December dividend income

My December total dividend income in the IRA account is $2,968. The month of March, June, September and December which I will receive the most dividend payout from my stock holding and the rest of the months will be relatively smaller.

My goal for 2012 is to position my mid 6-digit figure IRA portfolio for a 3-5% growth and at the same time to collect 4-4.5% dividend income and it would be equal to $20,000+ for the year.

Here are my current core holding:

ABT
BND
CVX
ED
JPM
KO
MCD
MSFT
PFF
PM

I also added one mutual fund to collect 4+ % dividend. I think it should be it for the time being in preparing the year of 2012.

Wishing you all a Happy Holiday Season and a Happy New Year.

Ocean

Buy SPY at the market close today

I initiated the buy signal on SPY at the close of the market today. I hope it will continue to catch the up trend at least for the rest of this year.

Ocean Signal on 12/02/211 at market close: Buy SPY with the hypothetical initial investment of $10,000.

Note: Information given here are for entertainment purpose. No financial recommendation is meant to be given here and you should conduct your own analysis before investing.

Ocean Signal Calls

Two years ago I wrote an article in this blog talking about the beating the performance of Decision Moose using weekly simple moving averages. Of course my result from back testing couldn’t beat his published results. For those of you don’t know who is the person behinds Decision Moose, you can visit William Dirlam’s web site at http://www.decisionmoose.com. 

Just for fun, I decided to make my signal calls using available technical indicators to track these calls going forward. I will concentrate on ETF funds only and the funds will include SPY, IWM, EFA, DIA, QQQ, EEM, TLT, IEF, AGG etc. Similar to Decision Moose, I will choose one fund at a time and switch to other fund when signal changes.  The signal calls will be more frequent compared to Decision Moose because I will be using charts with shorter time frames. I will make the first signal call in the next few days and will see how the result will be at the end of next year.

Markets rebounded at the end of November

The markets ended with an incredible huge rebound at the end of November and I will take it anytime.

My November total dividend income in the IRA account is $1044 and the portfolio is up 2.8% since mid Oct.

Sold call options expiring on Dec 17 are:

1. CVX
2. KO
3. JPM
4. MCD
5. MO
6. MSFT
7. PM

Hope to accumulate more shares with dividend reinvested and will see how it goes.

Hanging in there

As the markets continue to drop, my IRA account balance is approaching to my mid October entry level. Have to say that I had a good run and I will continue to hold. I will wait for the bounce back and dividend payout going forward.

Rollover options to next month

My IRA portfolio is doing ok despite the recent market volatility. I have collected about $1000 dividend payout since mid October and the dividend was reinvested back into the stocks without commission. I have closed all the covered options expiring tomorrow and roll it over to next month to collect more premium. So far it works as planned. New covered options expiring next month are:

1. MSFT
2. MCD
3. CVX
4. PM
5. MO
6. JPM

Added JPM in my portfolio

The markets dropped big the last two days and I took an opportunity to buy some JPM shares and wrote a covered call option. I just missed the dividend payout last month so I have to wait for 2 more months then.

October is about to end and it's has been the best October for the stock markets since 4 decades ago and I am glad that I am fully invested in my IRA account at this point. Every indicator shows that the market is on the way up from this point (S&P closed above 200 MA, VIX closed below 25 etc). Come Nov 1 after my ETF bonds such as IEF, AGG and TIP Ex-dividend date, I will reallocate most of it with stocks like MCD, KO and CVX to anticipate the year-end rally into 2012. At the same time, I will write some covered calls with these stocks which I already own to earn some extra income along with average of 3% dividend.

Sold covered call with MSFT

Yesterday I sold 20 covered call of MSFT with strike price at $28 expires on Nov 19 for $.52 and collected $1040 before commission. My average purchase price for MSFT was $27 so I have some room to spare. MSFT will have ex-dividend on Nov 15 and I will collect $400 quarterly dividend. If it hits above $28 on Nov 18 and my call option gets taken out, I still make some nice profits from it. If it does not hit $28, I will write another call option for December.

Fully invested in my IRA account

The rollover to my IRA account has completed and now I can purchase my favorite stocks for dividend income purpose. I just purchased 32 stocks as my entire portfolio and here is the core 12 stocks: ABT, AGG, COP, CVX, ED, IEF, JNJ, KO, MCD, MO, MSFT, and NLY. The entire portfolio will generate combined returns of about 4.5% annually and all dividends will be reinvested. Also, I will write some call options to generate extra income from stocks such as MSFT. One good thing about MSFT is that it has weekly options so I can keep writing out-of-money (OTM) calls every week if it falls in the right price range. If MSFT drops below my purchase price, I just sit there and collect my 3% dividend annually.

Two high tech companies with steady dividends

These two high tech stocks which you may be interested. Both Microsoft and Intel are DOW components and these two companies have been paying dividends and continue to increase their dividends over the years.

