Spring Flowers at Hawksbill Cabin

Spring Flowers at Hawksbill Cabin
Spring Flowers at Hawksbill Cabin

Friday, April 11, 2014

Rolling Out FB

This is the third time I have taken a position in FB in Rescue My IRA – I also had a 100 share position in my conventional trading account for a while.  Both of the previous IRA positions and the conventional position were quite lucrative.  I recognize that FB can be a volatile stock, but that membership and fan base offer so much potential for this company that I am willing to face the risks involved with this kind of stock.

This week’s market activity for FB is a fine example of the volatility that comes with this stock – it has had days where the stock price declined by a few dollars, and days where it rebounded and gained several dollars back.  My current position is out of the money by 20%; however, the position plan shows that it has already generated an estimated 10% plus on the capital invested in just 105 days (assuming the June call is assigned). 

I am content to hold the shares and continue using my covered call strategy until the stock is back in the $70 range, and perhaps beyond, all the way to $100 per share, if it goes there.

In the meantime, here’s the analysis of the current position, net of fees and commissions. 

FB

This is a 200-share position with a basis of $14,041.00, or $70.21 per share.  The current position has a $72.50 strike price and I am rolling monthly.

Total covered call premiums:  $1,055.35
Total dividend payments (no dividend):  $0.00
Total stock gain at $72.50:   $441.00
Total, absolute gain on the position:  $1,496.35
Total, absolute return percentage ($1,496.35/$14,041.00):  10.66%


Annualized total return percentage (held approx 105 days):  37.05%

Thursday, April 10, 2014

Rolling Out PFE

There are two transactions still to report after my trading activities in Rescue My IRA this week:  rolling out PFE, which I’ll post today, and a roll-out on FB, which will follow.

Since the market has been trading sideways for most of the month of April, there haven’t been a lot of opportunities to adjust existing positions.  However, PFE did have a drop earlier this week, and the stock price approached the $31 strike price on my April covered call.  Rather than waiting to see if this would mean the option simply expired, I decided to do a roll-out to get a little more cash back in option premiums, and by doing so, I extended past the May ex-dividend date, putting that payment in play as well.

Now, the shares remain in the money, and the current price is far enough above the $31 strike that my call could be assigned and the holder of that contract would make a profit – so I’m considering this a probable early assignment.  If I manage to hold the shares through the current contract and collect the dividend, my annualized return is just more than 13%, as shown below.  If not, which is likely, the holding period will be shortened by ten days, and the returns go down to just less than 12% - that is close enough for me to count this one as a success, since my goal on these positions is 12% annualized.

Here’s the analysis of the PFE position, net of fees and commissions, and assuming I collect the May ex-dividend. 

PFE

This is a 300-share position with a basis of $9,263.00, or $30.88 per share.  I have been selling $31 strikes on the shares.

Total covered call premiums:  $276.73
Total dividend payments (including May):  $156.00
Total stock gain at $31:  $19.00
Total, absolute gain on the position:  $451.93
Total, absolute return percentage ($451.93/$9,263.00):  4.88%


Annualized total return percentage (held approx 135 days):  13.19%

Tuesday, April 8, 2014

Unwinding CAT - after 600 Days Held!

I have three transactions I need to post – on Monday I rolled out PFE and FB, and today I unwound CAT.  Since CAT is probably the longest held position in the history of Rescue My IRA, just about 600 days held, I think I will go ahead and post on this transaction first. I’ll post PFE and FB before the end of the week.

CAT was a true “dog of the Dow” for most of 2013, at times I considered dumping it at a loss.  Instead, I decided to manage it intensively, eventually working out a “position recovery plan,” which I posted in February, here:  http://rescuemyira.blogspot.com/2014/02/position-repair-cat.html

Since there was a $2.00 per share bump in the price today, I decided I would go ahead and unwind the position and take the money off the table.  I didn’t hold through the ex-dividend date I forecast for later this month, and I bought to close the $95 May covered call – so my final numbers are a little bit lower than the plan I wrote in February.  Still, the absolute return was over 14 percent, and the annualized calculation works out to almost nine percent – below the goal of 12% annualized, but still a gain, so it’s a win.

I’m going to find a position or two to put these proceeds right back to work.

