Link to put strategy post as reference to strategy.

Selling puts for income is a relatively safe strategy as long as you are running the strategy against stocks you wish to own.  Every once in a while, however.  Sometimes the underlying stock tanks and you are forced to purchase stock at a price well above the current market price, have a look at the most common payroll issues.

This happened to me recently and I thought I would share the journey I took to business development.  In this post I will step through each trade that was made including trade details, thought processes and charts.

The post Foot Locker Option Play – $450 Gain For Being Wrong appeared first on Dividend Empire.

In this post I’ll provide an update on all of my investment activities over the last 3 months.  This will include dividends received (Empire portfolio and Retirement portfolio), income from transform your business, swing trading and peer to peer lending (lending club). Payroll administration services for small businesses cater specifically to their resource-saving needs. All organizations need to save costs, and that’s especially true for small businesses.

Q1 2017 Income Summary

In Q1 2017 I made a total of $2,558.61 in my taxable accounts from dividends (Empire Portfolio), option trading, swing trading and peer to peer (P2P) lending.  This is a huge number for me.  To put this into perspective I made a total of $4,406.96 in all of 2016!  Here is a breakdown of all my income sources for the quarter and also my total income by month (compared to 2016):

*Closed positions
**Taxable accounts only (Empire)

As usual the Option Income portfolio is leading the way.  I have been pumping more funds into this strategy due to my success last year and it’s paying off.  I also pulled in $217 from dividends and $610 from short-term swing trading.  Lending Club is way down since I’m in the process of selling off all of my notes.  You will find more details how you can be about doing the business online in 2021 .

Dividend Update

Please refer to my Historical Data page to view all past data with links to the write-ups.

• Empire Q1 2017:  $216.43 
• Retirement Q1 2017: $1,027.44

The totals slipped slightly in Q1 2017 for the Empire portfolio because Coca Cola (KO) is on a weird schedule (pays twice in Q4).  Dividend income in my Retirement portfolio shot up last quarter due to heavy buying and a lot of dividend increases.  I’ve made several additions to both of these portfolios which, along with the many dividend increases I’ve received, should continue to boost my dividend income. Looking for a shipping agency in Thailand? Then UNITHAI is your top choice, it is one of the largest shipping and logistics company in Thailand, if you are looking for a company to be able to do medical equipment transport, this is the right one for you.

Purchases:

Dividend Increases:

These purchases and pay raises will add about $60 in annual income to my Empire portfolio and about $350 to my Retirement portfolio, bringing my forward annual income to $913.23 (Empire) and $4,258.70 (Retirement).  I have some cash set aside in both portfolios to make some more purchases next quarter if any good opportunities arise.

Option Income Portfolio

Last update: January 2017

Q1 2017 Income: $1,719.32

The basic goal of the Option Income portfolio is to generate income from the sale of option contracts.  I write (sell) out of the money put contracts on stocks that I wish to own at the price that I wish to own them at.  If assigned shares, I simply write calls and collect dividends (if paid) until the shares are called away (detailed strategy).

I won’t go into the details of all of my transactions here because they can be found on my Option Income Portfolio page.  This page is updated daily with all transactions and price movements.  That said, I will try to post some interesting examples from this portfolio in the near future.

This strategy has been bringing in some serious cash for me.  I increased my allocation to this portfolio towards the end of last year (now ~$25k) and as a result I’m consistently bringing in about $500-$600 per month.  It is important to point out that I’m only reporting closed positions here (actual money in my pocket) – not just cash received for selling options.

Swing Trading Portfolio

Last update: January 2017

Q1 2017 Income: $610.40

For swing trading strategies I use technical chart analysis (support/resistance, chart patterns, indicators, etc) to take advantage of short-term swings in various stocks.  These trades last anywhere from a couple of minutes to several weeks and the same analysis can be used on charts with multiple time frames.

So clearly the results from this strategy are more erratic than the Option Income portfolio but I’m definitely getting better.  I place winning trades much more often than losing trades (74% overall winning percentage) but unfortunately my average loss is greater than my average win.  I’m still coming out on top but there is a lot of room for improvement.

Q1 2017 Swing Trading Stats:

Overall I made 38 trades, 19 swings (trades lasting greater than one day) and 19 day trades.  Out of my 19 swings last quarter I made money on 16 of them (84% wins).  I only made money 63% of the time on day trades.  My average gain per trade is $40 for swings and just a measly $3 for day trades so my path forward is obvious – no more (or very little) day trading.

In both cases my average loss was much greater than my average win and this is something I really have to work on.  I have this psychological issue where I take profits as soon as they appear instead of sticking with my original target.  On the flip side I let losers run all the way to my stop.  Letting trades go to my stop is fine as long as I also let them go to my target!

As always you can find all of my trades on my Swing Trading page (updated near real time).

There are hundreds of technical indicators traders can utilize depending on their trading style and the type of security to be traded. This article focuses on a few important technical indicators popular among options traders. Also, please note that this article assumes familiarity with options terminology and calculations involved in technical indicators. If you are not sure whether technical trading or options are for you, check out the best trading indicators for options.

Lending Club Portfolio (P2P)

I only made $12.12 last quarter because I’m in the process of selling all of my notes and considering getting a FHA Loan lender to build up my portfolio.  This venture was a total bust as a high percentage of my loans defaulted.  All but two of my notes have been sold at this point and I’m looking at about a break even overall.  All of the funds are being transferred to the Empire portfolio.  I currently have 3 loans over 60 days late and my expected return is around 2% now.  I am in the process of liquidating all of my loans on the secondary market so I can use a loan for Kickstarters,  I will no longer be posting on P2P, if you are on a similar position I would suggest you to Get your credit here

Moving Forward

My decision to move to a total return approach is paying off.  I’ve got the steady dividend income rolling in and my other strategies are working well so far.  I will continue pumping all of my gains and a portion of my day job income into dividend growth stocks and these other strategies (approximately 50/50).

I’m also hoping to do a couple of write ups on some dividend growth stocks over the coming months and I’ll also post some examples from my Option Income and Swing Trading strategies.

Thanks for reading and good luck to everyone in Q2!

