Diversion

Monday, January 2, 2017

Rescue My IRA: 2016 Retrospective

This year’s final report on Rescue My IRA results will closely follow the 2015 format – it summarized the key highlights without spending too much time on the monthly commentary.  So here goes:

BLUF, or Bottom Line Up Front:
  • From January through December 2016, Rescue My IRA rose from a balance of $159,592.67 to $183,945.12.  January was tough, as that result was down from the December 2015 balance of 167,609.77, which I use as the basis of year-to-year comparisons.  
  • The dollar gain for the year, calculated on a December to December basis, was $16,335.35, or 9.75%.  This result is right on the benchmarks used for the account – the S&P 500 gain was 9.54%, and the SPY ETF gain was 9.64%. 




Long-term Performance:

In dollar terms, the account’s statement value has increased from $127,606.44 at the start of 2012, to $183,945.12 at the end of 2016, a gain of more than $68K.  Besides the S&P 500 and SPY ETF results I mentioned above, a third benchmark I use is a goal of a 12% annualized return. Here’s a summary of the results, by year:
  • 2012: 4.11%
  • 2013: 16.31%
  • 2014: 8.50%
  • 2015: 0.00%
  • 2016: 9.75%

The average annual return for these five years is 7.73% - that’s not bad, but it is short of the 12% goal I’ve set for Rescue My IRA – and it basically matches the long-term average return on the S&P 500.  Last year I found the calculator at http://www.moneychimp.com/features/market_cagr.htm, which suggests I could have done closer to 16% over this time frame, 2012-2016.  

Analysis:

There are a few possible reasons that explain why Rescue My IRA falls short of the benchmarks on annual basis.  Most importantly is my status as a small time retail investor – which means I pay fairly high fees on average, and my trades are all manually entered, a process that is less efficient to computerized trading. 

Although it didn’t hurt the results as much in 2016, I have steadily increased the amount of cash reserves in Rescue My IRA.  At year end the account was nearly 41% in cash, which is a risk management philosophy I will pursue for the near term, as I expect the market to turn south during 2017.  This approach has the potential for reducing returns during 2017 if I am wrong and the market continues an upward trajectory. 

I’ve continued using the strategy of focusing on S&P 500 stocks, and specifically choosing shares that are rated 4- or 5-stars and paying dividends in the range of from 3% to 5% annually.  This approach may limit how many home runs I get, but it does reduce my risks as well.

I’m happy with the results and I have a good feeling about what I’m accomplishing by being in control of the investment choices and approach in Rescue My IRA – and that is one of my primary goals for this account. 

Resolutions for 2017:

During 2016, I finally found a way to put the cash reserves to work by selling cash secured puts on the SPY ETF.  The results were decent and certainly contributed to matching the market.  For now, however, at least for the first half of 2017, I will not use this strategy, as I believe we are in for a correction and I would likely get assigned the puts.  I’ll just keep the money in cash for now – although I may look at some preferred stocks as an alternative.

I had thought about retooling the Rescue My IRA trading plan last year, but never did it.  Now that I have some practice with the Cash Secured Puts approach, it seems like I need to incorporate it in the write-up. 

One final idea – while I appreciate the risk mitigation that portfolio diversity offers, and that is why Rescue My IRA will usually have between 12 and 16 active positions at any given time, I could go for a simplified approach that uses S&P 500 ETFs, like SPY, as a surrogate for the actual shares.  I hope be able to spend some time working on a strategy for doing this during 2017 – we’ll see. 

In conclusion:

As we look at the brave new world of 2017, there are things I hope I am wrong about, namely my concerns about a near-term market downturn or recession; but I also believe in the long-term growth of the stock market, so that there is the possibility of a positive year overall.  I’m simply going to put a larger cash reserve in place and wait it out. 


I hope my readers had a great 2016, and are looking forward to an excellent 2017.  Happy trading to all! 

