Tuesday, April 7, 2015

New Position: SPY

Once the JPM position was called away on the ex-date, April 1, I put most of the proceeds into a new position with SPY, the S&P 500 ETF.  The per share cost of this trade is fairly high – it’s the one security with highest share value I have ever bought in Rescue My IRA, although this is not my first rodeo with SPY. 

My approach this time was to look for a trade with only two weeks of time involved, and also to sell an in-the-money covered call to basically write a contract for a set gain.  In this case, I’ll have about $15.00 in a capital loss, but that is offset by a call premium of just over $160.00.  The net of about $145 over the course of the nine day holding period sets this trade up for an absolute return of .70%, which annualizes to 29%. 

This is the third trade in a series that started with a profitable DIS trade earlier this year, followed by the JPM trade that was called away.  I sure hope I can keep the string going!

Here is the position plans for the SPY position, with results reported net of commissions and fees:



Bought 100 shares at average share price $205.97 (total $20,597.00)
Sold 1 $206 April 10 2015 covered call for $163.75

Net Profit:

1) Options Income:  = $163.75
2) Dividend Income (no dividends this holding period): $0.00
3) Capital Appreciation/Loss if assigned at $206.00:  -$15.00

Total Net Profit if assigned on April 10:  $148.75
Absolute Return on Investment: ($148.75/$20,597.00) = 0.72%
Annualized Return if Assigned and Dividend Collected (9 days):  0.72%*(365/9) = 29.29%

Monday, April 6, 2015

Rescue My IRA - March 2015 Results

Here's the hop yards' logo.  Twitter
handle is @hawksbillhops 
I’m writing my monthly Rescue My IRA results post about a week late this month, but I have an excellent excuse.  In January, I decided to take a step towards starting a small business in Luray, Virginia – Hawksbill Hop Yards – which you can read about here.  The business plan and attendant chores related to getting this project underway have been time consuming (but incredibly fun!).

After the break out we saw in February, I decided that I would put more Rescue My IRA cash to work on positions and covered calls.  I have been tracking cash reserves at around 20-25% for the last year or so, but I made the strategic call to reduce this to around 15% during March.  As a result, I now have 15 positions trading, and we’re back to seeing the bulk of the monthly returns generated in covered call premiums.

In fact, the $1,900 generated from covered calls met my goal of a 1% return for the month all by itself, although there were good dividend and stock gains results as well. 

My wife and my farming partner
David, checking out the field.
As I wrote last month, I don’t calculate the unrecorded gains and losses in this account as part of the monthly return, which is why the account value changes independently from the transaction results.  I figure that with a good trading plan, these things take care of themselves over the course of the life of each position, so the best success indicator ultimately is simply the increase in account value.  Even so, monitoring the three component items is a good way to track progress and improve decision making.

Well, that’s all I have to say for now – I need to get back to work on the hops farm. Here is a summary of results for March 2015- as always, these amounts are net of commissions and fees.

Account Status:
·         Total Account Value, 3/31/2015 Market Close:  $169,187.41 – down slightly from the February ending balance.
·         Total Cash Reserve, 3/31/2015 Market Close:  $32,364.23 – also down from February.
·         Core Stock Positions (as of 3/31/2015):  ABBV (100 shares), AAPL (100 shares), CA (300 shares), COP (100 shares), EMC (400 shares), F (500 shares), FB (100 shares), FCX (500 shares), GE (400 shares), HAL (200 shares), JPM (100 shares), NUE (200 shares), PPL (300 shares), QCOM (100 shares), T (400 shares)

Performance Metrics:
·         Option Premiums Collected (net, month of March):  $1,908.82 (1.14%)
·         Capital Gains Collected (net, month of March):  $346.02 (0.21 %)
·         Dividends Collected (recognized on the ex-date): $310.25 (0.19 %)
·         Estimated Interest on Cash Reserve: $0.30
·         Total, Absolute Return:  $2,565.39 (1.53% absolute return, annualized return

Next Month To-dos:

As I’m writing this it is already the first week in April, so my forecast will reflect that I have already completed a couple of roll-outs, and I’ve added a 100 share position in SPY which will show a $15.00 loss when exercised on April 10.  JPM has already been called away on its April 1 ex-date, and there remain three positions with expirations in April, including SPY – the other two are FB and HAL. If all three are called away, there is the possibility of $650.30 in capital gains, or 0.39 % return. 

April’s dividend forecast is not bad, with four stocks going ex-dividend:  ABBV, F, FCX, and T.  JPM has already been called away, so there is a total estimated yield of $339.00, or 0.20%.  None of them have April contracts on them, so the estimate is pretty solid at this point. 

That puts estimated cash returns from stock gains and dividends at around $1,000.00, or 0.59% - I need another $700.00 or so from covered call premiums to make my goal of a 1% return for the month.  As of this writing, I have generated almost $600.00, so we are just about to the finish line.  With three ITM calls coming up this month, I should have the opportunity to sell a few more contracts, which will take the account across the finish line for April. 

When I write my April post, hops planting season will be starting us in the face.  I’ll try not to be late with the monthly post, despite that.  Until next month, happy trading!

Thursday, April 2, 2015

Called Away on the ex-date: JPM

I bought a couple hundred shares of JPM on the heels of my DIS trade last January.  It is a stock I've had a couple of good trades with over the course of the Rescue My IRA account, and this transaction adds to the track record.  

I held the shares a total of 75 days before they were called away on the April 1 ex-dividend date yesterday - and the trade earned an absolute return of 5.51% on the cash invested.  That works out to an annualized return of almost 27%, well above my goal of a 12% annualized return.

(For the original January post on this position, see this link.)

Meanwhile, here is the final analysis of the JPM trade, net of commissions and fees:


Bought 200 shares in January 2015, with a total basis of $11,223.00 and an average share price of $56.12.
The position was called away on the ex-dividend date at a $57.50 strike price, netting $11,482.77, for a total stock gain of $259.77.

Total options income:   $358.49 – I only sold one covered call on this trade, the April $57.50.

Total dividends collected:  $00.00 – the stock was called on the April ex-dividend date.

Net Profit:
Total Net Profit after Unwinding:  $618.26
Absolute Return on Investment: ($618.26/$11,223.00) = 5.51%
Annualized Return (75 days):  5.51%*(365/75) = 26.81%