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Hi ERN,
I am reading Passive income through option writing: Part 3 that you write in 2019 and was wondering if you want to update "Taking more risk with the margin cash" section ?
I would love to hear if the wild swing of bonds in 2020 and historic low interest rate changes your assumptions for that section for the next year.
Thank you
I had my doubts in March 2020. But the good news is that a lot of the Preferred shares and Muni bond funds have recovered their losses and they are all up for the year. I did some tax-loss harvesting along the way, so it all worked out well in the end. 🙂
@earlyretirementnowcom any recommendations for a tax loss harvesting partner for PFF? Was considering PGF as it tracks a different index and is highly correlated.
@nobatmanjokes Yes, that's the one! I've used the two as a TLH pair before when I still held the ETFs. Now I buy the underlying preferred shares directly.
@earlyretirementnowcom Thanks! It seems you might be holding the individual shares to save on the ER right? What was the threshold for making that worthwhile?
@nobatmanjokes PFF has a pretty steep ER, close to 0.5% p.a.
You can buy the underlying preferred shares on IB for $1 commission per lot of 100 to 200, so once you reach $20k+ in preferred shares you'd likely be better off with DIY.
@earlyretirementnowcom concentration risk of owning just a few preferred?
@navypack The way I understand it there aren’t actually that many companies in PFF/PGF. Sure there are 100 and 500 holdings but there are many holdings from each company so only a handful of distinct companies. That means you can buy them from a selection of as few as 5 or 6 companies and track well enough once you can do the trades large enough that the commissions are lower than the ER. Because the ER is 0.4%+ that threshold is pretty low. ERN please do correct me if I’m mistaken.
@nobatmanjokes Yeah, very concentrated holdings in a handful of financials. One might as well replicate this with a few underlying preferred.