Two New Positions: JPM and SBUX

Back in March, I decided that despite all the talk about whether the market might continue up or down for the balance of 2014, Rescue My IRA could benefit from increasing the number of positions in the portfolio.  Because of the larger than typical cash return I have been holding in the account and an average position value of around $10K, there were only 10 positions in play.  I’ve long believed that between 12 and 16 is optimal for managing the risk of any single or several positions going south.

By the end of April I had increased the number of positions to 12 – the final new position was JPM, which I am posting on today.  I added SBUX last week, bringing Rescue My IRA up to 12 positions. 

Also, I have made the strategic decision to reduce the amount of cash reserve from about 33% of the portfolio value to around 20%, I will probably add one more position at some point this month – and I will probably have my GE position called away, so there will be at least two more “new position” posts in May.

For now, here are the details of the JPM and SBUX trades.

JPM

Transactions

Bought 100 shares at average share price $57.88 (total $5,787.99)
Sold 1 $57.50 Jun 2014 for $215.74

Net Profit:

1) Options Income:  $215.74
2) Dividend Income: Next ex-date is July, $0.00
3) Capital Appreciation if assigned at $57.50:  -$55.99

Total Net Profit if assigned and dividend collected:  $159.75
Absolute Return on Investment: ($159.75/$5,787.99) = 2.76%
Annualized Return if Assigned (72 days):  2.76%*(365/72) = 13.99%

SBUX

Transactions

Bought 100 shares at average share price $70.68 (total $7.068.00)
Sold 1 $72.50 Jun 2014 for $99.74

Net Profit:

1) Options Income:  $99.74
2) Dividend Income (May 20 ex-date): $28.00
3) Capital Appreciation if assigned at $72.50:  $182.00

Total Net Profit if assigned and dividend collected:  $309.74
Absolute Return on Investment: ($309.74/$7,068.00) = 4.38%
Annualized Return if Assigned (45 days):  4.38%*(365/45) = 35.55%