Monthly Results: September 2013

September was another good month – I remember that back in May, I thought it would be the month for a correction or stabilization after everybody got back from vacations.  Instead, the Rescue My IRA climbed steadily throughout the month from the August level of $145K to close out September at more than $148K. The Fed spoke and said it would take it easy on fiscal moves, Syria appeared to stabilize, but we ended the month with the pending government shutdown and even the threat from Congressional Republicans of a default on US debt – if you can believe that!

An overview of investing activities for the month of September would have to highlight capital gains on my BA and GE shares.  I took action to unwind the BA shares at a gain, reinvested the proceeds in a GE weekly position that was called away, and then swept those proceeds into a TXT positions a couple of months out – just recognizing the capital gains from BA and GE yields nearly $700 in profits. 

The gains, plus dividends in the amount of $415 and covered call premiums for $360 (net) mean I met my goal for a 1% return per month, and the current statement value of the account shows a nearly 12% increase for the calendar year. 

I still plan to upgrade my Scottrade account soon, in order to give me more flexibility in a steady/consolidation market next year, but in the meantime, like I said above, it’s covered calls for me.  

So, finally, here is a summary of the Rescue My IRA statistics for September 2013, based on the September 30 market close:   

Account Status:

·         Total Account Value, 9/30/2013 Market Close:  $148,452.86 (vs. August close of $145,215.47)

·         Total Cash Reserve, 9/30/2013 Market Close:  $11,251.86

·         Core Stock Positions (as of 9/30/2013):   AFL (200 shares), CAT (100 shares), CMI (100 shares), DVN (200 shares), F (200 shares), IP (200 shares), KO (300 shares), PFE (400 shares), PSA (100 shares), SPY (100 shares), TGT (100 shares), and TRV (100 shares), TXT (300 shares)

Performance Metrics:
Option Premiums Collected (net, month of September):  $360.41 (0.27 %)

Capital Gains Collected (net, month of September):  $675.58 (0.51%)

Dividends Collected (recognized on the ex-date): $415.00 (0.31%)
Interest on Cash Reserve (estimated): $0.11
Total, Absolute Return:  $1,451.10
Absolute Return, Percentage Basis:  1.09%
Annualized Return, Percentage Basis:  13.29%

Next Month To-dos:

Turns out that October will be a light month for dividends – less than $200 is forecast from three positions:  CAT, F, and PFE.  All three of these positions have November contracts, so it is unlikely that they will be called away early.

There are currently six October contracts:  DVN, PSA, SPY, TGT, TRV, and TXT.  At the time of this post, only the PSA and TRV positions are in-the-money; if they are both called away I will end up with a slight capital loss, since I sold at-the-money calls on these.  I may try to do a little repair on the PSA position before the month is over – I originally started by selling $165 strikes, but rolled down to $160 – there may be room to roll-up if I extend the term out to the back months.

Well, those kinds of things make the whole Rescue My IRA a good time.  I really have my work cut out for me to generate the 1% return this month.  Fortunately I have six positions to work with – we’ll see what we can do.

Next month will be over before we know it.  Happy investing!

Summarizing Two Roll Outs: IP and KO

Because of some travel I took during the month of September, I missed posting on a couple of the Rescue My IRA positions that were rolled out during the month – Mary and I had an excellent week long trip to Las Vegas and the Grand Canyon.  So here’s a quick summary post on those.  The next post will be my monthly results summary, which I hope to get put up on either Monday or Tuesday of this week.

The two roll outs are IP and KO.

IP:  This is a 200 share position with a basis of just less than $48.  I have been writing covered calls at a $49 strike, collecting dividends.  I’ve had a position in this stock several times and have always done well with it.  At expiration of the current position of $49 Nov, this one will have earned an annualized return of 21.18% - well above my goal of 12% per year. 

KO:  This is a 400 share position with a basis of just over $40.  I have been writing covered calls at a $40 strike, and am collecting dividends.  It’s a “dog of the Dow” this year; even with covered call premiums it is underperforming my goal of 12% per year – it’s currently earning an annual rate of 8.89%. The current contract has a January expiration, I’m just having to wait it out with dead money.

