Consolidating the DDI Portfolio

Consolidating the DDI Portfolio

daily dividend investor consolidates option contracts increased monthly cash flow

For some time now I’ve wanted to be able to write option contracts (buy and sell puts and calls) in the DDI Portfolio to generate additional income. However, the WellsTrade account where I manage the portfolio won’t allow me to trade options. I suspect this has to do with not wanting to hand out free option trades in addition to the 100 free equity trades they offer me each year. So as the new year begins I thought what better time than now to take the DDI Portfolio to the next level and move it into my existing Fidelity account where I have free range to trade all the option contracts I like.

In early January I started the transition process by moving about 80% of the DDI Portfolio holdings over to my Fidelity account.  I didn’t want to close the WellsTrade account completely since it still offer me the 100 free trades – I figured, perhaps I could use it later – perhaps if I decided to start yet another DDI fund! The other kicker is that I get all of my banking fees waived by keeping a minimum balance in the WellsTrade account, so I left just enough in the account to avoid fees for the foreseeable future.

Options Contract for Income 

Over the last couple of years I’ve worked to increase the monthly income from the portfolio – however it’s been a bit of an uphill battle. However, one of the factors that has adversely affected the monthly income is the price of oil. The drop in oil prices over the last 2-3 years has meant reduced income streams from those holdings that are pure oil/gas investments, specifically the oil royalty trusts like SBR (Sabine Royalty) and CRT (Cross Timbers Royalty).

increase cash flow efficiency monthly spendMy goal is to replace some of that lost income by writing covered call option contracts on several of the larger holdings in the portfolio. Writing a covered call on ticker: O (Realty Income) for example has the potential to net an additional $.10-$.30 which in addition to the monthly dividend of ~$.21 equates to increasing the monthly income for that one holding by 50-100%. When writing a covered call the downside is the potential of having to sell the stock, usually at a less than optimal price. Since income is the primary objective of the DDI, I’m ok with that “risk” and am willing to buy back in at a potentially higher price. As Jeremy over at Go Curry Cracker writes – it can actually be beneficial in paying less tax to capture capital gains by performing “Capital Gains Harvesting” on a regular basis.

DDI Portfolio #2

As I mentioned in a previous post, I had moved some funds to another account over at Schwab where I planned to start the Daily Dividend Investor Portfolio #2. For now I’m just going to let those funds/holdings marinate while I focus on DDI #1 and working the options contracts for increased income. I’ll do an update post on DDI #2 once I’m ready to focus on it.

As always…stay tuned! Thanks for reading.