Investing Vision

As you may or may not recall. Around November 2018 I decided to sell most of my dividend growth stocks to change my portfolio into a ETF based portfolio. Here I’ll discuss how this process is getting along and what I’m doing with my capital at this moment!

For a quick overview of my current holdings you can visit my Portfolio page.

Compared to my old DGI (Dividend Growth Investing) days, my current portfolio has much more depth to it. This aligns quite nicely with my Twitter username @DutchInDepth. There are much more layers right now, these layers are as follows:

Sold Call Options
Sold Put Options
Technology Stocks
Fundamental Stocks
Bonds
Exchange Traded Funds

Exchange Traded Funds / Bonds

You can envision this list as a pyramid shape. ETF’s, bonds and fundamental stocks act as a nice concrete block underneath the ‘bigger risk assets’. On the bottom are a selection of ETF’s, consisiting of world wide stocks and bonds. Every month I add a bit of fresh capital and profit from my options into ETF’s to keep sturdying my portfolio.

Fundamental Stocks

I’m planning to get into a few high quality names from the DGI community like Unilever and Royal Dutch Shell when the stock price comes down a bit. Right now this portion of the portfolio consists of 55 shares of Altria and 35 shares of AbbVie. These purchases will mostly be temporary and funded with long term option premium income. Whenever I sell an option for a longer time frame, I gain quite a bit of money for the time being. Not using this money is a bit of a waste as I gain no interest on it. For now I will invest it in beaten down blue chips which provide me a nice dividend. Might the stock price appreciate, I might sell the stock to free up the money for options again.

Technology Stocks

I have seperated my technology stocks as a category because I feel these are more risky. However, looking for the extremely long term, I’m mega bullish on the technology sector and this is one of the reasons I want to be quite heavily invested there. Right now this section consists of names like AT&T, Alibaba, JD.com, Baidu, Qualcomm and ASML. I’m eager to add a lot of money to ASML whenever the price is right. I’m also looking to expand into the payment sector with names like Visa, Mastercard or Adyen. Unfortunately these are insanely expensive right now.

Options

With a lot of money in these ETF’s, bonds and stocks my broker let’s me use 70% of the value as margin for options. This allows me to sell options without needing to put a lot of actual cash in my account. Options might be a bit to complicated to explain here, just consider that I’m selling options on stocks that are solid and I wouldn’t mind having to actually purchase. In the first five months of 2019 I’ve realised a profit of €3,899,62 selling options for myself and for a few other people.

I consider my portfolio quite decently diversified and with a great potential for short term and long term income. I’m still adding as much new capital as I can, so that I can expand my fundamental sections and sell more options.

For questions about any of my holdings or my investment vision, make sure to let me know in the comments down below or to message me anywhere on social media!

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4 Comments

  1. Hi DI. I have another question which I think you can answer. You say your broker (Binck) let’s you use 70% of the value of your stocks and bonds as margin for options. How does this work and is this enabled by default? Reason I ask is, I sold an option (only option in my account currently) on INTC that netted me $50 in premiums, but Binck required me to have a minimum of something like €300 available in my ‘vrije bestedingsruimte’ that I now can’t use to buy stock. Do you have this too or is there something I’m missing? (I have more than €75k in stocks in this account.)

    Thanks.
    SD

    • DutchIndependence

      Hi SD,

      This works with the contract called ‘Effectenkrediet’ (margin). Whenever you have some decent securities they will be able to use it as collateral. So they take 70% of the value of those securities and add it to your ‘Vrije Besteedbare Ruimte’ (margin limit).

      With your example, the margin will be the same, I will have to have €300 of VBR as well. However because of the margin contract, I don’t need an actual €300, just €300 of collateral. They will use the collateral from my securities in that case.

      It works like a dream but it’s very important to remember that you’re not allowed to go negative in your VBR. So maintain a healthy limit or Binck might start selling some securities to get you back to a positive VBR. Whenever you go negative, you’ll have five days to wait/sell something/add cash.

      Hope this helps!

      DI

  2. Thanks! That makes a lot of sense. I have just finished reading the pdf file of Binck about the ‘Effectenkrediet’.

    There’s 2 things I’m still thinking about.

    1. Do I have to pay interest over the ‘Effectenkrediet?’. I haven’t read anything about that anywhere, but I also remember somewhere in one of your blogposts you mentioned you can use margin for against 1.5% interest instead of the 6% because it’s your employer. Or is this something else?

    2. I don’t think I’ll have more than 10 options at a time in my account (don’t want things to get too risky). Considering that I needed roughly €300 for 1 option of INTC
    (INTC -P Jan 2020 $35), I don’t think I’ll need more than €3000 in my ‘Vrije besteedbare ruimte’ to do all the option trading I expect to do. Would it make sense to keep €3000 for that and not use the ‘Effectenkrediet’ at all, or are there really not much downsides to the Effectenkrediet, if I use it very minimally? (If I get 70% margin over my stocks, that roughly €52.500 of VBR, of which I will only use €3000 for the options?)

    Hopefully I’m making sense.

    Thanks.

    SD

    • DutchIndependence

      Hi SD,

      1: The VBR that is created by the collateral of your portfolio isn’t immediately something you borrow from Binck. Lets say you have €1000 cash and €5000 of stocks in your account. With ‘Effectenkrediet’ (margin) this will give you 1000+(5000*0,7)= €4500 VBR (spending limit). Whenever you buy stocks for just the €1000, you won’t have to pay any interest, whenever you spend more than your own cash (€1000+), then Binck will start charging interest for the amount of actual money you borrow from them. The interest rate is 6% for normal customers.

      2: The downside of the margin is that whenever your stocks go down, margin percentages rise or in this case Intel drops far below $35, you’ll see that the VBR could go down fast. Whenever you hit a negative VBR, Binck will let you know that you have 5 days to make it positive again by selling something or putting more money in to the account. From my own experience, maintaining a VBR of a few thousand is a must in order not to stress or worry about the positions to much. In your case it could be nice to use the margin instead of keeping €3000 in cash, so you could buy stocks or bonds with the cash and simply sell the option with the collateral.

      As you have quite a large portfolio and you will have a lot of VBR, there is literally no way that those ten puts will get you into trouble. The only scenario where this could happen is that Intel goes bankrupt.

      Hope this helps!

      DI

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