Spring Flowers at Hawksbill Cabin

Spring Flowers at Hawksbill Cabin
Spring Flowers at Hawksbill Cabin

Friday, June 5, 2015

Another Wash Sale: GM for F

At the beginning of June, Rescue My IRA had 16 positions working.  The trading plan for this account sets a target range for the number of positions in the portfolio at 12 to 16, so we are right at the top of the range.  While we wait for contracts to mature and turn over, it’s time to have a closer look at the performance of some of these trades.

Last month I did a “wash trade” on COP – link here for details – selling a stock that looked to be a slow mover and replacing it for another in the same sector that look more promising, VLO in this case.  I reviewed Rescue My IRA’s portfolio this month with the same objective, and found that a wash trade of F for GM could make some sense.  In the end, that’s what I did – I sold 500 shares of F at a small loss and bought 200 shares of GM, creating a trade that pretty much makes up for the loss in about 30 days.  http://rescuemyira.blogspot.com/2015/05/a-wash-trade-vlo-for-cop.html

Meanwhile, here is the analysis of the two component trades of this wash sale, net of commissions and fees:

F

Shares:
Bought 500 shares in March 2015, total basis $8,292.00 with an average share price of $16.58. I sold the shares for a loss at $15.31.

Options:
Total options income:   $185.47 – I stated with the $17 strikes, but had rolled out to August and down to $16, setting this stock up as a wash sale candidate.   

Dividend:
Total dividends collected:  $75.00

Net Profit:
Total Net Profit after Unwinding:  -$383.72
Absolute Return on Investment: (-$383.72/$8,292.00) = -4.63%
Annualized Return not calculated.

GM

Shares:
Bought 200 shares in June 2015, total basis $7,275.00, with an average share price of $36.38.

Options:
Total options income:   $100.50, I sold July $37 strikes.    

Dividend:
Total dividends collected (June ex-dividend):  $72.00


Net Profit:
Total Net Profit if held through contract:  $279.50
Absolute Return on Investment: ($279.50/$7,275.00) = 3.84%
Annualized Return (45 days):  3.84%*(365/45) = 31.16%

Wednesday, June 3, 2015

Three Roll-outs: AAPL, DOW, and VLO

Once I wrote the monthly results post, I had a look at my portfolio to plan some transactions for the month.  Even though the market continues on an upward trend, we do seem to have hit a point of resistance, so I thought I might take the opportunity to make adjustments or do other maintenance, like I did with the COP/VLO wash trade last month.  I settled on rolling out three positions:  AAPL, DOW, and VLO.

Here are the updated trading plans for these three positions, net of commissions and fees, and assuming forecast dividends are collected during the holding period:

AAPL

Shares:
Bought 100 shares in March 2015, total basis $12,757.99, average share price of $127.57.
Selling $130 covered calls and rolling monthly.

Options:
Total options income:   $871.74 – I started with the May call and rolled out to July with this trade.

Dividend:
Total dividends collected:  $47.00

Net Profit:
Estimated Net Profit:  $1,142.75
Absolute Return on Investment: ($1,142.75/$12,757.99) = 8.96%
Annualized Return (125 days):  8.96%*(365/125) = 26.15%

DOW

Shares:
Bought 200 shares in May 2015, total basis $10,382.00, average share price of $51.92.
Selling $52.50 covered calls and rolling monthly.

Options:
Total options income:   $252.50 – I started with the June call and rolled out to July with this trade.

Dividend:
Total dividends collected (June ex-date):  $84.00

Net Profit:
Estimated Net Profit:  $435.50
Absolute Return on Investment: ($435.50/$10,382.00) = 4.19%
Annualized Return (75 days):  4.19%*(365/75) = 20.41%

VLO

Shares:
Bought 100 shares in May 2015, total basis $5,765.00, average share price of $57.65.  This trade was designed as a wash sale for COP, a stock that had been mired in its 52-week lows - a post about the trade is here.  Selling $60.00 covered calls and rolling monthly.

Options:
Total options income:   $163.25 – I started with the June call and rolled out to July with this trade.

