Cashflow Report: Paper Income during February 2011

This month, I JUST missed my profit target! Considering my exposure to the market is ~80% (meaning I’m still sitting on some cash), I am REALLY happy with that result.

This month has reinforced the saying “Don’t fight the market”. While the general market seems to have stalled, DRN continues its march higher (reached $70).

On the other side, EDC has been moving sideways, but appears to be in a longer term downtrend. With the state of unrest and uncertainty internationally, it doesn’t appear that there is fundamental support for a rally.

But it doesn’t matter what I think. Regardless of whether I am right or wrong, I want to make money.

So without further delay, here is the profit report for February 2011:

Cashflow Breakdown:

DRN-Direxion Daily Real Estate Bull 3X (ETF)

Premiums = $2410
Dividends = $0.00
Commissions/Fees = ($25.20)

EDC-Direxion Daily Emerging Markets Bull 3X (ETF)

Premiums = $500.00
Dividends = $0.00
Commissions/Fees = ($11.32)

Net Cashflow – Feb 2011 = $2878.51


February Option Investing – DRN Covered Calls – Part II

Well…that was quick. The market has taken a beating the past few sessions, and DRN has followed suit.

I was not able to capture the large spreads the other day (Blog Post: Holy Spread Batman!) using EDC and DRN positions. Looking back, these were pretty normal.

Yesterday, I made out a little better with a DRN trade. It does make me wish I would have waited to pull the trigger, but 9 times out of 10, waiting just reduces the time value and in turn, my cashflow. And that is the exact reason it pays to have rules and follow a process!

Sold a March 2011 call at a $62.00 strike price.

Gross Cashflow: ~$394 USD

February Option Investing – EDC Covered Calls

I decided to keep my small position in EDC and use it for a training experiment. I need to focus on generating cashflow, not a fluctuating account balance. Given the fact that EDC is a small position in my portfolio, a drop of 50% in the price of EDC would still not cause much damage overall (my ego, that’s another story).

So I am going to see what the effects are when selling covered calls on a position in a downtrend. If I am truly going to live off paper income, there will be times when I am watching my balance or my position size shrink, and both will have a negative impact on the amount of paper income created per month.

For the record, I sold March 2011 Calls at a $35.00 strike price on Monday.

Gross Cashflow: ~$493 USD

February Option Investing – DRN Covered Calls – Part II

Last weeks option expiry totally exhausted my positions in DRN, which means I added some capital to my account, along with the cashflows from options.

This also means that I can adjust the amount of money I have at risk with DRN and sell some additional covered calls.

The market has looked weak lately (IBD confirms with a Uptrend under pressure warning earlier this week), but DRN has followed the beat of its own drummer for a while now.

I sold March 2011 calls at a $66.00 strike price.

Gross Cashflow: ~$1642 USD

Holy Spread Batman!

Futures were down across the board this morning, but I did not expect such huge spreads.

A DRN call for March, at a 66 strike price, had a bid of $1.25 and an ask of $5.60. What an arbitrage opportunity! That is, if you can get someone to bite!

EDC was very similar, but less surprising given the uprisings over the weekend. Some of my calls were assigned, but I still have a small position…which immediately got whacked this morning.

Stay tuned…lets see what happens today.

2011-02-18 – Last Trading Day before Options Expire

Any opportunities out there for short term covered calls? I’ve been traveling this week, so access to my account was limited. No worries though…there will be more opportunities.

Rule-Based Investing Saves the Day (via Invest Safely)

Great advice on keeping your eye on the prize and not getting caught up in the all talking head hype!

Right now, the market has been in an uptrend for almost two years. Statistically speaking, the rally is one of the longest uptrends on record. So it is only natural for people to begin questioning "when will we see a correction?". When you begin to make investment decisions solely based on opinions, you run into issues; you can always find one to support your argument. As mentioned on our investing strategies page: Each strategy has staunch allie … Read More

via Invest Safely

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