While still recovering from my great summer ideas, I continue to to do what I like: writing options to gain a passive additional income. October was yet an interestingt month where I extended my knowledge and insights further.
Dividend Income
Let us start with a nice round number: 0€.
Hey, that is ok, I am not yet a diviend investors. And in fact, the Belgian government just increased the taxes on dividends from 27 to 30 pct. Add to that the foreign tax, and you pay just below 40 pct of tax on dividends, best case… Imagine you get 100 foreign dividend, that means 85 is left after the foreign witholding tax.Then, the Belgian state takes anoter 30 pct, leaving me with 59,5.
I might just get a second job (A great detailed rant was written by Dividends Are Coming Scroll down to the part below the Nike picture)
Option Income
Slowly, we are working our way up again. In October, I made 228€ in option income. That is a nice income and for sure a ice return on the limited amout of real cash that is blocked on my trading accounts for this (I use a collateral account to trade options).
Year to date, I am quite happy with my progress. I have now 2385€ income out of trading options. This is income I would not have had otherwise. Just remember, it is not free money. In exchange, I take on quite some risk!
I have also further evolved as a trader. My trading strategy is becmoing more clear. The core principles are
- trade small, trade often (Tastytrade)
- Diversify in trading exposure
Capital gains
It has been a while since I reported these. In October, my KMI stock got called away at 20 USD, realising almost 430€ capital gains on an investment of approx 1300€.
As I still doubt on building up a dividend portfolio, I decided to write a put on the stock again, to buy it back at 19USD. If not, I get to keep the option premium and that is just over 1 year of net dividend on this stock.
How was your October?
amber tree leaves 
Absolutely abysmal the tax increase… Dividends are taxed at the source and taxed after, it’s just a logical nonsense to act like that… 😦 Mind you, in Italy we have the same situation so there is little space to move I am afraid, unless someones moves to better and more agreeable countries…
Ciao ciao
Stal
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There must be countries with better tax rules. They might be expensive or too much hassle right now for me
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Canada might be an option 🙂 If you don’t mind winters that chill your soul.
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Solid month on the options front Mr AT, congratulations! Great to see that you have picked up the winning streak again and have handsomely compensated the learning moment back in August. Hat tip for that.
I think you make a very good point about the dividend taxes, you will have to make amazing yields in order to correct for the taxes. Using index funds and complement with options seems the way to go.
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That is my current thinking. In the long terme (me being 80 😉 ), I am not sure I want to keep playing with options…
For now, I have a lot of fun.
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Thanks for linking to my post 🙂 Nice option income for October by the way.
I think I’ll adjust my strategy to capture more of the gains via capital appreciation instead of dividends.
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Let’s wait and see what the government is going to invent on capital gains… With the big funds industry, I keep hoping that mutual funds and ETFs remain free for a long time to come.
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Too bad about your dividend tax. That’s really high. Dividend tax used to be higher in the USA, but it was lowered in the 2000s. Hopefully it doesn’t go back up. Congrats on your options income. 2385€ for the year is outstanding.
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so, you realized 658 € this month?
very good job! 🙂 I like it. My KMI shares were called away too.
I wrote a Put again to make some additional income and will hold the stock if assigned till it will be called away again.
Keep it up
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Yes, I hope to rebuy at 19 and write calls at 20 or 21
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Slowly but surely you are building up that option premium income stream and honing your strategy. I still think there can be some room in your portfolio for dividend paying stocks even though taxes seem outrageous. Dividend income seems more stable and reliable to me than options income. Just my 2 cents. Thanks for sharing.
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In the long run, dividends will be a bigger part of my portfolio. Why? selling a part of my portfolio for income is not a happy thought. Dividends are then a good alternative, despite the bad tax treatment. I expect selling ETFs to be more taxed over time anyway.
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I was really hoping for a flash stock sale the day after the elections. But oddly enough, things are rather stable. Who knows what the US tax situation will be like with Republicans in control of both the House, Senate and President. The only constant in the US is change. =/
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