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

CAT

Shares:
Bought 100 shares in August 2012 at an average price of $87.24, total position basis $8,723.99
Sold on unwind 100 shares at $10,303.27. 
Total stock gain:  $1,579.28

Options:
Total options income:   -$643.17 (By unwinding, I exchanged the option premium for additional stock gains in this trade)

Dividend:
Total dividends collected:  $336.00



Net Profit:
Total Net Profit after Unwinding:  $1,272.11
Absolute Return on Investment: ($1,272.11/$8,723.99) = 14.58%
Annualized Return (600!!!! days):  14.58%*(365/600) = 8.87%

Monday, April 7, 2014

Two New Positions: INTC and MAT

Since adopting my recent cash reserve strategy, where I am holding about a third of the Rescue My IRA value in cash pending a market correction or clear sign of surging ahead, I’ve only managed to keep nine or 10 stock positions going.  My preference is to have 12 to 16, it’s my sense of what is the correct amount of risk reducing diversity in my portfolio.  Acting on this hypothesis, I took the proceeds of my recent GLW unwind transaction, and some residual cash that was at rest in the account, and opened positions with INTC and MAT.

Both are stocks I’ve held before in the account.  I opened May contracts for them – there are now six covered calls with May expirations in Rescue My IRA!  So that will be a busy month.

Here are the position plans for these shares – net of fees and commissions.

INTC

Transactions

Bought 300 shares at average share price $26.57 (total $7,972.00)
Sold 3 27 May 2014 covered calls for $127.24

Net Profit:

1) Options Income:  = $127.24
2) Dividend Income (May 5 ex-date): $67.50
3) Capital Appreciation if assigned at $27.00:  $110.00

Total Net Profit if assigned and dividend collected:  $304.74
Absolute Return on Investment: ($304.74/$7,972.00) = 3.82%
Annualized Return if Assigned (43 days):  3.82%*(365/43) = 32.45%

MAT

Transactions

Bought 200 shares at average share price $40.18 (total $8,036.00)
Sold 2 40 May 2014 covered calls for $280.48

Net Profit:

1) Options Income:  = $280.48
2) Dividend Income (May ex-date, but since I sold an in-the-money call, I’m not including it in the plan): $0
3) Capital Appreciation if assigned at $40.00:  -$54.00


Total Net Profit if assigned and dividend collected:  $226.48
Absolute Return on Investment: ($226.48/$8,036.00) = 2.82%
Annualized Return if Assigned (44 days):  2.82%*(365/44) = 23.38%

Wednesday, April 2, 2014

Two Trades: Rolling out CRUS and Unwinding GLW

As April began, there were three contracts expiring that I needed to plan for:  CRUS, GLW, and PFE.  I rolled out CRUS earlier in the week, and today I unwound GLW.  That leaves me with PFE facing April expiration, and the option ($31 strike) is in the money, so I will let the shares ride until there is no time value left and I can unwind – the transaction is not optimized yet, as it was with GLW today.

In February I last wrote about my GLW position, which was comprised of 600 shares, bought in two lots:

At the $18 strike, I stood to take a small capital loss, but I could collect the dividend and a nice call premium.  Today I was watching the stock closely and saw an opportunity to make an unwind trade that took back some of the capital loss, improving my overall return by a small amount.  I pulled the trigger, and doing so upped the absolute return from 3.19% to 3.36%, almost a full quarter of a point – it doesn’t always work this way, in fact it usually results in a reduction of a few decimals.

In any case, here are the results of the two trades – the CRUS roll-out and the GLW unwind.  As always, results are net of commissions and fees. 

CRUS
This is a 400-share position with a basis of $8,038.00, or $20.10 per share.  I have been selling $20 strikes and rolling them monthly.

Total covered call premiums:  $868.40
Total dividend payments (no dividend):  $0.00
Total stock gain at $20:  -$56.00
Total, absolute gain on the position:  $812.40
Total, absolute return percentage ($812.40/$8,038.00):  10.11%

Annualized total return percentage (held approx 135 days):  27.33%

GLW

Shares:
As noted in the linked post above, this was a 600 share position bought in two lots, with an average price per share of $18.04 and total position basis $10,823.00
Sold on unwind 600 shares at $12,712.71. 
Total stock gain:  $1,889.71

Options:
Total options income:   -$1,585.69 (By unwinding, I exchanged the option premium for additional stock gains in this trade)

