Spring Flowers at Hawksbill Cabin

Spring Flowers at Hawksbill Cabin
Spring Flowers at Hawksbill Cabin

Tuesday, April 7, 2015

New Position: SPY

Once the JPM position was called away on the ex-date, April 1, I put most of the proceeds into a new position with SPY, the S&P 500 ETF.  The per share cost of this trade is fairly high – it’s the one security with highest share value I have ever bought in Rescue My IRA, although this is not my first rodeo with SPY. 

My approach this time was to look for a trade with only two weeks of time involved, and also to sell an in-the-money covered call to basically write a contract for a set gain.  In this case, I’ll have about $15.00 in a capital loss, but that is offset by a call premium of just over $160.00.  The net of about $145 over the course of the nine day holding period sets this trade up for an absolute return of .70%, which annualizes to 29%. 

This is the third trade in a series that started with a profitable DIS trade earlier this year, followed by the JPM trade that was called away.  I sure hope I can keep the string going!

Here is the position plans for the SPY position, with results reported net of commissions and fees:

SPY

Transactions

Bought 100 shares at average share price $205.97 (total $20,597.00)
Sold 1 $206 April 10 2015 covered call for $163.75

Net Profit:

1) Options Income:  = $163.75
2) Dividend Income (no dividends this holding period): $0.00
3) Capital Appreciation/Loss if assigned at $206.00:  -$15.00


Total Net Profit if assigned on April 10:  $148.75
Absolute Return on Investment: ($148.75/$20,597.00) = 0.72%
Annualized Return if Assigned and Dividend Collected (9 days):  0.72%*(365/9) = 29.29%

Monday, April 6, 2015

Rescue My IRA - March 2015 Results

Here's the hop yards' logo.  Twitter
handle is @hawksbillhops 
I’m writing my monthly Rescue My IRA results post about a week late this month, but I have an excellent excuse.  In January, I decided to take a step towards starting a small business in Luray, Virginia – Hawksbill Hop Yards – which you can read about here.  The business plan and attendant chores related to getting this project underway have been time consuming (but incredibly fun!).

After the break out we saw in February, I decided that I would put more Rescue My IRA cash to work on positions and covered calls.  I have been tracking cash reserves at around 20-25% for the last year or so, but I made the strategic call to reduce this to around 15% during March.  As a result, I now have 15 positions trading, and we’re back to seeing the bulk of the monthly returns generated in covered call premiums.

In fact, the $1,900 generated from covered calls met my goal of a 1% return for the month all by itself, although there were good dividend and stock gains results as well. 

My wife and my farming partner
David, checking out the field.
As I wrote last month, I don’t calculate the unrecorded gains and losses in this account as part of the monthly return, which is why the account value changes independently from the transaction results.  I figure that with a good trading plan, these things take care of themselves over the course of the life of each position, so the best success indicator ultimately is simply the increase in account value.  Even so, monitoring the three component items is a good way to track progress and improve decision making.

Well, that’s all I have to say for now – I need to get back to work on the hops farm. Here is a summary of results for March 2015- as always, these amounts are net of commissions and fees.



Account Status:
·         Total Account Value, 3/31/2015 Market Close:  $169,187.41 – down slightly from the February ending balance.
·         Total Cash Reserve, 3/31/2015 Market Close:  $32,364.23 – also down from February.
·         Core Stock Positions (as of 3/31/2015):  ABBV (100 shares), AAPL (100 shares), CA (300 shares), COP (100 shares), EMC (400 shares), F (500 shares), FB (100 shares), FCX (500 shares), GE (400 shares), HAL (200 shares), JPM (100 shares), NUE (200 shares), PPL (300 shares), QCOM (100 shares), T (400 shares)

Performance Metrics:
·         Option Premiums Collected (net, month of March):  $1,908.82 (1.14%)
·         Capital Gains Collected (net, month of March):  $346.02 (0.21 %)
·         Dividends Collected (recognized on the ex-date): $310.25 (0.19 %)
·         Estimated Interest on Cash Reserve: $0.30
·         Total, Absolute Return:  $2,565.39 (1.53% absolute return, annualized return
18.36%) 

Next Month To-dos:

As I’m writing this it is already the first week in April, so my forecast will reflect that I have already completed a couple of roll-outs, and I’ve added a 100 share position in SPY which will show a $15.00 loss when exercised on April 10.  JPM has already been called away on its April 1 ex-date, and there remain three positions with expirations in April, including SPY – the other two are FB and HAL. If all three are called away, there is the possibility of $650.30 in capital gains, or 0.39 % return. 