The post Portfolio Updates: Q1 2017 Total Income appeared first on Dividend Empire.

It’s time for a look back on my first full year of dividend growth investing and also my recent reentry into the world of trading using new tools to trade fx on VT markets in the UK and other coutries.

I have a lot to catch up on since I had to take some time off from posting.  My last update post was way back in August so here I’ll give some details on my activities from September – December 2016.  I will also summarize how I did for the entire year in all of my portfolios.

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The post Portfolio Updates: A Look Back on 2016 appeared first on Dividend Empire.

FINALLY I have some time to write up my trading performance from last month.  I am very eager to write this one since it was a breakout month for me, earning over $1000 in income from non-dividend related trading activity!

This is my 3rd monthly post on the activities and gains/losses in my other portfolios.  These portfolios include Option Income, Swing Trading, Day Trading and P2P Lending.  My goal is to reinvest all gains from these activities into either my Dividend Empire portfolio or my Freedom Fund.

In this post I will give an update on how I performed in August, 2016.  In July I made a total of $312.40 income from all of my portfolios, $41.04 from dividends and $271.36 from my other portfolios.  One of the secrets of a sucefful business is the well mange of the money, for that reason if you have business is important that you for a expert in payroll administration services.

My August goal was to break the $500 mark.  Well I did that and then some!

Summary

*Closed option positions only
**Taxable accounts only

I made a total of $1,131.23 in August, crushing my goal and my previous high of $435.70 set in June 2016.  Dividends accounted for $88.92 while all other activities produced $1,042.31.  The vast majority of this income came from my Option Income and Swing Trading portfolios.  My gains were offset slightly by a $54 loss in day trading.

Option Income Portfolio

July 2016 Income: $331.09

August 2016 Income: $570.39

The basic goal of the Option Income portfolio is to generate income from the sale of option contracts, here are some tips for business owners that can help you.  I write (sell) out of the money put contracts on stocks that I wish to own at the price that I wish to own them at.  If assigned shares, I simply write calls and collect dividends (if paid) until the shares are called away (detailed strategy).

I closed out a total of 6 positions in July and received one dividend on the HRL shares that were assigned to me back in June.

The VLO, GPRO, NFLX and MON were all closed out prior to expiration because they met my 75% of max gain criteria.  A big chunk of my gains this month came from FL.  I first sold a FL put back in April and I was assigned 100 shares in May when the stock tanked.  I then proceeded to sell calls and collect dividends until the shares were finally called away last month.  I collected the full $201.34 premium on the call and basically broke even on the shares.

This FL trade was a bit of a roller coaster and I plan on writing a post on it to show how much money you can make with this strategy when you are WRONG about price movement.

I also opened 5 new positions in August – selling the following put contracts:

I fully expect the F, DAL, MO, and DIS positions to expire worthless though I wouldn’t mind holding stock in these companies if I get assigned.  BMY, on the other hand, is one of those rare cases where I sold a near the money put to increase the likelihood of assignment.

I am extremely bullish on BMY and I wouldn’t mind buying shares at the current price.  I sold a put which was about $2 below the market price at the time (this contract has since gone in the money) and collected a nice premium.  If I end up acquiring these shares, it would be at a significant discount compared to purchasing shares outright on 8/23/2016.

A complete list of all open and closed option positions can be viewed HERE.

Swing Trading Portfolio

July 2016 Income: -$205.26

August 2016 Income: $513.07

In this portfolio I use technical chart analysis (support/resistance, chart patterns, indicators, etc) to take advantage of short-term swings in various stocks.  These trades typically last anywhere from a couple of days to several weeks.

Much better than last month!  The only thing I need to work on is closing out too early.  I have this nasty habit of shooting for $100 gains and quickly locking them in.  While this increases my winning percentage, it limits my gains.

Specifically I left a ton of cash on the table with the GPS and PTGX trades.  Had I followed my exit strategies I would have made $325 on GPS and PTGX would still be going with a gain (as of 9/23/16) of $585!

I won’t complain too much.  Gains are gains…

Day Trading

July 2016 Income: $132.90

August 2016 Income: -$54.09

I use the exact same methods for day trading that I use in my swing trades, just on a shorter time frame (usually the 5- and 15-minute intra-day charts).  I trade high-volume, very liquid stocks and futures contracts that have tight bid-ask spreads to avoid slippage.

I made a total of 4 day trades in July: 2 wins and 2 losses.  I have really cut back on this activity for two reasons.  I simply don’t have the time for it and I have shifted much of my focus to Option Income and, to a lesser extent, swing trading.  Moving forward I will simply combine my income from day trading and swing trading since they are essentially the same strategy.

Lending Club Portfolio

July 2016 Interest Received (minus fees): $12.63

August 2016 Interest Received (minus fees): $12.94

This portfolio is straight forward.  I use the Lending Club platform to buy notes, which are portions of loans to individuals looking to consolidate debt, make large purchases, etc.  Each month I (hopefully) receive payments from these individuals consisting of interest + principle.

The interest that I receive each month is income that can be added to principle and additional contributions to buy more notes, thus keeping the compounding snowball rolling.

Not much to say here.  I was able to purchase 4 new notes through gains and deposits so my income should continue to creep up in the coming months.

2016 Totals

So far in 2016 I have generated a total of $2,320.65 from all investing activities with $1753.23 coming from non-dividend related trading.  My best performing portfolio is still the Option Income portfolio, generating $1354.01 in just 5 months.

My September goal is still $500 since there aren’t quite as many options expiring and I haven’t had much time for swings.

The post Update on Other Portfolios: August 2016 appeared first on Dividend Empire.

As many of you know I am a trader turned into a dividend growth investor and provide retirement planning services.  I have a little more free time on my hands these days, so I decided to bring back some of my old trading strategies to hopefully generate extra income to fund my two stock portfolios – the Dividend Empire and the Freedom Fund.

The strategies that I have employed this year include options, day trading, swing trading and peer to peer lending. Many staff now also work from home or remotely so you need to know how to track remote employees if that is the case so that you can be sure of what they are doing.

I gave brief introductions to these strategies in a previous post, but didn’t get a chance to really do them justice.

