November 2016 Update


General Comments

November saw the election of Trump, the consequent rally and lots of opportunities for the Long Haul PF. Defensive stocks and Utilities were heavily under pressure, this allowed me to enter in a few new positions, consolidate some other and do a bit of wash sales to lower entry points of some core holdings. On the latter I have gotten lucky to do it before Trump took power and the PF enjoyed a very strong ride from TROW and WFC both of which were averaged down consistently before the election. I still have to understand what is going on on a macroeconomic scale, as the selloff seemed a bit strange, but if yields of bonds are on the rise I guess that investors are moving from bond proxies to real bond, and this can be interesting as some dividend investors darlings might be heading for lower entry points. I have made several trades (compared to standstill months like the summer) so the cash available to trade options will decrease, after all is a dividend portfolio, so buy and hold should be there to stay.

Having said that, November brought some new ideas and I am more resolute to start trading options in a more “aggressive” way, i.e. trading closer to the money and not making a tragedy if stocks are called or assigned. I’ll make some tests as usual, and then if they work I might consider escalating the experiment. I am still looking at reducing the number of holdings, without compromising too much the asset allocation, this should allow me to manage things in a more efficient way, although it’s easier said than done.

LH Fund 

TR stands for Total Return (what selling everything, paying taxes and commissions and converting to euro would mean in terms of return), YoC is Yield on Cost (what my investments have returned to me via dividends/options), TER is Total Expense Ratio (commissions + taxes).
Total Return is not something I am particularly concerned about at this stage (plus it’s an estimate as I have calculated potential taxes and commissions in it), it’s highly affected by the way the market behaves especially in a young portfolio such as this one. But it’s a metric that it’s worth keeping an eye on. YoC is on the other hand more interesting to me, as that is what the PF has produced over time, my target is to reach the 2% x year net mark (by net I mean YoC-TER).
TR (vs Previous Month/Record High November 2016): 4.21% (3.2% – 4.21%)
YoC (vs Previous Month): 5.23% (5.05%)
TER (vs Previous Month): 2.07% (2.16%)
November was a good month all in all, mostly driven by Trump rally at the beginning, with some heavy losses on the Utilities/Defensive side of the portfolio.
But if we compare this results to October we can see that the PF established a new record high for TR, YoC is growing at a great pace and TER is even DECREASING! How comes that TER is decreasing? Well, that has to do with two cash payments that I made into the fund in November, the first effect is a decrease in YoC and TER as the percentage is calculated against the total amount invested. TR takes into consideration the price of the fund when cash payments are made, but these other two metrics don’t.
Here some graphs to describe some of the movements of the Fund since I have started working on it.
Dividends and Options
Another 1K month, cannot complain at how things are going. There was an hefty help from Options here too, with 894 Euro vs 660 Euro coming from dividend income.
I expect following months to be less interesting mostly because this month I have had several stock operations so I am decreasing the capital that I have to trade Options. As usual though I cannot complain about the result!
On the option front I have had a very nasty wake up call with a Call option being called away on GME, this resulted in a flat loss of 800 dollars, mitigated by all the dividends and option trades that I did before. Net loss is around 300 USD. This incident taught me to be much more careful when selling calls, especially close to the dividend date.
Options-wise the
T USD 38.40
VZ USD 25.99
OKE USD 18.45
PG USD 43.52
DCA/Increased Positions
Bought 47 KO @ 40.90 USD
Increased position to 100 pieces so that I can trade covered call, bought at the same average price that I had before.
Bought 37 WMT @ 70.09 USD
Got 100 pieces to trade calls, the real aim here is actually to get the stock called away at 70 (my average price is 68), to that I can collect the last dividend and see the stock go. I think that I can employ the money in better ways than staying in WMT (no growth in 2 years for me).
New Positions – Sold Positions
Bought 400 LON:CTY @ 4.00 GBP
This is my first investment in a fundlike stock. CTY pays quarterly dividends and is invested in some of the stocks that I already own in the UK, so technically is just a bit of a copy of what I have got already. But it’s well managed, it’s managing to create value and it doesn’t invest in stocks that have risky dividends (so they say).
Bought 40 LON:WTB @ 36.30 GPB
Whitbread has been under pressure recently, thanks to Brexit and pounds woes. But it’s a very nice company, manages lot of hospitality related brands among which the most famous one is Costa Coffee. This acquisition is part of my “bet” on the weak pound as I believe that it will attract a lot more tourists to the UK driving revenues up for companies like WTB and GNK (pubs). Costa is also an international brand, not present only in the UK.
Bought 60 LON:IMB @ 34 GPB
Imperial Brands suffered the Trump crash for defensive stocks, they make cigarettes and tobacco related products, so nothing ethically great, but it’s a solid company that is sporting a nice dividend. Price is too high to own the minimum trading requirements to sell calls, so I started with a smaller position, technically a buy and hold stock.
Tax Optimisation
This is a strategy that is aimed at optimising taxes and losses/gains. In Italy we can compensate gains with losses, therefore, as I am not interested in Total Returns “now” but I am more interested in keeping average prices down in order to have an higher dividend yield, I sell at a loss (take the losses) in order to compensate these losses with the gains that I am having from my option trades and other gains. By reinvesting the original amount invested in the first place I increase stocks and yield at the same time. Clearly this only makes sense in a tax system such as the Italian one, in other regimes it might not be very convenient or even discouraged (like it is in the US for example). Moreover it is a strategy that I am going to put in play only with stocks that I really want to keep for the “long run”. In November the stocks were:
Please ask questions if anything is unclear, I have started only recently to report my trades and development like that, so maybe something is not really understandable and I do not realize!