April’s dividend forecast is not bad, with four stocks going ex-dividend:  ABBV, F, FCX, and T.  JPM has already been called away, so there is a total estimated yield of $339.00, or 0.20%.  None of them have April contracts on them, so the estimate is pretty solid at this point. 

That puts estimated cash returns from stock gains and dividends at around $1,000.00, or 0.59% - I need another $700.00 or so from covered call premiums to make my goal of a 1% return for the month.  As of this writing, I have generated almost $600.00, so we are just about to the finish line.  With three ITM calls coming up this month, I should have the opportunity to sell a few more contracts, which will take the account across the finish line for April. 


When I write my April post, hops planting season will be starting us in the face.  I’ll try not to be late with the monthly post, despite that.  Until next month, happy trading!

Thursday, April 2, 2015

Called Away on the ex-date: JPM

I bought a couple hundred shares of JPM on the heels of my DIS trade last January.  It is a stock I've had a couple of good trades with over the course of the Rescue My IRA account, and this transaction adds to the track record.  

I held the shares a total of 75 days before they were called away on the April 1 ex-dividend date yesterday - and the trade earned an absolute return of 5.51% on the cash invested.  That works out to an annualized return of almost 27%, well above my goal of a 12% annualized return.

(For the original January post on this position, see this link.)

Meanwhile, here is the final analysis of the JPM trade, net of commissions and fees:

JPM

Shares:
Bought 200 shares in January 2015, with a total basis of $11,223.00 and an average share price of $56.12.
The position was called away on the ex-dividend date at a $57.50 strike price, netting $11,482.77, for a total stock gain of $259.77.

Options:
Total options income:   $358.49 – I only sold one covered call on this trade, the April $57.50.

Dividend:
Total dividends collected:  $00.00 – the stock was called on the April ex-dividend date.


Net Profit:
Total Net Profit after Unwinding:  $618.26
Absolute Return on Investment: ($618.26/$11,223.00) = 5.51%
Annualized Return (75 days):  5.51%*(365/75) = 26.81%

Tuesday, March 31, 2015

Three New Positions: ABBV, F, and FCX

Halfway through the month of March, I decided that it was time to get a little bit more of the resources available in Rescue My IRA back to work in the market.  I have been maintaining the cash reserve within a range of 20-30% of the account value, and my strategy became to work on getting this down to about 15%. 

At first I pulled the trigger with two stock purchases and subsequent covered call sales – ABBV and KRFT.  As I wrote last week, KRFT was called away due to the recent merger news; but additionally, I had a number of trades that were likely to be called at expiration, so I went ahead and established two more positions:  F and FCX.  For a short time I had 16 positions in play, right at the top of my preference, which is to have between 12 and 16 active trades in the portfolio at any given time.

There’s no real logic behind that number except for the fact that I don’t feel that I have enough time to manage more positions than 16.  Subsequent to the KRFT call I have been looking for a replacement, but that is likely to take some time, and I may just do a few add-ons to existing trades instead of buying a new stock.

In order to catch the blog up on the ABBV, F, and FCX trades, here are the position plans, net of commissions and fees.  All three of these trades exceed my goal of 12% annualized returns – but FCX is something of a volatile high-flyer, so that trade could do somewhat better.  Time will tell.

ABBV

Transactions

Bought 100 shares at a basis of $6,149.99, for an average share price of $61.50.
Sold 1 $62.50 Apr 2015 covered call for $91.75

Net Profit:

1) Options Income:  = $91.75
2) Dividend Income (Apr ex-dividend, if collected): $51.00
3) Capital Appreciation if assigned at $62.50:  $82.01

Total Net Profit if assigned:  $224.76
Absolute Return on Investment: ($224.76/$6,149.99) = 3.65%
Annualized Return if Assigned and Dividend Collected (30 days):  3.65%*(365/30) = 44.46%


F

Transactions

Bought 500 shares at a basis of $8,292.00, for an average share price of $16.58.
Sold 5 $17.00 May 2015 covered call for $121.74

Net Profit:

1) Options Income:  = $121.74
2) Dividend Income (Apr ex-dividend, if collected): $75.00
3) Capital Appreciation if assigned at $17.00:  $190.00

Total Net Profit if assigned:  $386.74
Absolute Return on Investment: ($386.74/$8,292.00) = 4.66%
Annualized Return if Assigned and Dividend Collected (50 days):  4.66%*(365/50) = 34.05%

FCX

Transactions

Bought 500 shares at a basis of $9,467.00, for an average share price of $18.93.
Sold 5 $20.00 Apr 2015 covered call for $211.84

