Money Trades


I wrote earlier that I’d do a year end round up of my ETF Covered Call investment strategy on three of my accounts: Mini-account (for small time investors), Power-account (for those more adventurous), and Arbitrage (for those with no money but big cojones) and the results are official.

My power account returned a little under 25% return for the 2007 year. My mini-account returned 27% return for the year and my arbitrage returned a whopping 54.76% on an annualized rate, 13.69% actual.

I did some graphs to illustrate how my mini account did against the major indexes: Dow Jones, S&P 500, and Russell 2000 for illustration purposes.

First up, ETF Covered Calls vs. Dow Jones Index

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Next up, ETF Covered Calls vs. S&P 500 Index

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Last up, ETF Covered Calls vs. Russell 2000 Index

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Despite the great returns, I’m hesitant to think that 2008 will be as profitable as there are so many problems with the financial system in the U.S. that it could get ugly in 08 but we’ll have to wait and see what happens.  The year ended on a sour note and if the next few weeks are a roller coaster ride, people are going to get off the coaster and sit on the sidelines which won’t bode well for markets.

I’m primarily in cash right now with the exception of my arbitrage account and the mini account.  Both these accounts are energy top heavy which I believe will do well, recession or not, as demand and consumption continues to rip through previous consumption levels.

Good luck investing in 2008!

Alright, I said I liquidated all my positions and I did but it was simply too tempting to let $500 slip by and not pick it up.  With options expiry this Friday, I decided to do one more ETF Covered Call this year to rake in $500.00.  If I get called on Friday, I’ll earn another $250 and if I don’t I’ll ride it out with the volitility.

I picked up 500 shares of SSO (double leveraged S&P 500) and sold slightly out of money calls for about $475.00.   This represents about 1.2% return in under 4 days so we’ll see what happens on Friday.

I still believe in a big market dip soon and I have been so swamped at work with so many project due over the next 30 days that I simply haven’t been able to focus like a laser on my investments for a couple of weeks now.   I took a breather a few days ago, saw a quick opportunity to rake in a little cash and I took it.

I’ll post a follow up on Friday after market close.

A few weeks ago, Trent over at the Simple Dollar had a fascinating discussion about whether it’s cheaper to buy a $0.99 double cheeseburger or cook some burgers at home. The fundamental question seemed to boil down to what the total real cost of grilling your own burgers by picking up food at the grocery store vs. driving to Mickey D’s and picking up a double cheeseburger.

I’m not really sure what the final answer is to that complex question but I would suggest to the 80+ people or so that participated in the article via comments and perhaps the thousands that read it that perhaps if they spent as much time researching stocks, options, currencies, precious metals, ETFs, bonds or other investment opportunities as they do over trivial matters like a $0.99 double cheeseburger then perhaps they could earn enough money to not have to worry about spending $0.99.

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A couple of weeks ago, I wrote that I bought almost 60k worth of ETFs shorting the Dow and S&P 500 after spending a couple hours analyzing the markets movements the past 30 days and determining that it was the time to short the market. Yesterday it paid off with a handsome profit of $750 for a couple of hours of work and a few weeks wait.

The profit making didn’t stop there though, I also bought UNG in late Sepetember for $39.25 and sold October $40 Calls for a cool $645 in profit and it looks like I’ll be forced to sell at $40.00 on Friday which will bring up my total profit to $870.

“Aww but you need money to make those trades”, you say. Well there’s more! I borrowed 50k in credit card arbitrage (0%) and bought 900 shares of an ETF for $43.85 and sold October $44 calls for $1.35 to rake in $1200.00 in profit. It looks like my Calls will be assigned at $44 so I’ll make another $135 as I’m forced to sell off.

This will bring my total profit over the past three weeks to about $2800.

So the new debate question becomes, “Do you want to grill your own burger to save $0.99 or would you rather have $2800 in cash?”

Opportunity costs mean you can’t have both 😉

I’m a sucker for easy money.  I picked up 1000 shares of UNG around $39.60 and sold the August $40 Call for $1.25 to pick up $1250 in cash sans commission.  It’s all part of my ETF Covered Call Strategy and this transaction represents a 4.17% return in 11 days assuming I get called.  If I don’t get called then it’s a 3.2% return in 11 days and I’ll ride UNG through the winter.

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I hope you’re making money this week.

Alright, you can officially call me a flip-flopper.  I saw an opportunity yesterday and I took it.  Earlier this year I was averaging about $750 to $850 a month in ETF Covered Calls and I’ve now tweaked and boosted to $1000 to $1300 so far this summer.  The ETF-Cashinator told me to go for the kill so I picked up 800 shares of USO at $52 and sold in-the-money contracts at $1.70 to rake in $1300. This represents 3.2% return in 33 days. With unrest in Nigeria, hurricane season upon us, geo-political unrest in the middle east (Iran/Iraq) and China firing on all billion cylinders, I had to make a little profit off of energy.

With any luck, I’ll get called in July and move on to what the ETF-Cashinator tells me to move on to. No emotion trading here, the ETF-Cashinator crunches the numbers and tells me where to go to make money with my specified targets (1.5% to 3.5% per month). With this last trade, my portfolio is now up 15.2% from December 06 through July 07.

