Another Wash Sale: GM for F

At the beginning of June, Rescue My IRA had 16 positions working.  The trading plan for this account sets a target range for the number of positions in the portfolio at 12 to 16, so we are right at the top of the range.  While we wait for contracts to mature and turn over, it’s time to have a closer look at the performance of some of these trades.

Last month I did a “wash trade” on COP – link here for details – selling a stock that looked to be a slow mover and replacing it for another in the same sector that look more promising, VLO in this case.  I reviewed Rescue My IRA’s portfolio this month with the same objective, and found that a wash trade of F for GM could make some sense.  In the end, that’s what I did – I sold 500 shares of F at a small loss and bought 200 shares of GM, creating a trade that pretty much makes up for the loss in about 30 days.  http://rescuemyira.blogspot.com/2015/05/a-wash-trade-vlo-for-cop.html

Meanwhile, here is the analysis of the two component trades of this wash sale, net of commissions and fees:

F

Shares:

Bought 500 shares in March 2015, total basis $8,292.00 with an average share price of $16.58. I sold the shares for a loss at $15.31.

Options:

Total options income:   $185.47 – I stated with the $17 strikes, but had rolled out to August and down to $16, setting this stock up as a wash sale candidate.   

Dividend:

Total dividends collected:  $75.00

Net Profit:
Total Net Profit after Unwinding:  -$383.72
Absolute Return on Investment: (-$383.72/$8,292.00) = -4.63%
Annualized Return not calculated.

GM

Shares:

Bought 200 shares in June 2015, total basis $7,275.00, with an average share price of $36.38.

Options:

Total options income:   $100.50, I sold July $37 strikes.    

Dividend:

Total dividends collected (June ex-dividend):  $72.00

Net Profit:
Total Net Profit if held through contract:  $279.50
Absolute Return on Investment: ($279.50/$7,275.00) = 3.84%
Annualized Return (45 days):  3.84%*(365/45) = 31.16%

Three Roll-outs: AAPL, DOW, and VLO

Once I wrote the monthly results post, I had a look at my portfolio to plan some transactions for the month.  Even though the market continues on an upward trend, we do seem to have hit a point of resistance, so I thought I might take the opportunity to make adjustments or do other maintenance, like I did with the COP/VLO wash trade last month.  I settled on rolling out three positions:  AAPL, DOW, and VLO.

Here are the updated trading plans for these three positions, net of commissions and fees, and assuming forecast dividends are collected during the holding period:

AAPL

Shares:

Bought 100 shares in March 2015, total basis $12,757.99, average share price of $127.57.

Selling $130 covered calls and rolling monthly.

Options:

Total options income:   $871.74 – I started with the May call and rolled out to July with this trade.

Dividend:

Total dividends collected:  $47.00

Net Profit:
Estimated Net Profit:  $1,142.75
Absolute Return on Investment: ($1,142.75/$12,757.99) = 8.96%
Annualized Return (125 days):  8.96%*(365/125) = 26.15%

DOW

Shares:

Bought 200 shares in May 2015, total basis $10,382.00, average share price of $51.92.

Selling $52.50 covered calls and rolling monthly.

Options:

Total options income:   $252.50 – I started with the June call and rolled out to July with this trade.

Dividend:

Total dividends collected (June ex-date):  $84.00

Net Profit:
Estimated Net Profit:  $435.50
Absolute Return on Investment: ($435.50/$10,382.00) = 4.19%
Annualized Return (75 days):  4.19%*(365/75) = 20.41%

VLO

Shares:

Bought 100 shares in May 2015, total basis $5,765.00, average share price of $57.65.  This trade was designed as a wash sale for COP, a stock that had been mired in its 52-week lows - a post about the trade is here.  Selling $60.00 covered calls and rolling monthly.

Options:

Total options income:   $163.25 – I started with the June call and rolled out to July with this trade.

