Tag: Financial Independance

January 2019 – Dividend

Another month has passed, first in 2019, time for another dividend update. Comparing 2019 with 2018 , the January dividend has gone up 50% , mainly because of growth in the portfolio. I don’t know if it’s also down to individual company’s raising there dividends. To be honest I wasn’t too bothered looking it up. Maybe I can muster up some will power the next time round.

It’s still fun watching dividends come in, although I follow the discussion around whether dividend investing is still as viable today as it was in the past with great interest. I think it a bit of a save guard for management not too take too short term decisions , and look more towards stability in growth as opposed too fast growth. Well for me it still works well, and for now I will keep it as part of my investment strategy alongside the ETF part of the portfolio.

Now the numbers :

DateStockCurrencyAmount
23-01-2018
Cisco SystemsEUR8,10
15-01-2018
W.P. Carey IncEUR9,03
10-01-2018
Walt Disney CompanyEUR0,77
09-01-2018
Vanguard FTSE All-World UCITS ETFEUR37,11
02-01-2019NikeEUR1,92
TotalEUR56,93

Options – Basics , writing covered options

Part two in this new options series, this time we start looking at the practical use of options within a portfolio and the how and why of buying and selling options. In the first part we established options are more or less working as insurance. Because this is also a learning process for me I will keep it simple again. We are going to write covered options. Which basically means selling rights while covering the risk 100%. I know there are a lot more possibilities but as I said I keep it simple.

Writing a covered call option :

Our example in part 1 we had a Call Ahold Delhaize, strike price at 20 euro’s and a expiration date of 21 December 2018. Which just to remind ourselves means we have the right to buy 100 shares Ahold Delhaize at 20 Euro’s until the 21th of december. Puts are the other way around. The right to sell.

Now we are going to sell one, risking you have to deliver 100 shares of Ahold Delhaize at the expiration date for 20 Euro’s.

Why would you want to do this ? Well let’s say you bought 100 shares Ahold for 15 Euro’s and the current price is at 18 , you fully expect somewhere around 20 should be achievable in the future. You can now do two things , wait until the stock hits 20 Euro’s and decide if you want to sell then which can take quite a bit of time. Or you can sell a call option, with the strike price of 20 euros ,you can do this each month or sell one a few months down the line. The biggest risk is you would have too deliver the 100 stocks at 20 if the price at the expiration date is higher than 20. Which is annoying if it suddenly jumps up to 25. If it stays below 20 at expiration date you get to keep the shares and have also collected the cash for which you sold the option.

You can repeat this each month or on another interval you set for yourself, and have a little extra return on the equity. Basically you expect a rise but not all too sudden and with this set you will benefit from the time decay in the option. In other words time pushes value out of the option, given it has the expiration date as a hard line at which the option terminates.

Writing covered puts:

Exact opposite , you have got the cash , want to buy 100 shares of Ahold, but instead of just buying them , you will write a put. Let’s say one that is due in a month, at 18 euro’s. You again collect the option premium, reflected in the price you sell the option for, and the risk is covered because you have the 1800 euros cash in your account.

What is the advantage ? Well , the collected cash will cover your transaction cost and the assignment cost if you get to be assigned too buy the shares. The risk ? The stock drops significantly in the time you have until the expiration date of the option. Which would have been as bad when you bought the shares outright. Plus you can always take the loss and buy the option back if it’s gets out of hand.

Everything in between is another form of profiting from the time decay. Mostly this tactic is useful when the stock is moving sideways or when a slight drop in share price. With writing options you can also build in some buffer against the market going against you so instead of writing an option with the strike price of 18 which was the price when you wanted too buy , you can opt writing an option with a strike price of 17, give a bit of space, your premium will be lower.

There is a certain amount of expectation when trading options, a probability of future events. But with writing covered calls and starting out small you can see the benefit of time decay. And collecting premiums is good fun as well. It’s not huge amounts of money but all little amounts add up.

In the next episode I will specifically address time decay in option prices, until next time.

January 2019 – Option positions

This year I am planning on learning more about options. In another series on this blog I keep track of my knowledge and in this series I will share my option positions. Mainly because a lot of information is about the theory behind options and calculation examples. Apparently not many actually share the practical side of things, the doing part.

And although theory and calculations are the basis behind it all, it all tends too favor the profit side of things. A lot of examples explain in detail where the profit in the position comes from. The part about the losses and risks is generally just a sentence long. Also the supposed profit margins are always pretty fat. While I enjoy reading about theory and supposed succes. I feel like I am learning a lot more when I am reading about mistakes. And how people adjust and learn from them.

