Monday, July 20, 2015

Financial Planning: Options Monday - July 20, 2015

This was quite a month! The markets as a whole are trading near all time highs but with the threat of interest rate increases looming in September many of the rate sensitive stocks in my retirement portfolio are well below their original purchase prices. This isn't really a a big deal for two simple reasons:
  • The Dividends Keep Coming In
  • Covered Calls Add Consistent Income Each Month
This month is a a good example. Even though August is a "low dividend" month with only $655 coming in, I was still able to collect $3194 in options premium through Friday's roll outs on KO, PG and ED and this morning's sales on the remaining positions. You can see the difference in monthly income is entirely due to the fact that only PG and ED pay in the Feb/May/Aug/Nov cycle.

As I mentioned Friday, I decided to let MO be assigned because there were no profitable calls to roll out/up to. This morning I took that $30,000 and bought 400 shares of Ventas (VTR) and large healthcare REIT focused principally senior living/assisted care facilities. Later this year Ventas will be spinning off its skilled nursing facilities into a new company. This will give me the opportunity to work through a plan to handle such transaction in my "retirement portfolio" without risking any real money. When the spin off happens I'll split the portfolio into "keep" and "sell" branches and monitor them in parallel.

As you can see from the summary, my cash position is now over $25,000 and I expect to hit the $40,000 mark in October with the sale of November calls. At that time monthly income will be cycled into new purchases to keep the portfolio more or less dollar value balanced. And yes, that means more F.

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