19 thoughts on “November 2016 Update

  1. Hi Stalflare, another (relatively newly) Italy-based investor here – found your blog through Monevator. I am still learning about Italian tax issues but was very interested that you say straight up wash sales are ok – is this correct? I can sell a stock at a loss, buy exactly the same stock back the same day, and the loss is tax deductible?


    1. Ciao RoC,
      First of all welcome! If you have a blog yourself I’d love to see how/where you trade, it’s so hard to find fellow investors from Italy nowadays…
      As to taxes what you write is partly true. It’s not tax deductible, it will lower the amount of capital gains that you make. Be warned, in Italy there are two types of capital gains, the ones coming from buying and selling a stock (for example) and the ones from dividends. The losses can be compensated with the first one only, dividends will be taxed no matter what. In my case I am getting quite a lot of premiums from option trades, they fall under the first category of gains. Technically at the end of the year I must pay taxes on these gains, this is why it occurred to me that I can simply sell and buy a stock that I really like and that I want to have at a lower entry point to decrease my average cost. It’s a waste of “gain”, but in the long run (I do it only on the holdings that I really want to keep) should come in handy. In this way if I can compensate correctly, all the premiums that I am making are not going to be taxed, and my dividends next year are going to be higher in absolute and relative terms too. Of course you need to re-invest the same initial amount to have this effect.
      Thanks for stopping by! Ciao ciao


      1. Ciao Stal,

        Sono un investitore Italiano (e penso che presto farò anche un blog in inglese); ti seguo da un po’ ma non ti avevo mai scritto prima. Ti scrivo in Italiano perché tanto quello che voglio chiederti è una cosa che interessa solo noi italiani: ma quindi i premi sulle opzioni vanno sull’irpef? Mi sembrava di capire che andavano segnati lì e poi pagati metà a luglio e metà a dicembre dell’anno successivo in cui sono stati fatti. Tu che hai esperienza a riguardo puoi confermarmi che è così? Faccio fatica a trovare documentazione in italiano su queste cose… (se ti informi su qualche sito in particolare, ti va di linkarmelo? Mi faresti un enorme favore in quanto non so moltissimo di tassazione italiana, nonostante le mie ricerche)

        Inoltre, ti va di spiegarmi, magari via mail se ti è più comodo, la questione delle tasse sui “ricavi” e su come abbassarle con delle wash sales che spieghi a RatesofChange (soprattutto se sono applicabili ai ricavi dai premi di opzioni)? Mi basta anche un link a delle documentazione che spiega quel processo, se non hai voglia di spiegarmelo

        Grazie mille!


      2. Ciao Mattia,
        Grazie del commento e grazie anche del follow, spero che il blog possa essere di aiuto 🙂
        Allora, cerco di spiegare ma sappi che non sono un commercialista quindi potrei sbagliare in qualche punto. Purtroppo non ho link, ma discussioni fatte con professionisti vari-
        Che io ne sappia il nostro sistema di tassazione prevede che i ricavi ottenuti da operazioni che potrebbero avere un risultato “non certo” (come il ricavo della vendita di un’azione o di un’opzione, dalle quali puoi anche perdere soldi) diventa parte del CAPITAL GAIN e su questo noi italiani paghiamo il 26% di tasse a fine anno (se sei in regime amministrato PAGHI SUBITO ricordatelo, se sei in regime dichiarativo fai tutto a fine anno).
        Se vendi un titolo in perdita o un’opzione in perdita generi una minusvalenza. Queste minusvalenze si compensano con le plusvalenze di cui sopra. Quindi se ho un’opzione che mi da 10 euro e vendo un titolo in perdita realizzando una perdita di 5 euro, a fine anno lo stato mi chiede il 26% solo sui 5 euro che avanzano.
        Le wash sales hanno l’obiettivo di vendere in perdita un titolo che tu vuoi fortemente tenere in PF, e ricomprarlo subito dopo per abbassare il prezzo medio di entrata. Se reinvesti il capitale che avevi messo all’inizio di fatto comprerai piu azioni, aumentando il tuo dividend yield con lo stesso capitale. Ovviamente tu hai preso una perdita, però se hai delle plusvalenze da compensare di fatto pagherai meno tasse su di esse fino ad azzerarle se il totale delle plus meno minus va a zero. Esempio:
        Plus di 1000 euro, a fine anno dovrei dare 260 euro allo stato. Titolo X PMC 100 euro, 100 azioni, valore attuale 90 euro, dividendo 1 euro. Al PMC corrente il dividendo è 1%. Vendo e riacquisto realizzando una perdita di 1000 euro, riacquistando 10000 euro di controvalore (111 azioni). Il mio yield è adesso di 1.11%. Di contro ho annullato la perdita secca delle tasse di 260 euro che avrei avuto a fine anno.

