Normally, we would wait until the month of June is over to review the first half of the year. But since I am taking over Income Millionaire as of today, I thought this would be a good time to run through the portfolio. My colleague, Ari Charney, is leaving us to work for the fundraising department of a local university. We appreciate his contribution to this publication (and many others) over the years and wish him the best of luck in his new endeavor.

As the Director of Research for Investing Daily, I spend a lot of time thinking about the stock market and how we can help our readers profit from it. That is why I created the IDEAL Stock Rating System, since it helps me identify stocks that are mispriced and more likely to make a big move one way or the other.

Just as I use it to make profitable options decisions in my aggressive growth service, Systematic Wealth, it can also be used to determine which stocks make the most sense for generating income by selling put options for Income Millionaire. Next week, I will have a short put recommendation for you just as Ari has been doing for the past several months. In the meantime, let’s take a quick look at the portfolio to see how it has fared thus far in 2018.

Open Positions

There are currently 21 holdings in this half of the portfolio with an average annual yield of 7.5%. That more than satisfies our goal of producing income at a rate that is at least twice that of the 30-year Treasury bond, which is currently yielding 3.0% (and is now only slightly above the 2.9% yield on the 10-year Treasury note).

However, the average YTD (year-to-date) change in value of -3.4% is well below the 4.2% gain in the S&P 500 Index (through June 13). That’s not a problem in the near-term since our dividend yield is so high, but we’d prefer to at least break even on share price performance in the long-term to keep our investment capital intact.

My only concern with this portfolio at the moment is its heavy concentration in the energy sector, so I may be paring back a few of those positions later this year. In particular, the oil and gas MLP (master limited partnership) subsector has taken a hit in light of the recent FERC ruling that has resulted in many of these entities being rolled back up into their sponsors as Ari described a few months ago.

Options

Thus far, only one of our short put recommendations – Buckeye Partners LP (BPL) – has resulted in an assignment to us. Another – Spectra Energy Partners (SEP) – will most certainly be assigned at the end of today. Their combined average annual distribution rate in excess of 10% on these two additions will improve the average yield of our open positions.

As of this morning, all of the other seven options expiring at the end of today (June 15) are “out of the money”, meaning they would not be exercised against us if that remains the case. However, one of them – Service International (SCI) – is trading slightly above its strike price so there is a chance that it may end up slightly “in the money” by day’s end if the market tanks this afternoon. You can buy that option back today to close out your position if you want to eliminate the possibility of having it assigned to you (Symbol: SCI180615P00035000).

Our five options expiring on July 20 are all comfortably out of the money, with the underlying equities trading anywhere from 5% – 15% above their corresponding options’ respective strike prices so at the moment there is no threat of assignment on any of those. As a rule, we do not close out our options positions early since the cost of doing so would reduce our yield. The few that are assigned to us are companies that we believe would make good additions to our high-yield set of Open Holdings positions.