With that in mind I am logging all my option positions each month and what happend with them. The strategy is basic , I am only writing covered calls and puts. I am writing puts on stocks I am planning on buying anyway and write calls on stocks I have in my portfolio. No complicated scenarios as of yet.

It’s a bit of an experiment and I will probably adjust the format of this article series in the future but for now I will make due with this table.

Date position openOption QuantityPriceTotal amountBuy / Sell End dateTransaction costs
Open/ClosedResult
03-01-2019Ahold Delhaize Put 19.00 18 January 201914,004,00Sell18-01-20190,85Closed3,15
18-12-2108Bam Put 2.20 18 January 201915,005,00Sell18-01-20190,85Closed4,15
5-12-2018Philips Put 29.00 18 January 2019 113,0013,00Sell18-01-20190,85Closed12,15
04-01-2019Aegon Call 4,50 15 March 2019210,0020,00Sell15-03-20191,7Open
07-01-2019BAM Call 3,00 15 March 2019210,0020,00Sell15-03-20191,7Open
22-01-2019Philips Put 24,00 15 March 201917,007,00Sell15-03-20190,85Open
30-01-2019Philips Put 30,00 15 March 2019120,0020,00Sell15-03-20190,85Open

2019 goals

A new year and new goals, this will be my first time setting goals , up until now I mostly used to do lists and loosely set goals. Resulting in missing real focus. In turn running up the to do’s on the good old to do list.

First up the finance side of tings. Which can be roughly divided into 2 parts, mostly cost reduction and building wealth. The easiest way for reducing costs is paying off the mortgage which is the only and biggest debt. Last year saw the biggest reduction so far. It’s so easy it’s hard not simply keep on doing it. However I am now at a point which all the alternatives in the market, renting or buying another house will be more expensive. I have no way of living any cheaper. The mortgage needs paying off so I will continue doing the extra payments but the focus needs too be on other more lucrative investments. So the goal for 2019 is paying off an extra 1200 euro’s. That’s it.

Which leaves the other part , my stock and ETF portfolio. A fixed amount will be added each month, divided over ETF’s and handpicked company’s. In which dividend payments will be one of the main factors, as part of my passive income strategy. My goal is getting my dividend payments up too 1500 euro’s per year. In 2018 the total got over a 1000 for the first time, 1021,80. A small milestone. Let’s see if my new goal is achievable.

Something new I got into in 2018 and developed more during the year is options trading. Which turned out too be the suprise of 2018. I used too write options every now and then on stocks I wanted too buy, not really consistent and just for fun. Mostly I didn’t get the stocks and I tried again. After some time I started making this a more systematic approach and I also started writing options on stocks I had in my portfolio.

At the end of 2018 I also started using part of my cash buffers as collateral for writing options. Usually you will have a good idea which part of the buffers you don’t need in the coming month, so it’s pretty safe using a part of this as a way for generating extra returns.

All in all this approach yielded a nice 10,21% return on risked capital. Not shocking in the option trading world but for me an encourachement for learning more about it and applying this in 2019. I will write about my learning process in the option series on this blog.

So 3 finance goals, keep downsizing the mortgage , generate more passive income and enhance the result with option trading.

But without my health all the money is worthless. 2018 has been a year with a few stark reminders of my permanent brain damage. I took on too much in some instances and got into a few nasty periods afterwards. 2019 is all about finding and keeping the balance again and really accept my new me. I can’t keep going on adding more work each time until I crash. The focus will be on being stronger, training the left side of my body and going back too the start of my revalidation process and taking and celebrating small steps forward. I will elaborate more on this in coming blog posts. For now have a very good 2019 !

December 2018 – Dividend

Final month of 2018. And the final monthly dividend report for this year. The Stockmarket has tanked last few months which leads too all sorts of speculation and doubt, for my strategy it’s not important. For I am still in the building up part of the process. Time in the market is far more important than timing the market.

The dividend this month is less then December 2017, because I sold Shell in the summer. So we are down 67%. Green costs money ;). This will be corrected next year because the money went into other dividend paying company’s. Overall the dividend in 2018 is up 27% compared with 2017. Which is pretty good. It’s motivating.

We will see what 2019 will bring.

The numbers:

DateStockCurrencyAmount
20-12-2018Vanguard dividend appreciation ETFEUR1,51
18-12-2018Icahn Enterprises LPEUR1,53
14-12-2018DowDupont EUR3,33
14-12-2018Coca-ColaEUR5,13
13-12-2018Microsoft EUR8,07
05-12-2018UnileverEUR3,87
TotalEUR23,44

Options – What’s are options ?

