Saturday, February 1, 2014

January 2014 Results

We’ve had a couple of weeks now of market retrenchment, with the Dow and S&P now below the highs they hit earlier this month.  Despite that, Rescue My IRA ends the month with an account value above $154K, which is within a couple of hundred dollars of where it ended December.  Not bad; in terms of the revenue earned in the account, the account achieved the 1% goal by generating more than $2,000 between call premiums, dividends, and stock gains. 

After starting the month with over $50K in cash on the sidelines, I put about $10K into add-ons and roll-outs of existing positions that had corrected with the market.  Of that $40K, I will invest up to $25K should the correction continue to the 15-20% level. 

Two positions were called away last month, INTC and JPM, and of the four January contracts, I rolled out the other two.  It was a relatively light month for dividends; only $278 was generated that way.  All of which leaves the bulk of the income to have been generated through covered call premiums.

Many market analysts are saying that we could see the correction continue a few more months, possibly until summer.  My plan in Rescue My IRA will to be to sit tight with about this much cash waiting for buying opportunities, and to continue with a careful approach to rolling out those contracts that are bound to expire worthless.  I’d prefer not to sell too far into the back months with this approach and will try to stay within two months of the contract I am closing out.

Here is a summary of my Rescue My IRA statistics for January 2014, based the January 31, 2014 close.     

Account Status:
·         Total Account Value, 1/31/2014 Market Close:  $154,240.10 (vs. December close of $154,520.65)
·         Total Cash Reserve, 1/31/2014 Market Close:  $41,312.10
·         Core Stock Positions (as of 1/31/2014):   ABT (300 shares), CAT (100 shares), CRUS (400 shares), FB (200 shares), GLW (600 shares), IP (200 shares), KO (400 shares), PFE (300 shares), PSA (100 shares), SO (300 shares)

Performance Metrics:
Option Premiums Collected (net, month of January):  $1,592.91(1.03%)
Capital Gains Collected (net, month of January):  $96.61 (0.06%)
Dividends Collected (recognized on the ex-date): $278.25 (0.18%)
Interest on Cash Reserve (estimated): $0.20
Total, Absolute Return:  $1,967.97 (1.27% absolute return, 15.50% annualized return)

Next Month To-dos:

Next month will be slightly better in terms of dividends, with four positions going ex-dividend during February and yielding $320.00.  That works out to 0.21% return – about one-fifth of what I need to meet my 1% goal of $1,550.  I’ll need to sell some calls and earn some stock gains to meet that objective.

In the stock gains department, there is good opportunity with four positions expiring in February:  FB – currently in the money with a $60 strike; GLW – just out of the money with an $18 strike; IP – also out of the money with a $48 strike; and SO – in the money with a $41 strike.  If these contracts are called away, my net stock gain will be $1,150; that is a 0.75% return and puts me near the 1% goal when added to the dividend haul.

The rest of it will need to be made up with call premiums.  Since I forecast a little bit of rolling out activities during February, it doesn’t seem like I’ll have a problem getting on track with the goal.   

After a busy and mostly down January, I was happy to hit the goal for this account and to see the account value remain stable despite overall poor results in the stock market.  Hopefully, I’ll be able to keep this up in Rescue My IRA for February.

Until next month, happy trading!

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