Saturday, 20 December 2014

Dec 2014 Portfolio

Month of December

Finally the last month of the year has arrived. Came back from cruise and I find myself planning for the next holiday again. You can never spend too much time thinking about your next holiday.

Previously I was holding to 3 stocks which have been closed due to the recent drop in market. Now I’m looking at a few stocks which are showing rebounds from their technicals.


Net Liquidating Value : $11,489.00
Total Invested Capital : $10,261.02
Total Realised Gains   : $969.14
P/L YTD                     : 11.97%

Options on Futures
The market drop mentioned caused me to close 2 of the Dec contracts earlier to put some money back into the account. Besides, I do not need the to wait another 10 days just to get $20-$25 while risking my entire account going into a margin call situation. I try to avoid margin call as much as I can. And you should too. If new funds are not injected into the account or positions are not closed when you receive a margin call, the broker will force close ALL your positions and most of the time, it will cause trouble to your account. Hence you should try to avoid a margin call as much as you can. 

Oct 14             : -$837.50
Nov 14            : $937.50
Dec 14            : $917.5 ($642.5+$275)

Net Liquidating Value : $12,655.45 (If I close all my contracts now)
Total Invested Capital : $10,000
Total Unrealised Gain : $2,655.45
P/L YTD                      : 26.55%

Investing Wolf

Disclaimer: This is not a recommendation to buy or sell any mentioned stocks or securities in this blog.

Sunday, 14 December 2014

What is Options Selling?

To understand option selling, we need to understand what are options?

Options are contracts that allow the holder the right to exercise (buy or sell) the underlying asset at a specific price on or before a specific date for a premium. Common uses of option in daily life include buying a house or buying insurance.

For example, you pay the insurance company to insure the underlying asset (which could be you, your property or anything else) at a specific price (how much the insurance will pay in the event something happened)on or before a specific date (the duration of the insurance policy) for a premium (money that you pay monthly or annually).  If you fail to pay the premium then the policy will expire. But if something happens, the insurance company would have to pay.

The above example is typical for option buyers. Then, if you think about it, if there are buyers (policy holders), there has to be sellers (insurance company) out there.

Option Selling can be compared to being an insurance company for the financial world. You take on the risk for a small amount of premium. Who in the right mind will want to take on the risk? Well, think about it, most of the time you have insurance but how often do you make a claim? When no claim is made during the policy year, the premium will still be kept by the insurance company. Most insurance will either charge a higher premium or deny the application for those with a higher risk.

The most interesting part is this… you can choose to exit the position anytime you feel uncomfortable. You just have to buy back the contract and you close the position. Risk is always there, it’s how you manage it that defines your portfolio.

Investing Wolf
Disclaimer: This is not a recommendation to buy or sell any mentioned stocks or securities in this blog.

Saturday, 22 November 2014

Nov 2014 Portfolio

This is the first time I am posting my portfolio and let’s make it easy and summarized
All Prices Are in USD unless stated.

I invested $10,261.02 in January 2014 (Reason for the weird number is because I had to transfer SGD 13,000 and convert to USD within the brokerage forex). Through a series of buying and selling, I come into this month with $10,472.35. Currently I’m still holding on to 3 positions as they have not yet entered my stop losses.

Stock Buy/Sell Size Price Current Unrealised
MU BUY 84 $31.80 $34.29 $209.16
BBY BUY 52 $33.40 $38.08 $243.36
TTWO BUY 131 $22.40 $26.89 $588.19

Net Liquidating Value : $11,513.06
Total Invested Capital : $10,261.02
Total Unrealised Gain : $1,040.71
P/L YTD                      : 12.20%

Options on Futures
Similarly I have USD 10,000 in another brokerage account in July 2014. This would be the mainstay of my investing journey as this is the portion where it is most passively handled.

Oct 14 : -$837.50
Nov 14 : $937.50

I still have open contracts due to expire in Dec, Jan and Feb as of this writing.

Net Liquidating Value : $11,923.57 (If i close all my contracts now)
Total Invested Capital : $10,000
Total Unrealised Gain : $1,923.57
P/L YTD                      : 19.23%

Many of you would wonder how come options are passive… Here’s the answer.
I’m an Option Seller. Every month I sell option contracts and wait for the 3rd Friday of the next few months for it to expire and the premium automatically goes into my account.

October was kind of a scare as the market went down 10.9% from the top of Sept 19 to the bottom of Oct 15. Actually, I lost $2,400 when I decided to buy back the contract during Asian hour. However, when I sold the contract, I received a premium of $950. So that made the loss acceptable (-$2,400 +950 = -$1450). The loss was cushioned by another contract that expired a few days later and I collected my premium (+$612.5) and offset the loss to -$837.50.
Lesson learnt that it is not a good idea to trade during Asian hours because you get ridiculous prices.

That’s it for now. Waiting for Dec… Where I will have my long deserved Cruise and my options expiring.

Investing Wolf
Disclaimer: This is not a recommendation to buy or sell any mentioned stocks or securities in this blog.

Towards Financial Freedom!

Hi Everyone, 

This is dedicated to someone I admire and aspire to be since 2012. I chanced upon his blog when I was still in the NS and it prompted me to take action early to secure my financial future. I’m pretty sure most of you will know this guy: Dividend Warrior.

He inspired me to achieve passive income by taking small steps at a time and it has been a wonderful experience looking at how his portfolio grew from 50k to 200k in a few years.

Sadly, this December will be his last post as he goes on to taking a long and well deserved break. I wish him all the best and keep striving for more passive income.

This blog will chronicle my journey in the investing world. And hopefully it would also inspire you to strive towards your own financial freedom as Dividend Warrior did for me.

Investing Wolf
Disclaimer: This is not a recommendation to buy or sell any mentioned stocks or securities in this blog.