Vanguard’s International Emerging Markets ETF VWO
Although I am not opposed to holding international investments, especially Canada stocks, I find international investing unnecessary for investing success. While I thought VWO might be a good investment, it certainly has not kept pace with my primary ETF holding VYM. Therefore, I sold all of my VWO shares. VWO is Vanguard FTSE Emerging Markets ETF. Emerging markets tend to be higher risk with the potential for higher rewards. I’d rather reduce the international risk and stick with my other investing tactics. Furthermore, I can use the proceeds to continue to produce income from my covered call strategy.
KO has been in and out of our investment portfolio over the years. I will be growing our position in KO to 100 shares with the purpose of selling covered calls on the shares and then, if the shares are not called away, collecting the dividend. Coke is a long-term dividend growth champion with 58 years of solid dividend growth and a reasonable payout ratio.
Covered Call Results
YTD, I have managed to gain $3,994.09 in covered call income. The recent week’s activity let me keep my shares of AAPL, F, HPE, INTC, RIDE, and TGT. This gives me another week of opportunity to sell the same covered calls. So far this week I sold covered calls on KHC, F, and HPE. There are four things I always consider before I sell a covered call. They are ex-dividend date, earnings date, amount of the profit and the likelihood that the shares will be called away.
1) If there is an ex-dividend date soon, I want to consider that dividend in the contract price. The buyer of the contract is probably also looking at that. 2) Is there an earnings date before the contract will expire? If so, I probably don’t want to sell a covered call. 3) Can I get enough income to make it worth my time. If the contract is for pennies, then I am not interested because there is a $0.65 per contract fee for each contract of 100 shares. If the contract is for $0.01 per share, and I sell 100 shares in the covered call, then I only make $0.35 on the trade. That isn’t worth my time. 4) What is the calculated likelihood that the contract price will be achieved in the market before the contract expires? I usually look at contracts that are 30% or less likely to be called. Generally, I would like to keep my shares and then repeat the process again week-after-week
Each covered call trade can be researched and entered in less than ten minutes, so it is quick and easy income. If the shares are not called away, and the company pays a dividend, I earn income from both.
Ford – F
Cindie already had 200 shares of Ford in her ROTH IRA. I still believe Ford is a good growth story, so I bought an additional 100 shares for her account. I already own more than 2,500 shares of Ford stock, so that is one of the reasons I sell covered calls on 500 of those shares every week.
Covered Calls for Cindie’s ROTH IRA
This week we mailed a form to Fidelity Investments to get access to covered call transactions for her ROTH IRA. The goals is to start doing for Cindie what I have been doing in my ROTH and traditional IRA accounts.
We own 2,800 shares of F stock.