Saturday, December 31, 2016

Rescue My IRA: December 2016 Results

Last month during my catch-up post for October and November, I posted a strategy that I had begun to put in place for Rescue My IRA as we look forward to what 2017 holds.  I’ll start this month with a brief recap of those ideas, since I’m continuing to execute trades based on those assumptions.

Looking forward to 2017, I believe that the market faces headwinds from two factors:  first, the market has to come to terms with the American election; and second, we have to remember that we’ve been on an 8-year recovery since the end of the so-called Great Recession of 2007.  Even though the market appears to have responded positively to the election, it seems to me that we are due for a cyclical consolidation now, and that would have likely happened no matter how the election turned out.     

My focus for now, until we see how these variables play out, is to take money off of the table and hold it as cash reserves.  I started in August with about $34,100 in cash, and as of December 30, I had increased that amount to $72,000 – about 41% of the account value.  I will continue to work on getting this amount to 50% of the account value while simultaneously maintaining the other risk management strategy I have, keeping a portfolio of between 12 and 16 positions in play. 

The near-term downside of this strategy is that there is less money working for me in the market, so it is reasonable to expect that monthly results will fall short of the S&P 500 and SPY benchmarks I use to track performance.  That didn’t happen in December, thanks in large part to a tax-free spin-off from XRX (I counted the new shares as a dividend for tracking purposes) – and Rescue My IRA ended up slightly ahead of the market.  However, in the early months of 2017, I expect that the account will lag the benchmarks, no matter whether the market is up or down. 

I’m planning to do a 2016 annual recap next week, but meanwhile, here is the benchmark data for the account during December:     

Account Status:
·        Total Account Value, 12/30/2016:  $183,945.32, up from the November close of $180,605.81
·        Total Cash Reserve, 12/30/2016:  $72,046.12, or about 41%
·        Core Stock Positions (as of 12/30/2016):  AAPL (100 shares), ABBV (100 shares), CMCSA (100 shares), CNDTw (100 shares – this is the tax-free spin-off from XRX), CTL (300 shares), DIS (100 shares), FB (100 shares), GE (200 shares), GM (200 shares), IP (200 shares), KO (200 shares), MAS (300 shares), MDLZ (200 shares), MOS (200 shares), XRX (500 shares)
·        Cash Secured Put (CSP) positions (as of 12/30/2016):  None

Performance Metrics:
·        Option Premiums Collected (net, month of Dec):  -$624.02 (-0.37%)
·        Capital Gains Collected (net, month of Dec):  $848.87 (0.51%)
·        Dividends Collected (recognized on the ex-date): $1,796.25 (1.07%) – includes tax-free spin-off from XRX
·        Estimated Interest on Cash Reserve: $0.62
·        Total, Absolute Return:  $2,021.72 (1.21 % absolute return, estimated annualized return 14.47%) 
·        S&P 500 Index 2016 year to date performance as of 12/30/2016: 9.54%
·        SPY ETF year to date performance as of 12/30/2016:  9.64% 
·        Rescue My IRA year to date performance as of 12/30/2016: 9.75%

Next Month To-dos: 
In keeping with past practice, during 2017, whenever a percentage is shown in the monthly forecast, it is calculated using the December 31, 2016 account valuation.  Also, the forecast and actual returns are always calculated on a “net of commissions and fees” basis, since these are costs that lower the amounts I receive. 

For January, there are two positions that will go ex-dividend, ABBV and MAS, yielding an estimated $94.00 in dividends.  At the time of this writing, ABBV has an in-the-money January call written against it, so it is probable that the stock will be called away, reducing the dividend haul to $30.00 from MAS.  The expected yield from dividends is either 0.05% or 0.02% for the month – the balance of returns will need to come out of stock gains or premiums. 