Options, a very nifty and useful financial instrument which can be traded on all sorts of exchanges. In this new series I will start from the beginning and will explain what options are and how we can use them in our portfolio’s. Ok let’s start.

An options is the right too buy or sell a product for a set period of time for a predetermined price. Most people’s only experience with an option is when they take out an option on a house. For a fixed period the buyer has the right to buy the house at the agreed upon price without the seller having the option selling the house to someone else. Most of the time this is done for the buyer figuring out finances and seeing if the house is structurally sound. These conditions enable the buyer that if one of these non binding conditions apply they don’t have too buy the house. (This is the way it’s done in the Netherlands , maybe this will differ per country. But you get the idea, I hope)

With this option comes a risk, if there is no non binding reason for the buyer getting out of the deal, they either have to buy the house or pay a 10% fine, which means 10% off the agreed upon price. So there is also an upside for the seller. He/she knows they either sell the house or get 10% in such a case.

The risk for the seller is this, in the meantime they can loose possible other buyers and when the markets are hot they might miss out on the rising prices in the period the option on their house is valid. And if the deal falls trough they can start all over again finding new buyers.

An option is comprised of a set of attributes, an end date , an underlying product (stock, house, commodities , etc) an a fixed price at which the underlying product can be bought or sold.

Trading options can be done on all sorts of (financial) markets, but most well known are stock options. Which will be the main focus of this series.

You have 2 types of options. One gives the right too buy stocks , named call options. The reverse, a right too sell stocks is called a put option. Let’s look at them with a simple example.

Call option :

An option is being noted (mostly) as, AH C20.00 21DEC2018, which is Ahold Delhaize, Call 20 Euro , 21 December 2018.

The first part is the name of the underlying stock, in this case Ahold Delhaize. Followed by the price at which the option can be exercised, 20 Euro’s in this instance. Last but not least the end date of the option. The date on which the option expires, and becomes worthless.

Also worth mentioning, 1 option will give you the rights on 100 stocks , so in this case you can buy 100 stocks Ahold at a price of 20 euro’s each, before the option expires on 21 December of 2018. A total of 2000 Euros worth of risk. Options generally end on the third Friday of each month.

Put Option :

Essentially the same principle, just another right, one too sell instead of buying. It’s presented in the same way, AH P20.00 21DEC2018, Ahold Delhaize Put, 20 Euro, 21 December 2018. This is again a right for 100 stocks, Ahold in this case again, a sell right for 20 Euro each.

Well so far we have learnt a Call gives a buy right, a put a sell right. But when there are buyers there must be sellers. Together they make the market. Buying an option will cost you a premium. As expressed in the option price you see when looking up an option on the exchange.

You can look at the option price as an insurance premium, you will pay every month on your car insurance. The insurance company is the seller of the option (insuring your car against the risk of damaging it). And you are the buyer. You cover unexpected damages and events and in return you pay a monthly fee (the premium). The insurance company now takes the risk that if you have an accident they will have to pay for the damages. You are insured against these risks for a certain amount of time (mostly a year).

The premium or price of an option is changing a lot faster then the premium of your car insurance. But the same principle applies. A seller makes a risk analysis with selling the option and gives a price too the buyer. The option buyer insures the fact he can buy or sell the underlying stocks at the price of 20 Euros, until the expiration date. The seller has too buy or sell them too the buyer at this price.

The option price is determined by the price of the underlying stock, the distance too the strike price of the option (the 20 Euro’s) and the time left in the option, i.e the number of days , hours minutes until the option becomes worthless. Other factors are interest rates, dividend payments and overall sentiment in the market.

Where do people use these options , or insurances for ? Well, that will be the next item in the series. For now just let the characteristics of options sink in.

Portfolio news – Winter 2018

Time for another portfolio news. Since the last additions I have been going out of the fossil energy industry and reinvested the funds into technology and the ETF’s. I had still had Shell, sold ONEOK before that and now it was time to remove Shell from the portfolio. It’s a nice dividend income and for all their commercials and PR towards clean energy I haven’t really seen anything apart from sponsorships. No real moves as of yet. In name an Energy company, in practice still a old style oil giant. I realize I am still an investor by the way of the ETF, so I am not completely clean at the moment. But this is the first step.

Also out is General Electric, one of my longest holdings in the portfolio, and one I neglected acting on earlier which resulted in a loss, another testament towards simply buying an ETF and holding that instead of following separate companies. But I am still having fun doing the research, so for now I will keep adding some handpicked stocks to my portfolio.

As for technology , more ASML, Apple and Microsoft have been bought. Next on the list is Philips. Getting larger in healthcare which will remain a growing market, it’s been lagging a bit lately and now starts making up a bit. So I will start out with writing put options and seeing how things develop.

