Investment accounts are held by firms such as Schwab Institutional and TD Ameritrade Institutional. Gabriel Capital does not ever take possession of client investment assets.
Once accounts are in place and client goals and expectations have been established, Gabriel Capital provides complete portfolio management services. This includes: all investment recommendations, placement of investment orders and on-going daily management.
Stocks, no-load & load waived mutual funds, exchange traded funds (ETFs), bonds, options and money market are investments that may be used in building and managing client accounts.
- Rollover accounts (401k, 403b, IRA & Roth IRA)
- Taxable accounts (regular brokerage, margin, trusts, custodian, etc.)
- Managed (Independent 3rd party managers)
- SEP IRAs, SIMPLE IRAs and other business retirement accounts
Asset Allocation Reviews
(Ideal for 401(k) Accounts and Variable Annuities)
Maybe you are in a situation where you just need a review of how investments are allocated between stock, bond, and money market exposure. Gabriel Capital can provide this type of review at the time and frequency you select. This type of service is generally performed for an hourly fee.
Monthly Investment Education Topic: Beware of the dividend cut!
When a company cuts the dividend, it is rarely a good thing. It usually is an indicator management has lost confidence in the direction of sales and profits. Except for rare exceptions, a cut in the dividend is a good reason to sell a stock. At the very least, a firm review of the reason to continue holding should be conducted.
The 10% Income Solution: Using Covered Call Options
Income is getting harder to come by. The yield on the 10 year US government bonds hovers around 1.7%. Most bank CD's pay roughly 1% if you tie up your money for 2-3 years. These yields don't cover the cost of inflation.
Let's take a look at using a quality company in a way which adds income to a portfolio and can help to reduce portfolio risk. If you are an investor with at least a five year time horizon, this strategy may be appropriate for you to consider; Covered Call Selling.
"Selling a covered call” gives someone the right to purchase 100 shares of stock you own at a pre-determined price through a specified time frame. Selling 10 covered called gives someone the right to purchase 1000 shares from you at predetermined levels.
Let's say an investor buys 1000 shares of Autodesk (ADSK) at $56/share for a total purchase price of $56,000. Next, the investor sells a "call option” with an expiration of January 2017 and an option price of $60, against all 1000 shares. This investor is willing, by way of using an option, to give someone the right to purchase these 1000 shares from them at $60/share anytime from now until the third week in January of 2017. This is called "selling a covered call option".
In this example, the investor is willing to part with ADSK for $60/share anytime from now through January of 2017. This particular option can be sold today (06/14/2016) for the price of $4.00/share. This sale creates immediate income of $4,000 in the account (option price times number of shares covered). Whoever purchased this option is hoping ADSK trades above $60/share. If it doesn't sometime at or prior to January of 2017, the option they purchase will expire without value.
In the meantime, as a seller of the option, you are obliged to hold all 1000 shares of ADSK in your account. Autodesk does not pay any current dividends. The income you receive from the sale of the covered options will be the investment income you receive from owning ADSK. Your annualized option income return is 12.2% This is based on the value of the call option income you received annualized over the next 7 months.
If the stock is purchased ("called away") at the option price of $60/share, a capital gain of $4/share is realized. This $4/share is worth an additional 7.1%. The seller will pay into your account $60,000. The original $4,000 you received from selling the option is not part of the $60,000. This means you actually received $64,000 in combined sales proceeds and option income.
On the other side of this strategy is downside protection. If ADSK trades lower, this investor can see ADSK drop around 7% before they lose any money due to the income received. The first 7% of downside is covered by the person who purchased the call option!
So...why don't more investors employ this strategy? It takes patience and discipline. It also removes a lot of the upside if ADSK takes off and trades significantly higher. The investor who uses covered call writing is trading off future large appreciation less appreciation and more certain income.
While these numbers are all real as of the June 14, 2016, please keep in mind this discussion in no way reflects a recommendation by Gabriel Capital LLC. It is also possible Gabriel Capital, LLC, its' owner, or clients may hold positions in the mentioned securities, or hold a short position against this security. Anyone who takes action based on this sample explanation does so at their own hazard. Please consult your investment adviser or CPA prior to making any significant strategic changes in your investment method.
Would you like a complimentary technical analysis of a stock position of interest to you? Gabriel Capital provides one free review to anyone that asks. In the feedback section, please list the name of the stock, its' ticker symbol, your name, address and work number (for verification purposes only, you will not be solicited by phone at work). Within two weeks, you'll receive a complimentary review of the position you've requested. No strings attached.