This site outvpn.com will be the first of a series describing, in detail, the various strategies I am using to boost my income.  I will begin with a strategy very well suited for dividend growth investors, and one that can generate big monthly income: selling options for income.

Option Basics

In this section I am going to cover just enough about options to understand my strategy.  If you want to learn more or have any questions feel free to contact me at

ke*@di************.com











.  You can also do some simple Google searches on options to uncover a wealth of information.  If you already know the basics, go ahead and skip down to the strategy for businesses, and if you need to learn about taxes you should consider the approaching tax season to find out how to manage it.

While there are many different strategies that use options, even the most complex are based on the simple purchase or sale of call and put contracts (or combinations of both).  Luckily, for this strategy you only need a good understanding of these basic contracts and we don’t have to get into more complex strategies. For additional banking guidance and options visit wecu.com/business-banking/cash-management/

Calls & Puts

A call contract gives its owner the right to purchase 100 shares of an underlying stock at a predetermined price (the strike) prior to the expiration date of the contract.

A put contract gives its owner the right to sell 100 shares of an underlying stock at a predetermined price (the strike) prior to the expiration date of the contract.

Example call contract: AAPL Oct 21 2016 $110 Call

Contract Details (actual values on 8/30/2016):

• Underlying stock: Apple (AAPL)
• Expiration date: October 21, 2016
• Strike Price: $110
• Premium: $1.50

You could purchase this contract for $150 (100 shares * $1.50 per share) and have the right to purchase 100 shares of AAPL for $110 per share before August 19, 2016.  This would make your effective purchase price $111.50 (strike + premium).

At the time of this writing, AAPL is trading at $106.  So why would we consider buying this option when our effective purchase price is $5.50 over the current price?!?  The answer is leverage.  While it would cost $10,600.00 to purchase 100 shares of AAPL ($5,300.00 with margin), you can control these same 100 shares with only $150.  This, as with anything in life, comes with a price, if you want a loan then here is what to prepare before getting a loan.

You must not only be correct about the direction of the stock but also the timing.  In order for you to break even on the call contract, the stock price must rise $5.50 to $111.50 by expiration (52 days away in this case).  Anything less and you will take a loss up to the cost of the option ($150).

What are the benefits to the buyer?  The buyer is able to control 100 shares of AAPL with only $150 while purchasing 100 shares outright would have cost $10,600.00.  Risk is limited to the cost of the option, or premium, which is $150.  Stock ownership risk is $10,600.00 though few of us would let it get so bad. If you want to know what is harmonic pattern trading – introduction by NSBroker is the best guide you’ll find online.

What is the drawback to the buyer?  Time is not on the buyers side.  AAPL must reach a certain price, $111.50 in this case, before expiration just to break even.  If 100 shares were purchased at $106, gains would be realized at any price above $106.

Example put contract:  AAPL Oct 21 2016 $110 Put

Contract Details (actual values on 8/30/2016):

• Underlying stock: Apple (AAPL)
• Expiration date: October 21, 2016
• Strike Price: $110
• Premium: $5.40

This is the same expiration and the same strike price as the call example above, but this contract is a put.  Purchasing this contract would give you the right to sell 100 shares of AAPL for $110 per share before October 21, 2016.  For this right, you would have to pay a $540 premium (100 shares * $5.40 per share).

The same rules and logic that I discussed for the call apply here for the put, just in reverse.  The put buyer is expecting AAPL to decrease, and AAPL must drop below $104.60 (strike – premium paid) by expiration for this trade to be profitable.

Up to this point I have only talked about buying options.  Of course for every buyer there is a seller.

Selling, or writing, a call contract means you are obligated to deliver 100 shares of the underlying stock upon assignment.  This means that if you own the 100 shares and the stock prices rises above the strike price your shares will be called away.  If you do not own the shares, and you do not buy back the call contract, you will end up short 100 shares upon assignment.

Many people looking for money get into Forex and you should read this article about Forex Scams explained and learn about the financial consequences for getting into these companies.

Selling, or writing, a put contract means you are obligated to purchase 100 shares of the underlying stock upon assignment.  If you are short 100 shares and the stock price drops below the strike price your short stock position will be covered at the strike price.  If you are not short the stock, you will be the proud new owner of 100 shares at the strike price.  Put selling is the basis of my strategy and is a great way to accumulate stock and earn some income. If you are in the need of some money and you are considering a loan as a solution, check out this post about the Personal Debt Solutions you can also opt to.

Option Pricing

The first thing you will notice in the examples above is that although the strikes and expirations are the same for the call and the put, the put is much more expensive to buy.  The reason is that the put contract is in the money.  The contract already has intrinsic value – meaning that if the contract were to expire today it would be worth $400 ((strike price – stock price) * 100 shares).  The call contract is out of the money – if the contract were to expire today it would be worthless since the stock price is below the strike price.

So why is the call worth $150 if it has no intrinsic value?  Time.  This contract doesn’t expire for almost 2 months and the odds of AAPL reaching or surpassing the strike price by then are substantial.  This is the very basics of option pricing: Premium = Intrinsic Value + Time Value, where Time Value = some very complicated math that involves things like time until expiration and volatility.

In the examples above, the call has $0 intrinsic value and $150 time value while the put has $400 intrinsic value and $140 time value.  Any time value in an option premium will decay the closer it gets to expiration.  So unlike the buyer, time is an option seller’s friend.

In reality, option pricing is much more complicated than this and requires many large books to fully understand it.  For the purpose of understanding my strategy I only want to stress one of the factors, besides stock/strike price and expiration, that affects option prices: volatility.

High Volatility = High Option Prices

The reason for this is simple.  High volatility means higher expected price fluctuations.  Higher expected price fluctuations means increased likelihood of hitting a distant price target.  Option sellers get paid more to take on the added risk of the underlying making a volatile move. For more information on financial issues contact Bankruptcy Attorney San Jose for advice on how to manage your money correctly.

You can also go to Attorneysre.com there you can hire a financial attorney and it will help you make sound financial decisions, protect your assets, and enforce any financial or contractual agreements. Financial attorneys can provide customized strategies to deal with legal disputes and complex financial matters, ensuring that all parties are in compliance with the law. They can also provide advice on asset management, estate planning, taxation, and much more.

