Sunday, July 28, 2013

July 2013 Monthly Results

As I did in May, I will start the monthly results post with a quick look at a market benchmark for comparison purposes.  I have decided the S&P 500 index is the one I should use, since typically my stock positions will come from there.  CNN Money has the index at 18.61% year-to-date as of the Friday, 26 July close.

A quick calculation of my return on the account comes out at 10.68%, also as of the Friday close.  That compares to 7.80% when I last calculated things in May, and it compares favorably to my goal for the Rescue My IRA account of 12% annual.  I’m on track so far in 2013, and maybe a little bit ahead.

Just as in May, July has been another month where we saw the market hit some new highs – in fact, we’re on a five-week tear of weekly gains.  I had a lot of turnover in the account, finally weeding out some old shares that have under-performed against my goals, or that were downgraded and no longer meet my criteria of S$P four- and five-star shares.

As far as an overview goes, this was a great month for stock gains, just on the face of it.  However, I was using the unwinding approach that I have discussed before to increase my gains just a little – once the delta of a covered call reaches 1.00 in the contract month, you can generally buy to close the call and sell the stock outright for a little more gain.  The gains are offset by the premium used to close the call – roughly I had $5,700 in shares gains offset by $3,700 in call premiums.   

That nets to approximately $2,000 in gains, plus the dividends were about $400 combine for a pretty good month.  On a monthly basis that adds up to a 1.79% return, above my goal of an average of 1% per month. 

As far as a look ahead goes, I think the market is going to hold steady at about these levels.  We may see another percentage gain or two for the balance of the year, but nothing like we had the first half.  I am going to keep a watchful eye out, but stay in the market at the 90-95% invested level.  Later this year I will upgrade the account at Scottrade so I can sell cash secured puts, putting less capital up against what I expect to be something of a consolidating market.

So, finally, here is a summary of the Rescue My IRA statistics for July 2013, as of the 7/26/2013 market close:

Account Status:
·         Total Account Value, 7/26/2013 Market Close:  $147,023.95 (vs. June close of $142,516.26)
·         Total Cash Reserve, 7/26/2013 Market Close:  $27,074.95 (due to the SPY weekly assignment on 7/26/2013)
·         Core Stock Positions (as of 7/26/2013):   AFL (200 shares), BA (100 shares), CAT (100 shares), CMI (100 shares), COP (200 shares), DVN (200 shares), IP (200 shares), KO (300 shares), PFE (400 shares), PSA (100 shares), WIN (500 shares) – note, my SPY 168 weekly was assigned on 7/26/2013.

Performance Metrics:
Option Premiums Collected (net, month of July):  -$3,736.00
Capital Gains Collected (net, month of July): $5,697.67
Dividends Collected (recognized on the ex-date): $422.16
Interest on Cash Reserve (estimated): $0.08
Total, Absolute Return:  $2,383.91
Absolute Return, Percentage Basis:  1.79%
Annualized Return, Percentage Basis:  21.83%

Next Month To-dos:

August is a lighter month for dividends, with about $337.00 forecast from five positions:  AFL, BA, CMI, IP, and PFE.  BA and IP have August contracts against them, and both are in the money, so there may be early calls on them.  I will have a gain on BA but lose $2.11 on the IP position if they are called.  Two dollars!

There are currently four August contracts:  IP and BA as mentioned, and COP and WIN.  All four are in the money as we begin the month, with a total forecast gain of $334.  So between the dividends and the contract gains, I may have already accounted for about .50% of earnings this month – I’m halfway towards my monthly goal of 1.00%!

We saw the Fed announce that it is going to slow down on its tightening approach.  I think we have a couple of months more to run in this market, but it will be slow and steady.  So I’m staying 95% in until October…and I am always looking for good bargains.

Ciao until next month!

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