As we announced last week, all of our Income Millionaire subscribers will become full subscribers to the Income Trader service published by Profitable Trading starting this week.

For that reason, new trade recommendations will now come from Income Trader so we will not be making any new additions to the Income Millionaire portfolio. Instead, we are providing the guidance below for the open positions remaining in our portfolio. In addition, I will be available to respond to Stock Talk questions on this site until it is taken down.

Open Positions

There are nineteen open equity positions in the SW portfolio as shown below:

Of those, I recommend selling two of the Legacy Holdings (shown in top half of table above) now:

• Eaton Vance Tax-Advantaged Dividend Income Fund (EVT) since its dividend yield is only 1.6%, which is too low for an income portfolio; and
• New Residential Investment Corp. (NRZ) since the company just completed a secondary stock offering that will dilute its returns going forward.

Also, eight of them are Assigned Put Contracts (shown in bottom half of table above) that are the result of options that expired in-the-money and were assigned to us. The strategy for each of them is the same if you do not want to hold one or more of these stocks in your portfolio. Wait until the underlying stock price gets within a few dollars of the Entry Price (i.e., the strike price of the put contract assigned to us) and then write a covered call at a premium that when added to the Entry Price results in a net gain.

For example, The Gap jumped 25% in after-hours trading last night after releasing Q3 results and announcing it is spinning off its Old Navy division. Its share price jumped above $31, higher than the $30 strike price at which we bought it five months ago. Trading in the stock and its options will be messy today, but you should be able to sell a covered call on it at a profit or sell the stock altogether. Either way, be sure to use a limit order since the spread between bid and ask prices could be unusually wide at times (I will provide guidance on Stock Talk later today once we see how it is trading after the market opens).

Options

There are four open options positions in the Income Millionaire portfolio as shown below:

I recently discussed all three short put positions that expire on April 18 so I will not repeat myself here. The fourth open position is a covered call on The Williams Companies (WMB) that expires on August 16. One of two outcomes will occur with that option: either it will expire in-the-money in which case the stock will get bought away from you at that Strike Price or it will expire out-of-the-money in which case you can write another covered call against it at that time.

Final Thoughts

It has been my privilege to manage Income Millionaire over the past year. I trust you found this service useful in making informed investment decisions and hope that you were able to profit from it. I appreciate all of the kind words from many of you over the past year and know you will be in good hands with Amber Hestla at Income Trader. Thank you.

Jim Pearce