Time value decay and volatility are the two keys to my option income strategy and most strategies involving the sale of options.

Selling Puts To Accumulate Stock

Most of us don’t just go out and buy a stock at the market price on a whim.  We do our research, determine a fair price for the stock and we wait for the stock to fall to an acceptable level.  Then we buy.

Some of us add the stock to our watch list to monitor it and some of us will set a limit order for our desired purchase price.  This is where the power of options becomes apparent.  Think of your limit price as a strike price.

Instead of submitting a limit order for your stock you can sell a put with a strike price equal to your limit price.  In this way, you are getting paid a premium to essentially set a limit order.

There are some differences of course.  In order to acquire the stock the share price must be below the strike price at expiration.  If it falls below the strike prior to expiration but then recovers you would not be assigned the stock (whereas you would have acquired the stock with a limit order).  In this particular situation you would have made more money with a limit order.  The other reason to use a limit order is if you don’t want blocks of 100 shares.

Let’s take a look at an example comparing a put sale vs a limit order for AAPL (actual values on 8/30/2016).  AAPL is trading at $106.00.  Two investors, Option Joe and Limit Bob, studied the charts, poured through the fundamentals and both have decided that $100 would be a great price to pick up some AAPL stock.

Limit Bob decides to set a limit order to buy 100 shares of AAPL at $100.  Option Joe sells the following option contract: AAPL Oct 21 2016 100 Put.  Option Joe receives a $220 premium for selling the put contract.  Let’s take a look at the 3 possible outcomes:

1. AAPL shares trade sideways or increase.  Both scenarios leave our investors without any shares.  Limit Bob gains nothing while Option Joe pockets the $220 premium.  In this scenario the win goes to Option Joe.
2. AAPL shares drop below $100 then increase to $105 at expiration.  Limit Bob’s limit order would have been triggered, giving him 100 shares of AAPL at $100.  These shares are now worth $105 each giving Limit Bob a $500 unrealized gain plus any dividends paid.  Option Joe did not acquire any shares but still gets to pocket the $220 premium.  Here the win goes to Limit Bob.  However, Option Bob is looking for income and is content with the outcome.
3. AAPL shares plummet.  AAPL shares drop sharply and close at $95 at expiration.  Both investors would buy 100 shares of AAPL at $100 in this case.  Limit Bob picked them up on the way down while Option Joe was assigned the shares at expiration.  The difference is that while Limit Bob has a $500 unrealized loss (($100-$95)*100), Option Joe only has a $280 unrealized loss ((($100-$95)*100)-$220).  Option Joe actually purchased the shares at a discount due to the put premium received.  Limit Bob might have picked up a dividend before Option Joe was assigned his shares, but this is nowhere near the premium Option Joe received.  Another win for Option Joe.

For those wishing to just acquire stock, limits vs puts is a tough decision and one has to consider many different factors.  For those of us looking for income and the opportunity to pick up shares at a discount the decision is simple: puts are the way to go.

My Option Income Strategy

My strategy is quite simple.  I sell, or write, put and call option contracts to generate income.  I sell the contracts when they are expensive (high volatility) and I buy them back when they are cheap (or they expire worthless).

There is, of course, another thing that can happen.  Something that terrifies most people.  Sometimes the stock moves against me and I get assigned on the contracts that I write (forced to buy 100 shares per contract at the strike price).  Not to worry.  I only run this strategy on stocks that I want to own.

In the relatively rare event of assignment, I simply collect dividends (if paid) and write calls against the new stock position until the shares are called away.  This typically results in a break even on the shares, but can sometimes result in a profit depending on the strike of the calls that I write. however i also think it’s a good option to start ira investing so you can save money for your future projects.

*If call strike is greater than original put strike

Detailed Method

Step 1: Create a watch list

I create a watch list of stocks that I want to own and make sure they are optionable.  I research the companies as I would for any normal stock purchase then I assign what I believe to be a fair value – a price where I would be comfortable owning the shares.  This is typically a good 10-20% below the current price which is why the vast majority of my positions do not get assigned.

Then I go to the charts to find strong support levels and trend lines.  These are the areas where I want my strike to be.  If the stock happens to drop to my strike price I will be buying shares at support.  In rare instances, if I am very bullish on a stock and there is support close to the current price, I’ll go ahead and sell a put at that level with the hope of being assigned.  I get paid a very high premium for these positions making it worth the “risk.”

Step 2: Find stocks from list that are oversold and/or volatile

Then I regularly scan my watch list for stocks that are oversold (RSI and Stochastics indicators) and/or are very volatile.  Volatility could stem from news, earnings, a general selloff of the market, etc.  When markets fall or my stock of interest drops sharply option prices skyrocket.  This is the time to sell.  I make sure whatever caused the volatility spike doesn’t change my positive view of the company.  If everything checks out I move on to the actual sale.

Step 3: Sell puts

Once I have identified a stock that I want to own, the price I want to own it at AND the option premiums for that stock are high I start looking for the specific contract(s) that I want to sell.

There are several parameters that allow me to quickly narrow down my options:

1. I want to collect at least $100 premium to minimize commission damage
2. My annualized return for the trade must exceed 20%
   • Annualized return = ((net income / option requirements) * (365 / days to exp)) * 100, option requirements is the cash required to open a naked put (varies from broker to broker)
3. The strike must be at or below my desired purchase price
4. The expiration must not be more than 6 months away (I like quick turnarounds)
5. I must be able to afford the purchase of 100 shares if I get assigned

After filtering out the contracts using these rules I am typically only left with a couple of choices.  Do I go with a cheaper contract that is less likely to be assigned and just buy more contracts?  Do I go for a longer expiration to squeeze out more premium?  These are the types of questions I ask and the answers vary depending on factors like market conditions, my view of the stock’s likely direction and strength, how much I really want to own the stock (or am I more interested in the option income), etc.

