Welcome to the 7th monthly update for my Green Dot Portfolio. By all measures of income and return on investment, May was a very profitable month.
(Source: Image from www.pinterest.com)
Recap of my Green Dot Portfolio
- My portfolio is an active, self-managed retirement portfolio created in a Roth IRA trading account through Scottrade (now TD Ameritrade).
- Using a 457 plan distribution, I started buying stocks in August 2017 and published the first phase of the portfolio here on SA in November 2017.
- My goal was to develop a retirement account that yields at least 8% annually in income using high-yield dividend investments and swing trading.
- Because I started near the end of the recent 2-year, unrelenting market uptrend, I diversified across asset classes and purchased a large number of smaller positions to help manage risk.
- My portfolio consists of a changing mix of preferred stocks/preferred ETFs, REITs, CEFs, stocks, and option premiums.
- As a dynamic portfolio, I use swing trading to capture short-term profits, and I buy on dips and add incrementally to positions. I primarily use technical analysis for swing trading and include simple, low-cost options.
- My investing approach was introduced in my Part 1 article, and I provided a detailed list of the portfolio holdings (as of November 10, 2017) in my Part 2 article. As well, I provide weekly updates for followers via SA Instablogs, including detailed charts, technical notes, and trade logs for swing trades.
Recap of Market Action for May 2018
Overall, the markets in May continued the volatile intermediate level pullback that started in January of this year. Using a daily chart for 6 months for the broad market index, the SPDR S&P 500 ETF (SPY), it's now been 77 trading days since the market's 10 day drop (from the high at 286.63 on 1/26 to the low at 252.92 on 2/9) that marked the beginning of the market pullback. As I have described in my weekly blogs, the market has twice attempted the resumption of an uptrend in late February and mid-March, failing both times at about the 75% retracement from the 2/9 low. A third attempt failed again in April (4/18), turned back at a lower level (the 50% retracement).
The rebound in May has stalled, bouncing lately between the .50 and .618 retrace levels. There is also a strong, declining triple-touch trendline from 1/26, 3/13, and 5/10 that has served as resistance for this recovery. Despite rising above this trendline a few times, there is no consistent confirmation of a breakout. Trading volumes have been higher on down days than on up days, leading me to conclude that this market is still under pressure.
(Source: Chart created by author from TD Ameritrade 'thinkorswim' platform).
As I concluded the past few months, in order to resume an uptrend toward a new all-time high, the SPY especially needs to break resistance and confirm above the inside bar of 2/2 at about SPY 280. Should the SPY continue to lose its current footing, closing below the 200 period SMA (near SPY 263) and confirming below the 2/9 low, it is possible for a continuing decline to the SPY 250 level or lower. At SPY 240, the market is about equal to a pivot top in late February 2017 and near a basing level in August 2017.
Portfolio Strategy and Asset Allocation Changes for May
While I sat mostly on the sidelines in April because the market direction was so uncertain, in May I decided to become more aggressive and use swing trading of option premiums to generate some profits for further investing. I wrote about that trading tactic here, and it is paying off nicely so far, with 6 consecutive winning option swing trades in May. So I've continued to trade, consolidate, and add to positions, all intended to serve my overall annual portfolio growth goal of at least 8%.
Highlights of changes to my portfolio in May are as follows:
- The overall portfolio investment increased in May to a new high ($104,638) as of 5/31.
- The total number of current shares increased to a new high (6,340), and the number of holdings was 59 including my options. The number of positions is still about 20 less than in October 2017.
- The overall unweighted average dividend/distribution yield of my current investments remains high, at 6.98%.
- My total investment in CEFs increased slightly to 55% of the portfolio, and the investment in individual stocks and swing trade positions increased to a new monthly high (14.3% of the portfolio).
- The average investment per holding in the portfolio (excluding options) increased in May to $1,903.
The table below shows the monthly change in total investment across asset classes for my Green Dot Portfolio. Dates here are for months in 2018, and older data are available in previous articles.
|Asset Type||Date||# Holdings||# Shares||$ Cost||% of Portfolio||Div. Yield|
The portfolio's concentration in CEFs and REITs, my highest yielding assets, is emphasized in the chart below. In this chart, individual preferred stocks and preferred stock ETFs are combined. Please note that while I have reduced the number of individual preferred stocks, several of my CEFs are comprised mainly of preferred stocks. The chart includes all months from October 2017.
