Distribution Capture With CEFs?

[steelpony10]

        When I believe facts are tipped my way I cash in a CEF with a value gain after the x date and flip the money into another CEF with possible better upside (less premium or a discount) but before it’s x date usually about 5-10 days apart resulting in distributions for that money twice that month then waiting while I look for another position to flip to. I have a list of positions I use for this if an opportunity arises. If I get stuck for for a time I still have the cap gains and distributions but the gamble increases with values.

         Occasionally the stars align resulting in great opportunities. I have a chance over the next 10 days to pocket a small gain, collect 2 distributions and flip up in distribution percentage to a CEF with a discount. 

          I know they’re not many CEF investors on here but does anyone have any other ways to do this? It’s just an occasional move for me in a TIRA.

[judger]

Would it be a secret or could you share an example of a sell and a buy resulting in a double distribution? We are heavy into Pimco that goes ex-dividend tomorrow, 8/10/23. :-)))

[steelpony10]

judger ,

       Well we have some we hold (most) and some I mess around with after I run out of other moves for now = little cash. 

        So Friday (the 10th) we’re selling CCD with a low 11% distribution and about a 5-10% cap gain and a small premium and investing a smaller balance into WDI a higher distributor at a discount before 8/23 but in this case it pays 9/1. I may be able to jump back to CCD or something else after that if I choose, something that distributes mid month.

         I say more risky because like equities I’m at the mercy of headlines so when an opportunity comes up I try to take advantage of it and if I get stuck with WDI in this case at a discount that’s not too bad. I don’t risk doing this to turn $200 in a few days. I don’t know what traders risk. We’re getting the extra distribution, a small cap gain and investing less into WDI which all adds up.

[Chahta]

Aug 9, 2023 16:31:09 GMT steelpony10 said:

        When I believe facts are tipped my way I cash in a CEF with a value gain after the x date and flip the money into another CEF with possible better upside (less premium or a discount) but before it’s x date usually about 5-10 days apart resulting in distributions for that money twice that month then waiting while I look for another position to flip to. I have a list of positions I use for this if an opportunity arises. If I get stuck for for a time I still have the cap gains and distributions but the gamble increases with values.

         Occasionally the stars align resulting in great opportunities. I have a chance over the next 10 days to pocket a small gain, collect 2 distributions and flip up in distribution percentage to a CEF with a discount. 

          I know there’s not many CEF investors on here but does anyone have any other ways to do this? It’s just an occasional move for me in a TIRA.

You sly trader.....I thought all you cared about is INCOME. 

[steelpony10]

Chahta ,

     This is two accepted facts against one unknown located in the middle. I know what should happen where I’m going and if not I’m stuck with something that pays high monthly income. Trading is one interpreted fact as I see it against a possible future unknown with no safety net. Both methods can produce income. This is another cash flow faucet and more of a gamble.

      So just manipulation of facts with an unknown period between and a plan B. Apples to oranges. I just turn a couple widgets. How’s that for spin, ha, ha. 🇨🇦

[xray]

steelpony10,
Your:
When I believe facts are tipped my way I cash in a CEF with a value gain after the x date and flip the money into another CEF with possible better upside (less premium or a discount) but before it’s x date usually about 5-10 days apart resulting in distributions for that money twice that month then waiting while I look for another position to flip to. I have a list of positions I use for this if an opportunity arises. If I get stuck for for a time I still have the cap gains and distributions but the gamble increases with values.
Occasionally the stars align resulting in great opportunities. I have a chance over the next 10 days to pocket a small gain, collect 2 distributions and flip up in distribution percentage to a CEF with a discount.  I know they’re not many CEF investors on here but does anyone have any other ways to do this? It’s just an occasional move for me in a TIRA.

----------

 Some of us are buy and hold type (reduce/add on shares, take CapGains when opportunity strikes). Your system should always work well when monitoring the market (on a daily/weekly basis). With that said....

 Normally, some of us buy/hold types (6% maximum holding of any single stock in portfolio for "MARKET" risk protection) follow the more "VOLATILE" type of "STABLE" CEF's and normal securities (in our portfolio's) for both the up/down markets (when seeking CapGain) Examples:

1... Normal stock exchange security: CAPL
 Normally trades in the 18's-21's range. With that knowledge (observing over "time") we can sell 4% of our holdings (50%-75%) in the 20-21 range for "CAPGAIN" and then buyback the same amount of shares in the 18-19 range. Dividend x-div dates does not normally play in this scenario unless the x-div dates fall within our dates of our selling/buyback scenario....

2... CEF ... KYN:
 Normally trades in the 8.00-10+ range. With that knowledge we can sell 4% of our holdings and then buyback the 4% in the lower 8 range.

