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Thread: Dividend paying stocks....

  1. #25

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    Default Re: Dividend paying stocks....

    Schwab allows options for IRA account. I intend to use cover call options for now and may be spread options down the road. Interactive Broker allows margin for IRA but the gains/profits on margin IRA may be difficult to by-pass IRS.

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  3. #26

    Default Re: Dividend paying stocks....

    Quote Originally Posted by tsptalk View Post
    I have avoided options in my IRA, but I wish they would allow margin in IRA's, just so we could short stocks. I don't know if this is a NASD thing or if it's just Scottrade that doesn't allow it.
    I just confirmed that it is the IRS that prohibits margin in IRA accounts. Isn't that special. It seems overreaching for the IRS to be able tell us what we can and can't do in our own accounts. Shouldn't they (my ex-employer) just worry about collecting the taxes owed on the account?

    Oh well. I guess we're stuck with this silly 3-day settlement rule to avoid "free rides". It's funny how we have the opposite problem in our TSP accounts:

    In our TSP we can sell at any time. In an IRA you can buy any time, but you can only sell if you've held the position for 3 days - assuming you bought that position using the proceeds from a prior sale within 3 days.

    So many obstacles, so little time.

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  5. #27

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    Default Re: Dividend paying stocks....

    That's why I didn't open the margin account with Interactive Brokerage (IB) even they offer it. As far as I know, this is the only brokerage firm that offers margin IRA and I believe IB is a British owned company. That may be the reason that no other US companies can offer it.

    With the new IRA account, all my stocks will be dividend reinvested but I will pick a few stocks for covered call options to generate residual income. For example, today I wrote a covered call for MSFT with strike price at 28 for $.52 expiring on Nov 18. I have 2000 shares so I can write 20 calls to generate $1040 before commission. My average purchase cost was $27 which I bought yesterday with my new TSP transferred money so it would lower my purchase price to around $26.48. Also Nov 15 is an ex-dividend date for MSFT so I will collect another quarterly dividend pay out of $400. I will see how MSFT will do toward Nov 18.

    BTW, I just created a margin account (non IRA) with Tradestation specifically for serious short term trading from this account and I guess this is how I will spend my time as retiree for now.


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  7. #28

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    Default Re: Dividend paying stocks....

    Welcome to the shark tank when you go on margin - remember your interest costs are tax deductable as an incentive to assume risk with your capital. With this current bull run you can most likely kiss your MSFT goodbye - someone will call it away - not worth the extra risk.

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  9. #29

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    Default Re: Dividend paying stocks....

    I heard about the danger of the margin account with margin calls and I will be dancing with the sharks on the big stage pretty soon. I will let you know how I do.

    If MSFT gets call away on Nov 18, I am ok with that because I would have collected the $1040 option money, $400 dividend and $2000 profits (from $27 to $28). It is all done within about 36 days or so for returns of 6.3%. If MSFT doesn't hit $28 by then, I will write another call for December and I will just keep on writing it as long as I own the stock. Meanwhile, I will continue to collect $400 dividend each quarter and it is to be reinvested. It looks good on paper at least.

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  11. #30

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    Default Re: Dividend paying stocks....

    It would seem the whole of society has been focused on leveraging down - you and I are doing just the opposite. Interest rates will remain low for an extended period of time - and that's not my fault - but I'll certainly take advantage of the situation.

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  13. #31

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    Default Re: Dividend paying stocks....

    Quote Originally Posted by ocean View Post
    That's why I didn't open the margin account with Interactive Brokerage (IB) even they offer it. As far as I know, this is the only brokerage firm that offers margin IRA and I believe IB is a British owned company. That may be the reason that no other US companies can offer it.

    With the new IRA account, all my stocks will be dividend reinvested but I will pick a few stocks for covered call options to generate residual income. For example, today I wrote a covered call for MSFT with strike price at 28 for $.52 expiring on Nov 18. I have 2000 shares so I can write 20 calls to generate $1040 before commission. My average purchase cost was $27 which I bought yesterday with my new TSP transferred money so it would lower my purchase price to around $26.48. Also Nov 15 is an ex-dividend date for MSFT so I will collect another quarterly dividend pay out of $400.
    Thanks for the lesson on covered calls in IRA. wasn't sure that could be done. Taking notes for future reference-not ready now. Will be interested to hear your experience with IB, was looking at them with idea of having better access to foreign stocks, got the idea they are somehow more difficult to use than some of the others. After I learned Scottrade has reasonable access to foreign, I decided to go with them instead for new wading-pool venture (non-IRA-but using $ saved up so far for 2012 Roth).