Swing Trades in May
1. Equity Swing Trades Initiated in May
- On 5/2, I bought 80 shares of Credit Suisse - VelocityShares 3x Long Gold ETN (UGLD) at $10.735. This trade was based on an expectation for the US dollar, using the PowerShares US Dollar Bull Index (UUP), to pull back, with a resulting increase in gold. The UGLD is a triple play on the SPDR Gold Shares (GLD). On 5/22, I added 80 shares at $10.3745, bringing my average unit cost to $10.55475. I have temporarily set a sell limit at a price target of $12.35, which I may adjust as the trade progresses.
2. Equity Swing Trades Closed in May
- On 5/10, I sold all 65 shares of Mallinckrodt (MNK) at $14.50 for a gain of +5.45% (+68.4% annualized) for 20 days in the trade (purchased on 4/13 at $13.75).
- On 5/29, I sold all 100 shares of ProShares UltraShort Bloomberg Crude Oil (SCO) at $18.40 for a gain of +6.36% (+59.09% annualized) for 27 days in the trade (purchased 50 shares each on 4/20 and 5/7 for $17.30 average).
3. New Option Swing Trades Opened in May
- On 5/7, I "bought to open" 4 AAPL Aug 17 2018 150 Puts at $0.60/ contract. On 5/22 I added 4 contracts at $0.38/contract, bringing my average unit cost for the Apple (AAPL) option trade to $0.49. This trade is still open.
- On 5/11, I "bought to open" 2 SDS Sept21 2018 43 Calls at $1.44/contract. This option trade for the ProShares Trust UltraShort S&P 500 ETF (SDS) is still open.
- On 5/11, I "bought to open" 3 WMT Sept21 2018 92.5 Calls at $1.25/contract. As presented under section #4 below, this trade for Walmart (WMT) was closed on 5/15 for a profit.
- On 5/16, I "bought to open" 3 VLO Sep 21 2018 95 Puts at $1.16/contract. On 5/22 I added 3 contracts at $0.68/contract, bringing my average unit cost to $0.92. This option trade for Valero Energy Corp. (VLO) is still open.
- On 5/16, I "bought to open" 5 CL Aug 17 2018 67.50 Calls at $0.70/contract. As presented under section #4 below, this trade for Colgate-Palmolive Co. (CL) was closed on 5/30 for a profit.
- On 5/17, I "bought to open" 8 XLP Sep 21 2018 53 Calls at $0.40/contract. This option trade for the State Street Global Advisors' Consumer Staples Select Sector SPDR Fund (XLP), a popular ETF, is still open.
- On 5/17, I "bought to open" 3 XLE Sep 21 2018 71 Puts at $1.16/contract. As presented under section #4 below, my trade for this State Street Global Advisors' Energy Select Sector SPDR Fund (XLE), a popular ETF, was closed for a profit on 5/25.
- On 5/18, I "bought to open" 7 CPB Nov 16 2018 42 Calls at $0.43/contract. As presented under #4 below, this trade for Campbell Soup Co. (CBP) was closed for a profit on 5/22.
- On 5/24, I "bought to open" 6 CSX Aug 17 2018 55 Puts at $0.50/contract. This option trade for the CSX Corp. (CSX) is still open.
- On 5/29, I "bought to open" 3 MU Aug 17 2018 50 Puts at $0.95/contract. This option trade for Micron (MU) is still open.
4. Option Swing Trades Closed in May
- On 5/10, I "sold to close" my 6 QCOM Jul20 2018 60 Calls at $0.89 for +43.20% for 14 days in the trade. I "bought to open" this position on 4/23 at $0.60 per contract.
- On 5/15, I "sold to close" my 3 WMT Sep 21 2018 92.5 Calls at $1.69 for +31.46% for 3 days in the trade. I "bought to open" this position on 5/11 at $1.25 per contract.
