April Dividend and options trading in our ROTH IRA account has been very successful. From the dividend income perspective it was the best month so far.
Both incomes also helped the account balance growth although the Stock market shows a lot of bearishness and fear. However, last few days in the markets boosted the value of the account up.
This month, we received $91.49 dollars in dividends.
Our options income also exceeded previous months and by making $131.00 dollars premium we exceeded our entire last year options income. Last year, we made $341.00 dollars, this years we already made $342.00 in premiums.
Our average annual options income is 2.67%.
Our annual dividend income increased to $1,074.87 from previous month of $1,068.55 (0.59% increase MoM). This is a great increase compared to $883.48 annual dividend income from 2016 (21.66% increase YoY).
· ROTH IRA investing/trading strategy
Here is my investing & trading strategy I use in my IRA account. If you want to read about this strategy
In our ROTH IRA account we primarily invest into high quality dividend growth stocks. However, we allow exceptions and invest to higher risk, non-growth dividend stocks.
We reinvest all dividends using DRIP program. We will be using DRIP as long as dividend income will be below $1,000 per months or dividend period.
Once our dividend income reaches the limit of $1,000 dollars per the period (quarter, dividend payout, etc.) we will cancel the DRIP program and start re-investing the dividends selectively into either new stock holding, or existing stocks.
In our ROTH IRA account we also use options trading strategy called “triple play”.
We sell cash secured puts as long as we are assigned and buy the stock. With this strategy, we do not roll the puts unless there is a great opportunity to do so or the stock dropped in price significantly.
Once we buy shares, we keep them, collect dividends, and start Selling Covered Calls.
We sell covered calls at the money, slightly in the money, or above the money. We do this as long as we sell the stock.
During this cycle, our DRIP program ensures that we reinvest the dividends.
For example, we sell puts against stock XYZ, we get assigned and buy 100 shares of the stock. Later, we receive the dividend, which is automatically reinvested. We buy fractional shares of the stock, for example 2.468 shares. Now we own 102.468 shares of the stock. While we are selling covered calls, when we get assigned the calls, we sell 100 shares of the stock. At the end of the cycle, we are left with 2.468 shares which continue bearing new dividends. These dividends are then reinvested back into the same stock, so our position is slowly growing.
Now, you may ask, what if you buy a stock and it drops significantly down, so selling covered calls down low may result in selling the stock at a loss and what would we do in this situation?
This is a valid question and no stock, even dividend growth stocks are not protected against a violent price drop. It may happen. In this case, we may temporarily stop selling covered calls and simply wait, or we may be selling covered call down low, but we will strive avoiding assignment and rolling those calls higher as long as we get above our stock purchase price where we can let the calls assign.
Once we sell shares via covered calls, we start selling puts again.
This options strategy is slightly different than the one we use in our trading account.
You may ask why doing this and not just keeping the stock to avoid losing capital gains?
Many times, the options income from puts and covered calls is a lot larger than the dividend itself. Also bringing income from options every week or two weeks will exceed any capital gains of the stock.
And we want options income too. We want to capture dividends and we want income from options. Most of the stocks are quarterly dividend paying stocks. That means, if we keep the stock and we will not be selling options, money invested in the stock will be dead money. There may be a small capital gain, but overall, it will be dead money.
· ROTH IRA dividend income
As I mentioned above our dividend income was 21.66% better than last year. This month we made $91.49 in dividends and all dividends were reinvested back to the companies which generated them.
Here are some numbers:
Dividend Income = $91.49 (account value = $22,479.74 +1.78%)
The account is up 10.12% for the year.
Monthly dividend Income:
In February, we purchased 100 shares of Energy Transfer Equity, L.P. (ETE) using triple play strategy which ended this month successfully with 14.18% overall profit.
After the trade ended, we started selling new cash secured puts to get back in and buy shares back. At the end of April, we were assigned to ETE again and bought 100 shares back. We expect in May a new dividend capture and income from covered calls.
Since we had some spared cash in our account we also decided to add a few Iron Condor trades.
We added an Iron Condor using TECK stock as underlying. The trade is set to expire in May. If it won’t we will roll it.
Another trade we decided to open was a covered call against AGNC stock. This trade is set to expire in June, so there is a plenty of time. We will play AGNC stock the same way as with ETE. Basically this will be a dividend capture trade. If the stock gets assigned and called away, we will immediately sell in the money puts to buy back the shares.
Last trade we have is Iron Condor using STX underlying and we will trade it the same way as TECK above. Recently, after this month earnings STX dropped significantly down (8% drop) and our short calls closed for 0.05 debit. We still hold the put spread and although the stock dropped, it still is safely out of the money.
My dividend holdings:
(Click to enlarge)
· ROTH IRA options income
As I mentioned above we trade options in our ROTH IRA account to generate income which could be re-invested into dividend growth stocks.
We are in an “accumulation phase” when we deposit our sparse contributions of $50.00 dollars monthly and keep that cash in the account to trade cash secured options with it. This way we generate income from the options.
As of today, we only have approx. $3,200.33 dollars in ROTH IRA available for options trading (4.41% increase). The goal in 2017 is to reach $6,000 available dollars for options trading.
With that money available for trading, in April 2017, we generated $131.00 dollars income from options 4.09% return on invested capital.
· Our dividend investing outlook
The stock market seems to become a range bound and oscilating between $2,340 and $2,400:
On one hand this is definitely an improvement from last month when the market broke up from a descending triangle and we moved higher again.
But I have one fear and that is that investors are likely realizing that Trump will not deliver his promises and that will have a negative impact on the stock market.
If we break up above resistance of the channel, we will see new highs, but if we reverse from here and continue down and even break the support, we may see correction.
Also note, that if we stay in this channel long enough, it will become a consolidation channel for another leg up.
I do not predict the market though, so do not ask me what happens. I do not know it and I do not care.
As a dividend investor I will continue investing into dividend growth stocks and as an option trader I trade strategies where it doesn’t matter which direction the market or stocks go.
What was your dividend income this month? What do you think about today’s market amid the weak GDP data? Will Trump be able to positively affect the stock market?