This post covers some of the financial actions I’ve been taking over the last few months of 2020, since I last posted about my REITs project in August. I thought that once my sons started with their online school work I would be able to create content more frequently, but the opposite has happened. I’ve been needing to check in with my 10 year old son regularly while he is working. That has made putting together material for the website and for my YouTube account more difficult than I anticipated. I’ve had a few topics that I began writing about, but never completed. One was on the financial and emotional difficulties single moms have been encountering during the pandemic. The irony of not finishing that one is not lost on me. The longer I have gone without updating my blog, the more difficult it has been to actually do it. But here we are now!
Covered Call Writing
The main thing that has taken the place of me creating YouTube content is that I started covered call writing. In July, I bought “Alan Ellman’s Complete Encyclopedia for Covered Call Writing.” If you don’t know anything about covered calls and want to learn more, I strongly recommend getting the book. It took a few weeks for me to get through the book as it is like reading a textbook, but it was seriously worth it. You can also check out Alan Ellman’s YouTube channel, which has some good explanatory videos for those new to covered call writing. For a quick breakdown on Covered Calls, read about them on Investopedia.
Soon I began writing conservative calls on some stocks that I already owned. As I learned about this strategy and gained experience, I re-adjusted my portfolio by buying more of certain stocks and ETFs that I already owned so I could make full contracts of 100 shares. I also purchased 100 share lots of Cisco and Intel for my TD Ameritrade IRA in order to write covered calls on them. It took me longer to be comfortable using the exit strategies for covered calls and I did have some of my shares assigned early on. In November, when the election results and the news of the COVID-19 vaccine came out and the stock market rallied, I took losses on closing some of my contracts that were in the money in the following weeks, where I didn’t really want to sell the underlying shares. I began rolling some of my contracts up and out for the first time then. After over six months of writing covered calls, I now feel much more confident in my plan and the choices I am making. I’m averaging $500 per month in income from covered call premiums. This is $500 per month more than my blogging or YouTube income, which is zero, so you can see why I made that the priority for my free time.
Cash-Secured Puts
At the beginning of December, I discovered that when I got the approval to trade covered calls in my TD Ameritrade IRA, I also was approved for Cash-Secured Puts. I keep very little cash available in my IRA, but I was able to try out selling puts after one of my covered calls was assigned and the stock was sold. I let it go as it happened on a stock I no longer wanted to keep. For December 2020, I made all of $52 on cash-secured puts.
If I want to sell cash-secured puts in my E*Trade taxable brokerage account, I will have to get further approval as they don’t allow Cash-Secured Puts with Level 1 options trading. I find this odd as it seems like riding a bicycle with only one pedal, putting a puncture in the beginner options strategy known as the wheel strategy. With the wheel strategy, you write cash-secured puts until you get assigned the stock you are writing the option on, and then you write covered calls until that stock is assigned to someone else and sold out of your account. Then, repeat.
Lending Club Update
If you have been following me, you’ll know that I have tested out a few different investing platforms. Lending Club is one of those I tried out as part of the 2019 Grow Your Dough Challenge. Lending Club works by investors depositing money in Lending Club and buying Notes that represent a portion of a loan taken out by the borrowers. Unfortunately, some of the notes that I bought were not paid off as the loans were defaulted on and I lost money. After using Lending Club for over a year I decided to no longer re-invest my money in buying more notes. Instead I have been taking cash for the paid off notes and transferring it to my Robinhood account.
Following an acquisition of Radius Bancorp, Lending Club announced that they would be retiring the Notes platform at the end of 2020. Those who currently hold Notes will continue to receive principle and interest payments until those Notes are paid off. Lending Club is developing a high yield savings account with Radius Bank that will be exclusively available to those who have been Notes investors. I am not sure if I will be opening one of these Founder Savings Accounts, it will depend on the terms offered. I don’t need another savings account, so it is likely I will continue to transfer my cash out until all the Notes are either paid off or defaulted on and then I will close my Lending Club account.
Acorns Update
Another account that I had tried out was through the incremental investing platform, Acorns. I had an Acorns account for 21 months, but decided to close it in November 2020. I personally have no trouble saving chunks of money. I have monthly automatic withdrawals set up from my checking account to my Discover savings account, which I use for my emergency fund, and for both of my sons’ 529 accounts. I found that I did not like Acorns’ incremental round-up feature on items I placed on my credit cards or paid for from my checking account, which triggered frequent randomly timed withdrawals of $5 to $10 from my checking account to deposit in Acorns. It was sort of nice that there was this dollar cost averaging into ETFs, but as a more attentive investor, I don’t need this kind of additional help, at the cost of $1 per month. That’s a small sum of money for the service, but I can handle doing this kind of thing on my own for free. I turned the round-ups off when things began to get unpredictable in March 2020. I wasn’t using their affiliated companies’ shopping discount perks either. Plus, by closing the account, that’s one less 1099 form for me to have to remember at tax time.
Closing the account caused the sell off of the ETFs I was invested in, and returned a total of $2,136.18 to my checking account. I transferred $1000 of that to my savings account and $1,000 to my E*Trade taxable account for further investment. Looking back, my Acorns account total was $2,007.74 at the beginning of February 2020, so it did all right through all that happened in 2020. I still like the idea of the Acorns platform and believe it is good for beginning investors who struggle with saving or people who don’t want to be overly involved in investing research, but it didn’t really fit in with my financial plan.
Tax Loss Harvesting
During the final week of 2020, I completed some tax loss harvesting in my E*Trade taxable brokerage account. The point of tax loss harvesting is to sell investments at a loss to offset taxes on your capital gains. I’m still trying to fix my portfolio from the time I was using a financial advisor through Edward Jones and I wasn’t as involved with some of the investment picks as I should have been. By the way, I do not recommend using Edward Jones, as their fees really add up! Anyway, I had been pulling money out of the market, particularly at the beginning of the year, because I wanted to build up a cash deposit to buy a house and to help rebalance and streamline my portfolio. Of course, now my house buying plan has been delayed and I want to reduce the tax burden on the gains I have made, therefore, it is time to sell some of the duds I no longer want to keep.
Also, I have been going through some of the dividends I received through the dividend reinvestment plan and selling off those that I got at a higher price than the current share price. It doesn’t feel as bad psychologically to sell those at a loss, since they were given to me by the company and the price I received them at seems more arbitrary than stocks I intentionally bought into. For example, if the stock price happened to be $90 on the day I received the dividends and they were automatically reinvested in the stock and I am going to sell them now for $86, that $4 per share loss doesn’t sting so much as it would had I decided to buy the stock at $90 and now was taking a $4 loss per share. Selling at a loss also conveniently lowers the cost basis of the remaining stock position and has the psychological boost that I am getting a better return on my investment. Of course, these dividend sell offs are only for a few shares here and there, but every little bit counts, and when doing it across about a dozen different investments, it added up.
That concludes the review of these last few months of 2020. I hope now that I know what I am doing with Covered Calls, that I can spend less time on that and I’ll be able to devote more time to creating more content going forward into 2021. Please remember to follow me if you want to keep track on what I am doing with my finances. If you prefer videos over reading, check out my YouTube channel, also called Squintillions.
Disclosure: Information shared on Squintillions is based on the author’s own experiences, thoughts, and research and is not intended as professional advice. Please do your own research before committing to any investment! If you feel your personal challenges are beyond the scope of my suggestions or other self-help materials, please seek professional counseling. Further, there are some affiliate links and ads used in this website. If you purchase an item when following these links, I may receive a commission on your purchase.