Rescue My IRA June 2014 Results

As I begin writing my monthly results post, the first thing that comes to mind is that I wrote my May post from the porch of the John Dougherty House in Mendocino, CA (link here: http://jdhouse.com)  , where we were vacationing.  That put me in a good frame of mind for the month of June – but the market also conspired to cheer me up.  The bull market’s run is not over, so I was able to generate a return of 1% of the account value last month, while also taking some steps to improve diversification in Rescue My IRA and increasing the amount of cash reserves I’m holding to more than 20% of the account value – so June was a very good month. 

The highlight of the month was four stock trades, all of which resulted in stock gains.  I unwound three positions:  INTC, KO, and SBUX, which is why the returns from call premiums are negative – of course the stock gains exceed that negative.  The fourth trade was WIN, which was called away on the ex-dividend date. 

That’s a shame, because when I set up the position, WIN had an estimated annual yield of more than 12%.  I did slightly better, on an annualized basis, earning more than 23%, because of covered call premiums and stock gains.  The WIN position will likely show up as a top 5 trade in my year-end posts…but then again, I could be on a streak and we’ll leave that one in the dust! (summary post on the WIN trade is here:  http://rescuemyira.blogspot.com/2014/06/called-away-on-ex-date-win.html)

I’m happy with the portfolio at the moment, with 14 positions and about 25% in cash reserves.  I can forecast a decent amount of trading activities ahead for both July and August – enough to keep things interesting.  And I think the bull market has legs for a bit longer, even though we’ve settled into this low volatility stage that is making good covered call trades hard to find.

Finally, here is the monthly summary of Rescue My IRA statistics for June, based the June 27, 2014 close.    

Account Status:

·         Total Account Value, 6/27/2014 Market Close:  $163,508.74 (a new high, vs. May close of $161,404.45)

·         Total Cash Reserve, 6/27/2014 Market Close:  $43,735.05

·         Core Stock Positions (as of 6/27/2014):  AAPL (100 shares), CNP (300 shares), CRUS (400 shares), F (500 shares), FB (200 shares), GE (300 shares), IP (200 shares), JPM (100 shares), KRFT (100 shares), MAT (200 shares), PFE (300 shares), PSA (100 shares), T (200 shares), TGT (100 shares)

Performance Metrics:

·         Option Premiums Collected (net, month of June):  -$1,299.84 (-0.84 %)

·         Capital Gains Collected (net, month of June):  $2,642.31 (1.71 %)

·         Dividends Collected (recognized on the ex-date): $328.00 (0.21 %)

·         Interest on Cash Reserve: $0.30

·         Total, Absolute Return:  $1,670.77 (1.08% absolute return, annualized return 12.98%) 

Next Month To-dos:

Looking forward to July, five positions are due to go ex-dividend, yielding an estimated $325.00, or 0.21% for the month – that’s down slightly from the June estimate.  Four of the five are in the money – F, JPM, PFE, and T; while KRFT is just out of the money.  Except for JPM, which is a September covered call, the other four positions are on August contracts, so the likelihood of having these positions called away is about even, depending on how they fare this month. 

There are two July contracts on the books: the 200-share IP position, in the money with a $49 strike, and my 200-share MAT position, just out of the money with a $40 strike.  If these shares are assigned at expiration, the total stock gains will be $136.00, or 0.09% for the month.

Since dividends and forecast stock gains only yield 0.30%, I’ll have to make up some returns from covered call premiums in order to meet my goal of 12% annualized return this month.

That’s it for the June Rescue My IRA post – all in all, it was a pretty good month.  Until next month, happy trading!