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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