Step 4: Evaluate / close position

After selling the put I immediately start looking for a reasonable exit.  My target is to capture 75% of my premium in a relatively short amount of time.  For example, say I sell a put for $100 and the value drops to $25 after a month.  If there is still a substantial amount of time left until expiration (> 1 month) I will go ahead and close out.  There is no point waiting months just to collect another $25.  Instead, I take my funds and repeat the process.

If the opportunity to exit with 75% of my premium doesn’t present itself then I just wait for expiration.  If the stock price is close to my strike I have a couple of options.  I reevaluate the stock to make sure I still want it.  If I don’t, I buy back the contract.  If I really want the stock I do nothing.  If I am on the fence I will set a limit order to buy back the contracts for $0.05.  TradeKing graciously charges no commissions to buy back options for $0.05 or less.

Finally, if I was dead wrong and the stock drops well below my strike then I prepare for assignment.  This involves making sure there is enough cash to cover the purchase, finding the next support level for stop-loss placement and formulating a plan for call sales.

Step 5: Repeat steps 2-4

If Assigned:

When assigned shares the most important thing to remember is DON’T PANIC.  This is all part of the plan.  I refer back to steps 1/2 for comfort.  I bought shares of a company that I want to own at the exact price I wanted!  At a discount!

Now that I own a great company with great fundamentals at a bargain, I typically like to wait for a nice rebound before making another move.  Then I plan my call sales.  If the company pays dividends I check the ex-dividend dates.  Ideally I want to sell my calls with an expiration just beyond the ex-date so I can capture a dividend.

Once the stock finds a bottom and begins to rebound I sell calls.  If the rebound is strong and approaches my original put strike I might consider selling a call with a higher strike if I am still bullish.  This would enable me to realize gains from the stock transaction in addition to pocketing the option premiums.  If I don’t see too much upside I will sell a call with a strike equal to my original put, breaking even on the stock transaction but still collecting the dividends and premiums.

If the stock does not reach the call strike I have a few options.  I can buy it back for a profit and repeat the process.  I can let it expire and repeat the process.  Or if my view of the company has turned sour I can simply close everything out.  All along the way I am collecting premiums and dividends.

Common Criticisms:

When I discuss this strategy with other investors I receive two common criticisms.

Wouldn’t you make more money if you just bought shares outright?

First of all remember that the purpose of this strategy is to earn extra income (primarily from option premium) and to acquire shares at a discount.  I use my other portfolios for straight share purchases.

That said, the short answer to this question is yes.  Assuming that you knew the stock would go up of course you would make more money just buying 100 shares.  Unfortunately we don’t have a crystal ball.

Assuming that we can’t predict the future there are plenty of reasons to choose put sales over buying stock.  Two of the biggest reasons are cost (it will cost much more to buy shares vs sell puts) and buying shares outright comes with more risk.  Let’s go through an example using Netflix (NFLX, actual values on 8/30/2016).

The obvious advantage to outright stock purchase is unlimited upside.  With the put sale the max profit is the premium received for the put which in this case is $158.  That is where the advantages end.

Entering the put trade requires only $1700 (at TradeKing) whereas buying the stock will cost almost $5000 (using margin for both).  In addition the put trade carries less risk.  The potential loss is much less due to the lower purchase price and the premium received.

Finally, my favorite advantage with the put sale is the safety margin.  In this example, NFLX would have to drop 14.4% to $83.42 to reach break even.  Now that helps me sleep at night.  At $83.42 the outright stock purchase would be down $1400…

And if NFLX does in fact drop to $83.42 or lower, I will consider myself lucky to own stock in a great company at such a low price.

What if the market tanks and you are assigned on ALL of your put positions?

This is something that will most likely happen to me at some point and it is admittedly a little scary.  While this scenario is obviously not ideal there are two things that put my mind at ease.

First of all, most of the puts I sell would require a drop of 10% or more for me to be in danger of assignment.  This is a HUGE drop and it doesn’t happen often.  When it does happen, I am usually scrambling to buy as much stock as I possibly can anyways – so I’ll happily collect income from puts to acquire these discounted stocks.

The second thing is that I don’t take on more put positions than I can afford.  While I’m technically writing naked puts, I always make sure I have the cash or assets to back it up.

The important thing to remember is to run this strategy on stocks you want to own.  If you follow this rule there is no reason to worry about assignment.

Hopefully this post was helpful and provided you with some options basics.  I apologize for the long post but believe me when I say that this is the short version.  When I originally wrote this I basically had a book when I was done.  I trimmed it down to what I though was most important.  That said, if you want details on anything or have any questions don’t hesitate to comment below or shoot me an email at

ke*@di************.com











.  You can also check out all of my open and closed positions in my Option Income Portfolio for my trade details – updated daily.

The post Selling Options For Income appeared first on Dividend Empire.

Time for my second monthly post on the activities and gains/losses in my other portfolios.  These portfolios include Option Income, Swing Trading, Day Trading and P2P Lending.  My goal is to reinvest all gains from these activities into either my Dividend Empire portfolio or my Freedom Fund.

In this post I will give an update on how I performed in July, 2016.  In June I made a total of $435.70 income from all of my portfolios.  My Empire and Freedom portfolios produced $105.31 in dividends and I raked in $330.39 from all other activities .  I was hoping to break the $500 mark in July but unfortunately I fell a little short due to some poor swing trading decisions that is why a looked into the best payroll tips.  Here are the details…

Summary

* Income generated from CLOSED positions only
** Dividends received in the Empire portfolio and Freedom Fund

I made a total of $312.40 in July falling well short of my $500 goal.  Dividends accounted for $41.04 while all other activities produced $271.36.    Clearly I had a bad month swing trading.  If it wasn’t for the -$205.26 in that category I would have hit my $500 mark.

Other than that I am very pleased with my performance considering the fact that I was only active for 2.5 weeks out of the month (vacation).  I did very well in the Option Income and Day Trading categories.  Lending Club (P2P) looks minuscule in comparison but I expect this income to steadily rise each month.

Option Income Portfolio

June 2016 Income: $196.74

July 2016 Income: $331.09

The basic goal of the Option Income portfolio is to generate income from the sale of option contracts.  I write (sell) out of the money put contracts on stocks that I wish to own at the price that I wish to own them at.  If assigned shares, I simply write calls and collect dividends (if paid) until the shares are called away (strategy post in the queue).