Dividend:

Total dividends collected (no ex-date during holding period):  $0.00

Net Profit:
Estimated Net Profit:  $380.25
Absolute Return on Investment: ($380.25/$5,765.00) = 6.60%
Annualized Return (60 days):  6.60%*(365/60) = 40.12%

Rescue My IRA May 2015 Results

Here with a report of trading activity in Rescue My IRA for May 2015.  The markets have had their ups and downs, but the account is still up by nearly 4% for the year, improving over the April results.   I have decided finally to put a little more of the cash reserves to work on shares, so now the reserve stands at just below 10% - down from the 20% or so in April, and much further reduced from the amounts as high as 35% I was holding last year. 

This has meant finding good candidates to buy and sell covered calls against, and I haven’t always been able to do this.  In some cases, I’ve added shares to the positions when I can’t find a new stock to trade, however, on one or two occasions this month I returned to some old favorites (CSCO and DOW) to set up good trades. 

As I closed the April post, one of my to-do items was to roll-out and roll-up my EMC and TXN positions.  I took care of this early, and both are set to earn a positive return now, at the trade-off of having October contracts against them. 

I also did a “wash sale” – selling COP and buying VLO, working within the same industry to switch horses.  In my previous conventional accounts, we used to do these kinds of trades to take losses on shares while still holding out for rebounds in their industries without having to wait for 20 days to reinvest, as you would have to do if you wanted to maintain a position in the same company.

So we’ll call May 2015 a maintenance month – selective pruning here and there, and a couple of strategic moves to keep momentum going.  All totaled, the result was a little less than half of my goal:  0.42% absolute return vs. the goal of 1%.  I can live with it, and I feel that the decisions I made will set the stage for profits later.

Finally, here is a summary of benchmark results for May 2015- as always, these amounts are net of commissions and fees.

Account Status:

·         Total Account Value, 5/29/2015 Market Close:  $174,180.54 – up from the April ending balance of $172,428.51.

·         Total Cash Reserve, 5/29/2015 Market Close:  $16,653.54 – moved down to just below 10% in cash reserves this month.

·         Core Stock Positions (as of 5/29/2015):  ABBV (100 shares), AAPL (100 shares), CA (300 shares), CSCO (300 shares), DDD (200 shares), DOW (200 shares), EMC (400 shares), F (500 shares), GE (500 shares), NUE (200 shares), PPL (300 shares), QCOM (100 shares), SPY (100 shares), T (400 shares), TXN (200 shares), VLO (100 shares)

Performance Metrics:

·         Option Premiums Collected (net, month of May):  -$351.50 (-0.21%)

·         Capital Gains Collected (net, month of May):  $931.62 (0.56%)

·         Dividends Collected (recognized on the ex-date): $127.00 (0.08 %)

·         Estimated Interest on Cash Reserve: $0.19

·         Total, Absolute Return:  $707.31 (0.42% absolute return, annualized return

5.06%) 

Next Month To-dos:

Rescue My IRA begins the month of June with five covered call positions set to expire in May:  AAPL, DDD, DOW, SPY, and VLO.  Only one of them was in the money at the May 29 close, but they were all within a few cents of my strike prices.  If these stocks are called away, the net returns from stock gains will be $650 – about 0.40% absolute return.  With a good dividend month, that’s pretty far along towards my 1% goal1 

Indeed, the dividend forecast for June is very good:  seven positions go ex-dividend this month.  These will yield $582.75 or 0.35% if I collect them all.  Since AAPL and DOW have covered calls that may be assigned, I could see the dividend haul reduced to $406 or so, and about 0.24%.

That doesn’t leave a lot of work to be done on collecting call premiums, although I’m pretty sure there will be a good number of trades.  Besides the five positions in June, there are currently four July contracts, so managing those nine positions will be a focus – and will likely produce income from premiums.  All in all, June should be a decent month.

So that’s it for May 2015 results.  Until next month, happy trading!