Will I Be Called Out?

image

Between yesterday and today, I made a few trades in some IRA accounts. Just a few shares, but I made a profit by selling and getting right back in. 2%(sold at $34.20) overall gain in one account and I got right back in at $33.85. Too bad I could not sell those shares again today at $34.50, but that is how an IRA works. However, I am in at a much better price than I sold at to begin with and I ended up buying 2 more shares on the round trip. I would love to do that every day.

Also, in another IRA, I made about the same 2%, but on a much larger share number. I ended up picking up 5 extra shares on that round trip at $33.85. Again, I wish I could have made a sale today, but the IRA rules prevent that from happening.

image

In my trading account, I am in at $34.41, but I got the dividend on the x date, so I am ahead the .48 on that trade, so I sold 15 – Jan. 15,  2015 $34.50 covered calls for .20. I made the decision, because, if I sold today at $34.50, I would have to wait for the stock to get hit in order to buy. So, with only one day left do for the call, I stand to profit .20 for the call, .48 for the dividend, and .09 for the stock if I am called out tomorrow. That would be .77/share cent profit in 15 days since I bought the stock after selling it for $34.70 on Dec. 31. That would be a profit of 2.24% in 15 days. That is not a bad return, and if I could compound those kind of results every 2 weeks, the results at the end of a year would be fabulous on a stock that usually just sits in a trading range.

I know that the calls expire tomorrow, so, I am very possibly going to buy them back if the value of the call is almost nill during the day. That would save my shares so that I could resell the calls next week or actually sell the stock outright potentially. Either way, if I am called out, I plan to sell the cash secured put for Jan 22 2015 34’s If I can get a 1%,or there about, premium. I would be crazy to let the 1% slip through my fingers if it was available. It is amazing how those 1% trades add to the number of shares after each round trip.

image

Vigilance seems to be the name of the game in this market. I feel that it is in my best interest to book profits when possible, especially for stocks that have a tendency to be somewhat stagnant such as T, especially when those shares are held in an IRA. 1% in an IRA per week, (.34 cents on T’s share price at current levels) would result in a 52% increase in the value of my holdings. That result would be about doubled to almost 100% if the money was rolled right back in and not kept separate from the next trade.

I know that it is a stretch to lay out a plan like that. But, I also know that the outcome is very plausible if trades are made and greed is not allowed to overpower the decisions to buy or sell in order to milk more out of the trade. I may not come close to those kinds of returns, nevertheless, It is absolutely possible to achieve such results if only 1% is booked on 1 trade per week.

I know that it is a lot of work, and the risk becomes greater as the number of shares become larger after each successful trade. I can only answer that issue with the statement,

” I only acquired the shares through actively trading the stock. If I end up with more shares after each trade and the share price drops, I will end up receiving more dividends going forward, while I wait for the trade to become profitable. Therefore, I am only planning on trading shares of a company that I would be holding anyway. In addition to all of the above ideas on the process, the shares are most probably going to be traded in IRA accounts. When trading in an IRA, bookkeeping is a non issue, taxes are of no concern, and the possibility of actually netting the 1% is increasingly more probable for each and every trade when compared to an open account.”

The main issue with IRA accounts is the inability to trade freely. Because the account cannot be margined, the money has to be settled before it can be utilized to buy or sell after a buy/sell or a sell/buy. Because of this, money can, and will, be left on the table. To this, I say, “So what!” There, I said it. Wow!  That feels really good. Of course money will be left on the table. Each and every day, money is potentially left on the table for every person who holds shares in publicly traded companies. Also, there will be times when the stock is sold only to see it keep rising from that point. That is how it goes sometimes. However, it has not happened recently, and without trading those original shares I bought in the trading account, I would still be underwater except for the dividend.

image

I want each of you who read this to think back about how many times the shares of the companies you hold have run up- only to run right back down. In the process, what did you really gain? Certainly, you collected the dividend, but the shares themselves may not have treated you so kindly. If those shares were held in am open account, the process is not so lucrative because of the paperwork and the taxes involved. However, when the trades are in an IRA, that is truly when the outcome can really be beneficial to the portfolio’s top and bottom line. It is not magic- It is basic math! It just requires a bit of gumption and determination, and maybe, just a bit of luck.

The biggest issue I tend to have with trading with my strategy is that greed always creeps into the equation. I cannot tell you how many times I waited to milk just a bit more out of the trade, only to see all the gains wash right down the drain. It has happened quite a lot. For example, last year, I made a number of profitable trades in T. by mid year, I was up quite a bit, and the last trade before T made the DTV deal final, I was up almost 7% on the trade, but I thought it was going to run to 37 or 38 with no issues. Well, we all know how that turned out. Instead of booking my 7% on the trade like my brother was encouraging me to do, I tried to milk more out of it. Well, not only did it disappear in the blink of an eye, the stock tanked and did not come back until the end of the year. Along the way, I did collect the dividends, but the real money was made early in the year. So, I decided to make the trades as soon as I can realize a 1% profit (or thereabout), and let the chips fall as they may.

image

I know it feels great to see big run ups, but they are few and far between, amd I feel that the fall always results in a worse feeling of loss than the euphoria from the rise. Since T has been trading in a range of about .40-.50 cents, it is quite possible to catch the stock on a dip somewhere during each week- Maybe even twice. It is not a foolproof strategy, but it is a strategy, nonetheless. If I follow it, it can potentially be very profitable. I have been giving it my best effort, and I plan on incorporating covered calls and cash secured puts as the need arises.

Does anyone follow a similar strategy?

Any thoughts would be greatly appreciated.

Keep cranking,

Robert the DividendDreamer
AKA — Seeking Dividends

Follow me on Twitter– Seeking Dividends@DividendDreamer

Please feel free to comment. All comments will be greatly appreciated.

Seeking Dividends
AKA — DividendDreamer

Advertisements

About dividenddreamer

Doing what I can to make the best of today and the most of tomorrow.
This entry was posted in Uncategorized and tagged , , , , , , , , , , , , , , . Bookmark the permalink.

2 Responses to Will I Be Called Out?

  1. I’m surprised that your brokerage doesn’t allow you to trade as freely without margin. I’ve never tested it within my IRA accounts but with my taxable accounts I’ve been just fine when selling or closing a position and being able to use the funds prior to the settlement date. It just goes into my cash available to trade balance but I wouldn’t be able to withdraw it if I needed to.

    • In my IRA’S The rule is: I can buy and sell the entire available funds or sell and buy the entire available funds, but I have to wait until the settlement date of the first in or out I. order to roll the money either in or out again. Also, I have to abide by the pattern day trader rules. Check this out.

      http://sixfigureinvesting.com/2010/01/trading-in-ira-accounts-and-avoiding-free-riding/

      I made a free ride in the middle of 2015 because I used unsettled funds. I am on probation for the year, they say.

      Thanks for stopping by.

      Keep cranking,

      Robert the DividendDreamer
      AKA — Seeking Dividends

      Follow me on Twitter– Seeking Dividends@DividendDreamer

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s