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Archive for the ‘Virtual Portfolio Review’ Category

Dividend Investing – Giving Yourself an Automatic Edge (Members Only)

In uncertain markets, dividends can give you a critical investing edge.

As you can see from the chart on the left, just mindlessly investing in dividend-paying stocks can give you more than a 2:1 annual advantage in your investments and that adds up to quite a difference over time

Of course, here at PSW, we teach the art of selling options premiums – something that turns virtually any stock into a "dividend" payer.  For example, MSFT is only a small, 3.3% dividend-payer but a fairly solid cash-machine of a stock that we don't feel is likely to go bankrupt overnight so it makes for a nice safe staple in a long-term virtual portfolio.  But MSFT is also a very poorly-run company that hasn't grown in 20 years but we can make it a much more interesting stock by simply selling covered calls.

For example, we buy MSFT for $27.70 and we sell the Jan $27 calls for $1.28.  This lowers our effective basis to $26.42 and selling the call puts us in no special danger – we are simply agreeing to sell MSFT for $27 on expiration day in January (the 18th).  Should the stock be called away from us, we make a .56 profit or 2.1% of our net $26.42 cash investment in just 54 days.  That works out to a 14.2% annualized ROI and, even if we get called away, we can simply buy the stock again and again and sell calls every month.  Of course, you can optimize all this with timing and we favor stocks that are on sale – this is just a very simple example of how our most basic options strategy can drastically boost your annual returns on any stock in your portfolio.

Let's say you don't want to mess around with MSFT every month.  You can simply sell the 2015 $28s for $3.35 that drops your net entry from $27.70 to $24.35 and getting called away at $28 would be a profit of 14.9% over 26 months PLUS you would be getting your .92 annual dividend so let's call it $1.84 more for a total profit (if MSFT holds $28) of $5.49 or 22.5% – 1% a month certainly beats what the banks are offering these days!  Not as sexy as the 17.5% annual ROI you make by working the trade every month (with the dividend), but you do get a built-in cushion that…
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Income Portfolio – Still Selling in May and Going Away

Last month, we decided we were going to sell in May and go away in our special update (regular update was here). 

We had turned bearish on the market by the 12th, perhaps a little early but it gave us plenty of time to make good exits and get our prices.  Since our Income Portfolio was running 100% ahead of schedule and more like 250% counting the unrealized gains from our buy/writes as the market zoomed higher on us, we decided it would be good to go back to cash – especially as it would be fun to build a brand new Income Portfolio for 2012 that our newer Members will be able to benefit from following as well as it is, by far, our most popular virtual portfolio.

We're not cashing it all out as some positions still need to run their courses, but we won't be upset to be cashed out on some so we covered conservatively in anticipation of the pullback that just began last week.  We had $97,716 in realized (albeit virtual) gains as of our March 10th update – not bad after 10 months with a $500K portfolio that was only looking to take out $4,000 a month!   

This is the kind of set-up that my Mom and many of her friends need to do to supplement their not very generous Social Security checks but it's also using the same principle that applies to any long-term wealth-building strategy, utilizing our best long-term growth strategies combined with a concentration on generating an income collecting dividends and selling short-term options to create our own "dividend" stream on ordinary stocks.  Please see previous posts in our Virtual Portfolio section for our main strategy discussions – this is just an update. 

This month was unusual as we had quite a few action items, mostly per the Special Update, the following positions were closed:

  • 10 GE Jan $17.50 puts sold for $2.10, closed at now $1.30 – up $800
  • 20 RIMM 2014 $22 puts at net $3.52, closed at $10.10 – down $13,160
  • 3,000 NLY .55 dividend paid on 3/28 – up $1,650
  • 10 TITN March $22.50 puts sold for $4.50, expired worthless – up $4,500
  • 1,500 NYB at net $8.70, out at $10 – up $1,950
  • 10 TM Jan $62.50 calls bought for $6.50 ($6,500), out at $23.20 – up $16,700
  • 1,000 CSCO .08


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Income Portfolio Moves – Selling in May and Going Away

Now that I've slept on it, I want to raise cash

As I mentioned in yesterday's update, we are very bullish, perhaps too bullish in our Income Portfolio and we are also 100% ahead of schedule and more like 250% counting the gains from our buy/writes, some of which are well in the money.  Since we aren't thrilled with the overall economic picture and, since we're supposed to be learning new techniques and, since I think it's time to start a fresh Income Portfolio anyway, let's go through our positions and learn how to sell in May and go away with style.