The ETF’s have seen the biggest growth in my portfolio, simply because it’s easy and cheap. Which comes a long way in having a nice return in the future. Low costs and simplicity is key. Its also remarkably stable. My handpicked portfolio goes up and down a lot more, which makes sense because it only contains a few positions versus hundreds combined in an ETF.

So my testcase is more and more in favor of the ETF’s , which I will be allocating more money towards in 2019.

Control your finances, but why?

Nice oneliner, isn’t it? But having control over your finances, what’s that exactly ? It’s knowing exactly whats coming in and going out each month, for starters. It leaves you with an exact number you have left each month. And you can go figure out what you can or must do with it.

In the Netherlands, where I live the national budget institute, which advises people on responsible finances has a lot of different data on budgets, savings etc. It says only 27% of all Dutch people keep a monthly cash flow report. And 25% has savings less then 2200 euros. Which is roughly 1,5 months of expenses if you don’t a lot of those. A lot more numbers are available but you get the idea.

It’s simply a fact most people don’t know their financial status from one month to the next. Which doesn’t have to be a problem if you simply spent less than you make. Which leaves a buffer automatically. Which in most cases end up in savings accounts.

But it pays dividends knowing how the numbers look and taking it as a starting point in thinking about your financial future. Best case scenario is thinking about how your surplus can make you money, worst case if you come up short each month how too fix that issue.

Let’s start easy, by making a simple monthly balance in a spreadsheet or on a piece of paper, doesn’t matter. You first write down your income, for most your salary. Then deduct your mortgage or rent, your utilities bill, all your taxes etc. Then if applicable monthly tax breaks and or subsidies. (which vary per country.)

Which leaves an amount of money which you can spend, but we’re not there yet. You need too eat. If you haven’t got an exact number on your groceries make an estimate. Deduct that and you have your free spending money for that month. Well most sensible thing you can do is make a fixed reserve and deposit in a savings account. Anyway now you know more or less what comes in and goes out each month. Easy enough right ? Your monthly budget is alive !

With what you have left , you can start doing stuff, spending it , or saving it, or reducing debt. It doesn’t matter really. You now now a figure which you can safely allocate or spend for this month. Start saving for future calamity’s is smart, replacing broken washing machines, unexpected car repairs and so on. You name it, it will happen and an nest egg will help you overcome such things.

Looking up all your monthly costs will take some time when doing it for the first time. Most don’t really changes a lot during the year and once you have 1 month mapped out, the rest will be less work. For inspirational purposes I added an example, a very basic spreadsheet as a start, click here [download id=”1429″] . Most months after the first initial set up it will take about 5 minutes making a new one for the coming month. Maybe 10, but 5 is an amount people tend to want too spend on not so fun stuff, so just stick with 5.

But why ? Well stress which comes directly from financial issues is one of the most recurring causes of stress. A nagging feeling not knowing if you come up short or have enough money in reserve or when having have debt is a large amount of stress people experience on a daily basis. Im my experience starting out with a budget will make things a lot clearer and is a good starting point in solving financial problems one might have. Your feelings get to be facts and facts make solutions possible. You can now start improving your financial situation.

November 2018 – Dividend

Its the end of November and time for another albeit short dividend report. Let’s see, as usual November is a slow month in the dividend department. This year even more so as I sold ONEOK this year which paid dividend in November, which leaves Apple as the sole dividend paying position in my portfolio. So a 13% drop in dividend income compared to last year. Next month the last dividend update and a final report on 2018.

The very short list :

DateStockCurrencyAmount
15-11-2018AppleEUR9,69
TotalEUR9,69

Simple steps towards financial stability, pay your bills per year

Well, a new simple step towards more financial stability, It’s only a bit harder getting started. It needs some money upfront. Let me explain. Most insurance, utility, communal taxes and so on we pay per month, but as with all businesses people like to get their money upfront. And usually they give out a discount because of that. First figure out which ones gives discounts.

Discounts vary , generally between 1 and 2 percent of the total amount. It isn’t that much, but as with all little savings, they add up quickly. As long as interest rates on savings accounts are as low as they currently are , this pays off.

All it takes is a start. So most of us have a bit of a nest egg somewhere, so you can start by picking one that you can take out of your savings without making too big of a dent and paying it at once. Then you save the amount for next year every month. In the meantime you can try and save up some more and start paying an extra bill per year the next year. As long as the interest is below the discount this pays off.

It might take a year or two but once you get the ball rolling the savings can add up. And as with all savings you can use them paying off debt and or invest the money.