        Occhio che:
        1. i dividendi sono redditi diversi e non contano nelle plusvalenze del capital gain, loro verranno sempre tassati.
        2. Per alcuni non ha senso prendere le perdite (il titolo potrebbe risalire), e sono più interessati al total return di un portafoglio, quindi preferiscono mantenere il gain anche se a fine anno verrà tassato. E’ una questione di strategie.
        3. Se sei in regime amministrato scordati tutto questo giochino, perchè non funziona.

        Spero di esserti stato d’aiuto, se hai altre domande ben vengano! 🙂

        Ciao ciao


  2. Ah, perfetto!

    Cercherò anch’io dei professionisti per aiutarmi in questa impresa. Comunque tengo a mente tutto quello che mi hai detto fin’ora. Magari quando aprirò il blog verrò a fare spudorata pubblicità anche qui ; )

    Grazie di nuovo!


  3. Ciao ragazzi, mi sento di dare il mio piccolo contributo sul tema delle minus. Io sono in regime amministrato. Tendenzialmente investo in azioni da cassettista, difficilmente vendo. In portafoglio, poi, mi piace inserire anche certificates con cedole. Le cedole dei certificates possono compensare le minus e quindi arrivare nette. Mi capita talvolta di “esaurire” le minus accantonate e, per evitare di pagare tasse, ho venduto e ricomprato azioni in perdita ma delle quali non volevo disfarmi, creeando perció nuove minus.
    Occhio che se vendi e ricompri nella stessa giornata il prezzo di carico non sarà il prezzo di ri-acquisto, ma una media tra il vecchio prezzo di carico e il nuovo prezzo d’acquisto. Stessa cosa anche per la minus, che sarà circa la metà di quello sarebbe stata vendendo e basta (o magari ricomprando il giorno successivo). Io opero solo con azioni italiane e etf negoziati su borsaitaliana, quindi non posso dire se lo stesso discorso vale anche con azioni estero, ma penso di sì.


  4. CIao Bierollo,
    Corretto tutto, la wash sale nel regime amministrato ha questo particolare che se fatta lo stesso giorno ha carichi mediati. In regime dichiarativo no, in quanto il calcolo delle plus e minus è effettivamente fatto a fine anno e non a fine giornata come nell’amministrato. Ma hai fatto benissimo a sottolinearlo perchè anche io quando ero in amministrato ho fatto degli errori. Corretto anche quello che scrivi sui certificates con cedola che infatti sono trattati come plus “normale”, non sono redditi diversi come i dividendi.
    Ciao ciao e grazie per il contributo!


  5. Hi Stal,
    Congrats! I like the UK purchases – a diverse selection there. Sorry to hear about the GME trade dragging returns down, but it sounds as though you’re making adjustments to your strategy to prevent a reoccurrence.
    Best wishes,


    1. Ciao DL,
      Thanks for stopping by! Yes absolutely there is still much to learn on options, but these bad experiences are helping me to adjust the way I trade so I guess that I will have less chances to have an occurrence like that in the future. As to the pounds holdings, I am deploying some capital at last, although I expect more joyrides thanks to Brexit as it will unravel in 2017. We’ll see what happens there of course…
      Thanks for stopping by!
      Ciao ciao


  6. Ciao ATL,
    If I have invested the minimum tradeable I am going to sell CCs no matter what. I need to watch out when dividends are going to be paid now I know and it has certainly been a learning experience. Of course it’s also true that not all stocks have earnings 4 days before dividend and get a 10% rise in 1 day… 😛 But it’s part of the game, so we need to accept these rules no matter what. 🙂


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