Saturday, January 4, 2014

Trading Year 2013 - The Wrap

As I prepared to do my look back at calendar year 2013 in the Rescue My IRA account, I had a look at the 12 monthly results posts for the year.  Sure, I wrote them, but what they revealed to me is that after using this covered call system for two years, I’ve probably hit my stride with the approach.  At year end, the account value stood at $154,520.55, up from $132,850.69, yielding an overall return of 16.31%. 

In keeping with how I have reported annual results in the past, this post will provide a very short summary – mainly to ensure that it is not redundant with the monthly results posts.  Since I did not record any “lessons learned” style posts this year, I don’t have a lot of summarizing to do about the results.  Plus, the trading year is already underway and in just two days I already have a backlog of six trades to report!

While there were no lessons learned posts, that is not to say that I did not not make any trading mistakes or learn anything this year.  I simply was more careful about my trades, using solid criteria, including choosing positions that rated an S&P four- or five-star ranking, so I managed to minimize failed positions.  

Another valuable lesson I learned was how to unwind positions once the delta is at 1.00 – while this comes at the price of buying to close an in-the-money covered call, there is usually a stock gain that slightly exceeds that cost, and since the money can be quickly moved on to the next position, there is an opportunity to increase the overall rate of return on the account.

Those two improvements made for a better trading year, but most of the gains this year can be attributed to one thing:  the booming stock market.  The S&P 500 index increased by 29.6% this year, and since the first screen on my picks is to choose stocks from that index, those returns carried me.  At 16.31%, my returns did not beat the market, but they did beat my objective of a 12% annualized return. 

Here’s a quick summary, bullet point style, of Rescue My IRA results for 2013:

  • 12/31/2012 Account Value:  $132,850.69
  • 12/31/201 Account Value:  $154,520.55
  • Net increase in account value:  $21,669.86
  • Annual percentage return:  16.31%

For comparison purposes, Rescue My IRA percentage return in 2012 was 4.11%.

I guess I will close with some resolutions for 2014.  I still plan to use covered calls as the heart of my strategy going forward, but I am planning to make some adjustments.  These include moving to an Options First account at Scottrade, which will allow me to use cash secured puts in addition to covered calls, and relaxing my four- and five-star criteria to expand my ability to choose positions.  That should keep the account on its growth curve, which I hope will continue to exceed 12% a year.

I just reread Lehman and McMillan’s Options for Volatile Markets (Amazon link in the right-hand column), and was reminded of some new strategies I could put in play this year.  I have a third of the account, $50,000, sitting in cash right now, waiting for a pull back before buying new shares.  So it’s going to be a fun year working with the account – I have a lot to look forward to!

This will be the single wrap-up post this year.  As I mentioned, I am already behind by six trades!  So it’s time to get back to work!

Happy trading in 2014, readers! 


  1. Jim, congrats on your covered call success. You might enjoy borntosell.com, which offers a time-saving covered call screener and covered call portfolio management tool.

  2. Thanks Mike! I have a link to your site over in the blog list to the right - it doesn't pick up the feed for new posts, but Born to Sell is just a click away.