New Position TXT

With the quick coming and going of that GE weekly, I decided to put the money back to work ASAP with a position on TXT – this is an S&P five-star stock that I held earlier in the year.  The covered call premium on this one added more than $300 to my monthly cash flows – and otherwise the position meets my goals. 

So after unwinding BA earlier in the month, these are all the trading activities I’ve been able to do with the returned capital. It was worth the effort to close that position a few weeks before expiration.

Here is a summary of the TXT position.

TXT

Transactions

Bought 300 shares at average share price $29.30 (total $8,791.00)
Sold 3 TXT Oct 2013 $29.00 for a net of $343.24

Net Profit:

1) Options Income:  = $343.24
2) Dividend Income: ($0.00) – no dividends before October expiration
3) Capital Appreciation if assigned at $29.00:  -$108.11

Total Net Profit if Assigned and dividend collected:  $235.13
Absolute Return on Investment: ($235.13/$8,791.00) = 2.67%
Annualized Return if Assigned (30 days):  2.67%*(365/30) = 32.54%

Called Away Early on GE

Mary and I were traveling last week – Las Vegas and the Grand Canyon.  It was a great trip, and while we were away I got a not that the most recent position I had established – a GE trade with a Sep Wk 4 covered call – had been assigned on the most recent ex-dividend date for the shares.

This is a pretty exceptional result – I held that position for six days and earned 1.05% on the trade…which works out to an astounding 63.75% annualized!  Even though the cash return was only $100, that is likely to be the best annualized rate of return I generate on a trade this year.

We were in Las Vegas - this trade and our experience at the Tropicana were almost enough to convince me to sit at a Blackjack table.

Here is the record on this quick turnaround position, as usual, net of fees and commissions:

GE

Shares:

Bought 400 shares at an average price of $23.85, total position basis $9.521.00

Sold on assignment 400 shares at $9,582.89, average share price $23.96

Total stock gain:  $51.89

Options:

Sold to open $24 Sep Wk 4

Total options income:  $47.99

Dividend:

I did not collect the dividend on these shares, as the position was called away on the ex-dividend date.

Net Profit:
1) Stock gains:  $51.89

2) Options income:  $47.99

3) Dividend Income: $0.00

Total Net Profit after Assignment:  $99.88

Absolute Return on Investment: ($99.88/$9,521.00) = 1.05%
Annualized Return (105 days):  1.05%*(365/6) = 63.75%

New Position: GE

I opened a second new position last week after the BA unwind, this time picking GE.  I do seem to get in cycles with some of the stocks I pick – maybe in some future post I will write about some of the multiple rounds in stocks like this one and IP. 

With an ex-dividend date coming up and the stock trading close to the next higher strike I decided to go for a week 4 covered call – my normal approach is to trade in the next calendar month or the one beyond, especially when there is a dividend play during that time period.

In any case, here’s the analysis, or position plan, if you will – all values are net of commissions and fee: 

GE

Transactions

Bought 400 shares for $9,531.00, or $23.83 per share

Sold 4 GE wk 4 Sep 2013 $24.00 for a net of $47.99

Net Profit:

1) Options Income:  = $47.99
2) Dividend Income: October ex-date, $76.00
3) Capital Appreciation if assigned at $24.00:  $51.89

Total Net Profit if Assigned and dividend collected:  $175.88
Absolute Return on Investment: ($175.88/$9,531.00) = 1.85%
Annualized Return if Assigned (14 days):  1.85%*(365/14) = 48.11%

New Position: F (Rescue My IRA and Conventional)

As I sometimes do, I established positions in the same stock in the Rescue My IRA account and in my traditional account – choosing F, which I have picked before.  Here’s the analysis, or position plan, if you will – all values are net of commissions and fee: 