Net Profit:

1) Options Income:  = $211.84
2) Dividend Income (Apr ex-dividend, if collected): $156.25
3) Capital Appreciation if assigned at $20.00:  $515.00


Total Net Profit if assigned:  $883.09
Absolute Return on Investment: ($883.09/$9,467.00) = 9.33%
Annualized Return if Assigned and Dividend Collected (30 days):  9.33%*(365/30) = 113.49%

Friday, March 27, 2015

Called Away Due to Merger: KRFT

On Tuesday afternoon the financial markets were informed of the intent to merge HNZ and KRFT.  As it happens, I opened a 100 share position on KRFT just last week on March 19 – when the merger news broke, those shares rose more than $20 in one day, and my $62.50 April 2015 was called away.

Although the position plan for KRFT was designed to be a hat trick, where I would collect a covered call premium, dividend, and share gain, in the end that stock run up meant my call would be assigned early, well before the ex-dividend date, so I only received the call premium and the share gain, for an absolute return of $146 or 2.37%.  

If you extrapolate the annualized return on this 7-day trade, it is 123.60%!  I’m thinking that will be the best trade of the year, but if it isn’t, it's still good for me. 

Meanwhile, here is the final analysis of the KRFT trade, net of commissions and fees:

KRFT

Shares:
Bought 100 shares on March 19, 2015, for a basis of $6,149.99, or $61.50 per share. 
The position was called away on a $62.50 strike price, netting $6,232.00, for a total stock gain of $83.01.

Options:
Total options income:   $62.75

Dividend:
Total dividends collected:  $00.00 – the call was exercised before the April ex-dividend date.


Net Profit:
Total Net Profit after Unwinding:  $145.76
Absolute Return on Investment: ($145.76/$6,149.99) = 2.37%
Annualized Return (7 days):  10.69%*(365/7) = 123.60%

Tuesday, March 24, 2015

Called Away on DOW

This is the second of two posts about the CRUS and DOW positions, which were both called away last Saturday on expiration of their March covered calls.  As with CRUS -the topic of yesterday's post here, the DOW trade proved to be a good one for Rescue My IRA, generating an absolute return of 3.38% over the 45-day holding period, for an annualized return of 27.39%.  Rescue My IRA sets up these trades with the goal of generating a 12% annualized return, so between the 18% for CRUS and 27% for DOW, the account is on a streak!

In any case, let’s move ahead for a look at the final analysis of the DOW trade, net of commissions and fees:

DOW

Shares:
Bought 200 shares in January 2015, for a total basis of $9,047.00 and an average share price of $45.24.  The position was called away at expiration on a $45.00 strike price, netting $8.982.00, for a small capital loss of $65.00.

Options:
Total options income:   $370.48 – there was only one covered call contract written for the duration of this trade.

Dividend:
Total dividends collected:  $00.00 – these shares were called away before the ex-dividend date.


Net Profit:
Total Net Profit after Unwinding:  $305.48
Absolute Return on Investment: ($305.48/$9,047.00) = 3.38%
Annualized Return (45 days):  3.38%*(365/45) = 27.39%

Monday, March 23, 2015

Called Away on CRUS - 18%+ Annualized Return!

At expiration last Saturday, I had two positions called away for a profit:  CRUS and DOW.  Normally, I would make a combined post on these transactions, but I am short of time this morning and will only write about the CRUS trade – I’ll update on DOW tomorrow morning.

CRUS was a little bit of a flyer when I selected it last year – it has consistently been rated as 3 stars by S&P, where I typically work with 4 stars stocks, and it pays no dividend, which is a second key criteria within Rescue My IRA.  Other than that, solely by selling covered calls I was able to generate a very respectable yield of more than 18% for the holding period (absolute return), and better than 18% annualized, which exceeds my goal of a 12% annualized return, and then some.

Here is the final analysis of the CRUS trade, net of commissions and fees:

CRUS

Shares:
Bought 400 shares in February 2014, for a total basis was $8,038.00 with an average share price of $20.10.
The position was called away on a $20 strike price in March 2015, netting $7,982.00, for a total stock gain of -$56.00.

Options:
Total options income:   $1,576.28 – I sold $20 covered calls on a monthly basis through most of the holding period, with one transaction at the $18.50 strike.

Dividend:
Total dividends collected:  $00.00 – CRUS does not pay dividends.


Net Profit:
Total Net Profit after call:  $1,520.28
Absolute Return on Investment: ($1,520.28/$8,038.00) = 18.91%
Annualized Return (375 days):  18.91%*(365/375) = 18.41%