Dividend:
Total dividends collected (no ex-date during holding period):  $0.00


Net Profit:
Estimated Net Profit:  $380.25
Absolute Return on Investment: ($380.25/$5,765.00) = 6.60%
Annualized Return (60 days):  6.60%*(365/60) = 40.12%

Monday, June 1, 2015

Rescue My IRA May 2015 Results

Here with a report of trading activity in Rescue My IRA for May 2015.  The markets have had their ups and downs, but the account is still up by nearly 4% for the year, improving over the April results.   I have decided finally to put a little more of the cash reserves to work on shares, so now the reserve stands at just below 10% - down from the 20% or so in April, and much further reduced from the amounts as high as 35% I was holding last year. 

This has meant finding good candidates to buy and sell covered calls against, and I haven’t always been able to do this.  In some cases, I’ve added shares to the positions when I can’t find a new stock to trade, however, on one or two occasions this month I returned to some old favorites (CSCO and DOW) to set up good trades. 

As I closed the April post, one of my to-do items was to roll-out and roll-up my EMC and TXN positions.  I took care of this early, and both are set to earn a positive return now, at the trade-off of having October contracts against them. 

I also did a “wash sale” – selling COP and buying VLO, working within the same industry to switch horses.  In my previous conventional accounts, we used to do these kinds of trades to take losses on shares while still holding out for rebounds in their industries without having to wait for 20 days to reinvest, as you would have to do if you wanted to maintain a position in the same company.

So we’ll call May 2015 a maintenance month – selective pruning here and there, and a couple of strategic moves to keep momentum going.  All totaled, the result was a little less than half of my goal:  0.42% absolute return vs. the goal of 1%.  I can live with it, and I feel that the decisions I made will set the stage for profits later.

Finally, here is a summary of benchmark results for May 2015- as always, these amounts are net of commissions and fees.

Account Status:
·         Total Account Value, 5/29/2015 Market Close:  $174,180.54 – up from the April ending balance of $172,428.51.
·         Total Cash Reserve, 5/29/2015 Market Close:  $16,653.54 – moved down to just below 10% in cash reserves this month.
·         Core Stock Positions (as of 5/29/2015):  ABBV (100 shares), AAPL (100 shares), CA (300 shares), CSCO (300 shares), DDD (200 shares), DOW (200 shares), EMC (400 shares), F (500 shares), GE (500 shares), NUE (200 shares), PPL (300 shares), QCOM (100 shares), SPY (100 shares), T (400 shares), TXN (200 shares), VLO (100 shares)

Performance Metrics:
·         Option Premiums Collected (net, month of May):  -$351.50 (-0.21%)
·         Capital Gains Collected (net, month of May):  $931.62 (0.56%)
·         Dividends Collected (recognized on the ex-date): $127.00 (0.08 %)
·         Estimated Interest on Cash Reserve: $0.19
·         Total, Absolute Return:  $707.31 (0.42% absolute return, annualized return
5.06%) 

Next Month To-dos:

Rescue My IRA begins the month of June with five covered call positions set to expire in May:  AAPL, DDD, DOW, SPY, and VLO.  Only one of them was in the money at the May 29 close, but they were all within a few cents of my strike prices.  If these stocks are called away, the net returns from stock gains will be $650 – about 0.40% absolute return.  With a good dividend month, that’s pretty far along towards my 1% goal1 

Indeed, the dividend forecast for June is very good:  seven positions go ex-dividend this month.  These will yield $582.75 or 0.35% if I collect them all.  Since AAPL and DOW have covered calls that may be assigned, I could see the dividend haul reduced to $406 or so, and about 0.24%.

That doesn’t leave a lot of work to be done on collecting call premiums, although I’m pretty sure there will be a good number of trades.  Besides the five positions in June, there are currently four July contracts, so managing those nine positions will be a focus – and will likely produce income from premiums.  All in all, June should be a decent month.


So that’s it for May 2015 results.  Until next month, happy trading!

Sunday, May 17, 2015

A Wash Trade - VLO for COP

The value of Rescue My IRA has crossed the $170K threshold and appears to be holding on at that level, so I turned my thoughts to doing some pruning in the covered call positions for the last few weeks.  I looked for candidates with long holding periods and significantly out of the money covered calls where I could do a “wash sale” – taking a loss on one stock and buying a replacement in the same industry – which is an approach you might use in a conventional account to manage capital gains taxes. 