F – Rescue My IRA position

Transactions

Bought 200 shares for $3,497.00, or $17.49 per share

Sold 2 F Nov 2013 $18.00 for a net of $92.48

Net Profit:

1) Options Income:  = $92.48
2) Dividend Income: October ex-date, $20.00
3) Capital Appreciation if assigned at $18.00:  $85.89

Total Net Profit if Assigned and dividend collected:  $198.37
Absolute Return on Investment: ($198.37/$3,497.00) = 5.67%
Annualized Return if Assigned (45 days):  5.67%*(365/45) = 46.01%

F – Conventional Account position

Transactions

Bought 100 shares for $1,749.99 or $17.50 per share

Sold 1 F Nov 2013 $18.00 for a net of $41.74

Net Profit:

1) Options Income:  = $41.74
2) Dividend Income: Ex-date October, dividend is $0.10 ($10.00)
3) Capital Appreciation if assigned at $18.00:  $32.90

Total Net Profit if Assigned and dividend collected:  $84,64
Absolute Return on Investment: ($84.64/$1,749.99) = 4,84%
Annualized Return if Assigned (45 days):  4.84%*(365/45) = 39.23%

Unwinding BA

Last week my September contract on BA reached the point where unwinding it made sense, so I took quick action and closed the position.  To me, the goal of an unwinding transaction is to capture the profit in the stock price, which will often mean trading off some covered call premiums, as it did in this case – but the goal also has to be to get the money back to work quickly.  As it turns out, I was able to use these proceeds and a little additional cash to put two new positions into play, and I will post about them later in the week.

I held the BA position for 80 days, and the position exceeded my goal of a 12% annualized return by earning more than 24% annualized during this period.  That’s pretty good – I wish I could count on that every time.

In any case, here is the final record on this position, net of fees and commissions:

BA

Shares:

Bought 100 shares at for $10,317.00, or $103.17 per share. 

Sold on unwind 100 shares at $10,957.80, average share price $109.58.

Total stock gain:  $623.69

Options:

Total options income:  -$113.02

(As I’ve mentioned in posts about unwinding positions, the higher sell price is the result of buying to close option premiums, which can turn this revenue source negative over the course of the position)

Dividend:

Total dividends collected:  $48.50

to

Net Profit:
1) Stock gains:  $623.69

2) Options income:  -$113.02

3) Dividend Income: $48.50

Total Net Profit after Assignment:  $559.17
Absolute Return on Investment: ($559.17/$10,317.00) = 5.42%
Annualized Return (80 days):  5.42%*(365/80) = 24.73%

Rolling Out TRV

So far, not a whole lot of trades this month in Rescue My IRA.  I rolled out and up my IP position and posted on that, so this post is about rolling out TRV. 

The market has recovered nicely this week after some of the uncertainty about Syria has been resolved.  I think that is temporary, but hopefully it will work out for the longer term soon enough.

Here’s the analysis of my TRV position.

TRV

This is a 100 share position with a basis of $82.11 per share – the lot of 100 shares cost me $8,210.99.  I established the position in August, selling a Sep $82.50 call, and this trade rolled that out to October.

Total option premiums:  $205.23

Total dividend payments:  $50.00

Total stock gain at $82.50:  $21.90

Total, absolute gain on the position:  $277.13

Total, absolute return percentage ($277.13/$8,210.99):  3.38%

Annualized total return percentage (held approx 65 days):  18.95%

Rolling out IP

During the downward sloping trading action last week – we are all in a tizzy over Syria, don’t you know – I rolled out a couple of positions that had September expirations.  Today I will post about rolling out the IP position in the Rescue My IRA account and the smaller position I have in my stand alone account, and I will post about rolling out TRV later in the week.

As it stands today, I have only one September contract left, BA 105, which is in the money.  I will keep an eye on this one as expiration approaches next week to see if I can unwind it, and if not, we’ll let it run to see if it is called away.

Here’s the analysis of the two positions.

