I was explaining option trading to a friend and came up with a question that I don't know the answer to. Perhaps someone out there can help me.
The question concerns how dividends are handled in an option contract. Suppose it is now March and I write a covered call with a May expiration. In April, the stock pays a dividend. In May, the option is in the money and is exercised. Who keeps the dividend? It was paid to me in April, since I held the stock then, but if the option is exercised, do I have to pay the dividend to the new stock owner?
The last covered calls I wrote were for SFI, a dividend paying stock, but no dividends were paid between the time I sold the option and the expiration date, so I did not face this problem. However, if I decide to write some longer term covered calls, this issue will come into play.
Property Management Set Up For Rental #1
My first choice for property management did not work out, so I've signed up with another property management company. The terms are almost identical to what I had planned on with my first choice: the monthly fee is 10% of the monthly rent, there is no fee when the property is empty, and when a new tenant is put in place, there is a charge of 75% of the first month's rent. The only difference between my original PM choice is that the new tenant fee would have been 50% of the first month's rent. I need to send in $250 to be held in a contingency account for any repairs (which I would have had to do, no matter which PM I used).
I wanted to get all this done this week, before the first of the month so that the tenants could start sending their rent to the new manager.
I wanted to get all this done this week, before the first of the month so that the tenants could start sending their rent to the new manager.
Tenant Complaints
My first rent checks from Tulsa were actually two money orders. Before I deposited them, I noticed that the names on them were not the same as the name on the lease. Hmm.. That's not good. So I asked my property-manager-to-be to have these people sign an addendum to the lease showing they were living there as well. This is mainly for legal reasons in case I need to evict them or take other action against the tenants. They did sign, but of course, when the property manager showed up, they had a couple complaints. They said one toilet and the dishwasher leaked. Also, they said they saw some bugs.
So I've contacted a pest control company and a plumber to fix this. I've given them the tenant's phone number so they can set up an appointment.
So I've contacted a pest control company and a plumber to fix this. I've given them the tenant's phone number so they can set up an appointment.
AZ Number 2 In Subprime Mortgages
The Arizona Republic today had a front page article that said Arizona ranks number 2 in the nation for percentage of subprime mortgages, second only to Nevada. But the delinquency rate on those loans in Arizona is 9.26 percent, which is less than the national average of 13.3 percent.
What does this mean? I think it means the worst is still yet to come for the Arizona housing market. I expect foreclosures to continue to increase, especially since the recently announced inflation rate was higher than expect, meaning the Federal Reserve likely won't lower rates for some time and may still raise them.
Of course, one person's bad news is another person's good news. If you are looking to pick up houses for cheap through foreclosure and preforeclosure sales, start amassing your funds now to go on a buying spree.
What does this mean? I think it means the worst is still yet to come for the Arizona housing market. I expect foreclosures to continue to increase, especially since the recently announced inflation rate was higher than expect, meaning the Federal Reserve likely won't lower rates for some time and may still raise them.
Of course, one person's bad news is another person's good news. If you are looking to pick up houses for cheap through foreclosure and preforeclosure sales, start amassing your funds now to go on a buying spree.
SFI Options Expire Worthless
About a month ago, I sold some call options for some SFI stock I own. Those options had a strike price of $55 and expire tomorrow. Unless the stock shoots up 9 points in the remaining 3.5 hours of trading today (highly unlikely), those options will expire out of the money and I won't be required to sell my shares. I get to keep the $625 I got for selling the options (actually, around $611 after commissions) and on Monday I can turn around and do it all again!