I closed out a total of 4 positions in July and received one dividend on the FL shares that were assigned to me back in May.

I closed all of these positions well before their expiration date.  My general rule for buying back options is to do so if the position reaches 75% of the max gain prior to expiration.  This allows me to reinvest the funds held up in the position (option margin requirements) into a new position with greater profit potential.

The dividends received from the FL shares were automatically reinvested to purchase shares of FL.  These shares now reside in my Empire portfolio.

The FL call I sold against my 100 shares is now deep in the money.  I expect these shares to be called away at expiration on August 19.  This will result in a break even on the share transactions but I will book another $201.34 income from the call sale closing out.

I already closed out my VLO position early August for $65 (not shown since I closed 8/3).  I also plan on closing out the NFLX put in August if I reach my 75% profit target and I will receive a dividend for my 100 shares of HRL.  My anticipated income for August is somewhere around $400.

Swing Trading Portfolio

June 2016 Income: $94.80

July 2016 Income: -$205.26

In this portfolio I use technical chart analysis (support/resistance, chart patterns, indicators, etc) to take advantage of short-term swings in various stocks.  These trades typically last anywhere from a couple of days to several weeks.

Not much to say.  This was just an awful month.  I entered these trades too early without waiting for confirmation of the trend reversal.  As a result I got caught up in the relentless market rally.

Day Trading

June 2016 Income: $27.02

July 2016 Income: $132.90

I use the exact same methods for day trading that I use in my swing trades, just on a shorter time frame (usually the 5- and 15-minute intra-day charts).  I trade high-volume, very liquid stocks and futures contracts that have tight bid-ask spreads to avoid slippage.

I made a total of 14 day trades in July: 12 wins and 2 losses.  The income seems rather small for this strong win record but I am still keeping my position sizes small until I’m comfortable trading again (it’s been a while).

Lending Club Portfolio

June 2016 Interest Received (minus fees): $11.83

July 2016 Interest Received (minus fees): $12.63

This portfolio is straight forward.  I use the Lending Club platform to buy notes, which are portions of loans to individuals looking to consolidate debt, make large purchases, etc.  Each month I (hopefully) receive payments from these individuals consisting of interest + principle.

The interest that I receive each month is income that can be added to principle and additional contributions to buy more notes, thus keeping the compounding snowball rolling.

One of my notes was fully paid off in July and I reinvested the cash in a new note.  I didn’t contribute any additional funds and this was my only note purchase.

2016 Totals

So far in 2016 I have generated a total of $1189.42 from all investing activities with $710.92 coming from non-dividend related trading.  My best performing portfolio is still the Option Income portfolio, generating over $783.62 in just 4 months.  I am putting more resources into this strategy since it is clearly my biggest money maker.

Since I didn’t hit my $500 goal in July I will keep it the same for August.  Hopefully I can get there!

The post Update on Other Portfolios – July 2016 appeared first on Dividend Empire.

The good excuse is that I was on vacation for a week and a half and had limited access to computers and research.  The bad excuse is that I’ve been waiting on the sidelines for the market to drop.

I have acquired this nasty habit of trying to time the market which results in me missing out on a lot of good opportunities.  My goal moving forward is to simply look for undervalued companies and invest in them regularly no matter what the market is doing.

That said, here are the buys and sells that I managed to squeak out in July:

I made a total of 12 purchases; 9 in the Empire Portfolio and 3 in my Retirement Portfolio.  I also made one sale – closing out my HSY stake (more on this below).

I did manage to make quite a few small purchases in the Empire portfolio, but after selling off my HSY shares my NET investments for the month totaled only $70.  This isn’t going to help improve my dividend totals so I figured I’d start looking into Buying and Selling Regulation CF Shares.

To make matters worse, I didn’t make a single purchase in my Retirement portfolio.  The only 3 buys were my automatic payroll deductions to buy AMGN shares.

Transaction Details

Here are some details around two of my more interesting transactions.

7/1/2016 – Sell 4.6662 Shares of Hershey (HSY)

It’s interesting looking back at my original post on HSY.  When I made my first small HSY buy I noted that a $25 purchase didn’t seem significant at the time, but over the course of years could build a sizable position.  Also, through dollar cost averaging I could hopefully accumulate these shares for a reasonable average price / share.

I began accumulating HSY in my Loyal3 account back in May 2015.  I have since contributed $25 per month, every month and managed to amass 4.6662 shares at a cost of $425 ($91.08 per share).

Last month HSY shares skyrocketed to over $113 due to the Mondelez bid, which was promptly rejected.  I felt that at those levels HSY was extremely overvalued so I decided to close out my shares and redistribute the funds.

I closed out at $111.86 per share for a gain of ($118.86-$91.08) * 4.6662 shares = $96.96.  In addition to these capital gains I received a total of $7.49 in dividends from the company.  That brings my total gains to $104.45, or 24.6% (21.1% annualized).  Not bad for just a $25 per month commitment over a year!

Now keep in mind that it is very rare for me to sell one of my dividend growth stocks.  I review my portfolios periodically to identify stocks that are either under performing or are overvalued.  Stocks that I deem to be extremely overvalued are considered for sale since the funds / gains can be used for fairly valued investments.

This was the case with HSY.  I used some of the proceeds to start positions in American Express (AXP) and Hasbro (HAS), companies that I feel have better growth potential than HSY.  I plan on adding to these two new companies regularly.

7/29/2016 – Buy 0.464 Shares of Foot Locker (FL)

On the surface this doesn’t look very interesting.  Who cares about half a share of Foot Locker?!?  The significance of this transaction comes from the method used to obtain the shares.

I recently wrote a post describing some of my other investing activities and in that article I mentioned my Options Income Portfolio (post on my method coming soon).  In this portfolio I acquired 100 shares of Foot Locker at a discount by selling a put option contract.

After being assigned the 100 shares, I went on to sell a call option contract with an expiration date AFTER Foot Locker’s ex-dividend date.  This allowed me to capture a dividend on my 100 shares before they get called away (expected later this month).

