Spring Flowers at Hawksbill Cabin

Spring Flowers at Hawksbill Cabin
Spring Flowers at Hawksbill Cabin

Sunday, August 2, 2015

Rescue My IRA August 2015 Results

During July, the market continued the summer doldrums, moving downwards, and as a result, the statement value of Rescue My IRA has dipped below where it started for the year.  The ending balance, is less than 1% down from the January 1 balance, that’s not where I’d like to see it, but that’s the market we have, not the one we want, Donald Rumsfield!

I took advantage of these movements and bought to close and then sold to open some of my covered calls, trading them as securities in their own right, if you will.  This strategy brought in almost $1,300 in premiums to the account this month – a result that did help pacify any worries I might have about where the market is headed next.

The situation means I’ll be keeping a careful eye on my core positions and the profitability of the covered calls I’ve written. With many of them out of the money and in back month contracts, the temptation is always there to do a buy to close and roll down – the portfolio can handle this type of activity and still be profitable overall, but it’s not my preferred approach, and it takes a lot of work.  It’s probably better to stay in a hands-off mode until the summer is over.

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

Account Status:
·         Total Account Value, 7/31/2015 Market Close:  $166,516.56 – that’s down from the June ending balance of $169,438.04, and down from the account’s 2015 starting point of $167,659.68.
·         Total Cash Reserve, 7/31/2015 Market Close:  $30,090.56 – just less than 20%, and I am still looking to move up to 50% by October.
·         Core Stock Positions (as of 7/31/2015):  AAPL (100 shares), CSCO (400 shares), DDD (500 shares), DOW (200 shares), EMC (400 shares), FB (100 shares), GE (500 shares), HPQ (400 shares), MSFT (200 shares), NUE (200 shares), SPY (100 shares), TXN (200 shares), XRX (500 shares)

Performance Metrics:
·         Option Premiums Collected (net, month of July):  $1,296.46 (0.77 %)
·         Capital Gains Collected (net, month of July):  -$339.25 (-0.20 %)
·         Dividends Collected (recognized on the ex-date): $152.00 (0.09 %)
·         Estimated Interest on Cash Reserve: $0.20
·         Total, Absolute Return:  $1,109.41 (0.66 % absolute return, annualized return is estimated at 7.94%) 

Next Month To-dos:

August is no better for dividends than July was, with only two ex-dividend dates forecast:  AAPL and MSFT, for a total of $114.00, or a 0.07% return on the portfolio.  September will be better, but this forecast leaves a lot of work to be done in August to make my goal of an overall return of 1% monthly. 

The forecast of covered call contracts set to expire this month include an August 28 FB strike of $95 and an August 21 MSFT strike of $46.50.  As of this writing, MSFT is in the money, and FB is just out of the money; because I set these contracts up with in the money contracts I’ll take a small capital loss on both of them if I let them get called away, which I am inclined to do, as I am still trying to grow the cash reserve through October.

On a further point of clarification:  the MSFT position is set up to yield an absolute of 3.33% over the 30 day holding period, even with the stock loss.  With the ex-dividend date of August 18, even if the August contract is called early and I lose the dividend, the position will have earned an absolute return of nearly 3%, so I’m good with that.

Similarly, on the FB position, the position was set up in the money to yield just about 3% over the course of the 35 day holding period.  The position is about $1 out of the money as of this writing, but there’s enough volatility that I have no worries – and the benefit of this approach is that I will simply roll-out if the call is not assigned.


That’s it for the July update.  I hope everyone is enjoying their summer, despite the market.  Until next month, happy trading!

Sunday, July 5, 2015

Rescue My IRA - June 2015 Results

For much of the month of June, the market moved in a sideways direction – until the last week, anyway, when the financial community collectively became very afraid of what might happen in the Euro-zone.  While this was all going on, I remembered my studies in business school about country-level bankruptcies and their short-term impacts on world markets, so I decided to take advantage and buy to close some of the most impacted covered calls. 

Now I feel like I am poised to make a little money off of a down market, which was one of my goals with the Rescue My IRA strategy in the first place.  That will happen when I sell those covered calls back into a rising market.  Meanwhile, overall, the account value closed out the month down a bit due to the market duress, but not so far down to have given back all of its gains for the year.

Looking forward now, I was reminiscing about how the 7th year of a US president’s administration is generally pretty good for the market, but the 8th is often bad.  I’m planning to gradually lighten up my holdings through October until I’m at 50% cash – this will allow me to watch and wait for trends, and it will give me some flexibility about a new strategy I am considering.  More on that in a future post.

It was a busy trading month, focused on pruning the portfolio.  I made a few more of those “wash trades” I have been working on – VLO for COP, GM for F, and HPQ and XRX for CA.  These trades improved the quality of the portfolio and they should result in gains that make-up for the southward tendency of the original holdings.

For example, the net loss on COP after unwinding it last month was about $1000 – over the course of a 240-day holding period.  It looks as if VLO will be called away from me during July, generating a net gain of almost $400 after just 60 days.  That sums up what I’m after in these trades, to get back most of the loss quickly – and while I’m writing this, I’ve just realized that given the perspective of all of this trading, the loss on the original doesn’t bother me so much anymore, as it might have earlier in my Rescue My IRA career.  There are just too many trades, and the good results outnumber the bad enough to convince me to keep on keepin’ on…

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

Account Status:
·         Total Account Value, 6/30/2015 Market Close:  $169,438.04 – that’s well off of the May ending balance of $174,180.54, but most of the paper loss can be attributed to the Eurozone market impact; the account has already recovered $1K of the lost value by the end of the week.
·         Total Cash Reserve, 6/30/2015 Market Close:  $34,565.54 – back up to 20%, and looking to move up to 50% by October.
·         Core Stock Positions (as of 6/30/2015):  AAPL (100 shares), CSCO (400 shares), DDD (500 shares), DOW (200 shares), EMC (400 shares), GE (500 shares), GM (200 shares), HPQ (400 shares) NUE (200 shares), SPY (100 shares), TXN (200 shares), VLO (100 shares), XRX (500 shares)

Performance Metrics:
·         Option Premiums Collected (net, month of June):  -$133.66 (-0.08 %)
·         Capital Gains Collected (net, month of June):  $1,337.02 (0.80%)
·         Dividends Collected (recognized on the ex-date): -$1,495.07 (-0.89 %)
·         Estimated Interest on Cash Reserve: $0.18
·         Total, Absolute Return:  -$291.43 (-0.17% absolute return, annualized return is negative) 

Next Month To-dos:

Rescue My IRA begins the month of July with only one covered call position set to expire:  VLO.  The stock is currently in the money and has held up in that status despite the Eurozone shenanigans.  The current trading plan for VLO will yield a gain of $217.00, or 0.13% on the portfolio.    

While June was a heck of a month for dividends, July is dismal:  only CSCO and TXN have ex-dates this month, for a total of $152.00 or 0.09% return on the portfolio.  CSCO had its ex-date on July 1, so that is already in the bank, but I still have my work cut out for me to make a 1% gain this month. 

To make plan, this analysis shows I need to sell covered calls for about $1,400.00 or so.  That’s a lot of trading, and doesn’t seem likely, but I’ll make a solid go of it.  Meanwhile, should see things crawl out of the temporary blip from Greece, so the portfolio value will recover its paper losses from June.


…so that will be fun, and give us all something to look forward to.  That’s it for the June report…until next month, happy trading!

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%