After making only one option trade to start the week off I finally got around to some account house cleaning this week which was overdue. I’ve been sitting on a large portion of my account in cash recently due to most my naked puts expiring out of the money and my covered calls expiring in the money. In an off-line conversation with a MTJ reader who’s in the same situation we discussed where we should park our cash while we don’t have it in use. He suggested PowerShares VRDO Tax-Free Weekly Portfolio (NYSE Arca: PVI).
PVI attempts to track the price and yield of an index called the Thomson Municipal Market Data VRDO index. While not guaranteed, it tends to trade within a few cents of $25.00 and pays a monthly dividend. PVI’s current yield is 2.73%. I put a limit order in and bought 2000 shares at $25.00 for a total cost of $50,009.99. This left me with $11,145.54 in cash. I won’t be posting all of my moves in and out of PVI, but thought is was worth mentioning where I’m saving the bulk of my cash these days. Last year I used one of the TD Ameritrade’s money markets, but its yield is so small now that it’s not worth using now.
My other move was overdue by about seven years. I owned shares in Actrade and when it went bankrupt I didn’t remove the shares from my account until this week. It was just one of those nagging tasks of having to actually call TD Ameritrade to get them to remove the shares that I kept putting off. Actrade was one of those companies that got some good buzz from reputable industry rags and when one of my friends who was a financial advisor recommended it I got in and when it started to fall I bought more with naked puts. The premiums were great and I quickly learned what it meant to be too good to be true.
To remove shares of bankrupt companies, TD Ameritrade charges a regular online commission of $9.99, but “gives” back $1.00 for the shares. So, it cost me $8.99 to allow me the tax write-off. I really could’ve used the write-off for taxes in 2007 when I had a pile of realized gains that I was taxed on, but didn’t get to it then. I’m still carrying over losses from 2008 that I don’t see me exceeding this year and maybe not next year. Either way, the loss is now on my books, so I can write it off as my gains catch up to my losses again.
I think you bought shares of 2,000 PVI — not 200. The 2.73% yield in PVI is tax-free which is worth mentioning.
I see the tax free yield. How it compares to TLT which has has 4.16% and good option premium. i am also looking to stash the cash in a secure and better yield place.
Yes, 2000 shares. I’ve updated it now. The tax free makes it closer to 3.5% for those in the 28% tax bracket and of course improves even more with each tick up in tax brackets.
TLT fluctuates too much for my needs. I want the principle to be stable since I might have to withdraw it each month. I’ll take a lower interest rate for better stability of principle.