Like many of my generational colleagues, the baby boomers, I've found that my best intentions about saving for retirement aren't always meeting the mark. I've taken some past 401(k) accounts and combined them into a self-directed IRA with Scottrade. This blog will chronicle the progress of the IRA rescue.
Another green day in the markets yesterday, so
I unwound my MAT trade a week early, rather than waiting for the shares to be
called away next week at expiration.
This position was in place for a mere 35 days, and the annualized return
on it was almost 26%.
I have a couple of positions that will likely be called away this month, so it could be a good month on that account. I haven't seen any opportunities to roll out other positions, and my cash stash is piling up, now 30% of the account value.
Details of the MAT below, net
of fees and commissions, of course!
The average price per
share for this 200 share position was $44.88, with a total position basis of $8,975.00
Sold on unwind 200
shares at $9,274.83
income: -$149.01 (due to BTC transaction)
Net Profit: Total Net Profit after
Absolute Return on Investment: ($222.82/$8,975.00) = 2.48%
Annualized Return (35 days): 2.48%*(365/35) = 25.89%
Last winter, when I decided that I would focus
strictly on S&P four- or five-star stocks in my trading plan, one of my
first trades was with CMI. My most
recent contract was a December $125, and early last week the delta finally
pegged at 1.0, so I unwound it rather than waiting for the shares to be called
A highlight of this trade is the absolute gain
percentage – it is above 12% for a position I held for 300 days.
Readers know that my goal is 12% annualized;
here is a trade that did better than my goal for it.
And, hopefully, CMI is the first of between
three and five positions that I will exit during December, all for share gains.
Here is the record on the position, net of
fees and commissions:
The 100 share position
had a basis price of $119.56, total position basis $11,956.00
Sold on unwind at $133.43
share, net $13,342.76
Net Profit: Total Net Profit after
Absolute Return on Investment: ($1,444.20/$13,342.76) = 12.08%
Annualized Return (300 days): 12.08%*(365/300) = 14.70%
Trading activities in Rescue My IRA last
month were successful. The value of the
account held at above $152K for the second month in a row, so I’m pretty happy
about that. Also, there were a couple of trades that have ended up well – I use
a 1% monthly gain as a target to proxy the income I will be able to draw from
this account when I retire, and this month I hit the target.
There were three trades that I unwound at a
profit, meaning I bought to close the covered call contract and sold the
underlying. Not counting these, I had at
least 10 adjustment trades or “STOs.” November
was a good month for dividends to, with more than $500 in income recorded for
There’s a lot of talk about maybe a bubble in the
market. Sure, there is always the chance
of a correction and consolidation at any given moment, and while I am ignoring
statistics and probability, this might be a good time for it after those
successive record closes at the end of November. But to be frank, I think that is a lot of BS
just meant to scare away small-time investors such as myself so that the big
guys can steal our money.
I’m thinning out the portfolio here during December – four or
five contracts are due and they are in the money or close. I expect to end the month in a 25-50% cash
situation while I reconsider my strategy, which I promised myself I would do
once the account was valued at above $150K.
That’s a good benchmark, by the way. Back in 2007, the value of the three legacy
accounts that I combined in a Merrill Lynch IRA was $144K – the covered call
strategy has made me whole and then some over the last two years. I am looking forward to what the future
Here is a summary of my Rescue My IRA statistics for November 2013, based on last Monday’s close, December 2, 2013.
·Total Account Value, 12/2/2013
Market Close 152,928.16: $ (vs. October close of $152,733.17)
Capital Gains Collected (net, month
of November): $5,094.27 (3.83%)
Dividends Collected (recognized on
the ex-date): $546.50 (0.46%)
Interest on Cash Reserve (estimated): $0.19
Total, Absolute Return: $4,056.50
Absolute Return, Percentage Basis: 3.05%
Annualized Return, Percentage Basis: 37.15%
Next Month To-dos:
There’s not a lot of dividend
activity scheduled for December, with only DIS, MRK, and PSA scheduled. The forecast says that would yield $378.00 or
0.28% for the month if it held – but DIS and MRK are both in the money with
ex-dividend dates before the December contracts expire, so I am likely to be
called early…as a matter of fact, I designed the trades that way, and these trades will
yield about $500 in capital gains if they are assigned.
As I mentioned above, I am going to
slow down the activities in this account this month while I do some research on
augmenting the covered call strategy.
Obviously I will continue to post my trades.
The holidays are here – here’s to a
great season, readers!
