Like many of my generational colleagues, the baby boomers, I've found that my best intentions about saving for retirement aren't always meeting the mark. In 2011, I took some old 401(k) accounts and combined them into a self-directed IRA with Scottrade, and established a strategy of using covered calls to stabilize and enhance my returns. Rescue My IRA chronicles the progress of my IRA rescue using this approach.
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
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.
·Total Account Value, 1/31/2014
Market Close: $154,240.10 (vs. December
close of $154,520.65)
·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)
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%
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.