Since I love Foot Locker I decided to have the dividend automatically reinvested in FL shares and I assigned these shares to my Empire portfolio.

Other Buys

The rest of my purchases were either small Loyal3 purchases or DRIPs so I won’t go into any details.

August Goals

Purchase at least $1000 worth of stock in Empire and $3000 in Retirement.

The post July 2016 Buys and Sells appeared first on Dividend Empire.

I’ve been wrong so far – the market just keeps going up!  I’m planning on nibbling a little bit this month by making a few small purchases.  Clearly I need to do something because my dividend growth is suffering.

As you will see below my Empire dividends actually decreased year over year coming in at just $40.70 for the month of July.  My Retirement portfolio, however, continues to grow at a nice, rapid pace.

Here are some of my key dividend stats:

Dividend Income

In July I received a total of $167.76 in my two portfolios: $40.70 in my Empire portfolio and 127.06 in my Retirement portfolio.

For the Empire portfolio, this was a small $0.70 increase over April 2016 and is actually a $2.79 decrease year over year.  The good news is that this decrease wasn’t a dividend cut.  My Coca Cola (KO) position increased in value quite a bit since my initial purchase.  I felt a bit overweight in the company and decided to sell off some of the shares.

My Retirement portfolio increased by about $5 compared to April and a cool $73.15 year over year.  This increase was mostly new purchases with a few dividend increases mixed in.

Here is a breakdown of the companies that paid me in July:

July isn’t a really exciting month for me with just 4 companies paying me in my Empire portfolio and 6 paying me in my Retirement portfolio.  Dividend reinvestments increased my forward annual income by $1.75.

Pay raises:

Only two small raises last month that gained me another $10.92 annual income.  Better than nothing…

Forward Income Progress:

My forward income progress has slowed to a crawl.  Waiting for a drop in the market isn’t helping.  Hopefully I can take some time this month to find some bargains out there and boost my income.

Progress Against Goals:

Finally, my dividend goals for 2016 are to receive at least $1000 worth of dividends in my Empire portfolio and $3000 in my Retirement portfolio.  Here is my progress through July:

My Retirement portfolio goal shouldn’t be a problem this year.  Unfortunately, as I’ve mentioned several times, Empire needs some work.

Thanks for reading!  I hope everyone had a great July and best of luck to you in August.  I will post my July purchases, updates on my other portfolios and a breakdown of my option income strategy later this month so stay tuned.

Also be sure to check out my Historical Data page where I have organized all of my monthly incomes, updates and screens (with links).

Disclosure: Long all stocks mentioned in this article.

The post July 2016 Dividend Income appeared first on Dividend Empire.

As I’ve mentioned several times on this site I am relatively new to the world of wood building. I have only been doing it for a little over a year now and I love it.

Before that, however, the vast majority of my investing life was spent day trading or swing trading stocks, options and futures.  While profitable, it was so time consuming that I had to put these activities on hold while I built up my dividend growth portfolios.

These portfolios are now fairly large, purchasing is slowing down a bit and I feel like I’m at the point where I can continue to successfully manage them while bringing back some of my other investing activities.  Therefore, I decided to allocate some of my time and funds to day trading, swing trading, options, peer to peer lending and starting a new stock portfolio for my wife and I. If you’re planning on trading crypto, I suggest you read this yobit exchange review.

I am starting slow, so the income generated from these activities is not too impressive yet, but I will gradually increase my risk tolerance as I get the trading feel back.  The goal of these activities is to generate additional funds to put into my two taxable stock portfolios: Dividend Empire (for my children) and the Freedom Fund (for my wife and I).

In this post I will briefly describe each of these new “portfolios” and give an update on how I’ve done so far.  If you are interested in detailed methods or if you would like more information feel free to contact me.  I am also planning on writing a series of posts over the next couple of months detailing each of these methods so stay tuned.

One final thought.  I realize that this is a dividend-focused website so I don’t want to overemphasize these other portfolios. I do feel like it is important to introduce manpower management online tools and these other activities and include these updates on my site since any income (or losses) generated will directly affect my dividend stock portfolios.

Competition is fierce between two of the biggest tax-prep software providers. This tax season mydealsclub suggests either TaxAct or TurboTax , see why comparison to help you sort out which cloud-based software is better for you.

Summary

*Income generated from CLOSED positions only
**Dividend income from the Empire and Freedom portfolios

As you can see I got off to a rough start, losing money day trading in February and March.  Since then I have shaken off most of the rust and have been increasing my monthly gains.

So far in 2016 I have generated a total of $877.02 from all investing activities with $396.80 coming from non-dividend related trading.  My best performing portfolio by far has been Option Income (see below for details) generating over $450 in just 3 months and nearly exceeding my dividend totals for the entire year.  Unfortunately I have done rather poorly day trading, losing a total of $270 this year, but I have been improving.

Just a couple of things to point out before going on.  For option income (the sale of option contracts) I only report income from CLOSED positions.  A lot of people like to report income as soon as the contract is sold  This is incorrect.  While you do receive cash from option sales that you can use immediately, this is offset by holding a short option position in your account.  Only when the contract is bought back, expired or exercised can you truly report it as income.  Second, I am only reporting dividends from taxable accounts that can be used immediately.

Option Income Portfolio

The basic goal of the Option Income portfolio is to generate income from the sale of option contracts.  I write (sell) out of the money put contracts on stocks that I wish to own at the price that I wish to own them at.  Most people simply set limit orders at their desired purchase price – but why not get paid to do this?

I won’t go into details on options or this particular method in this post because I don’t have the space to do it justice.  I am planning on writing a comprehensive article this month that will cover my strategy in great detail.

For now – here is my activity for the month of June:

June Income: $196.74

I closed out 3 positions in June.  The HRL put was assigned and I was forced to purchase 100 shares at $37.50 (see open positions below).  Not a big deal because I love the company and I feel like I got it at a good price.  I will happily sell calls and collect dividends until it gets back to $37.50.

The FL call was sold against my 100 shares that were assigned to me in May.  FL dropped a bit after selling the call, enough to close out the position early for a nice $74 gain.