We're not purposely cashing it all out but we won't be upset to be cashed out on some – and I'm sure you'll see why.  I'm going to comment on every position with red highlights for action items, we'll start with our short puts:

  • 20 HCBK July $9 puts sold for $1.45 (-$2,900), now $2.10 – down $1,300
  • 1,000 HCBK at net $6.83, now $6.79 – .08 dividend expected 5/8 ($80)
    • HCBK is now $6.79 and we essentially own them for $9.  They pay a .32 dividend and we already have 1,000 shares uncovered so let's sell 20 July $7 calls for .30 ($600).  If we're over $7, then we lose our current 1,000 shares (but get paid $7) and we'll have 10 short calls to roll into July, where anything between $7 and $9 is an improvement to our current short puts.  
  •  10 GE Jan $17.50 puts sold for $2.10 (-$2,100), now $1.38 – up $720
    • I don't see GE popping $20 very easily but let's cash these puts in and sell 15 April $19 puts and calls for .99 to raise $1,485 that will expire in April.  As we're willing to own GE long-term, either being forced to roll the puts or forced to buy stock to cover (with $2,195 already in our pocket) is


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Income Portfolio March Update – EZ Money!

Who says we're not bullish?

It's interesting how many people think we're bearish just because we talk about the problems in the economy and just because we don't buy into the market hype.  Yes, short-term, we expect a correction and so far – so wrong on that one but, long-term, I don't think we have ANY bearish plays and our largest portfolio, our virtual income portfolio, is 100% bullish (with hedges) and has been since day one.

As of Friday, our $25,000 Portfolio was down $7,500 for the year.  That's not good but that portfolio is supposed to be the aggressive carve-out of a more conservative $250,000-$500,000 portfolio like our income portfolio, which is long-term bullish and doing extremely well.   How well?  Up $73,792 in our first 9 months is an average of $8,199 per month generated off a conservatively invested $500,000 and double our goal of pulling a $4,000 monthly income without digging into our principal.  

This is the kind of set-up that my Mom and many of her friends need to do to supplement their not very generous Social Security checks but it's also using the same principle that applies to any long-term wealth-building strategy, utilizing our best long-term growth strategies combined with a concentration on generating an income collecting dividends and selling short-term options to create our own "dividend" stream on ordinary stocks.  Please see previous posts in our Virtual Portfolio section for our main strategy discussions – this is just an update. 

 

Prior to making our moves, we had $87,042 of realized gains (positions we had cashed in) against $13,250 of unrealized losses for a $73,792 net gain in our 9th month so averaging a bit better than $8,000 a month and, as I said above, well ahead of schedule. The following positions were closed since then:

  • 20 DIA Feb $120 puts sold for $1.60, expired worthless – up $3,200
  • 20 SDS Feb $18 calls sold for .98, expired worthless – up $1,960
  • 2,000 shares of AGNC paid a $1.25 dividend on 3/5 – up $2,500
  • 3,000 shares of FTR paid a .10 dividend on 3/7 – up $300
  • 1,000 shares of HCBK paid a .08 dividend on 3/8 – up $80
  • 5,000 shares of SVU paid a .088 dividend on 2/28 – up $440
  • 500 shares of MT paid a .188 dividend on 2/16 –


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Income Portfolio Feb Update – The Joy of Nothing

Nothing!

Not one move since expiration day and that's the way uh-huh, uh-huh we like it in our virtual retirement portfolio because, when we actually retire – who the hell wants to have to work – even when that job is simply pushing a couple of buttons on a computer screen once in a while?  Our long-term outlook has been bullish since we began this portfolio last April and we did nothing when the S&P fell 300 points and we did nothing now that it's back up 300 points – to about where it was when we started

Our goal here is to simply generate a monthly income of $4,000 using $500,000 invested without depleting the principal – the kind of thing that my Mom and many of her friends need to do to supplement their not very generous Social Security checks.  Please see previous posts in our Virtual Portfolio section for our main strategy discussions – this is just an update. 

