Monday, April 29, 2013

Monthly Results: April 2013

During April, we’ve continued the recent trend of finding new highs in the markets.  There was a period of more or less sideways trading during the middle of the month – that might have gone either way according to what I’m reading, for either a correction of consolidation in preparation for a new upward trend.  It turned out for the latter.

As I wrote at the end of March, it’s reasonable to question whether this is sustainable; I believe we are in a bull market that will last until the next recession, at least.  However, it is typical to see retrenching and consolidation, and even corrections in the near term.  That’s going to make for a good test of the Rescue My IRA strategy and I’m looking forward to it.

There are still a few trading days left in April, but I’m feeling like I probably have done everything that I am going to do this month, and I will go ahead an report my monthly results a few days early.  Rescue My IRA had good revenue from all three sources:  covered call premiums, dividends, and stock gains – and all proceeds are reinvested, as usual for this account. 

A couple of the trading highlights included my selection of TLT as the first ETF covered call in the account, and the assignment of the second lot of ITW. 

I chose TLT, a US Treasuries Index ETF, as my first ETF position, in part because I felt that it would reduce some risk to what is actually going to be a learning experience for me.  This ETF pays a monthly dividend and does not have a lot of price variation, so my plan is simply to roll-out the current call I have in place until the ETF is called away.  I may also add another 100 shares with any proceeds from the May expiration.

On the ITW trade, having those shares assigned this month closed out a 200 share position I held for just about a year.  It was a hat trick and between the call premiums, dividends, and stock gains, I earned about $1,600 on the original basis of $11,274.00.  With half of the position assigned on the December ex-dividend date, I probably did a little better than the absolute yield of 14.14% I calculated – but that meets my goal and I will leave it at that.

In April, Rescue My IRA collected $212 in dividends on three positions.  This is the slow month in the quarterly cycle, so this is a good amount of yield for the account.

Interestingly, I only made seven options trades in April, counting the three new positions I established.  That is the same number that I had in March…I wonder if that is a trend.  I netted $1,034.93 in premiums, just about the same as in March, so for two months running I have hit my benchmark of $1,000 in monthly premiums. 

Here is a summary of the Rescue My IRA statistics for April 2013, as of the 4/26/2013 market close:

Account Status:
·         Total Account Value, 4/26/2013 Market Close:  $142,267.90 (vs. March close of $139,988.24)
·         Total Cash Reserve, 4/26/2013 Market Close:  $8,086.90
·         Core Stock Positions (as of 4/26/2013):   AFL (200 shares), CAT (100 shares), CMI (100 shares), CSCO (500 shares), CSX (500 shares), DOW (300 shares), F (500 shares), GE (500 shares), GLW (700 shares), JPM (300 shares), MSFT (400 shares), SPLS (700 shares), TLT (100 shares)

Performance Metrics:
Option Premiums Collected (net, month of April):  $1,034.93
Capital Gains Collected (net, month of April): $965.67
Dividends Collected (recognized on the ex-date): $212.00
Interest on Cash Reserve (estimated): $0.08
Total, Absolute Return:  $2,212.68
Absolute Return, Percentage Basis:  1.67%
Annualized Return, Percentage Basis:  20.26%

Next Month To-dos:

May is a generous month for dividends, with $425.00 forecast from seven positions:  F, TLT, AFL, CMI, CSX, GLW, and MSFT.  At the time of this writing, F, CSX and GLW are in the money, and it is very likely I will see an early call on the F position on April 30.  For reporting purposes, I will include that in the May results if it happens; CSX and GLW go ex-dividend after the May contracts, so if they are assigned it will be on expiration date (and my dividend haul will be reduced by $133.00).

May is going to be an exciting month for call expirations – I have seven positions with May contracts:  CMI, CSCO, CSX, DOW, F, GLW, and TLT.  As I mentioned above, CSX, F, and GLW are currently in the money, so are DOW and GE.  For TLT, it is trading within $1.00 of my strike price so I could see that one called away, but CMI is well out of the money just now and I will probably look at a roll-out there.

I’m hesitant to say what I will do with those proceeds if everything comes out the way it looks right now.  I have half a mind to add 100 shares to the TLT position – assuming it is not called away, otherwise, I might re-establish it as a 200-share position – and then just sit on cash for the balance of the summer and look for bargains, should we see sideways trading for a consolidation or a correction. 

We’ll just have to see how it plays out.  I am happy with the April results and hope that May is even better.

Ciao for now!

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