IP

The current Rescue My IRA IP position consists of 200 shares.  My basis is $47.93 per share, so for most of the holding I’ve had $48 strike prices.  I also rolled up when I made this trade, so my strike is now in-the-money $49; this trade also rolled out my contracts from September to October.

Total option premiums:  $528.42

Total dividend payments:  $120.00

Total stock gain at $49:  $197.89

Total, absolute gain on the position:  $846.31

Total, absolute return percentage ($846.31/$9,585.00):  8.83%

Annualized total return percentage (held approx 150 days):  21.49%

IP – Conventional Account

This is a 100 share position I established at about the same time as the one above.  The share basis is $47.76 on this position, and I rolled up to $49 and out to October with this trade as well. 

Total option premiums:  $221.45

Total dividend payments:  $60.00

Total stock gain at $49:  $107.24

Total, absolute gain on the position:  $388.69

Total, absolute return percentage ($388.69/$4,775.65):  8.14%

Annualized total return percentage (held 150 days):  19.80%

Rescue My IRA Results: August 2013

For most of August we had a good month of market action.  The Rescue My IRA showed a book value above $149K for a couple of days, as a matter of fact.  However, by the end of the month, the worries about what’s happening in Syria and the continued fear about upcoming Fed action to their toll, even as we continued to hear that the economy is still improving, and the balance ended up retrenching at around the $145K level.

 

That’s still up quite a bit from where the account started at the beginning of the year, around $133K – so needless to say, I think I will stick with covered calls.

As far as an overview of investing activities for the month of August goes, this was another good month for stock gains.  I unwound a couple of in-the-money contracts and took profits on them, while rolling out the out-of-the-money expirations.  That approximately $800 in gains, plus dividends of about $380, combined to get me very close to my goal of an average of 1% per month.  The balance of the returns came from a steady pace on adjustments – either roll-outs or roll-ups, which earned me more than 0.5% this month in about 15 transactions. 

For the monthly prognosis, I plan to continue to stay invested at the 90-95% level, even with a little consolidation going on.  Once there is some clarity to Syria and one the Fed’s intentions are clear, I think the market will regroup and we’ll see another one or two percent gains in the balance of the year.  I still plan to upgrade my Scottrade account to give me more flexibility in a steady/consolidation market next year, but in the meantime, like I said above, it’s covered calls for me.

So, finally, here is a summary of the Rescue My IRA statistics for August 2013, based on my August statement: 

Account Status:

·         Total Account Value, 8/30/2013 Market Close:  $145,215.47 (vs. July close of $147,023.95)

·         Total Cash Reserve, 8/30/2013 Market Close:  $11,432.72

·         Core Stock Positions (as of 7/26/2013):   AFL (200 shares), BA (100 shares), CAT (100 shares), CMI (100 shares), DVN (200 shares), IP (200 shares), KO (300 shares), PFE (400 shares), PSA (100 shares), SPY (100 shares), TGT (100 shares), and TRV (100 shares)

Performance Metrics:
Option Premiums Collected (net, month of August):  $713.58 (0.54%)

Capital Gains Collected (net, month of August):  $813.68 (0.68%)

Dividends Collected (recognized on the ex-date): $380.00 (0.29%)
Interest on Cash Reserve (estimated): $0.11
Total, Absolute Return:  $1,907.37
Absolute Return, Percentage Basis:  1.44%
Annualized Return, Percentage Basis:  17.47%

Next Month To-dos:

September will be a good month for dividends – about $411 is forecast from five positions:  TRV, DVN, PSA, KO, and SPY.  Only TRV is subject to a September contract, and it is out-of-the-money at the time of this post.  That return is about 0.31% on the account value.

There are currently three September contracts:  TRV, noted above, IP, and BA.  The BA contract strike price is $105.00 and it is in the money, while the others are not.  If all three positions wind up being called away, my forecast gain is $186 or so, only about 0.14% return on the account, combined with dividends totaling nearly half of my monthly 1% goal, so there is still some work to do to generate the returns I want. 

That’s it for now – I’ll update in a month!