- On 5/22, I "sold to close" sold my 7 CPB Nov 16 2018 42 Calls at $0.65/contract for +44.56% for 3 days in the trade. I "bought to open" this position on 5/18 at $0.43 per contract.
- On 5/25, I "sold to close" my 3 XLE Sep 21 2018 71 Puts at $1.75/contract for +46.57% for 6 days in the trade. I "bought to open" this position on 5/17 at $1.16/contract.
- On 5/10, I "sold to close" my 5 CL Aug 17 2018 67.5 Calls at $0.97/contract for +33.84% for 10 days in the trade. I "bought to open" this position on 5/16 at $0.70/contract.
I provided details for each of these trades, including charts and my trade logs, in my weekly blogs. Trade profits stated include commissions and fees.
Cumulative Swing Trade Results
Last month, I wrote that I would start adding option premium swing trades as a tactic for my Green Dot Portfolio. Since August 2017 when I started buying for the portfolio, I have been most fortunate to close 42 consecutive winning swing trades, including 36 equity swings and 6 option premium swings for a total profit of $3,470. The table below presents the cumulative % gains, average days in trade, average trade cost, % gains annualized, and total profits for these equity and option swing trades. Profits are inclusive of all commissions and fees.
|Trade Type||# Trades||% Gains||Avg. Days||Avg. Cost||% Gains Annualized||Total $ Gains|
As I have emphasized before, swing trade profits help me grow my portfolio faster than from dividends alone over relatively short periods of time. In fact, over the past 7 months (since November 2017 when the portfolio discussion was first published), swing trades and dividends on swings have provided 48.3% of my total portfolio income of $6,343.
The chart below shows the percentage gains for my 36 closed equity swing trades (since August 2017).
(Source: Charts created by author using portfolio data as of May 30.)
I've decided to chart the option premium swings separately, given that I expect that they will return higher percentage gains as well as some losses for options that expire worthless. The chart below is the percentage gains for the 6 closed option premiums swings to date.
I provided some details about my approach to swing trading option premiums in a recent article.
May Portfolio Adjustments
Over the past few months I have made adjustments and trimmed some positions in my portfolio, moving mostly out of weaker performing individual preferred stocks, REITs, and CEFs. I occasionally also sell positions that have increased sharply in price short-term, with the possibility of re-purchasing them on pullbacks. I have not counted these changes as swing trades. I moved out of 2 positions in May:
- I sold my 30 shares of Quest Communications, preferred shares (NYSE:CTAA), on 5/10 at $24.69. I had purchased CTAA on 11/10/17 at $24.10. This trade continued my activity to reduce individual preferred stocks with call dates before 2022 (CTAA is callable in February 2021). With dividends collected and accounting for commissions, I made a small profit of $39.44 (+5.43%).
I sold my 115 shares of Omega Healthcare Investors, Inc. (OHI) on 5/16 at $28.6952. Despite that OHI has continued to advance since I sold it, I had lost confidence based on research, which I detailed in my weekly blog for the week of 5/18. Even leaving money on the table, with dividends and accounting for commissions, my total profit was $210 (+6.46%).
I used the proceeds from these adjustments as well as swing trade profits to buy new holdings and add to existing positions.
Portfolio Additions in May
I added to 6 Closed End Fund positions in May. Data below on distribution rate and discount to NAV are from CEFConnect as of 5/31.
- I added 90 shares to Nuveen Preferred and Income Securities Fund (JPS) on 5/10 at $9.3745/share. This CEF pays an income-only distribution of $0.062/share/month (+7.94%) and is trading at a -3.09% discount to Net Asset Value. These shares bring my total holding to 623 shares and reduce my average cost to $9.8286.
- I added 50 shares of DoubleLine Income Solutions Fund (DSL) on 5/16 at $20.19. This CEF pays an income-only distribution of $0.15/month (+9.00%) and is trading at a -3.24% discount to NAV. These shares bring my total holding to 265 shares and reduce my average cost to $20.5041.
