December 2011 Recap

Here’s a recap of the action for December.  I will follow-up this week with a summary for 2011, adding together my returns for the three months the account was active:  October, November, and December.  As with last month, the recap is loosely organized into the following sections:  account status, performance metrics, and a to-do list for the next month. 

The returns for this month (and when I post for 2011) are based on the initial valuation of the account:  approximately $51K plus.  To keep an element of anonymity to the blog, I generally post in rounded numbers – and honestly, it is too much work to calculate any kind of average daily balance and other approaches to valuation that would be technically correct!  But one thing is consistent; it is my big-ass goal for this money is to generate 12% growth per year in the account.

One additional significant event to mention in the introduction: I rolled the IRA from my previous employer AECOM into this account.  That added about $75K to the balance (I will be more specific about this next month).  I’ve already established a few positions with these funds.  That income is included in the December returns…it will inflate my return percentage for the month a bit, but that will all average out over the longer term.  One thing that needs to be mentioned is that I had a position in AECOM shares (symbol ACM); I plan to write calls on this until I am able to get back to a break-even price above $25 per share.
Account Status:
Total Account Value, 11/30/2011 Statement:  $51,785.53
Total Cash Reserve, 11/30/2011 Statement:  $11,315.78
Core Stock Positions (as of 12/31/2011):  ACM (800 shares), CAT (100 shares), COP (100 shares), CSX (200 shares), DIS (300 shares), GE (400 shares), GLW (400 shares), IP (300 shares), MSFT (400 shares)
Performance Metrics:
Option Premiums Collected (net, month of December):  $806
Capital Gains Collected (net, month of December): ($626)
Dividends Collected (recognized on the ex-date): $248
Interest on Cash Reserve (estimated total): $.70
Total, Absolute Return:  $429
Absolute Return, Percentage Basis:  .84%
Annualized Return, Percentage Basis:  10.18%
Next Month To-dos:
None of the current positions will go ex-dividend next month

The following covered call contracts expire in January: 

CAT 92.50

COP 72.50

DIS 36 (x2)

DIS 37 (x1)

IP 27 (x2)

IP 29 (x1)

Several of these are in-the-money, so I should have some capital gains to report next month.

Consolidated Lessons Learned:
Formal trading plan:  Earlier during the month of December, I finished and published my first trading plan for the account.  I am finding that I am having to make some exceptions on the stock picking requirements, mainly in terms of the rigor I had applied for S&P 4 STARS and above shares.  At present, a few of the positions, including ACM, IP and CAT do not pass that hurdle.  I will revisit it in a few months as these situations evolve.

Taking a loss on a bad position:  This month I closed my AA position at a loss.  It was a pretty big loss, actually, and lowered my results below my goal of 1% total return on the account.  However, I believe that stock is going to be stuck in the doldrums for some time, and I am glad to have the opportunity to invest those funds elsewhere. While taking a loss this month reduced my return below the goal of 1%, on average, even with this loss, the account is exceeding 1% returns per month – more on this in the next post.