Microsoft current yields is about 2.4% and P/E is 10. Although the stock has been trading in a tight range over the last 10 years (closed at $27.21 as of 9/20), the steady growth of dividend made the stock stand out comparing with IBM and HPQ. IBM pays 1.7%  dividend and P/E is 14, and HPQ pays 2.0% with P/E of 5.38.

Intel is one of the leader in the Semiconductor industry. The chipmaker may not have future surge consumer demand for its CPUs like it was back in the 80s and 90s. The near term demand could still be rough but it continues to lead the CPU market over AMD in PCs and laptops.  Currently, Intel is paying 3.8% dividend with P/E of 10 and the new expected Microsoft Windows 8 release may spark some attention to this giant chipmaker. Intel closed at $21.53 on 9/20.

Established Bull Put Credit Spreads

Established paper trade with a pair of put credit spreads:

1. IWM at $71.80
    Sell put IWM 64 @ .18 expires on 9/23
    Buy put IWM 63 @ .09 expires on 9/23

    Credit: $.09
    ROI before commission: .09/1 = 9%

2. SPY at $121.09
    Sell put SPY 110 @ .19 expires on 9/23
    Buy put SPY 108 @ .13 expires on 9/23

    Credit: $ .06
    ROI before commission: .06/2 = 3%

NFLX bull put spreads options got hammered yesterday

Recently I came across with an option trading strategy named "Vertical Bull and Bear Credit Spreads". The credit spreads would look like this.: I would start with a position in buying and selling the same underline equity options with two different strike prices and same expiration date. By doing this, I created the spread positions. The positions would be either Call or Put but both would be on the same side.  If the price I receive on the sell option is more than the cost that I pay for the buy option, I immediately receive credit in my account. I would profit from this credit if both options expire after the expiration date. This is one of the method I just learned in using options to generate steady income.

I picked up a few stocks such as AMZN, APPL, IBM and NFLX last Friday and paper traded with the Bull Put Spreads hoping the general markets would go up this week. (Bull Put Spreads: Sell a put with near closing striking price and buy a put with lower striking price and receive credits from the difference in prices from these two options).

Everything was going well towards the market open yesterday. Howerver, the positions I established on 9/9 for NFLX was to Sell 10 Puts NFLX 175 at $.66 expires on 9/16, then I bought 10 Puts NFLX 170 at .45 expires on the same date. The stock was trading at $208.53 at the time and I received a credit of $0.21 which was equivalent of $210 ($0.21 x 1000 shares) before commission. I had about 16% cushion on this (208 - 175)/208 = 16% and I thought I would be fine with 1 week left that it will expire on 9/16 (today). Sure enough NFLX was down about $33 before the market open with "bad bad news" yesterday and continued trading in that range during the day and closed at $169.25. So basically I would lose the $5 delta per share in this spreads position if the closing price of NFLX remained under $170 today. It would translate to a $5000 lost ($5 x 10000) . By trying to make $210 and lose $5000 - $210 = $4790, this is a risky business. Well, fortunately this was still a paper trade and I will continue to study more in this area.

Core holding in portfolio

The following stocks and ETFs will be part of my portfolio for dividend income and the combined average yields would be 4.0% as of today.

1. ABT - 3.8% (annual dividend)
2. AGG - 3.30%
3. CVX - 3.30%
4. ED - 4.3%
5. HYG - 8.06%
6. IEF - 2.77%
7. JNJ - 3.6%
8. KO - 2.7%
9. MCD - 2.8%
10. MO - 6.20%

Stay in cash since last post

The major markets have not been doing well entering the 2nd half of July and continued performing poorly except commodities. The simulated Ocean ETF portfolio is still in cash.

I am retiring as systems engineer this Thursday (September 15) after 30 years of working in this field. I am looking forward to do something else and at the same enjoy my retirement. From this point on, I will spend my time in managing my own portfolio by following the stock markets and spend more time with my family.

In managing my own portfolio, I will divide it in the following areas.

1. Dividend income generated from stocks and ETFs from my IRA account.
2. Position, Swing and/or Intra-day trades from my regular account.
3. Options play for added income purpose.

I think it will keep me busy.

Nice gains for the last 5 days in a row

The markets regained the upward momentum the last 5 days and my portfolios were bounced back from the loss column. I decided to close all positions at today close and re-examine the strategy for the rest of this year.

In order to make it easier for me to run this blog, I decided to eliminate all the other portfolios but just to keep the Ocean Portfolio for simplicity. I will apply mixed strategies for entry and exit points. These strategies still are based on technical indicators which are available on any of the financial and charting sites such as Yahoo, Stockcharts etc.

The Ocean Portfolio was up about 1.8% as of today. It lagged the major indexes but it's all fine with me as an experiment. The rest of the eliminated portfolios were also doing fine and all achieved some small gains.