Even with the holiday shortened trading week,
there has been a lot of activity in the Rescue My IRA account so far. In fact, yesterday alone, I did four
roll-outs, netting about $400 in cash from the premiums. Because of the holiday and how busy I’ve been
so far, I’ll just list those four symbols today so I can get on with the topic
of this post, the recent unwinding of my TXT position: PSA, INTC, F and FB.
The trading week started out tentatively, but
we’ve ended up setting new highs for three consecutive days. The articles I am reading are evenly split
between their anticipation of a traditionally great month during December and a
looming correction in the range of 10-20%.
Since I can be as wrong as any of the experts, I am going to hold
off on new positions during the month
and let the contracts I have in place take care of themselves – there are still
four December positions, even with the four roll-outs listed above.
One action I did take was to unwind my TXT
position – there was an odd situation with the covered call premium once the
delta reached 1.00, and I decided to close it out to get some cash off the
table. I did this even though TXT will
go ex-dividend early next month. The
dividend is only $2.00; I decided that getting the cash in was more prudent
than waiting to see what the market is going to do this month.
This was the second time I’ve taken a bite of
TXT, it’s an S&P 5 star stock. I
held the previous position for 50 days; it also exceeded my goal of a 12% annualized
return – that time it achieved a 24.83% annualized. Even so, comparing the actual returns between
the two positions, this one did a little better – 3.89% vs. 3.40%.
So here is the record on the TXT position, net
of fees and commissions – it was an excellent performer, once again:
This was a 300 share
position an average price of $29.30, total position basis $8,791.00
Sold on unwind at $9,742.83
income: -$610.03 (due to unwind transaction)
Net Profit: Total Net Profit after
Absolute Return on Investment: ($341.80/$8,791.00) = 3.89%
Annualized Return (75 days): 3.89%*(365/75) = 18.92%
After I post today
about two roll-outs – CAT and FB – I’ll be caught up on the month’s
trading. We’re headed into the holiday
weekend and I’ll be drafting my monthly results to go up over the weekend. Of course the trading week will still have
some opportunities and I will seek them out, posting if there are any more
In the meantime, here’s
the analysis of the CAT and FB positions.
This is a 100 share
position established in August 2012; basis is $8,716.99 or $87.17 per share.
This transaction rolled out to a $85.00 Feb 2014 covered call. I've held the position for more than a year - it's very much a dog of the DOW and just sort of limps along, albeit with an overall positive return on the position.
Total dividend payments
(including dividends through the current contract): $336.00
return percentage (held approx 540 days):
Since I had a good
experience with a short-term trade on FB last month, I decided to try again…even
though I knew lightning probably wouldn’t strike twice. This is a 100 share position with a basis of
$5,186.99 or $51.87 per share.
Total option premiums: $213.21
payments (no dividend on this stock – a rule breaker!): $0.00
We’re in the middle of
a great month here in November 2013 – plenty of new highs getting strung along
so far this week. That’s put most of my
positions, which are all S&P 500 stocks, in the money, or close to it. I used the trading action of the last two
weeks to do some adjustments on the shares that hadn’t made it to that
status: F and IP.
For F, the position is
right at the target of 12% annualized return, the goal for Rescue My IRA
positions, while IP is performing slightly better than that. Here’s the analysis of the two positions.
F is a 500 share
position started in August, bought in two lots, with a basis of $8,616.00 and
average share price of $17.23. I have
been selling covered calls at $17.00, $17.50, and $18.00 on the position.
Once again, I found that I had enough
cash on the sidelines to set up another buy-write covered call position. I used the same criteria for this I have in
S&P 500 Index standing (starts with
500 high-quality companies).
S&P rated four or five stocks
(narrows down to about 200 companies).
Annual dividend of 2 to 5 percent
Ability to develop a position that
yields $100 or more in call premium
By this time, I am down to four or
five symbols that I can balance against other companies already in the portfolio. I then screen for earnings announcements
coming up (avoiding those), and ex-dividend dates in the upcoming quarter. That’s how I ended up at MRK for the new
position last week.
Here’s the analysis, or position plan,
if you will – all values are net of commissions and fee:
Bought 200 shares at
average share price $47.87 (total $9,573.00)
Sold 2 MRK Dec 2013 $48 for a net of $116.48
1) Options Income: = $116.48
2) Dividend Income: Ex-date is in December, dividend is $0.48 ($48.00)
3) Capital Appreciation if assigned at $48.00: $9.89
Total Net Profit if Assigned and dividend collected: $222.37
Absolute Return on Investment: ($222.37/$9,573.00) = 2.32%
Annualized Return if Assigned (30 days): 2.32%*(365/30) = 28.26%