The account’s continuing situation is that many of the covered call positions in Rescue My IRA are month-to-month contracts.  In January, seven positions face expiration dates:  ABBV, CMCSA, CTL, FB, GE, IP, and MOS.  Only four are in-the-money as I write this summary, but if all seven are called away, the account will recognize revenue of $759.02 from stock gains.   

For now, these estimates add up to about half of my goal for the month, which is a net return of about 1%.  Given the cash reserve strategy in place, I expect some challenges – but I’m up for it, and I’m looking forward to seeing what the market holds.  My outlook is not quite bearish, but certainly aware of some potential risks in the market, so I don’t expect much for the first few months of the year.    


That is the December update.  I’ll post a 2016 wrap up later this week.  Until next month, happy trading!

Sunday, December 4, 2016

Rescue My IRA: November 2016 Results

Well, somewhere around the middle of the month, I realized that I hadn’t written my monthly update for October 2016.  That’s the first time I’ve missed the monthly recap in five years on this blog.  The only pitiful excuse I can offer is that I was pretty fascinated by the last few weeks of the US election – fascinated then, and truly disappointed now, like millions of others – I don’t see how an embarrassment a day, as we have experienced over the last month, is going to “make America great again.”

America is already great, and I believe we’ll survive this election, despite the President-elect’s high school level understanding of the global economy and macro-economics in general.  My strategy going forward will simply be to hunker down in the near-term, and accept what is likely to be a lower than average return in Rescue My IRA, at least for the first year of the new administration.

It’s my sense that two factors will be setting up some market headwinds as 2016 ends: first, the market has to come to terms with the American election, and during November we saw that there appears to have been a relatively positive response.  More on my results in Rescue My IRA shortly.

We also have to consider that we’ve been on a long-running recovery, essentially throughout the 8-year timeline of the current administration.  There will be many who disagree with me on this characterization, but those folks will disagree with me on a whole lot more than that, and so be it.  If we simply step back from our disagreements and consider the probability of an economic slowdown, or even recession, after nearly eight years of growth, we need to take a sober assessment of the situation – and my conclusion is that we are due for cyclical consolidation now, and we would have been, however the election turned out.

So, I’m turning my thoughts to preparing for that situation by taking money off of the table.  During November I started to take money off of the table and build cash reserves so that I could watch and wait to see what will happen, and as I write this in early December, I currently have $62,500 in reserves.  To show the growth of cash reserves, in September, I had $34,100 or so in reserves, representing just about 17% of the account; that increased to $40,100, or 22.5% in October, and $53,200, or 30% by November.

My goal will be to get this amount to around 50% of the account value and hold it there until I can get a good sense of how things are going to go.  If the markets are positive during this time, Rescue My IRA will underperform, but if my hunch is correct, my account value will hold a little more of its value than the market overall.

That said, here is a summary of result highlights for October:

·        Total Account Value, 10/31/2016:  $177,497.69, slightly down from the September close of $178,312.12
·        Total Cash Reserve, 10/31/2016:  $53,161.61, or about 29.95%
·        S&P 500 Index 2016 year to date performance as of 10/31/2016: 4.0%
·        SPY ETF year to date performance as of 10/31/2016:  5.9% 
·        Rescue My IRA year to date performance as of 10/31/2016: 5.9%

Here is the benchmark data for the account during November:     

Account Status:
·        Total Account Value, 11/30/2016:  $180,605.81, up from the October close of $177,497.69
·        Total Cash Reserve, 11/30/2016:  $53,165.61, or about 30%
·        Core Stock Positions (as of 11/30/2016):  AAPL (100 shares), ABBV (100 shares), DIS (100 shares), FB (100 shares), GE (200 shares), GM (200 shares), IP (200 shares), JNPR (300 shares), MAS (300 shares), MDLZ (200 shares), MS (200 shares), SPY (100 shares), T (200 shares), TXT (200 shares), XRX (500 shares)
·        Cash Secured Put (CSP) positions (as of 11/30/2016):  None