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  15. #32

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    Default Re: Dividend paying stocks....

    Quote Originally Posted by Birchtree View Post
    It would seem the whole of society has been focused on leveraging down - you and I are doing just the opposite. Interest rates will remain low for an extended period of time - and that's not my fault - but I'll certainly take advantage of the situation.
    Our strategies may be different, but the goal is the same. I am happy with average of 4% dividend income with growth of 3 - 4 % without margin in the IRA account. This way I would sleep better at night. With my non IRA margin account, I am not sure what I will do ... day trade, swing trade or position trade ... I will find out ...

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  17. #33

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    Default Re: Dividend paying stocks....

    Quote Originally Posted by alevin View Post
    Will be interested to hear your experience with IB, was looking at them with idea of having better access to foreign stocks, got the idea they are somehow more difficult to use than some of the others. After I learned Scottrade has reasonable access to foreign, I decided to go with them instead for new wading-pool venture (non-IRA-but using $ saved up so far for 2012 Roth).
    I don't have IB account but just recently transferred most of my TSP fund to Schwab IRA account with cover options feature. The last 2 days I'd committed 100% in stocks on this account with combined average of 4.5% dividend and one covered call option with MSFT.

    As for my non IRA margin account, I just sent a check to Traderstation for my day trade, swing trade and position trade purpose. Commission is $1 per 100 shares for the first 500 shares and $.006 each share thereafter. Not sure how well I would do with this account but I guess this is my on-the-job training as new equity trader and I will try my best.
    Last edited by ocean; 10-14-2011 at 09:50 PM. Reason: spelling

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  19. #34

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    Default Re: Dividend paying stocks....

    In my IRA account:

    I bought 20 puts options of MSFT at strike price of $27 for $.27 each ($540 in total) expiring Oct 21 (Friday) to protect my 2000 shares of MSFT because it is scheduled for earnings announcement tomorrow. Not sure if it is good or not, just want to protect it using about 1/2 of the premium from the covered options I sold earlier. (Rationale: Apple's unexpected poor earning announcement today and the stock drops about 5% as of now).

    Abbott Labs announced to split the company into 2 this morning, the news was able to move the price more than $2. I sold 3 covered calls with strike price at $55 which I bought 380 shares at $52.56 last week for $1.12 expiring on Nov 19. So I locked in the profits about $300 for now.

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  21. #35

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    Default Re: Dividend paying stocks....

    MSFT is trading around $26.6 now which is below yesterday closed at around $27.13 . I took this chance to sell 10 puts at $.75 to cover the cost of my put options yesterday at $540 and leave 10 puts for hedging for the earnings announcement at the market close today.

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  23. #36

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    Default Re: Dividend paying stocks....

    In my IRA account:

    MSFT earnings met the expectation and the stock did not drop dramatically after the market closed like AAPL earlier. My remaining 1/2 of protected put option is expiring today so I will close this position for whatever price that I could get today while I am still holding 2000 shares MSFT waiting for dividend payout on Nov 15.

    In my non IRA account:

    Today I will try to place some small calendar call options and bull put spread options orders in my day trade account. I know the basic option strategy such as covered calls and puts very well but I have to admit that I am new to the more advance options strategies such as spreads. The beauty of spreads is that the maximum gain and lost can be projected within a specific time and it is dynamic during the course of the contract duration. I believe there may be a year-end rally this year so I am bullish for the next two months at least. Here are two stocks that I am looking at for actions toward the bullish side.

    1. MSFT - rationale: earnings announcement was fine and the stock price should be pretty stable near term
    2. JPM - rationale: financial sector began to bounce back from the recent low. JPM in my opinion is the best in the sector so I will focus on this stock

    Again, I am not a financial advisor or market analyst, this is only my own opinion and I just want to experiment some strategies that may work for me to generate profits as part of my on-the-training.


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