December 2013 Results

During December 2013, the trading activities in Rescue My IRA were essentially breakeven, but the market value of the account grew by nearly $2K, to more than $154K.  We’ll count the month – and the year, for that matter – a success.    I unwound five positions for a stock gain, an activity that typically trades option premiums for the stock profits, but ends up with a little extra profit; I also went ahead and cut my losses on a position.

This year, there weren’t as many companies trying to beat the clock on tax law changes, so dividend activity was limited to one position, although there was the potential for dividends from three companies when the month started – two were in the money as the ex-dividend date approached, so I unwound those.  The single dividend I collected was $140, and January doesn’t look to be much better right now since the four stocks with ex-dividend dates next month are all in the money by good margins right now. 

There is always the chance of a correction and consolidation at any given moment, and while I am ignoring statistics and probability when I say this, the successive record closes we’ve been enjoying during 2013 make me feel like any day now might be a good time for it.  To mitigate potential risks, I’ve decided to hold back some cash in anticipation of this possibility and closed the month with about a third of the account value sitting on the sidelines. 

I intend to do a series of retrospective posts on my 2013 trading year next week.  One thing I’m happy to report and that bears repeating from last month is that the covered call strategy has made Rescue My IRA whole again and then some over the last two years.  When I combined three legacy 401(k) accounts into a Merrill Lynch IRA (and left management to one of their consultants) the account value was $144K, before it declined to around $100K.

Here is a summary of my Rescue My IRA statistics for December 2013, based on last Tuesday’s close, December 31, 2013.     

Account Status:

·         Total Account Value, 12/31/2013 Market Close:  $154,520.65 (vs. November close of $152,928.16)

·         Total Cash Reserve, 12/31/2013 Market Close:  $50,800.85

·         Core Stock Positions (as of 12/31/2013):   ABT (300 shares), CAT (100 shares), FB (200 shares), INTC (400 shares), IP (200 shares), JPM (200 shares), KO (400 shares), PSA (100 shares), SO (300 shares)

Performance Metrics:
Option Premiums Collected (net, month of December):  -$2,352.30 (-1.77 %)

Capital Gains Collected (net, month of December):  $2,413.78 (1.82%)

Dividends Collected (recognized on the ex-date): $140.00 (0.11%)
Interest on Cash Reserve (estimated): $0.11
Total, Absolute Return:  $201.59
Absolute Return, Percentage Basis:  0.15%
Annualized Return, Percentage Basis:  1.85%

Next Month To-dos:

Four positions go ex-dividend during January 2014, but all of them are in the money at the time I am writing this report – and they are all ITM by more than the dividend payment, making it slightly more likely I will see them called away.  The stocks are ABT, CAT, JPM, and SO, and the estimated dividends are $354.25 if I collect them.  The ex-date on JPM is Thursday, 2 January – so I may find an assignment message in my inbox from the get go!

Last month I reported that I am going to slow down the activities in this account for a short while so that I can do some research on augmenting the covered call strategy.  One result of this was the decision to make a trade on FB – a hot stock that does not meet the usual criteria I have applied to the account.  I will post a little more on this topic next week during the 2013 wrap up posts.

Here we are at New Year’s Eve – here’s to a great 2014, readers!