Wednesday, April 8, 2015

Financial Planning: Weekend Update - April 4

Late post due to vacation (Vegas Baby!).

This was a pretty schizophrenic week, shortened by the Good Friday market holiday. Monday was a huge up day on news of health care merger activity, China hinting at stimulus, and a 3.1% gain in pending home sales. That was followed by a Tuesday where the market gave back half of Monday's gains. Wednesday the S&P was down a bit and Thursday gained back Wednesday's drop. After all that the S&P ended up down about 10 points for the week.

At the end of it all my portfolio closed with half the positions still "in the money". Some like CVX just barely ITM and others, like PG just barely OTM. I think the principal lesson after 3 weeks is:
  • Don't Get Greedy For Option Premium
$6K in premiums in a month looks great but writing calls so close to the underlying stock price just means I'll end up re-purchasing companies I want to keep in the portfolio time after time. In addition to my Social Security (which won't kick in until February 2016) I only need about $2000 of additional income. I do want to build up a cash reserve of about $40,000 but as long as Beth is still working I can do that slowly. There may well be months when I don't write calls against all the positions if the premium isn't there for any given stock.

As I mentioned last week I plan to eliminate one of the Oil's and while I was going to re-purchase ETR (should it be assigned) I'm now leaning toward changing my electric utility allocation to ED and switching out DBD for EMR. That will leave me with 10 positions and I'll allocate the remaining funds so that everything is more or less equally weighted.

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