Performance Metrics:
·        Option Premiums Collected (net, month of Nov):  -$533.01 (-0.33%)
·        Capital Gains Collected (net, month of Nov):  $1,975.69 (1.18%)
·        Dividends Collected (recognized on the ex-date): $179.60 (0.11%)
·        Estimated Interest on Cash Reserve: $0.20
·        Total, Absolute Return:  $1,602.38 (0.96 % absolute return, estimated annualized return 11.52%) 
·        S&P 500 Index 2016 year to date performance as of 11/30/2016: 7.58%
·        SPY ETF year to date performance as of 11/30/2016:  8.10% 
·        Rescue My IRA year to date performance as of 11/30/2016: 7.75%

Next Month To-dos:
During December, there are six positions that will go ex-dividend for the month, yielding an estimated $377.75 in dividends.  If all of these dividends are collected, the expected yield is 0.23% for the month. 

Currently, many of the covered call positions have evolved into month-to-month situations.  In fact, at the start of December, a total of eight contracts had forecast expiration dates during the month.  At the time of this writing, the first weekend of the month, five positions are still in play.  Four are in the money, and one is out of the money, but the forecast gains from these stocks are $436.78 or 0.26% yield. 

With about half of my monthly goal of 1.00% return forecast from these activities, covered call premiums will need to make up the balance.  We’ll see how that turns out in light of my updated cash reserve strategy – it will certainly be a stretch.  The flip side of that risk, however, is capital preservation…I hope so, at least!

That’s it for the November update – as always, the results are reported net of commissions and fees.  I certainly hope that the markets will perform before than my prognostication.  In any case, until next month, happy trading!

Tuesday, October 11, 2016

Thoughts on Cash Secured Puts, Part 2

Last week in this post I wrote about the strategy of using Cash Secured Puts (CSPs) in Rescue My IRA to augment the five-year track record I have in that account with covered calls.  The post referred to the Options Industry Council (OIC) web page, summarizing the information there into an overview of CSPs:

…the risk profile of a CSP trade, while significant (as with any option strategy), is essentially equal to the risk of a covered call trade.  Both trades are focused on the prospect of owning the underlying security, which has market and equity value, rather than trading on the value of the financial instrument represented by the option.  
 
My plan for this second and final post in this introductory series about CSPs is to document what I’ve learned about these options so far, since I began trading them in June 2016.  So far, I’ve sold these options against eight underlying securities:  MOS, VLO, CMI, IP, SKX, FLR, TGT, and SPY.  For the record, my experience with MOS and VLO have already resulted in a refinement of the strategy:  never sell a CSP on a stock or fund that you don’t care to own!

My approach so far has been slightly contrary to the concept outlined on the OIC page.  Instead of using the CSP to discount the eventual price of owning shares, I’ve sought to avoid assignment and to collect premiums for a net gain, essentially trading the CSP as a security in its own right.  This means combining sell-to-open (STO) and buy-to-close (BTC) trades following the old stock market maxim of buying low and selling high, except in reverse.

Still, I’ve had my VLO and TGT trades result in assignment.  These price of these stocks dropped quickly in the days just before my CSPs expired, leaving my options in-the-money, so the shares were assigned.  Although I was able to quickly close those positions at a gain, it reminded me that I still have to do my due diligence research on these trades, and I have since then.

For future CSP assignments, my plan is to simply convert the trade into a covered call situation, writing new options against the same strike price.  In these cases, the CSP premium can be considered a discount, so being called away at the original strike will actually result in a stock gain in these trades.  The takeaway for me is that this is exactly what the OIC described.