The Ocean Portfolio is all cash now and will see how the 2nd half of the year will do.

Out all positions before the close today

I have not updated the blog for a while and let the positions sit there. The markets have been swinging up and down lately and there is no clear direction where the market is heading. Today is the end of first half of 2011 and I will close out all the positions by taking the advantage of the recent market run up. I will evaluate and determine what my next move will be.

Ready to take the long position again

I have been waiting for the markets to pullback since the end of January and now seems this is the time to get back in after a nice pullback the last few days. The overall markets in my opinion is still in good shape at least for the next few months. I will place the long position of selected ETFs in the portfolios at the market close today.

ETFs that I am looking at for Long position included: SPY, IWM, EFA, EEM, ILF, GLD, SSO. For pair trading I will close out the current position and go Long with TLT and hedge with PST (inverse) as I think the interest rate will be kept at the current level for a while.

Initiated TBT and IEF bond pair

Re-enter the TBT and IEF bond pair with half of the portfolio size as the technical indicators for TBT showed sign of improvement. The RSI and Williams %R crossed above the mid point line which indicated there is a potential upward momentum for TBT. TBT is the 2X inverse of TLT.

Expand Bond pair trading to ETF Pair Trading

On the Bond Pairs Trading Portfolio, I realized that I may miss out some other ETF potential trades if I just wait for the bond pairs signal. Therefore, I expand it to other ETF pairs in order to create more opportunity. ETF pairs that I am looking at are TNA, TZA, FAS, FAZ, SSO, SDS, SPY, SH and others. The portfolio will include 1x, 2x, and 3x leverage pairs and it is now named ETF Pair Trading. Let see how it plays out.

Cash out on TBT and IEF pair

Closed the position on TBT and IEF pair with some profits. Will wait for the next entry signal.

Took profits with first sign of pulling back

S&P 500 may hit some resistance when it reaches to the 1300 level and can cause some short term pullback. I took profits on three portfolios except the bond pair. I will wait for the next signal to enter the new positions.

Continue to hold SSO

Major markets continued to be strong last week but we may be in the over bought territory and pull back is way over due. Should there be any sign of weakness, it may be time to lock in some profits. Until then, enjoy the ride.

Added SPY shares as momentum picked up

Added SPY shares on Ocean Portfolio and TSP Portfolio as momentum picked up again

Initiated the Bond Pair with TBT and IEF

The TBT and IEF pair looked pretty good as interest rate may go up in the future. The inverse 2X TBT can be benefited from it where the IEF just to hedge its position.

Sold ETF losers

Sold EEM, EWZ and VWO at the close today to cut the loss small.

Click here for:

Ocean Portfolio Performance

Took some profits off the Bond Pairs

Took profits from the ProShares UltraShort Lehman 20+ Year Treasury (TBT) and the  iShare Barclays 7-10 Year Treasury Bond (IEF). I will wait for the next signal to get back in.

Click here for the Bond Pair performance spreadsheet:

Bond Pair Performance

IWM and EFA looked weak on the TSP portfolio, took small loss and liquidated it.

Click here for the TSP portfolio performance spreadsheet

TSP Portfolio Performance

Happy New Year and Happy Trading in 2011

I started two portfolios in this blog with one focuses on a 2 times leverage of SSO and SDS and the other focuses on the bond pairs trading. These ETF bonds are  TLT vs PST (2x inverse) and TBT (2x inverse) vs IEF. The reason that I choose reverse is that it can be traded in a retirement account where short trade is prohibited in this type of accounts.


The pairs trading will be traded with a long and short pair in the interest rate ETF bonds. I only chose the TLT (iShares Barclays 20 year treasury)  vs PST (ProShares Ultra Short Lehman 7 - 10 year bond) and the TBT (ProShares Ultra Short Lehman 20 Year treasury) vs IEF (iShares Lehman 7 - 10 year treasury). The reason I chose the inverse ETF instead of short is that it can be traded in a non-margin retirement account and not paying dividend on the shorts. The pair will be traded in a non-correlated fashion comparing with the equity markets but the pair itself is highly correlated. This is to be less risky because of the nature of the correlated long and short pair in theory will go from convergence to divergence, and to convergence again from time to time as it is referred to "reverse-to-mean". The profits will be made when the pair reverses to its normal spread. For detail information on pair trading, reader can google pair trading and there are tremendous info related to pair trading or pairs trading on the internet.

As of 12/31/2010, all portfolios are fully invested based on my observation that the overall market will continue to trend up in a near term. The NYSE Advance and Decline issues indicated that this is the case at the moment. See chart below, as long as the $NYAD index stays above the 20 and 50 EMAs, the portfolios will remain the current positions.

Below is the chart on NYSE Advance and Decline Issues which indicated that the upward momentum is still strong.