Sunday, November 27, 2016

Rolled my $CM covered calls to DEC16 for a credit. CIBC

This is an update on my CIBC covered calls that have had for the last month.  To see my entry into this position, see my initial post here.  

My 7x 100-strike CIBC covered calls were set to expire on Friday the 25th.  I rolled them out to December for a credit of $90.  This reduces the cost of the position to $69405.  Not a lucrative roll, but it keeps me a shareholder for another 3 weeks and sets me up for the next roll that may get me the dividend.  The ex-dividend date, while not announced yet, will likely be the week following the 16th in December so I will need another roll for a credit for any chance to collect it.  At stake is 1.21 per share or $847 on 700 shares.  

TD;DR version:
Long 700 shares of CIBC
Short 7x Dec 100 covered calls 

Total cost of the position: $69405

Follow me of twitter at @Kingston_Trader for trading chatter or at @fraserrc for sarcasm, snark and wit.

Monday, November 21, 2016

Rolled my $POW covered calls. Its complicated.

This post is about an ongoing position I have on Power Corporation.  To see how I got to this stage go to my previous post here.
On Friday, I had 15 contracts of 29-strike covered calls on my 3000 shares of Power Corp (POW).  I wanted to keep all the shares as the ex-dividend date is early in December and I typically like to collect dividends because they are money in the bag... they also help pay the bills while waiting for capital appreciation.  The stock price was about 29.40 mid afternoon which is when I decided to roll the covered calls. If I didnt roll the covered calls, 1500 of the shares would have been called away at 29 dollars.

I decided to roll in two parts... the first was to roll for a wash and reduce the number of shares covered at this strike of 29.  I rolled 15x NOV contracts out to 9x DEC contracts for a credit/debit of $0.  This left 2100 shares uncovered to write new covered calls on.  I chose to go out 2 months on the 2100 shares and raise the strike to 30.  I wrote 21x JAN 30 covered calls at 0.31 a share, which amounted to $615 after fees.  This reduces the total cost of the position to $82373 (or $27.45 per share) and puts me in a great position to collect the 0.335 dividend on 2100 shares and possibly the first 900 as well.  The dividend on 3000 shares is $1005 so I'm pretty keen on collecting the dividend on ALL shares.  This means I will be looking to roll the 9x DEC contracts if the covered calls go deep in the money (ITM).

Long 3000 shares of Power Corp $POW
Short 9x DEC 29 covered calls
Short 21x JAN 30 covered calls
Total cost of the position $82373

As I dont know if I will be able to count on collecting dividends on all the shares, I wont add it in on in this post, but will look to add it once I know how much I will get.  Til then, I will be watching the DEC 29s closely and may need to roll early in order to ensure I hold the shares on ex-dividend date on December 7th.

Sunday, November 20, 2016

Whole Food Markets shares called away. Profits realized. $WFM

This is an update on a current position involving Whole Foods Market shares.  For last weeks post on this position, go here.

Yesterday my WFM shares were called away at 29 dollars per share.  The total proceeds of the assignment were $28957.  As of last week, including all premiums collected and the dividend to be collected in December, the total cost of the position was $27588.50.  Total profit after the shares were called away is $1368.50.  This represents a rate of return of 5% in two weeks.  Making a 5% rate of return in such a short period of time is pretty good.  Since initiating the position the stock has gone up about 10% so I would have been better off not putting the covered calls on the position, but hindsight is always 20/20 in these cases and the position I made initially made sense at the time.

I make it a general rule not to get fussed when I leave money on the table, specifically when I make a profit, and in this case making $1368.50 is a nice profit.  I plan on writing naked puts on $WFM, likely at the 28 strike again, so as to collect a bit of premium and possibly reload on shares at the about the same cost as from 2 weeks ago.

Friday, November 11, 2016

The dividend is mine! Rolled my $WFM covered call for a credit.

Fred says Keep Rollin Rollin Rollin Rollin!

I work up today, still owning my $WFM shares which mean I get to collect the $140 dividend in December.  For a summary of the original position go to the link here.

Today's Roll.
Today was expiry day for my Whole Foods Market 29-strike covered calls.  The stock price was above $30 which places the calls more than a dollar in the money (ITM).  I could have let the shares get called away at the end of the day, but instead I decided to roll the covered calls a week out if I could get more than a $100 credit.  I placed my roll order for 10x NOV19 29-strike covered calls in the last hour of the trading day and it got filled after about 15 minutes.  Total credit collected was $105.  This further reduces the cost of the position to $27588.50

Summary of position
Nov 4: Bought 1000 shares of WFM, sold 10x NOV11 29-strike covered calls. Cost $27822.50
Nov 11: Ex-Dividend date, entitled to dividend in December of $140
Nov 11: Rolled 10x 29-strike covered calls to NOV19 for a credit of $105

I'm not sure I want to hold this position for a long time.  I could have let the shares be called away but I decided to roll to continue to generate income on the position.  I will continue to roll covered calls for another week and will reevaluate on a weekly basis.

Tuesday, November 8, 2016

Trudeau Bucks Account update. Bought $CM on margin.

