steamroller…

I just have to keep reminding myself that the risk isn’t any different than simply being long the index fund, which is made up of the largest companies in the greatest country in the world.

It’s going to be okay. Right?

Leave a Reply