ETF's for Dividend Income

Instead of exposing yourself to individual stock risk trying to get high dividend yields, try a dividend ETF. Here is a good list of some dividend ETFs that can provide cash flow income:

Preferred Stock ETFs for Attractive Yields

http://finance.yahoo.com/news/preferred-stock-etfs-attractive-yields-143033023.html

Another great list is here:

Best Dividend ETFs

http://www.dividend.com/dividend-etfs/

Some of the common ones mentioned are:

PFF - the iShares U.S. Preferred Stock ETF it has a 6.05% 12-month yield

PGX - the PowerShares Preferred Portfolio it has a 5.94% 12-month yield

Market Correction

The large market move downward is in my opinion a scared reaction to China's market instability.  China and the US market have been going up steadily for years now and at some point the market was going to stall.  The current market valuations are pretty pricey and there isn't any real reason for many stocks to go any higher based on global market conditions and with China's market going through some issues.

In the days ahead I think the market is going to continue to be volatile moving down and up as people try to figure out what prices should be.  The market is more than likely not going to go any higher until there is favorable news about China or the Fed's decision about interest rates.  I personally think that the SPY (the benchmark for many investors) is going to stay between 185 and 205 until the next earnings come out.

Updated Trading Strategy

Here is my updated trading strategy:

• Trade high volume, high price stocks
• Look for the stock to be around the middle of its 52 week trading range
• High IV rank of 30% or better preferably 50% on up
• 90% probability of success and at least 1-2 standard deviations away
• Between 7 and 35 days left till expiration
• Leg into an iron condor with vertical spreads
• Collect at least .70 for each trade 
• Look to close each side at .15 one week later but no longer than 2 weeks later
• When the stock moves big one way look to close the winning side for a profit and re-deploy another iron condor
• Always stay at 90% probability OTM (out of the money) when you place your trade
• Never trade this strategy during earnings – use a different strategy 
• Use Person’s Pivots (PPS) to time entry
   

*Cash management

Leave $2000 available for options trading so you can fix any situations that go against you or jump on opportunities that may arise

Making A Successful Trading Plan

When you make a plan you need to stick to it as best as possible.  You can refine it along the way but the point of having a plan is to learn what variables are out there so you can account for them in future revisions of your plan.  That’s what the Constitution is: a plan for governing this country. We add amendments to it to help refine what it is because of events that have happened over the years.  These variables have helped to clarify what our nation’s purpose is.  

When you trade you should clarify your trading with your intent.  Are you just trying to make monthly income or are you looking to build a nest egg for retirement.  This should be factored into what type of trades you will make and which securities you will trade.  Stick to your plan for a few tries and if it’s successful review what made it successful and stick to it.  If there are problems try to find out what went wrong and refine what you are doing to address those problems.  

Making a trading plan takes time and if you are consistent you will come up with a successful plan that works for you.  

I’ve Been Tasty Trading

I’ve been away for a little while trying to refine my strategy.  After finding the Tasty Trade network I wanted to digest a lot of what they were talking about to be able to speak intelligently about my own perspective on their approach.   

I believe that everyone has to find a trading strategy that works for them.  Each individual trader has their own risk tolerance and temperament and you can’t expect everyone to have the same results with one style.  There are however certain key aspects to trading that everyone uses to help them be successful and that’s what the Tasty Traders are using.  The concept of selling implied volatility is I think one of the foundational keys to their success.  One of their other concepts of taking profits at 50% of max profit is useful as well.

I was not as successful with one of their techniques like buying a poor man’s covered call as synthetic stock.  Time decay or theta is a very real force and should not be messed with.  

The best strategy for me at this point after trying several different approaches is to sell out of the money vertical spreads.  I have come up with a strategy that is an updated version of my previous one that I am having success with now.  Last winter I went 2 months without a losing trade with this strategy but I had some close calls.  I wanted to refine it so I could make it less stressful and more lucrative.  

I will post the strategy in the next day or so.  

Quicken Issues

I recently purchased Quicken software to import my bank statements for tax season.  It was a very cumbersome process trying to figure out how to import old bank statements because many banks only offer 90 days of the file that you need to import into Quicken. Quicken has discontinued its use of the QIF file and you cannot import CSV (the format my bank uses for older statements).  The only file format that Quicken will import with little problem is the QFX file format. 

After a lot of web-surfing, trial and error, and reading threads in support and forum communities, I was finally able to come up with a workaround for the situation. There is a company called Propersoft who makes a bunch of converters for this type of situation.  The  specific program that I purchased was the CSV2QFX  program. Be sure you buy the CSV2QFX and not the CSV2OFX program for Quicken. OFX is another file format and is not compatible with Quicken.   

The program will set you back $40 but it is well worth it considering the headache I went through trying to figure out a way around this issue.  The problem is I am really only going to use the program once because after I have all of my statements imported, I can update all of my bank data on a regular basis inside Quicken.  You would think that this type of solution would be intuitive for a company named Intuit.  

ETFs Versus Individual Stocks

After analyzing my past trades alongside the S&P and their corresponding ETFs I have come to conclusion that from here on out I will be trading the ETFs.  Although AAPL has the highest return I could have made a comparable return by trading the highly liquid ETFs that have similar or higher premium.

I can also use other contrarian ETFs to hedge my trade and make my overall portfolio delta neutral.  

 

SPY, YHOO, AAPL 52 week comparison

 

QQQ, SPY, YHOO, AAPL 52 week comparison

 

Facebook Earnings Play

I just figured out why my Facebook trade is not working out as quickly as I wanted it to. I got into a put spread with the wrong expiration date.

I have a bull put spread with the 72 strike and 67 strike expiring the last week of January.  Facebook is announcing earnings at the end of that week.

I wanted to take advantage of volatility during earnings  but I did the wrong thing.  I should have sold my put spread a week before earnings and not the week of earnings.   This would allow the volatility and time decay of earnings week to eat up the premium  faster.

By selling the put spread during the week of expiration  I exposed myself to the volatility of expiration week.   As it looks now I may have to wait till the week of expiration to exit my trade for a profit.