Since August, most of my CSP trades used the exchange traded fund SPY as the underlying security, and I’ve evolved to using weeklies in the process.  The contracts were never assigned.  Here is the September record of the SPY trades:
  • Three weekly CSPs at strikes between $212.50 and $216.00
  • Net option premiums (includes STO/BTC trades and commissions and fees):  $274.00
  • Absolute return against highest strike price:  1.26%
  • Annualized return based on 21 days invested:  21.98%

Thus, at least for the month of September, I was able to achieve the investment goal that Rescue My IRA uses as a guideline:  seek an annualized return of 12%.  Some of my colleagues on the Yahoo Just Covered Calls board write about their goal of 24% annualized.  That goal seems feasible to me, although achieving it probably will require more research and experience than I have so far.


My way forward is to continue with these trades and build on my experience of 12 or so trades to date.  I do use the portfolio concept of holding 12 to 16 positions as a way to mitigate the risk of trades going extremely south, and it’s inevitable that I will take some hits, but my sense of it is that by combining the due diligence approach I use with covered calls and limiting my picks to stocks I wouldn’t mind owning otherwise will make that risk manageable.

When I have cash sitting in reserve, that capital's return is negligible.  So these CSPs should lead to an improvement in that situation, and improve the annual results for Rescue My IRA in the process.

Tuesday, October 4, 2016

Thoughts on Cash Secured Puts, Part 1

After some background reading, and after several years’ worth of posts on the Just Covered Calls Yahoo board, I decided I might try incorporating Cash Secured Puts (CSPs) to set up trades in my Rescue My IRA account.  I started making CSP trades in June this year and have written contracts on eight different stocks.  In keeping with my goals for the blog, I thought I might write up a two-parter on what I have learned so far.

Before starting on this topic, I’ll recap the history of Rescue My IRA, which I started in October 2011 with the goal of generating positive returns in good and bad markets.  The trading strategy I chose used covered calls in trades that were initiated either as buy-write transactions or sold against portfolio holdings.  My objectives were to generate returns from three sources:  option premiums, stock gains, and dividends, and to manage capital risk with careful stock selection and account monitoring.

Except for 2016, which was remarkably precisely a break-even year, the account has had positive returns every year since its inception in 2011, and a simple average of the annual rate is about 6.50%.



At the suggestion of one of the members of the Yahoo board, I put together a trading plan to guide trading in this account.  I seek to have between 12 and 16 positions in play at any given time, a portfolio approach that means that I am likely to have some big winners and big losers, but the majority of my trades are likely to generate average returns.  Although each trade is set up to achieve an annualized return of 12 percent, the accounts growth reflects only six to seven percent annualized.

As far as stock picking goes, I tried to simplify the rules into a critical three or four elements:  must be a part of the S&P 500 Index, should be rated 4- or 5-stars by S&P, should pay a dividend at an annual rate of from three to six percent, and generally should be a mid-cap or larger.  There is a combination of liquidity in these rules, meaning I don’t get stuck in trades while trying to execute strategic moves, and the dividend yield rule of thumb combined with the 4-star rating tends to mean I’m picking stocks with more upside opportunity than downside risk.

Because I typically have anywhere from 10 to 30 percent of the account value sitting in cash reserves, and the interest paid on those balances is negligible, I began looking for a strategy I could incorporate to generate additional returns.  Then I learned that my fellow investors regard CSPs as substantially the same as covered calls, and Scottrade began allowing them in IRAs.  A severe price reduction in the underlying security could still create significant risks with any individual holding, but it seems to me that the liquidity aspect of these trades reduces the overall risk of any given contract.

Before I get into what I’ve actually learned from CSP trading already, I thought I would take a minute to cobble together an overview of CSPs, summarized from the Options Industry Council web page:




That web site notes that the risk profile of a CSP trade, while significant (as with any option strategy), is essentially equal to the risk of a covered call trade.  Both trades are focused on the prospect of owning the underlying security, which has market and equity value, rather than trading on the value of the financial instrument represented by the option.    

Saturday, October 1, 2016

Rescue My IRA: September 2016 Results

Continuing with the recent trend of starting these monthly Rescue My IRA blog posts with a comparison of some benchmarks to the performance of my account, the covered call approach is holding its own for 2016 year-to-date through September 30.  The account has achieved 6.39% for the year so far, while the S&P 500 index is at 6.08%, and the SPY ETF is at 6.10% - that’s the first time the account has been slightly above the other benchmarks.