Rescue My IRA is not taxed, but the approach is still a sound one.  Since the covered call portfolio is set up to operate with between 12 and 16 positions going at any given time, it’s expected that there will be one or two losing positions a year – those are offset by one or two big winners – while most of the rest perform according to plan, steadily generating a better than market return.

I settled on reworking the COP position after doing a screen for other petroleum related shares that offered the potential for replacing it.  I quickly found VLO as an opportunity, and pulled the trigger on this trade.  While I ended up taking a four-digit loss on COP, I was able to set up a VLO trade that would recover a third of that in 30 days; and since the account has stabilized around a new high I was able to absorb the loss within the portfolio without affecting performance for the year.

Here’s a final analysis on the COP position, along with the position plan for the VLO shares – as always, these figures are net of commissions and fees.

COP

Shares:
Bought 100 shares in September 2014 at a basis of $8,050.99, or $80.51 per share. 
Sold the shares netting $6,531.87, for a loss on share value of around $1,500.00.

Options:
Total options income:   $364.95 – I started with the $80 strikes, but had rolled down to $72.50, and even with this approach it didn’t appear the stock would rise to a callable level anytime soon.

Dividend:
Total dividends collected:  $146.00

Net Profit:
Total Net Profit after Unwinding:  -$1,008.17
Absolute Return on Investment: (-$1,008.17/$8,050.99) = -12.52%
Annualized Return (240 days):  -12.52%*(365/240) = -19.04%

VLO

Shares:
Bought 100 shares in May 2015 at a basis of $5,765.00, or $57.65 per share. 

Options:
Total options income:   $102.75 – I sold a June $60 option on these shares.

Dividend:
Total dividends expected:  $0.00 – there’s no ex-dividend date during the holding period.


Net Profit:
Total Planned Net Profit at $60.00:  $217.00
Absolute Return on Investment: ($319.75/$5,765.00) = 5.55%
Annualized Return (30 days):  5.55%*(365/40) = 37.48%

Wednesday, May 13, 2015

Unwinding FCX

When I picked FCX for a trade last month, I knew I was choosing a stock with a lot of volatility, as well as one that gets a lot of talk in various forums.  These facts define shares that I would normally not deal with in Rescue My IRA, but I did have the capital at the time and the potential profit on the trade seemed to offset the risks of a short-term position, so I bought 500 shares and sold covered calls against them.  I was able to unwind the position for a good profit in early May, after a six week holding period. 

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

FCX

Shares:
Bought 500 shares in March 2015.  The total basis was $9,467.00 with an average share price of $18.93.
I unwound the position in early May at an average price of $23.84, for a total gain of $2,450.74

Options:
Total options income:   -$1,527.92 – as is often the case on unwind trades, I traded option premiums for stock gains.

Dividend:
Total dividends collected:  $25.00


Net Profit:
Total Net Profit after Unwinding:  $947.82
Absolute Return on Investment: ($947.82/$9,467.00) = 10.01%
Annualized Return (45 days):  10.01%*(365/40) = 81.21%

Two New Positions: CSCO and DOW

So far in May, I’ve opened two new Rescue My IRA positions, one each in CSCO and DOW.  I’ll catch up those posts today with an assessment of the position plans. 

I placed the DOW trade first, early last week.  The source of funds was the proceeds of the FCN trade, which I had unwound for a profit – I guess that is another post I should catch up on this week! 

The CSCO trade was one I decided to place after thinking a little bit about the market:  I think it has legs until October or so, once election activities get hot and heavy and we collectively start thinking about what the change will mean.  Until then, I wanted to get more of my cash reserves into stock, so with the CSCO trade I have the ratio down to around 12 percent.

Here are the position plans for CSCO and DOW, net of commissions and fees. 

CSCO

CSCO is one of a half dozen or so stocks I have traded multiple times in Rescue My IRA.  I bet there has been at least one per year and probably two per year a couple of times.  It’s such a well-recognized brand name that I have no reservations choosing it, as long as it meets my other selection criteria.

