Lol you are hesitating whether or not to build a stream of dividend income by investing in stocks and yet you daytrade derivatives based off financials ( the above mentioned option trade)

Good luck! Let the wind blow in your way!

@douche – Fixed 🙂

@DGI – Uh hesitating? That’s what I have been doing for the past year or so, building a dividend portfolio. Day trading was obviously a wrong choice of words (like explicative 😀 ). Actually, technically, it was wrong too. I did not buy and sell the same security on the same day. However, I did have to buy the options today before they expired, so the increase in blood pressure would be similar to day trading

What I do is to set a sell price for my dividend paying stocks typically defined by them not paying very much in dividends anymore. For instance WFC now pays 3.5% while GE pays over 5%. Once the stock gets closer to the sell price I write a call on it. If it does not meet the call, I get a little extra income (this can be up to 20% on top of the dividend a year!). If it meet the call, I got it sold.

So why did I roll it out?

Now it may happen that something unforeseen happens in the meantime (like the government deciding to bail out the market — I’m not good at predicting these rescues, this is the second time around when things were going great (for prudent me) until the government decides to mess with it) which causes me to reevaluate the underlying stock (the financial sector just got 15% better in two days!).

Thus I had to get rid of the short call options. The most profitable way to do that is really to sit and stare at the ticker with the finger on the trigger. It is something that has to be done (I seldomly do it. Last time was June 2007 as far as I remember). So no, I don’t rely on day trading other than to save maybe fifty bucks (although with today’s volatility it would have been much more – around $400 or so) instead of just going for the market price at a random time of the day.

Derivatives are simply a tool, but it’s not my main tool.

@Executioner – I did not know that market orders took priority. I’ve actually seen a situation with a limit of ,say, 10.00, where the ticker dropped to 9.99. I assumed the trader missed it, but if market orders execute first, I could see how it could happen. Would it not have been smarter for the trader to match the 10.00 seller up with the market order buyer instead? My guess is that the 10.00 order arrived slow.

@Douche – Oi, fixed again. I thought the modern term for idiot was “slow learner” 😛

So you must be selling covered calls, right? Otherwise you wouldn’t be getting the dividend. Anyway, I avoid having to worry about tax ramifications (like whether a dividend is qualified) on my short-term trading by doing it in a Roth IRA. Of course losses in a retirement account hurt all the more ;-(

Kudos on this wonderful blog. You’ve managed to make explicit many of my unarticulated thoughts and directions.

Platform-wise, do yourself a favor and switch to interactivebrokers.com. 1$ per contract, no minimum. Trade in any market, any currency, and receive the prevailing rate on multicurrency balances- so when the New Zealand dollar was yielding 8.25%, that was the rate paid out on my NZD balance (even though I live in Canada). Trades are routed instantly, complex option & future strategies fully supported… like scottrade for grownups.