Last post I wrote about Building Wealth For Early Retirement and the post prior to that was about 2018 being the start of our Early Retirement Adventure. We are now in Singapore for a week checking out the sights before hopping on a 16 days Asian cruise. Through all this travelling I didn’t provide a trading recap for December.
You may recall December was a tumultuous month for the stock market. I wrote about some of the craziness here (Crazy Market, Smart Plan). Purely from a trading perspective, it wasn’t a good month for me. Thank goodness the majority of my portfolio is in dividend growth stocks. Moreover, I only trade or write options on the same dividend stocks.
The dividend growth portfolio is the main component of our financial independence. It provides us with passive income for early retirement and travel. The trading provides, in most cases, additional returns to supplement the dividend growth portfolio. Unfortunately, not every trade goes my way. However, when the markets go against me, I end up with more shares I don’t mind owning anyway. From a trading perspective, you shouldn’t hold on to losing trades if it breaks your support level, but my methods have evolved over the years and works for me.
Trade 1 – In November I wrote some PM Nov 87.50 puts for a credit of $0.90. I then rolled them out to the Dec 87.50, with a net credit of $1.89. Seeing some resistance, I closed out this position at $1.50. This turned out to be a good move.
In retrospect, I should have also closed out my PM Dec 85 puts. The chart looked like there was strong resistance at just above $88.00. In any case, I don’t mind owning a stock that is paying over 6% dividend yield.
Trade 2 (Assignment) – I got assigned on one of my put positions of PM. Since the put was assigned I purchased PM at $85.00. I was looking to add to PM to my core holdings but had I closed out the puts I could’ve purchased PM at a much lower price. The stock has touched $65 but has since bounced to $69.50. This stock is currently yielding 6.56%.
Trade 3 – I sold some shares of ENB at $44.00. These shares were purchased in November for $43.35. Gross profit $0.65 per share.
Trade 4 – I wrote some ENB Dec 43 puts for a credit of $0.72. These options ended up expiring worthless.
Trade 5 – I wrote some ENB Jan 44 calls for a credit of $0.44. As at Jan 11 2018, the stock closed at $45.90. If ENB closes above $44 at the close of the trading day on January 18th, 2018, I will end up selling my shares at $44.00. If this happens overall profit will be $2.16 per share (excluding commissions).
Trade 6 – I bought some shares of BMO at 93.91.
Trade 7 – I bought some more shares of BMO at $92.25. My average price of BMO is now $93.09. As at Jan 11th, 2018, BMO closed at $92.76. When I purchased the shares there wasn’t full confirmation (cross over) with the slow stochastic. It looked like $93 was going to be support.
Option Expiry – In addition to the ENB puts I mentioned above my BNS Dec 74 calls expired worthless.
Swing trading is something I enjoy and gives me a chance to improve my technical analysis skills. As you can see, not all trades go your way or move in the anticipated timeframe. Because my trades are on dividend stocks, I don’t mind owning, and because the majority of my portfolio is in dividend growth stocks, I don’t rely on the swing trades for income. Swing trading can provide some outstanding returns like my November trades but can be inconsistent during extreme volatility like this month. The markets seem to have stabilized a bit for now but I’ll be taking extra care in 2019.