Vermont is an odd state in many ways. Montpelier hasn't changed much since our last visit. Just a few more empty store fronts. Same thing in one of the "gold" towns, Manchester. I did not get the sense the economy had turned the corner in either location. Still, the state presses on. The legislature is about ready to pass a single payer medical insurance plan. To close the budget gap, one proposal adds a 1.5% income tax surcharge for anyone making more than $75K. Also in the works is a 3% dental services tax. Gee, isn't going to the dentist painful enough?
Shifting gears, I did get margin approved for the non-IRA account. In the weeks ahead we'll keep working with our market neutral portfolio and perhaps try a short sale or two. This week's worst performers were the international REITs WPS and RWX, each off nearly 3% even after a nice bounce back Friday. RWX is paying a lofty dividend of about 8.5% which makes the bad week palatable.
4 comments:
enid, I cannot recall your ever having mentioned options on the blog. They are, among other things, a way to generate income from non-dividend paying stocks. Any thoughts you can share?
Thanks,
JCarroll
Hi J and thanks for the nudge. I know practically nothing about options but am familar with the concept of writing covered calls. With margin enabled, I'm going to look into writing options very soon. Do you think this is a good strategy?
Yes, I think it certainly has potential. I wrote my first 2 options a little over a week ago, both 5%-10% out-of-the-money covered calls and both with April 16 expiration dates; so far, neither has been exercised on me and both are still around 5% under the strike price. Will see how these go. If the calls expire worthless, I make 1%-2% in about 5 weeks (not bad); if they are called I make a little more in the same period of time (5%-10%, even better), but I lose my stocks and have to buy them back at a higher price if I want to hold them. Of course, there are other risks; such as the stocks going down in price a lot and I cannot sell without first closing out my position at a loss, and losing out on price increases beyond the strike price without closing out my position. That said, I am in the process of getting the brokerage privileges and freeing up some cash, so that I can write cash-secured puts on stocks that I will not mind being put to me; again, with strike prices 5%-10% out-of-the-money. The fact that commissions are significantly higher than straight stock trades at my discount brokerage is a bit of a downer, and I am exploring opening a separate account at another broker just for trading options.
I will be interested in hearing about your experiences with options, if you go this route.
Enjoy your blog and check back daily for new posts, thanks for putting in the time.
JCarroll
PS: Here is a link to the Options Industry Council:
http://www.optionseducation.org/default.jsp
Recommend registering and taking some of the education courses they offer; all free. I am currently working my way through their course offerings, and find them to be excellent.
Thanks J. You said "so that I can write cash-secured puts on stocks that I will not mind being put to me; again, with strike prices 5%-10% out-of-the-money." Way over my head so I've decided to take some lessons at the Options Industry Council per your suggestion. Funny thing, I've had similar thoughts about moving some money to a different broker offering better commissions on short sales and options but haven't made the move yet.
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