- I added 100 shares of MS (Morgan Stanley) Emerging Markets Debt Fund (MSD) on 5/16 at $9.03. This CEF pays an income-only distribution of $0.14/quarter (+6.20%) and is trading at a -12.05% discount to NAV. These shares bring my total holding to 300 shares and reduce my average cost to $9.7243.
- I added 42 shares of Flaherty & Crumrine Dynamic Preferred and Income Fund (DFP) on 5/16 at $23.66. I also added another 40 shares on 5/22 at $22.985. This CEF pays an income-only distribution of $0.148/share/month (+7.74%) and is trading at a -7.13% discount to NAV. These shares bring my total holding to 150 shares and reduce my average cost to $24.0748. The Fund objective is: "The Fund seeks total return by investing in a portfolio of preferred and other income-producing securities issued by U.S. and non-U.S. companies." As about 97% of its holdings are preferred stocks, this fund helps to mitigate for my recent reduction in individual preferreds.
- I added 75 shares of BlackRock Floating Rate Income Strategies Fund (FRA) on 5/22 at $14.18. This CEF pays an income-only distribution of $0.061/share/month (+5.18%) and is trading at a -5.03% discount to NAV. These shares bring my total holding to 125 shares and reduce my average cost to $14.296. The Fund objective is: "The Fund seeks high current income and capital appreciation through investment in floating rate securities." This fund should therefore do well in an increasing interest rate environment.
- I added 75 shares of Cohen & Steers Quality Income Realty Fund (RQI) on 5/22 at $11.27. This CEF pays an income-only distribution of $0.08/share/month (+8.22%) and is trading at a -7.19% discount to NAV. These shares bring my total holding to 175 shares and reduce my average cost to $11.8286. The Fund objective is: " The Fund seeks high current income and capital appreciation through investment in common and preferred stock issued by REITs." This fund helps mitigate my reduction in the number of individual REITs.
I continue to consider that most of my CEFs provide great returns, and most are still trading at good discounts to their Net Asset Values, or the value of their portfolio holdings. I try to focus on adding CEFs that pay stable dividends and for which most of their distributions are consistently from income (i.e., no destructive return of capital).
Dividend Income for May
Total income from dividends increased to a new high for May, at $612. I have collected >$3,680 in dividends since I started purchasing portfolio positions in August 2017. Average monthly dividend income (blue line below) continues to increase and is now $494 (since November), and monthly dividend income for 2018 averages $545. As I commented last month, my dividend income will allow me to continue adding to existing positions and/or to add new holdings to my portfolio.
(Source: Chart created by author from portfolio data as of May 31.)
I've been increasing the concentration of my portfolio in CEFs and REITs, as they are the leading asset classes for generating dividends. On a cumulative basis since November, CEFs now comprise the greatest proportion of total dividend income (48.1%), with REITs second (30.6%). As I noted last month, the "Preferreds" group includes individual preferred stocks and preferred ETFs, but not preferred CEFs.
(Source: Chart created by author from portfolio data as of May 31.)
The table below summarizes the cumulative value of dividends received since August 2017 by asset class and the percentage of total dividend income by asset class.
|$ 437.25||$1,124.95||$1,770.90||$ 348.38||$ 3,681.48|
As I explained previously, since February all dividends have been added to my cash account. In lieu of automatic dividend reinvestment, I use dividends to add purchases for holdings that are trading at lower share prices.
May was a great month for adding to the bottom line of my portfolio!
As a growth and income portfolio, Green Dot generates income each month through dividends and profits from swing trades. These are realized gains, or money that is available for additional investment. I am tracking this in order to gauge progress toward my portfolio goal of an 8%+ annualized gain. I continue to use November as the tracking origin, so the data below do not include 5 swing trades ($393.72 in profits plus $10.80 in dividends on those) in September-October when the portfolio was actively under accumulation).
