Found Money

I updated my Current Portfolio page yesterday and although I knew it previously, it really hit me yesterday that had over $50,000 in cash that was doing nothing for me.  Since I generally sell naked puts and rarely hold many stocks in my account I tend to have a good portion of my account in cash.  I’ve always considered this cash my safety net for the puts I’ve sold.  I never felt bad about having the cash sitting idle, but that changed yesterday.  $50,000 is a chunk of change not doing a thing for me.  I checked Ameritrade’s “cash sweep” options and saw I could get a return of around 1.5%.  That would be an extra $750 a year, but that still seemed like chicken feed compared to a CD.  At the bottom of one of the pages I found that they have money markets you can use.  I chose TD Waterhouse Plus Fund Inc Money Market Portfolio (NPLXX) which has a 4.76% YTD return.  I tried to put $45,000 into it, but was not able to.  Apparently I do actually need some of that cash sitting even more liquid than a money market to cover my short options.  In the end I entered my order for 25,000 shares at $1.00 to start with. If I’ve read the details correctly, my order will go through a the end of business today and it doesn’t look like there will be a transaction fee.

I’ll see how this goes over the next few months and will increase my NPLXX holdings if I can continue to stay heavily in cash.  For now this feels like found money, like I reached into an old pair of jeans and found an extra $1,187 that I didn’t realize I had.  If this stays consistent I’ll add another near 2% growth to my account.  2% can mean a lot over the long term.  The only downside I can see so far is that if I do need this $25,000 within the next 90 days I’ll have to pay 0.6% fee for an early exit.  $25,000 was the minimum allowed to enter the order, so I didn’t have the option of starting smaller for a test run.  If I’ve planned well and the market doesn’t tank, I should have that $25,000 “mature” in threee months then allow myself to run closer to my margin limits with a greater investment in the money market.  Even after 45 days I should be close to break even with the interest I will have earned by then.  I consider this an extremely low risk move.

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