Archive for March, 2012

Personal Portfolio Update March 2012

I thought it was time to give an update on my personal brokerage account. I recently wrote about my stock pick of Metlife in my new  “Stocks for the long run” series, but I thought it would be a good idea to give a comprehensive update. The biggest update has to be the fact that I put a considerable amount of money into my brokerage account. I put my tax return along with all of the spare money in for investing.

My goal is still to hit 10% or greater return for the year, and I think this still is very possible despite taking a giant hit previously on both Netflixs and Amazon.  My account is up 2.66% as of today. I also have $429 worth of negative equity because of the options I wrote, and when these “out of the money” options expire that will add a 3.71% to my account. Additionally I will receive dividends from Dow Chemical (2.94% Yield), Hewlett Package Co. (1.99%), and Metlife (1.93%). These three stocks represent 83.7% of my portfolio.

My current holdings:

Stock Holdings

As you can see, I have Dow Chemical and Metlife, both of which have cover calls written on them. I bought HPQ (Hewlett Package Co.) and had intentions of writing a cover call on it, but I decided to sit on it long for a bit. which was a big mistake. HPQ has single handedly drained all of my gain made from my other successful stocks picks in recent times. I have contemplated selling out of HPQ, but I stand by it strictly on fundamentals. I have considered writing an option on it today to offer some downward protection, but I feel if I am not long in the stock at $24.18, then I should just sell the stock altogether. I am long on HPQ unless something else changes. 

Sprint OptionsMy Sprint option, which I have previously wrote about is up 26.42%. I remain long on Sprint. I have considered selling out and waiting for an adjustment, but I stand by my initial decision on this stock to be long. I also previously talked about straddling this Sprint Nextel Corporation and I think now is the time I would do so if I was considering taking a hedge position.

Overall I am very happy with my current brokerage account portfolio except for HPQ. I finally feel that my account is large enough to be relevant ($11,535). I also feel that things have finally settled down and I have found my trading strategy. I look forward to hitting double digit returns for 2012.

$240 Ipad? Yes Please.

Cheap IpadI posted earlier about iPad prices going down after the announcement of a release date for the iPad 3. I also commented that I was considering buying an iPad 1st generation for $259, but I decided to wait a little longer to see if prices would go down further. They did just that. $240 for an iPad 1st generation described as “Very good condition” with a original box and a case.

Could I have gotten this iPad cheaper on craigslist? Sure, but I had a lot of amazon credit from a credit card promotion so it made sense for me to buy it via amazon to avoid cash out of my pocket. Also I don’t have to deal with the hassle of craigslist.

I plan on using the iPad mainly for reading. I want to read a lot more about programming (PHP first). Sadly the price of the iPad 1st generation has jumped back up to around $280, which I would say isn’t a steal. Just keep your eye on the link below and you will definitely be able to grab a used iPad 1st generation 16gb one under $250.

iPad 1st generation 16gb

Planning to buy a home when you’re in debt – Is this a feasible idea?

Are you planning to buy a house of your own? If answered yes, you have to go through a nerve-wracking experience as the entire process is not a simple one. Buying a house is a huge investment as the money involved is also a large amount. You need to be watchful before taking the ultimate plunge as there are many small details that can lead you to a mess. Did you incur a huge amount of unsecured debt on all your credit cards and your student loans? If answered yes, you have to think twice about taking the plunge as a homeowner. Taking out a home loan with unsecured debt is a huge risk. Here are some points that you should take into account while taking out a home loan despite owning a huge amount of unsecured debt.

Can you afford a home loan after making the high interest debt payments?

Calculating your mortgage loan affordability is the most important factor when it comes to being a homeowner. Unless you calculate your affordability, you’ll never know what amount of loan you can afford according to your budget. Apart from this, if you already owe debt on your credit cards, can you afford to repay the secured loan on time? As your home is pledged as collateral, you have to be sure that you don’t miss the payments lest you lose your home to a forced foreclosure. Therefore, considering your mortgage loan affordability before taking the loan out should be the first job of a prospective homeowner.

Can you afford to pay down the required amount after paying your credit card debt?

You must be aware of the fact that you have to pay down at least 20% of the loan amount as down payment so as to lower the interest rates on the loan. But if you have enough credit card debt, will you be able to manage paying down the required amount as the down payment? You should think twice before taking this decision as you may be subject to PMI or Private Mortgage Insurance that can unnecessarily increase your monthly payments. PMI only benefits the lender and not the borrower. Therefore, consider your choices about repaying your credit card debt or taking out a home mortgage loan so that you don’t fall in a mess in the long run.

Can you maintain your home loan payments while repaying your credit card debt?

When you’ve taken out a home mortgage loan, you have to maintain the payments throughout the term of the loan so that you don’t lose your home to a forced foreclosure. However, if you have too much credit card debt and if you don’t change the financial habits that have lead to debt, you may dig deeper into the financial mess. Therefore ask yourself whether you can manage to change your financial habits so that you can save enough money for making the monthly payments on your home mortgage loan.

Whenever you ask any financial expert about the possibilities of taking out a mortgage loan despite having credit card debt, they will advise you against it. You just have to make sure that you repay the debt so that you can lower the DTI ratio and improve your credit score before grabbing the loan. This way you can secure a mortgage loan at an affordable rate and save enough money while repaying the loan throughout the repayment term of the loan.

About the author : Ryan is a contributory writer associated with the http://www.debtcc.com and has written several articles for various financial websites. He holds his expertise in the Debt industry and has made significant contribution through his various articles.

Stocks for the Long Run: Metlife

Long StocksLong Investing

Today I am introducing Epic Finance’s first Stocks for the Long Run, a series of posts that will highlight what stocks I personally have in my brokerage account.

Today’s Stocks for the Long Run post is focusing on Metlife. I recently had some cash laying around (mainly from my tax return) and tossed it into my brokerage account. I decided I wanted a strong fundamental stock which I could write “cover calls”. “Cover calls” are when you sell an option to a stock that you own. Just think about it this way, if someone “calls” or executes the option, you have the stock to “cover” the “call.”

Why Metlife? This company has been around since 1868, this company is definitely in it for the long run. More importantly it has a P/E less than 6! Did I mention a dividend of about 2% yearly?

Metlife Long

Forget all the Pandora and Yelps of the stock market, this company is making money and is fundamentally strong. I would even argue that the market is very optimistic about this current year for Metlife by looking at the option chains. I purchased the stock for $38.42 and shortly after, wrote an option to call the stock for $45 by Jan 19th, 2013 for a premium of $192 (5%).

That option I sold was $6.58 “out of the money,” meaning that the stock could appreciate $6.58 before the option would be executed (45 – 38.42). If the stock did appreciate and the stock was taken from me come January or before, I would have made $6.58 + $1.92 = $8.50 a share (or 22.1%+dividends in about 10 months). That of course would be the best case scenario. I don’t expect that kind of return, but I do think it is viable this move can and will return hopefully in the double digit percentage range.

If the market turned against me (as it did today) I have $1.92 worth or 5% of downward protection from the premium from the option. I want to be completely clear though, I am long on this stock. I plan on having this stock for a while and most likely this won’t be the only option I sell on the stock.

That is the first ever Stocks for the Long Run post, more to come.

Disclaimer: Do not use information on this website for decision making of any kind, always consult a financial expert.

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