One of my 2016 goals is to generate some income with my play money. By having playmoney, I keep myself occupied and active on the markets. This is only a small part of my portfolio. The vast majority is then left alone, like it should be.
The result of my playmoney
The target is to make 85EUR per month. Not a lot, but I play with a maximum risk I am willing to take.
In January, I earned 115 EUR. We are one track! I got 43 eur and 82 USD dollar in option premium.
Where did this come from?
Most of the profit is the result of covered calls. Due to the steep market decline in January, I was able to buy back the calls for less than I received. I make my profits like that.
In total, I bought back 5 covered calls, most of them between Jan 11 and 21st. This is the lows of the market. It concerns RDS.A, KMI and GDX. Just like the broad market, there was a steep decline in the prices of these assets. As a result, the value of the calls goes down as well. I prefer to take my profits then.
1 put was closed early January on GDX. This tracker peaked on Jan 7. I took off the trade on the 6th, realizing 51pct of max profit.
New trades in January
In Belgium, we have a new controversial tax: speculation tax. We have to pay 33pct tax pay tax on profit we make when selling stock and related derivatives within 6 months. There is no tax due if you do the same with Trackers… I am not going to rant about this, as it is the backdoor for me to keep
I sold an XLF (tracker on the US financial sector) put, expiring Feb. This trade is in the money, and I might need to roll this put to avoid assignment. I would not mind owning the tracker as I am psoitive on the banking sector for the long term.
At the same time, I sold an XLY put (tracker on the US consumer discretionary sector: Amazon, Home Depot, Starbucks, Mc Donalds,…). hope to manage at 50-60 pct of max profit. Noted at a significant MtM paper loss in January.
As I believe that the gold miners are beaten down too much, bought GDX and wrote a covered call. At the end of January, I seems I am right. GDX is up and the call is in the money. I will roll my put out in time and maybe up in order to get more credit and a higher sales price.
At the same time, I sold a GDX put for the March cycle. The strike is well below my current cost basis.
I own KMI as a bet on their recovey. The mechanical action I take is to write a covered call that allows me to make around 10 pct profit. Until now, these call are a source of income as I am able to buy them back with a profit.
Unilever is a stock that is on my dividend wish list. I wrote an UNA put at 34, this is the price I am willing to pay. I traded after they announced good results. Combined with the recent recovery, I look forward to get a nice premium.
Older open trades
My RDS.A puts…. I have been rolling some of these quite some time now. If oil recovers further, I might be able to close these trades for profit. For now, I have an important paper loss (based upon the Market-to-Market value). The fact that I need to hold them for a few months is bad as they tie up some of my risk that I could deploy elsewhere.
If have a put on the US energy sector. I plan to manage at 50 pct of max profit. It looked bad when oil reached a low below 30 USD/ barrel. If the market stays where it is now, I will be happy and can book a profit in February. If not, this will be a trade I need to roll as well.
The start of the year was good.I am on track for 1000 EUR income in 2016. Id realise this is due to the covered calls. I am in a way lucky that the market did not really crash further, but in stead saw some recovery.
February success will depend on the possibility to manage my open puts at 50 pct max profit. I consider to roll my covered calls. This will not produce income, it is rather a move to accumulate more potential profit the upcoming months.
Currently I take on max risk, so I need to close some trades before I can (allow myself) make extra trades.
How was your passive income in January?