Latest Stock Buy 10 shares of BAC

On May 6, 2020, I bought 10 shares of Bank of America (BAC) paying $22.395 per share. 

With its quarterly dividend payout of $0.18 per share, this latest buy has a dividend yield of 3.1% and will pay us $1.8 (before tax) every quarter.

The sum might sound small (and it is very small) - but I bought this stock because of other reasons - I plan to increase the total share count to 100 in a reasonable time frame (say one year) and once we have 100 shares start selling covered calls on it. Here I wrote an article for OptionsBrew.com - Covered Call Trade Idea - Generate $100/mo from this Stock

By now BAC stock takes 1.74% from our US stock portfolio.

For the rest of the year, we are looking to take $4.59 (after tax) from this buy, which is about 0.1275% from our $3,600 goal for 2020

2019 in Review and Financial Goals for 2020. 

In total BAC now contributes about $6.12 (after tax) yearly to the dividend income portfolio.

I bought this stock on margin, and as a penalty. Penalty for overtrading a while ago, let me explain - In March our portfolio lost about 80% of its value, as I had some naked options trades opened, I faced several margin calls, I lost a lot of good stock, like CSCO, PFE, T, PBCT and was left with high yielding junks, which one after one trimmed their dividends.

At the end of March, I was playing out with ratio call back spread the idea, and set up following call ratio back spread on BAC

• Sold 1 BAC NYSE May15'20 22 CALL @ $2.39
• Bought 2 BAC NYSE May15'20 25 CALL @ $1.09

From this trade setup, I was able to collect a small premium of $0.21

To make it profitable BAC needed to stay either below the strike price of $22.00 - in such case, I would keep the premium. Or for this call ratio back spread really start to work, BAC should rise in the price to at least $27.79 (25+(25-22)-0.21), and even then I would only break even.

With BAC stock hovering around $23 and expiry time fast approaching, there was little to do - yes I could adjust and hope this will work out later, but I decided to close this position with loss and bought back this contract for $100.

My loss from this trade is $80. Sure I could go and buy 100 shares instantly (I have a margin account) and sell a covered call with one-month expiry to collect about $100.

The worst what could happen - after one month BAC would fall another 10 dollars per shares and I would be a bag holder - waiting for shares to recover before selling again covered calls but owning my broker $2,300. Trading on Margin is tempting, but if possible, better avoided.

That's why I decided to play modestly safe and as the "penalty" buy 10 shares of BAC - where I now owe to my broker - $230 which  is a reasonable amount which I can pay back without problems. 

Starting May 2020, I have decided to switch on covered calls only with exception using cash-secured puts to take back shares if assigned. Also for the month of May, I have a goal to decrease my negative cash balance down to EUR -2.500 + later at the month I have to buy additional 8 shares of PFE (another stock I'm looking to sell covered calls once 100 shares reached)

With this latest buy, my negative cash balance now is -EUR 3.850 + I have to spend additional EUR 280 to acquire 8 shares of PFE later the month. Bringing my cash balance down to negative -EUR 4.150.

Last, but not least I will proceed 50% from this month covered call income to buy PBCT stock, it looks about additional EUR 150. Now we are talking about EUR 4.300 debt.

I need to find at least EUR 1,800 to get it down to EUR -2,500 goal, luckily there are several covered call trades I'm looking to expire in the money and bring back cash + profit. With additional cash installments, I see I can get to my monthly goal. Hard but doable.

To sum it all up - I just didn't have enough money now to buy more than just 10 shares