Re: Hi EKS,
Hi EKS,
When I started to design and build my dividend portfolio,I first started with put selling.
The goal was to go far out in time (to build premium) with the hopes of them being assigned and providing a modestly higher yield.
I looked at the past 5 year low and chose a strike price that with the far out premium would approach the 5 year low. Many stocks were not touchable to get that low.
Then along comes a pandemic - shows how wrong a man can be. <smile>
None the less, better prices could have been achieved back in March, but I've never held myself accountable for perfect buy the dip timing - nor will I in the future.
Time goes by, the premium decays and I've been assigned some shares above the current market price.
That being said the dividend yield I was happy to accept when I sold the put has been the yield I'm getting. Even some increases (KMI and T).
You have to start the revenue income stream before it can compound and go to work for you.
The other part of my plan was to harvest some revenue by selling covered calls on stocks that had been assigned.
To be critical,I've thought about how to do that, but have not yet begun.
Your doing it will be more than instructional for me. I thank you for disclosing your trades.
I FEEL a bit like a protective parent.
I waited patiently for the stock assignment and it now has taken years to catch those down markets when I was lucky enough to choose the correct expiration date that coincided with a market dip.
My plan has always been to build premium on far out puts and not chase premium on the selling of covered calls (other than try to sell at a short term wave or short term cycle top.
I always thought i would do this 30 to 45 days out at a time and if I could scalp 1 to 2 % on a higher priced strike call - I'd be very happy owning my hard acquired shares,collecting the dividend and supplementing the underlying stock dividend yield.
If one can get 5 to 7 percent on the dividend yield, and supplement that revenue stream with puts sold that expire to zero and covered calls that expire to zero without assignment of your dividend portfolio holdings, a person could harvest 10-12 percent (with different tax rates dividends being 20% max and expired option revenue 35% max.
If one does that with effectiveness, the rule of 72 allows you to double in 7 to 8 years.
That's of course simplistic, but if you pinch your nose and hold during those pandemic general market sell offs, and do some levered put selling during them , while reinvesting the dividend stream during those low priced swings, it could even be accelerated in making it a double.
I'm not there, but I still think it can be done.
Going to have to work the covered call side now.
Probably do some 45 to 60 day paper trades.
I originally thought I'd do the covered call selling,but wait for the market to get lofty. I missed doing that with T in the upper 30's. I'll nibble on a 40 call. Thinking a KMI 22 call would be a good goal - most likely will require the 1.25 dividend bump.
Just some ramblings, but a guy has to have a plan before you take the big jump. <smile>
At any rate, sure want you to know I appreciate your thinking and posting your trade moves!
Bob |