Dividend:
Total dividends collected:  $60.00


Net Profit:
Total Net Profit after Unwinding:  $364.02
Absolute Return on Investment: ($364.02/$10,823.00) = 3.36%
Annualized Return (62 days):  3.36%*(365/62) = 19.80%

Sunday, March 30, 2014

Rescue My IRA March 2014 Results

While the market value of Rescue My IRA shows sideways movement for March, the account’s cash value actually grew, so I’d assess this as a good month.  That’s despite the fact that global chaos and tepid economies continue to be in the mix.  As I noted last month, Warren Buffet and others have said that good news or bad, the stock market rises in the long term – so I’m holding my place with about 70 percent of Rescue My IRA in stocks.

I plan to continuing rolling along with this unusually large (at least compared to what I've typically maintained in the account) cash reserve on hand until we get a little bit of a correction, or until the market starts moving up again.  While I have had this strategy in place, I have been a little worried about my portfolio approach – I only have 9 or 10 positions going at the moment, as opposed to the 12 to 16 that I consider optimal.  As cash becomes available from position close outs, I am investing with the goal of lowering the average position value to create more diversity in the account.

To close out these introductory remarks, I’ll repeat that March was a good month:  the account value reached above $158K a couple of times before settling at the value I’m reporting today as of month end. Although it didn’t start out that way, the dividend returns were higher than usual, at $437.00, and call premiums were lower, at $325 – just about a half percent return between the two of them.  Rounding out the returns was a solid gain on ABT, which I unwound earlier in the month, so the account met my goal of more than 1% return for the month.   

Here is a summary of my Rescue My IRA statistics for March 2014, based the March 28, 2014 close.   

Account Status:
·         Total Account Value, 3/28/2014 Market Close:  $157,488.79 (vs. February close of $157,816.52)
·         Total Cash Reserve, 3/28/2014 Market Close:  $53,892.78
·         Core Stock Positions (as of 3/28/2014):   CAT (100 shares), CRUS (400 shares), F (500 shares), FB (200 shares), GLW (600 shares), IP (200 shares), KO (400 shares), PFE (300 shares), PSA (100 shares), WIN (900 shares)

Performance Metrics:
Option Premiums Collected (net, month of March):  $325.26 (0.21 %)
Capital Gains Collected (net, month of March):  $1,135.73 (0.74 %)
Dividends Collected (recognized on the ex-date): $437.00 (0.28 %)
Interest on Cash Reserve (laughable): $0.38
Total, Absolute Return:  $1,898.37 (1.23% absolute return, 14.74% annualized return)

Next Month To-dos:

As I look forward to April, the month looks to be one where it will be a challenge to meet my goal of a 1% absolute return:  only two positions are scheduled for dividends (CAT and F), and I have three calls expiring (CRUS, GLW, and PFE).  The dividend income is offset by slight stock losses on these three positions combined, so I am starting off with a forecast of zero percent absolute return. 

I’m continuing to rebuild my spreadsheets for the account – the battery replacement on the old Dell didn’t end up working.  Mostly, I have everything back to a place where I can manage the account and keep the blog up to date.


I hope my readers have enjoyed a couple of good months in February and March, as I have.  Until April, happy trading!

Monday, March 24, 2014

IP - Rolling Out and Up

I’m still rebuilding my portfolio data, which was lost when my old laptop crashed.  Just rebuilt the proforma spreadsheet for IP, which I rolled out and up last week – so here is an adjustment post about that transaction.

I’ve traded in and out of IP since the beginning of Rescue My IRA.  My current position is the longest I’ve held any contract on these shares.  IP has been bumping along at the top of its trading range, and its failure to break through to a new high has meant I have ended up holding it for the long haul.

Here’s the analysis of the position, net of fees and commissions, and assuming I collect dividends through the holding period.

IP

This is a 200-share position with a basis of $9,592.00, or $47.96 per share.  I have been selling strikes between $47 and $49 strikes and rolling them monthly; the current contract expires in July 2014.

Total covered call premiums:  $684.40
Total dividend payments:  $330.00
Total stock gain at $49:  $190.00
 Total, absolute gain on the position:  $1,204.40
Total, absolute return percentage ($1,204.40/$9,592.00):  12.56%


Annualized total return percentage (held approx 425 days):  10.78%