Our last update was on January 12th and we finally had some work to do after taking 4 consecutive months off as we just laid back and collected our Q4 dividends but January had a lot of our short sold January positions coming due or paying off.  We knew this was going to be our time for action as there really is no such thing as a free lunch – even the investing class has to roll out of bed and sit at a desk a couple of times a year!  

Prior to making our moves, we had $80,617 of realized gains (positions we had cashed in) against $39,965 for a $40,652 net gain in our 8th month so averaging a bit better than $5,000 a month and well a head of schedule but this is the month we EXPECTED to do well in so we'll see how we made out.  The following positions were closed:

  • 1,000 shares of RRD paid a .26 dividend on 1/25 – up $260 
  • 1,500 shares of NYB paid a .25 dividend on 2/3 – up $375
  • 4,000 shares of AA paid a .03 dividend on 2/1 – up $120 
  • 2,000 shares of F paid a .05 dividend on 1/27 – up $100
  • 10 KFT Jan $30 puts sold for $1.60, expired worthless – up $1,600 
  • 10 EXC Jan $37.50 puts sold for $2.20, expired worthless


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Chart School

The Philly Fed ADS Business Conditions Index

Courtesy of Doug Short.

Note from dshort: After posted an update yesterday for the Chicago Fed National Activity Index, I received requests to update my periodic look at the Philly Fed ADS Index.

The Philly Fed's Aruoba-Diebold-Scotti Business Conditions Index (hereafter the ADS index) is a fascinating but relatively little known real-time indicator of business conditions for the U.S. economy, not just the Third Federal Reserve District, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Thus it is comparable to the better-known Chicago Fed's National Activity Index, which is updated monthly (more about the comparison below).

Named for the three economists who devised it, the index, as described on its home page...



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Zero Hedge

Silver Recoups Sharp Loss And Rises 2% On Record Volume

Courtesy of ZeroHedge. View original post here.

Submitted by GoldCore.

 

Today’s AM fix was USD 1,378.75, EUR 1,070.21 and GBP 908.39 per ounce.  

Yesterday’s AM fix was USD 1,353.75, EUR 1,051.95 and GBP 890.86 per ounce. 

Gold climbed $19.40 or 1.43% yesterday to $1,384.30/oz and silver finished 2% higher. 

Silver’s recovery yesterday from being 10% lower at one stage to recouping these losses and then rising over 2% was very positive technically. The key reversal is leading some to postulate that we may have seen the bottom or are close to a bottom. 

...



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Phil's Favorites

Merkel Pins Cameron in Corner; Will Cameron Bury His Head in the Sand, Pretending to Not Notice?

Courtesy of Mish.

UK prime minister, David Cameron, promised to hold a referendum on whether Great Britain should remain in the EU, but only on two conditions. The first condition, that Cameron be re-elected as prime minister is iffy enough.

The second condition, that Cameron renegotiate the Lisbon Treaty, I said would never happen. And it won't.

German Chancellor Angela Merkel sealed the fate on that score as Berlin plans to streamline EU but avoid wholesale treaty change.
Berlin is drawing up plans for treaty changes to streamline decision-making in the eurozone, while stopping short of any wholesale renegotiation that would allow the UK to repatriate powers from Brussels.

Although Angela Merkel, German chancellor, has expr...



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Insider Scoop

Benzinga Market Primer: Wednesday, May 15

Courtesy of Benzinga.

Futures Lower on Weak European Growth Data

U.S. equity futures traded lower in early pre-market trade following a weaker than expected GDP report from the eurozone for the first quarter. GDP growth rose to -0.2 percent on a quarterly basis from -0.6 percent but missed forecasts of a 0.1 percent contraction. Weakness was notably seen in Germany, France, and Italy in the report, with the annualized rate of growth for Germany dropping to -1.4 percent vs. 0.2 percent growth forecast.

Top News

In other news around the markets:

  • The U.K. had fewer people claim unemployment benefits in April than expected, a positive sign for the labor market as the ...


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Sabrient

What the Market Wants: No Easy Answer

Courtesy of David Brown, Sabrient Systems and Gradient Analytics

So, what did the market want today?  Nothing it appears.  It traded on weak volume and had very little movement.  This morning the market hated commodities especially silver, but by days end, the market liked silver, gold and even oil but not the dollar.  Why?