After buying CIBC in my TFSA a few weeks ago, I was thinking of what other companies I wanted to add to the Canada Child Benefit ("Trudeau Bucks") funded account that we have set up.. A bank would be a natural addition and since I just did a quick analysis on Canadian banks, it made sense that CIBC would be my favourite add at the moment.  I decided to add the stock yesterday for the same reasons I added it a week ago in my TFSA... Low PE, high yielding dividend, stable industry etc... While there is no urgency in buying the shares now, I do believe the stock is due for a dividend increase and I generally like to buy shares immediately before dividend bumps so as to participate in a potential stock price reaction.

I bought 10 shares of $CM for $1007 yesterday.   I bought these shares on margin but as mentioned in previous posts I am comfortable borrowing on margin since every month until next Summer, we will receive $225 in Trudeau Bucks.  This coupled with the fact that the dividend stream pays for the interest accrued on the borrowed portion and then some means over time the loan will be paid down.

In Summary, our Trudeau Bucks account looks like this:

20 shares of Power Financial $PWF.  Dividends paid out:  $31.40
30 shares of North West Comany $NWC.  Dividends paid out: $37.20
10 shares of Canadian Imperial Bank of Commerce $CM.  Dividends paid out: $48.40
----> Total cash paid out from dividends:  $117

In 12 days we will receive our next CCB payment and it will be put right into this account.... This will reduce the borrowed amount by $225.  The next list of numbers are based on the amounts after the CCB is deposited into out Trudeau Bucks account on November 20th.

Total amount borrowed on margin as of Nov 20: $1184
Annual interest at 4.25%: $50.32

Total Annual Positive Cashflow ($117 - $59.88):  $66.68

The account is now providing $66.68 in positive cashfow which will continue to grow as we put more CCB payments toward the account, as dividends help pay down the borrowed amount, and as dividends are increased by each of the companies we are invested in.

I dont expect to be adding any new shares to this account for another 3-4 months.... but I will continue to pay down the borrowed amount with each CCB cheque that we receive.

Follow me of twitter at @Kingston_Trader for trading chatter or at @fraserrc for sarcasm, snark and wit.

Peace Out.

Friday, November 4, 2016

Brand New Buy-Write on Whole Foods Market. $WFM

I've been looking for a big-chain food retailer to invest in for years.  Canadian food retailers like Loblaws and Metro always seem way to expensive for me so I've been looking for alternatives.  I've also been looking at stocks in the US, specifically stocks with a dividend in a growing market.  I had been watching Whole Foods for some time, and it too always seemed expensive... that is until the last couple years.  The stock price has essentially been cut by more than half from 65 down to sub-30.  Competition in the organic/whole food market is heating up and companies like Kroger and Safeway are eating some of Whole Food's lunch by offering some of the cheaper organic brands.

Two days ago, Whole Foods announced a dividend hike to 0.56/share per year that put the dividend yield to almost 2% which caught my eye.  I looked into the stock some more and noted that they are in the middle of a restructuring plan aimed at turning the business around.  They are buying back stock at these lows and have a plan to focus on customer service and offering high quality products rather than get in price wars with other chains on lower quality foodstuffs.  Its a space I like and I'm a big believer that in the future more people will be looking for higher quality food over cheaper processed food.

I put in an order today to buy 1000 shares of WFM at 27.99 per share.  This would put the dividend yield at 2% if the order is filled.  The order was filled about an hour later so the total cost of the position, including trading fee, was $27999.99.  The ex-dividend date is Nov 11 which is a week from today and the dividend of 0.14/share would be paid in January.  1000 shares of WFM means $140 per quarter.  Sweet!  I decided to pair a covered call with the position as soon as I got notification that I bought the shares.  I wrote November 11 covered calls at 29 strike for the full 1000 shares.  I collected $177.50 on the covered calls.  This meant the total position cost me $27822.49 to open.  If the shares are called away before Nov11, I will collect $29000 on assignment, meaning a profit of $1177.51... If the shares are called away ON NOV11, it will mean I get to collect the dividend as well... an addition $140 in my pocket.  If the shares are below 29 on NOV11, the covered calls will expire worthless and I will look to sell more covered calls on the position... I will continue to sell covered calls so long as I believe in the company/sector or until the stock is called away and then I will reassess WFM again.

New Starbucks Covered Calls - Red Cup 2016 edition. $SBUX

Today my 58 strike covered calls on Starbucks expired worthless.  My last covered call write is here for reference.  This meant I was able to write new covered calls today.  I chose to write 6x Dec9 57-strike covered calls for 0.20 per share or $102.50 after fees, which is what I collected.  This reduces the total cost of the position to $32701.00, or $54.50 per share.  The stock closed today at 52.75 so I am underwater on the position, however the company announced a 25% dividend increase yesterday which increases the payout on 600 shares from $480 to $600 per year so I'm happy to continue to hold a stock that pays me to do so.  The next dividend will be paid on December 2 to stockholders as of November 17.  For me this will reduce the cost of the position by $150, so by next post, the cost of the position will be $32551 or $54.25.

Long 600 shares of SBUX
Short 6x DEC9 57 covered calls
Total cost of the position is $32551.

If the shares get called away on or before DEC9, I will profit about $1649 although assignment looks like a pretty low probability at the moment.  My plan is to keep writing covered calls 3-5 weeks out to try and generate $100 each month as well as collect the dividend.  Its a pretty slow and simple strategy that doesnt generate huge returns but it does generate a modest cashflow.