till death do you part
i was a naive believer in this approach to mlps
being an owner of line and bbep has causedf the death fo many hard earned dollars
still ,, thanks for the sound opinion
One of the problems with writing calls on a high-div security is that because the option-pricing model adjusts for future dividends, call prices are relatively low and put prices are relatively high, compared to other stocks with similar price volatility. So the premium for selling calls is much lower relative to the risk of it being called away. so IMO the risk/reward is skewed in favor of either buying calls or selling puts.
The PAA leak is having a surprisingly negligible effect on the other MLPs ...... so far. I wonder what kind of insurance coverage is in place to offset damage from these events. Even though the current PAA problem is inconsequential compared with the Exxon Veldez and the BP blowout in the gulf, the lingering bad publicity could hang over the industry for awhile. It's going to depend on how PAA and their insurance companies handles the situation.
Colonel - I write calls on EPD every month in my IRA so there is never an immediate tax liability. Like you said, this is a good way to collect "extra" divy. Probably agree with others on the board that writing calls in a taxable account isn't worth it however. If you do write calls in your taxable account, however, make sure that the stike date puts you at a point in time where you have held the underlying security at least a year to avoid short term capital gains. Option income is always taxed at the short term rate no matter what the strike date is, however.
I spent several years in the options business back in the 1960's, so I have a little knowledge of what it's about. The main drawback to trying to do what you're thinking is the tax problem.... as jsore points out. I'm inclined to leave well enough alone. Once the group gets moving again, you'll be happy you didn't muddy the water with options. MLPs are meant to be held 'till death do you part.
You've got one of the best buy and hold stocks of all time, so why would you want to dilly#$%$ around with options on this stock? I checked Forbes list of the 400 richest people in the world last month, and I didn't see one single person who made their fortune in trading options.
That's not the DRIP.
Schwab will reinvest dividends. That is different from the DRIP.
Reinvest dividends just means that schwab will buy the stock for you the day after the dividend shows up. For this schwab uses the price at 10am.
The DRIP is a completely different mechanism. With the DRIP EPD calculates the share purchase price as an average of some days before the dividend date. It then gives a 5% discount and issues stock to you. This stock is then given to your broker INSTEAD of the dividend.
I have all my holdings now with Fidelity. I use to have some with Schwab. I moved it all over when Schwab habitually delayed dividend reinvestments and also would not reinvest dividends from some ADR holdings, e.g. Gerdau, GGB. I have never experienced a problem with either issue with Fidelity.
lauriontj - I am using Active Trader Pro. When I look at the open lots it shows a share price 34.10, when I look at the activity log it shows 32.3922, while both same number of. shares. Fidelity told me today that the difference is the taxable incentive income that was received for reinvesting the shares. The 34.10 is the basis for capital gains.
MNGA poised for monstrous movement after confirming sale MagneGas® to two major buyers – both are US based which means monster growth potential and even bigger orders.
I calculated my shares back and they came in at 32.394. I am not #$%$ about that at all.
Wish the pps would go up instead of going sideways.
I checked this morning on the price of the new shares - it was $34.10 . The closing price on Wed was $33.57 - I lost money
I don't use Schwab, but I was under the distinct impression that Schwab (also Fidelity, TDAmeritrade, and several other brokerages) were full participants in the 5% DRIP discount program. Vanguard is not and never has been. The current DRIP price (after 5% discount) was $32.3922. The average price for the day was $34.0970. Interestingly, the current DRIP is the lowest it has been in many quarters, meaning the unit price has declined while the distribution has increased.
Everyone should be aware that holding your shares directly through the transfer agent will be charged a FEE of $15 PLUS a commission of 12¢ per unit to sell or buy. This does not apply to the DRIP (EPD pays the fee for that.) To avoid the outrageous fees and commissions, you can transfer your units to your regular broker by instructing your broker to do a DRS (direct registration service) transfer from Wells Fargo to your broker. My broker charges nothing, nada, zip for doing that. It's free..... both ways, but it does take some time. If you're planning on selling, leave about 2 weeks to move the units. Your broker will notify you when they receive your units from Wells Fargo. Remember.... the request has to go through your broker, not Wells Fargo. Your broker then has to deal with Wells Fargo. For security reasons, the transfer has to go to an account with the same name, address and Social Security number. Seems logical.
My accountant has a love/hate relationship with me. She loves the check I write her, but hates the stack of K1 forms (on top of everything else) I give her each year. That's part of the reason why I'm simplifying my taxable account this year. My taxes will suck next year (and be complicated), but I think after that it will be much easier. I'm hoping to start doing it myself at that point and save the hefty CPA fee.
Good advice though about selling all compared to a portion. I am following that. I'll add to an MLP position, but when I sell I sell it all.
Rules to owning MLPs:
1) Never sell a portion of your position. Sell it all or sell none of it. This is critical to 'release' your suspended passive losses (treated as ordinary not capital losses) that you want to offset your ordinary gain recapture (due to accelerated depreciation) and likely capital gains (due to your reduced basis created by prior losses (practically guaranteed) and distributions).
Your accountant is going to love you.
Sentiment: Strong Buy
I called about my Fidelity account this morning (Wed) - the transaction was posted as a dividend pending reinvestment on Friday. The word is that the revised transaction is on hand and should be posted tonight, definetly by Friday. The share price will be $32 + change - I can not remember the exact change.