The table below shows the total investment and investment return in my portfolio each month, including total profits from swing trades, ex-dividends, dividends on swings, and other dividends collected. I separated dividends from swing trades in order to avoid double counting. Dividends are reported for the month received in my account.
|Month||$ Cost at Month Close ||$ Swing Profits||$ Divs on Swings||$ Other Dividends||$ Total Income||% Profit on Investment|
As presented in the table, total portfolio return in May increased significantly, especially compared to the past 3 months. Using my new option premium swing trade tactic, I increased income nearly 50% above the highest previous month (January). The 7 month total return is +6.80%, which should assure that I will meet if not exceed my annual goal of at least a +8% return. I continue to expect that dividend income will remain high as I have added significantly to existing positions. I also expect to continue to make at least a modest income from swing trades, especially if I continue to successfully make option premium swings.
The chart below depicts the monthly source of realized portfolio profits. The increase in swing trade activity in May, including from option premium swings, is emphasized.
In May, the total unrealized market value (minus dividends) of my portfolio was -8.54%, which was an improvement from the -10% for the past few months. All asset classes became more profitable. My portfolio is continuing to feel the pinch from this now months-long market pullback, along with many other equities. As I have commented from the start, making new investments in the fall of 2017 as markets were approaching the end of a nearly 2-year unrelenting uptrend was a challenge. If I had started this portfolio a year earlier, I would be seeing unrealized gains even if some of the profits would have declined since the highs of late January.
But for now, three holdings - Colony Northstar Inc. (CLNS), Macquarie Infrastructure (MIC), and General Electric (GE) - continue to account for an out-sized percentage of unrealized loss, at 45% of total losses for May, all due to dividend cuts in recent months. On the bright side, 6 positions are profitable and another 17 are down <3%, with the net total loss for those 23 positions at only $164. I'm working to manage the portfolio to reduce losses, and I am aware that these are paper losses at this time.
Of the asset classes, CEFs and preferreds continue to weather the storm the best, and stocks and REITs the worst. The chart below presents the percentage gain/loss of market value, by month, for each asset class in my portfolio.
(Source: Chart created by author using portfolio data as of May 31.)
Below is a summary table of the 59 holdings in my Green Dot Portfolio as of May 31. Full names of holdings as of mid-November were included in my Part 2 article introducing the portfolio, and new additions were described in my weekly position update blogs.
As I have commented before, the portfolio remains diversified and comprised of multiple asset classes. These classes and a moderate number of holdings were chosen to help reduce risk. With increased market volatility, I think that this is still a good strategy. That said, I will likely continue to consolidate holdings and increase position size, with about 7% as a maximum for any individual holding.
|Symbol||Qty||Unit Cost||Close 5/31||Div. Yield||% of Portfolio|
|AAPL Aug 17 2018 150 Put||8||0.490||0.42||--||0.37%|
|CSX Aug 17 2018 55 Put||6||0.500||0.41||--||0.29%|
|SDS Sep 21 2018 43 Call||2||1.450||1.39||--||0.28%|
|XLP Sep 21 2018 53 Call||8||0.400||0.21||--||0.31%|
|VLO Sep 21 2018 95 Put||6||0.920||0.73||--||0.53%|
Despite the continuing pullback and volatility of the markets in May, and regardless of what unfolds over the coming months, I remain comfortable with my overall strategy to collect growing income through swing trades (including for option premiums) and high dividend CEFs and REITs, as well as to capture the potential for price appreciation for longer-term holdings.
Author's note: If you found this article of interest and want to read more about my Green Dot Portfolio and my incremental, multi-asset approach to investing, please click the "follow" button at the opt of this page. Please share this with others who you think would be interested.
I have appreciated the comments from readers in the Seeking Alpha community, and I look forward to continuing to share my investing experience and to learn from others.
Best to your investing/trading!
=Green Dot Investor=
Disclosure: I am/we are long AWF, BGX, BKH, BRX, BXMT, C-J, CLNS, D, DFP, DOC, DSL, DSLV, EMD, EPR, EVV, FAX, FEO, FLC, FRA, GE, GOV, HASI, HPS, HPT, JPS, JQC, KBWY, KHC, KIO, LTC, MHLA, MIC, MPW, MRCC, MSD, MS-E, NHI, NVG, O, PFXF, PG, PGX, RA, ROIC, RQI, SKT, SO, SPFF, UGLD, UTF, UTG, VTR, WELL.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I also have open option calls or puts for AAPL, CSX, SDS, VLO, and XLP.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.