Some Cascade hops cones from the 2016 harvest.
On a side note, my home brewing hobby has now turned into a business.  Last year, I started a farming venture to grow hops, which I used in my hobby brews but have also sold to a few Virginia breweries.  This year I pulled the trigger on starting a Nano brewery in the Shenandoah Valley with a five-barrel brew house; all of the financing is in place, the equipment is being fabricated, the mechanical, electrical, plumbing, and construction contracts are in place, and we have submitted for licenses – we hope to open in March! 

I’ve added the second benchmark here, SPY ETF, at the suggestion of one of my colleagues on the Yahoo Just Covered Calls board.  While the ETF is one of my frequent covered call trades, and I have often written Cash Secured Puts (CSPs) against it since early this year, the hypothesis is that it may be a better benchmark than the S&P 500 tracker, since dividends are incorporated, and they are a key part of the strategy for Rescue My IRA.

It was a busy month for the account, with trading activities balanced between option premiums and stock gains.  The highlight was dividends, with eight positions hitting their ex-dividend dates and yielding almost $560 – that amount comprises the cash yield on the account. 

During the month I unwound two positions with the goal of settling back into the routine of having from 12 to 16 trades in progress (the month ended with 15 trades in place).  The cash balance is averaging about 20 percent, but I am using that as a way to write CSPs with about 10 percent of the account value.  To date, most of these trades are on the SPY ETF, as noted above; I think this may be my way forward on   

To keep moving forward in business and in life, we have to keep learning.  That’s where I’m coming down on the CSP question – it is adding value to Rescue My IRA.  I’ll put together a blog post about the approach I’m using later this month.

Here is the benchmark data for the account during September:     

Account Status:
·        Total Account Value, 9/30/2016:  $178,312.12, up from the August close of $177,642.51
·        Total Cash Reserve, 9/30/2016:  $40,066.12, or about 22%
·        Core Stock Positions (as of 9/30/2016):  AAPL (100 shares), DIS (100 shares), DOW (200 shares), FB (100 shares), GM (200 shares), IP (200 shares), MDLZ (200 shares), MET (200 shares), NUE (200 shares), PPL (200 shares), QCOM (100 shares), SPY (100 shares), T (200 shares), TROW (100 shares), XRX (500 shares)
·        Cash Secured Put (CSP) positions (as of 9/30/2016):  None

Performance Metrics:
·        Option Premiums Collected (net, month of Sep):  -$1,306.00 (-0.78%)
·        Capital Gains Collected (net, month of Sep):  $1,286.08 (0.77%)
·        Dividends Collected (recognized on the ex-date): $556.75 (0.33%)
·        Estimated Interest on Cash Reserve: $0.24
·        Total, Absolute Return:  $537.07 (0.32 % absolute return, estimated annualized return 3.85%) 
·        S&P 500 Index 2016 year to date performance as of 9/30/2016: 6.08%
·        SPY ETF year to date performance as of 9/30/2016:  6.10% 
·        Rescue My IRA year to date performance as of 9/30/2016: 6.39%

Next Month To-dos:
During September, I had to carefully manage six covered call trades that were expiring during the month.  I unwound two of these, and rolled out several of them, mostly to October, so this month starts with seven positions forecast to expire. 

Two positions are long-term under water:  NUE and XRX, so I am looking to roll them out and up; I’ve picked out some January strikes as my strategic targets for these.  If I am successful with those two, and the remaining five positions play out, the account will be most of the way to achieving my goal of 1% cash return during October. 

Four of the remaining five positions are narrowly out of the money, and one is in the money.  I can predict a busy month of either rolling out some of these or setting up new trades if they end up getting called away at expiration.