Transactions

Bought 300 shares in two transactions at average share price $29.14 (total basis $8,741.99)
Sold 3 $30 June 2015 covered calls

Net Profit:

1) Options Income:  = $141.25
2) Dividend Income (no dividend forecast during contract): $0.00
3) Capital Appreciation if assigned at $30.00:  $240.01

Total Net Profit if assigned in June:  $381.26
Absolute Return on Investment: ($381.26/$8,741.99) = 4.36%
Annualized Return if Assigned and Dividend Collected (40 days):  4.36%*(365/40) = 39.80%


DOW

I traded DOW earlier this year.  When I ran my screen to reinvest the proceeds from FCN, it was the only stock I did not currently hold in Rescue My IRA.  So there you go.

Transactions

Bought 200 shares at average share price $51.92 (total basis $10,383.00)
Sold 2 $52.50 June 2015 covered calls

Net Profit:

1) Options Income:  = $205.50
2) Dividend Income (no dividend forecast during contract): $0.00
3) Capital Appreciation if assigned at $52.50:  $99.00


Total Net Profit if assigned in June:  $304.50
Absolute Return on Investment: ($304.50/$10,383.00) = 2.93%
Annualized Return if Assigned and Dividend Collected (45 days):  2.93%*(365/45) = 23.79%

Tuesday, May 5, 2015

Rescue My IRA: April 2015 Results

Here’s the monthly report for Rescue My IRA: while we’ve had some decent market volatility this account is up by nearly 3% for the year.  My side venture of Hawksbill Hop Yards is still keeping me busy (you can read about the farm here:    

My strategy of reducing cash reserves to between 15-20% of the account value seems to be working out, although I have to admit I picked a few stocks I am not entirely happy with – I compromised my selection criteria on one or two of them so I will be riding these out.  However, there are 14 positions in the portfolio as of April 30, so the risk from those few is spread out over some higher quality positions.

In April, the bulk of the returns - $1,860 – was produced from stock gains as four positions were either called away or unwound:  FB, HAL, JPM, and SPY.  Covered call premiums were at about breakeven, mainly due to the position unwinds that generated the offsetting gains above, and it was a good month for collecting dividends – Rescue My IRA earned just over $400 through this category of income. 

Here is a summary of benchmark results for April 2015- as always, these amounts are net of commissions and fees.

Account Status:
·         Total Account Value, 4/30/2015 Market Close:  $172,428.51 – up from the March ending balance of $169,187.41.
·         Total Cash Reserve, 4/30/2015 Market Close:  $26,314.51 – still tracking in the 15-20% range.
·         Core Stock Positions (as of 4/30/2015):  ABBV (100 shares), AAPL (100 shares), CA (300 shares), COP (100 shares), EMC (400 shares), F (500 shares), FCX (500 shares), GE (400 shares), NUE (200 shares), PPL (300 shares), QCOM (100 shares), SPY (100 shares), T (400 shares), TXN (200 shares)

Performance Metrics:
·         Option Premiums Collected (net, month of April):  -$109.14 (-0.07%)
·         Capital Gains Collected (net, month of April):  $1,859.97 (1.11 %)
·         Dividends Collected (recognized on the ex-date): $407.00 (0.24 %)
·         Estimated Interest on Cash Reserve: $0.30
·         Total, Absolute Return:  $2,158.13 (1.29% absolute return, annualized return
15.45%) 

Next Month To-dos:

Rescue My IRA begins the month of May with four covered call positions set to expire in May:  AAPL, EMC, FCX, and TXN.  It looks like I am pretty far underwater on EMC and TXN, so I’ll take early action to roll these two out, although I may have to go pretty far into back months for this – possibly July, or worse, October.  We’ll see what we can work out on those, meanwhile, the gains on FCX and AAPL should hold us over.   

The dividend forecast is not as good as April but still not bad:  there are four positions going ex-dividend this month, yielding $315.00.  One of these, AAPL, is in the money with a May expiration, so it’s not likely I’ll be holding this one on the ex-date, reducing the dividend haul to $263.00.

Assuming I can roll out EMC and TXN, the account will have a good month during May, otherwise it will be a breakeven month.  The market seems to be holding forth with steady gains, so I’m content to watch and wait, although I will do a better job of staying true to my stock picking criteria. 


So that’s it for April results.  Until next month, happy trading!