3... CEF ... (NRZ) now called RITM:
 Normally trades in the 7+-10+ range.With that knowledge we can sell in the 9-10 range and buyback same amount of shares 7-8 range. WARNING: This particular CEF is a Penny stock (<$10) and can be "very volatile" in that range....

Comment: Many buy/hold types are blue collar workers trying to get further income for their retirement and not wanting to take additional risk beyond being in the market. They want stay income and mostly look for 15% each year (10% dividend + 5% CapGain) with the buy/hold strategy. Like playing baseball, single here, double there but not playing for home run that many risk takers take when we hold too many shares in any one security....

One single opinion of the many I am sure....

Live Long and Prosper....

[judger]

steelpony10 , sounds like one needs to do a bit of research and documentation to identify acceptable CEF's and ex-dates. Then an on-going bit of work to monitor for sell/buy. Whew! Not sure I  am up to that.    :-)))

[steelpony10]

judger ,

       Except for 5 holdings I have an acceptable exchange for me to be stuck with if I can’t flip flop back way ahead of time. So I work with 7 holdings. 

       As I mentioned this is a last resort exercise when my other schemes run out of steam. For those I need market turmoil and cash. It took about 1/2 hour using a calculator last Friday morning the 11th for 4 market orders. I needed calm flat markets.

        Maybe it’s just experience. I don’t have the opportunity often to increase cash flow and raise cash. 

xray ,

         I still consider myself a buy and hold investor. I’ve never seen any scheme that will assure a secure financial future. Self imposed searches for control of the future found in percentages, allocations, diversification etc. is just sleep well medication. I do know the more real dependable cash flow regardless of markets I have allows me to put off the affects of any calamity down the road further so I keep that as my primary goal. Cash flow compounds cash flow over time.

[richardsok]

As I've written many times, my main efforts are directed toward technical trading, but in side buckets I have put moneys into individual preferreds for longer term holds and also some div cap.

After a lot of thinking, and some trading (which I rarely report) I've tentatively concluded that div cap is successful longer term only if one trades among a limited number of stocks or funds  that  have very TIGHTLY CORRELATED price movements in their short term charts.

The tactics (in simplest terms) :

Let's say you have found five income funds, paying monthly -- call them A B C D E. All are tightly correlated. You wanted funds with XDivs dispersed throughout the month.  You chose:
A ex div 1st to 3rd monthly
B ex div 6th to 8th monthly
C ex div 9th to 14th monthly
D ex div 15th to 20th monthly
E ex div 23rd to 28th monthly

Let's also say you identify three other funds with somewhat less correlation.
Call them
F ex div 1st to 4th
G ex div 14th to 18th
H ex div 20 to 25th

We begin by buying a position in A. Its XDiv passes and it dips in price 2%. You wait two days to give it a chance to possibly recover. It recovers only 1% so you are down 1%, not counting the div. You now want to roll it over to capture the next div in the month, but IF POSSIBLE, you prefer buying the next available fund going XD so long as it is down more than 1% the last few days... and you continue, always limiting yourself to tightly correlated funds.

Say B is up 1% but C has slipped 2%, so you skip B and buy C.

C goes XD and it has climbed 2%. So you sell C and buy any next upcoming XD so long it is up LESS than 2%.... and you continue.

If anything from your second tier of funds (less correlated) drops more sharply than your favored five, you may buy there.

My notion is that I do not want to give back my divs by realizing losses UNLESS I can buy the next ex div at an EQUAL or DEEPER dip -- and continue.  If I limit my div cap activities to tightly correlated funds, then my "dip" buys should usually recover more strongly than the other funds as a whole.

That's the theory, briefly.

[steelpony10]

richardsok ,

          Thanks for the explanation.

          Got that judger , I do that once in awhile sorta the same way. Line it up in advance over time and watch for it. It’s another investing tool in one’s tool box for those interested. A lot of small successes from real factual investing work you have to do yourself instead of juggling allocations based on what one thinks or waiting for Putin to die to help you. The not so easy money when markets are uncooperative for an unknown period.

          

[richardsok]

To clarify, limit yourself to a tightly correlated group of funds or stocks that tend to trade within a narrow range. Attempt to buy near the bottoms of range and sell near tops. But if a fund you own goes ex-div AND it is also near its range bottom, try to roll over into a second fund that is also near the bottom of its range to minimize potential trading losses while harvesting ex div days.
     I am working out kinks with decent success using a small trading bucket, but I still prefer applying technical analysis to ultra low volatility assets.
     I have never tried to apply div cap in a bear market, rolling over an enhanced stream of ex divs to mitigate principal loss.  Should be interesting.