The cash keeps tumbling in and the system is working good for me.  I made another $1300 yesturday by scooping up 200 shares of OIH and selling June in-the-money call contracts for $500 a piece.   Also made another $300+ selling GDX in-the-money call contracts for $115 a piece after I scooped up 300 shares at $39.00.

Both of these trades will result in about a 3 pct return, respectively, for just under a 30 day investment.  If OIH and/or GDX fall below the strike, then I’ll be in a position to sell more calls for July, Sept, or October time frames.  If I get called then I’ll take a breather and look for another 3 pct return in under 30 day investment opportunity.
You can read more about these trades at http://www.etfcoveredcalls.com.

They say a picture is worth a thousand words but this picture is worth $3050.

In round 5 of ETFs vs Mutual Funds, I’m going to conclude this “fight” with the final numbers on SMH. I got called on Friday so my SMH shares were sold off at $35 which brought me another $750 in profit.

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A quick review.

12/4/2006 Buy 1000 SMH @ $34.25

12/4/2006 Sell 10, January 2007 $35 strike calls for $850

1/22/2007 January Calls EXPIRE WORTHLESS

2/02/2007 Sell 10, March 2007 $35 strike calls for $750

3/16/2007 March calls EXPIRE WORTHLESS

4/10/2007 Sell 10, May 2007 $35 strike calls for $700

5/18/2007 May Calls CALLED/ASSIGNED at $35, made $750

Do the math: $850+$750+$700+$750 = $3050
Initial Investment: 1000 @ $34.25 = $34,250

Return = 8.9% Time Frame = Dec 06 – May 07 (5 months)

Click on the image below to see money making in action.

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Now click on the comparison image and ask yourself if you would have been better off doing ETF Covered Calls or investing in Mutual Funds!

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Oh yeah, I didn’t include DIVIDENDS I received for owning SMH as you’d receive them as well with the mutual fund.

So I’m calling this FIVE round fight to ETF and grand champion SMH by TKO!

I drove by a gas station this morning and saw the price of a gallon of regular for an eye popping $2.89. I expected gas prices to rise during Memorial Day for the big summer rush but not this early in the spring.

The high price of gas gave me an investment idea that I’d written about before here. I checked the market and saw an opportunity to buy in my new favorite ETF OIH after a pullback. I bought 300 shares at $152 and sold 3 contracts for May 07 $155 Strike for $3.60. This netted me a cool $1100 or 2% return in 30 days.

If I get called in May at $155, I’ll make an additional $900 and bring my return up to 4% in 30 days! If I don’t get called then I’ll be in a position to sell July or October calls currently selling for $7 and $11, respectively.

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I wasn’t going to write about this transaction since it’s in one of my other accounts but I did mention previously that I was aiming for an entry point in OIH and now was the time to do it but I happened to do it with an outside account.

In other news, SMH jumped past $35, if this trend holds, my May calls will likely be assigned and I’ll make another $750 with that money tree.   By the way, all of this cash gets immediately placed in my account for me to spend as I please; it’s not sitting as “paper” gains like in some mutual fund.  Be sure to keep enough cash to pay taxes though!
Happy Hunting.

This is the third time that I’ve been able to snag at least $700 in profit from ETF Covered Calls.  In comparison to mutual funds, ETF kicks Mutual Funds butt out of the ring.

First things first, the first image will illustrate the trading activity of how I’ve made the money.  Here is a quick breakdown.

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  • 12/4/2006 – Buy 1000 Shares of SMH for $34.25 and immediately sell 10 January 07/$35 strike contracts for $0.85/each to make $850.00
  • 1/22/2007 –  Options Expire Worthless so I keep the 1000 SMH shares.
  • 2/02/2007 – Sell 10 March 07/$35 strike contracts for $0.75 to make $750.00 in profit.
  • 3/16/2007 –  Options Expire Worthless so I keep the 1000 SMH shares.
  • 4/10/2007 – Sell 10 May 07/$35 strike contracts for $0.70 to make $700.00 in profit.

If I get called in May at $35, I’ll make another $750 in profit.  If I don’t get called in May, I’ll be able to sell August 2007 calls.

Now let’s compare this to someone who bought SMPSX mutual fund similar to the SMH ETF.  If I had purchased SMPSX in December 2006 the same day I bought SMH, I’d be down 4% with SMPSX and I’d be even with SMH.  But by selling covered calls on the shares I own, I’ve managed to squeeze 6.7% return and this doesn’t even include dividends.

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I hope this helps illustrate why I don’t invest in crummy mutual funds and why I feel ETFs are far superior.  With an ETF you can sit like a passive investor, you can do a little trading or you can be a bit more aggressive and trade options.  It’s the difference between riding a bicycle or driving a car – both will get you to your final destination but one has much greater range, capability, creature comforts and faster speed! Oh yeah, when it rains you won’t get soaked with an ETF like you do with mutual funds!

Exciting news on two fronts today of the ETF Covered Call Strategy. My SMH Options expired worthless today so I’ll have another cash harvest in the upcoming weeks. I also planted another money tree in China. I bought 100 shares of FXI for $98.00 and sold the May 07 $98 Strike Calls for a cool $600. I’ve pocketed a 6% return in a 60 day window. If FXI drops, I’ll keep my shares and write more calls for August or January Calls!

If you want to learn more, click on over to http://www.etfcoveredcalls.com where the ETF-Cashinator crunches numbers all day long to find profitable opportunities for me. Learn how it’s done.

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