After all the dividends in September, there is only one position with an ex-dividend date in October.  The stock is T, and since the November contract I have on it is out of the money, I am forecasting that Rescue My IRA will collect that $96.00.


That’s it for the September update – as always, the results are reported net of commissions and fees.  Until next month, happy trading!

Saturday, September 3, 2016

Rescue My IRA: August 2016 Covered Call Trading Results

As I have been doing this year, I will start the post with a comparison of Rescue My IRA year-to-date results with the S&P 500 figure, sourced from the Money Magazine web site.  and will continue to do so.  As of August 31, the year-to-date performance of the S&P 500 was 6.34%, and the year-to-date performance of Rescue My IRA was 5.44%, so we are staying close to the benchmark.

The performance gap closed a bit this month, possibly for two reasons:  first, I have started using cash secured puts (CSPs) in the portfolio, and second, I lowered the cash reserve I have been keeping to approximately 10 percent, although at month end I had my BAC shares called away due to an August 31 ex-dividend date so I am sitting at about 17 percent to start the month of September.

All in all, there is not much to report in terms of activity during August, except it was a steady, busy month of trading.  At one point during the month Rescue My IRA had 17 covered call positions in play and two CSPs – that is three trades higher than what I might usually have.  The goal has been to maintain a portfolio of between 12 and 16 positions, but I’ll rationalize this exception by saying it does appear that the trading has set the account up for a good September, which I will describe after the benchmarks:   


Account Status:
·        Total Account Value, 8/31/2016:  $177,642.51, up from the July close of $176,729.72
·        Total Cash Reserve, 8/31/2016:  $30,089.51, or about 17%
·        Core Stock Positions (as of 8/31/2016):  AAPL (100 shares), CSCO (500 shares), DIS (100 shares), DOW (200 shares), FB (100 shares), GM (200 shares), HST (300 shares), MDLZ (200 shares), MET (200 shares), NUE (200 shares), OXY (100 shares), PPL (200 shares), SPY (100 shares), TGT (100 shares), TROW (100 shares), XRX (500 shares)
·        Cash Secured Put (CSP) positions (as of 8/31/2016):  None

Performance Metrics:
·        Option Premiums Collected (net, month of Aug):  -$1,084.83 (-0.65%)
·        Capital Gains Collected (net, month of Aug):  $1,786.40 (1.07 %)
·        Dividends Collected (recognized on the ex-date): $125.00 (0.07%)
·        Estimated Interest on Cash Reserve: $0.24
·        Total, Absolute Return:  $827.61 (0.49% absolute return, estimated annualized return 5.93%) 
·        S&P 500 Index 2016 year to date performance as of 8/31/2016: 6.34%
·        Rescue My IRA year to date performance as of 8/31/2016: 5.44%

Next Month To-dos:

As of this writing, there are six covered call contracts expiring in September:  CSCO, DOW, MDLZ, MET, OXY, and TROW.  If all of them are called away on expiration (they are a mix between the 2 Sep weeklies and the conventional contracts), the account will net stock gains of $602.11, or 0.36% absolute return on the account.  A number of these stocks go ex-dividend during September, so the likelihood of assignment and receiving these gains is high.

September is always a good month for dividends, and 10 of the current positions will go ex-dividend this month.  If I collect the dividends on all of them – DOW, GM, HST, MDLZ, NUE, OXY, PPL, SPY, TROW, and XRX – the haul is $692.75, or 0.41% absolute return.   However, there is significant overlap with the expiring contracts this month, and I am forecasting that the total of dividends will be more like $259.00, due to the likelihood of having many of the stocks called away.

The lower dividend factor will be fine with me if the stock gains are achieved – it’s a total of $851.11, or around 0.51% absolute return.  I’ll need to make up another $850.00 or so to cover my monthly goal of 1.00% absolute return – but, hey, bring it on!


So that’s my update for August.  Until next month, happy trading!