My VZ put didn’t expire until January but I decided to close out early for a small gain.  VZ looked extremely overbought and I’m anticipating a drop in share price.  If this does happen, I’ll jump back in when the put premiums are higher.

I will most likely close out my INTC puts and my Aug 19 FL put in July.  VLO looks pretty bad right now but it will hopefully bounce off of the strong support level at $45, at which point the premium value will drop rapidly.  V and GPRO are looking good.

I sold HRL and FL calls against my stock positions at my original assignment prices.  If assigned, this will result in a break even on the stock transactions while allowing me to collect extra premium from the option sales.  The expirations I chose will also give me a dividend payment for both holdings.

Swing Trading Portfolio

In this portfolio I use technical chart analysis (support/resistance, chart patterns, indicators, etc) to take advantage of short-term swings in various stocks.  These trades typically last anywhere from a couple of days to several weeks.

June Income: $94.80

Definitely not one of my best months but at least I finished with a gain.  I actually feel like I traded better than the numbers suggest.

I believe HSY was a perfect trade.  The setup was ideal and I was happy with my entry.  Unfortunately I got smacked by the Mondelez buyout attempt.  If this wouldn’t have happened perhaps my short would have been a winner.

SBUX would have made me money had I followed my exit rules.  I stupidly closed out too early in the wake of my MU and GLW success on the same day.  Finally, LOCK was just a bad entry.  I jumped in too early before confirmation of the reversal.

Day Trading

I actually use the exact same methods for day trading that I use in my swing trades, just on a shorter time frame (usually the 5- and 15-minute intra-day charts).  I trade high-volume, very liquid stocks and futures contracts that have tight bid-ask spreads to avoid slippage. When it comes to trading forex, I rely on reputable forex broker uk for their reliability, transparency, and regulatory compliance to ensure a smooth trading experience and access to competitive spreads.

I got off to a decent start in June seeing myself up $150 through the first 3 weeks.  Unfortunately a couple of mental errors during the final week nearly wiped out these gains.

June Income: $27.02

Sorry, no time this month to provide detailed transaction data.  I’ll be sure to include it next month with an example trade.

Lending Club Portfolio

This portfolio is straight forward.  I use the Lending Club platform to buy notes, which are portions of loans to individuals looking to consolidate debt, make large purchases, etc.  Each month I (hopefully) receive payments from these individuals consisting of interest + principle.

The interest that I receive each month is income that can be added to principle and additional contributions to buy more notes, thus keeping the compounding snowball rolling.

June Interest Received (minus fees): $11.83

I received $12.11 in interest resulting in $11.83 income after fees.  This was my first month receiving payments and everyone is current on their payments as expected.  Hopefully this continues and my charge-offs are minimal.

I contributed $50 which, along with the $27.61 principle + interest received in June, allowed me to purchase 3 new notes bringing my total up to 43.

Freedom Fund Update

The Freedom Fund is a portfolio my wife and I created back in May, 2016 to help us save for retirement.  Other than our 401k, most of our savings goes to the Empire portfolio, a dividend growth stock portfolio set up for our descendants.

We decided that we needed a bit more savings for ourselves, so we created this portfolio that focuses on high growth.  There will be a mix of dividend stocks, growth stocks and some purely speculative plays.  Funding will come from monthly savings and gains from other trading activities.

Since this is the first time updating the Freedom Fund, I’ll include my May purchases here along with the June buys.

Amazon (AMZN) and Anheuser-Busch InBev (BUD) are monthly Loyal3 buys, Lending Club (LC) was a one-time purchase through TradeKing and the remaining buys were through the commission-free broker Robinhood.

Overall my June income total was $435.70.  The $105.31 from dividends was reinvested into stocks in my Empire portfolio.  The $11.83 from Lending Club interest was reinvested into more notes.  Finally, the $318.56 earned from other activities will be spread between the Empire and Freedom portfolios.

Hopefully the income uptrend continues and I can break the $500 mark in July!  It would be nice to have some extra funds to help build my savings and dividend portfolios.

Thanks for reading and best of luck to everyone with their investments!

The post My Other Portfolios – Introductions and Updates appeared first on Dividend Empire.

June was a great month for me in terms of dividend income.  But unfortunately I didn’t have time to write up my purchases for the month, so now I’d like to review all of my June buys in this post.

I made a total of 15 purchases; 10 in the Empire Portfolio and 5 in my Retirement Portfolio.  There was one new purchase, one large addition to an existing position and several small DRIPs / monthly Loyal3 buys.

While I’m happy to say that my contributions to the Retirement portfolio were substantial ($5,556.47), my Empire contributions were a measly $221.36.  I want this amount to be at least $500 each month so I’m making this a priority moving forward.

On to some details…

6/13/2016 – 50 Shares of Microsoft (MSFT)

My initial purchase of MSFT was back on April 22, 2015 when I purchased 70 shares at $43.04.  Microsoft has since treated me quite well, paying me a total of $119 in dividends and increasing in value by $9.26/share as of this writing (~$650 unrealized gain).

I decided to add to my position (now 120 shares total) after Microsoft announced their plans to acquire LinkedIn.  After hitting a high of nearly $57 a couple of times MSFT pulled back to the $50 range.  I find this price very attractive since I believe it is a bargain price and also sits on a very strong support level.

Weekly chart of MSFT drawn on the ThinkOrSwim platform. Previous resistance at $50 has turned into a very strong support level.

If you are interested in why I believe MSFT is a bargain at $50 check out this article.  The author shares my views on the company so I won’t go into any detail here.

6/27/2016 – 40 Shares of Visa (V)

I’ve had Visa on my watch list since I started dividend growth investing.  Unfortunately I just kept on missing all of the dips.  I finally pulled the trigger last month and picked up 40 shares.

Visa is a bit pricey but it is for a good reason – strong growth.  This company has been high on my list for one reason: great EPS growth + low payout ratio = big time dividend growth.

Other Buys

The rest of my purchases were either small Loyal3 purchases or DRIPs so I won’t go into any details.

July Goals

I’m hoping to contribute at least $500 to Empire, $3000 to Retirement and $1500 to other investments.

The post June 2016 Buys appeared first on Dividend Empire.