Last week the economic reports were tough, with bad misses on more than one occasion.  But the market tended to ignore the bad news, probably because money continues to pour into equities from money market funds, long term fixed income, and many struggling foreign economies.  On Thursday, investors finally caved to even more bad news from Initial Jobless Claims and weak Housing Starts.  Then on Friday, when Michigan Sentiment and Leading Indicators posted large positive surprises, the money came pouring back to generate qui...



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Option Review

ING US Call Buyers Look For Shares To Extend Post-IPO Rally

 

Today’s tickers: VOYA, GRPN & SIGM

VOYA - ING US, Inc. – Shares in ING Group’s U.S. retirement, investment and insurance business are up as much as 8.0% today to $26.98, the highest level since the company’s May 2nd IPO. ING US was rated new ‘buy’ at BTIG LLC with a 12-month target share price of $31.00 today. The stock has rallied nearly 40% over the IPO price of $19.50, and some options traders are positioning for the price of the underlying to extend gains during the second half of the year. November expiry options are the most ac...



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Market Montage

Status Quo Redux…

Submitted by Mark Hanna

Courtesy of MarketMontage. View original post here.

Again, not much to add to this market in terms of analysis – nothing matters other than central banks.  Last Wednesday/Thursday there were some 9 economic reports, 7 of which were disappointing or could be considered as such and all it got was one rare day down, and then new highs Friday.  Markets are up 10 of the past 12 sessions and 17 of 21.   Friday's move to 1666 was an exact 1000 point rally from March 2009's 666 bottom.  Since this most recent leg of the move has been medium fast rather than a huge spike ala 1999, things are not necessarily overbought on the daily chart but we are seeing extremely rare action on the ...



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OpTrader

Swing trading portfolio - week of May 20th, 2013

Reminder: OpTrader is available to chat with Members, comments are found below each post.

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here

Optrader 

...

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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Stock World Weekly

Stock World Weekly

NEW: Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the latest Stock World Weekly! Just sign in with your PSW user name and password, or sign up to try it out. 

...

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IRA Strategy/Income Trader

The IRA portfolio

Reminder: Craigzooka is available to chat with Members regarding his virtual portfolio performance, comments are found below each post.

By Craigzooka

I am going to share with you how I manage my IRA and the power of reducing your cost basis.  My goal each year is a 20% return in my IRA.  Sometimes I make it and sometimes I don't, but I believe that all of my success is due to reducing my cost basis.  To illustrate the power of reducing your cost basis here are some trades we did last year.  These trades are taken from an educational portfolio we ran in a paper-trading account for a little more than a year.

  • We bought RIG on 5/15/2012 for $44.13, sold it on 1/18/2013 for $46 but booked a profit of $1,154.
  • We bought MT on 1/4/2012 for $19.24, sold it on 12/21/2012 for $15 but booked a profit of $454.
  • We bought CHK on 1/27/2012 for $21.93, sold it on 10/19/2012 for $18 b...


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ETF Selector

Stock Market Gets Big News After Friday’s Close

Courtesy of John Nyaradi.

Stock market posts another record setting week, but the big news came after Friday’s close.

Courtesy of NASA

The stock market put on another record setting show with the Dow Jones Industrial Average (NYSEARCA:DIA) closing at a record high 15,118 and the S&P 500 (NYSEARCA:SPY) closing at 1633.70, another all time closing high.

For the week, the Dow Jones Industrial Average (NYSEARCA:DIA) gained 1%, the S&P 500 (NYSEARCA:SPY) climbed 1.2%, the Nasdaq Composite (NYSEARCA:...



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Pharmboy

Give Them an Inch, They Will Take a Mile

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well, well, well....it is good to know that there are others in the scientific arena who believed that YMI Bioscience's data (cough - Gilead) is a better drug than Incyte's Jakafi.  Now, the definitive data are still unknown, but there was enough evidence from a Phase 2 trial to take a small risk for a huge reward.  So, let's forget about Apple (AAPL), and do nothing but biotechs from now until Congress passes universal health care coverage for prescriptions....and drive the prices down so that research and development is no longer feasible to conduct in the US. Even Seattle Genetics (SGEN) has been on a tear as of late...



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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the Favorites backup site (blogroll, archives, more). Contact Ilene to learn about our affiliate and content sharing programs.

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