Sunday, August 2, 2015

Rescue My IRA August 2015 Results

During July, the market continued the summer doldrums, moving downwards, and as a result, the statement value of Rescue My IRA has dipped below where it started for the year.  The ending balance, is less than 1% down from the January 1 balance, that’s not where I’d like to see it, but that’s the market we have, not the one we want, Donald Rumsfield!

I took advantage of these movements and bought to close and then sold to open some of my covered calls, trading them as securities in their own right, if you will.  This strategy brought in almost $1,300 in premiums to the account this month – a result that did help pacify any worries I might have about where the market is headed next.

The situation means I’ll be keeping a careful eye on my core positions and the profitability of the covered calls I’ve written. With many of them out of the money and in back month contracts, the temptation is always there to do a buy to close and roll down – the portfolio can handle this type of activity and still be profitable overall, but it’s not my preferred approach, and it takes a lot of work.  It’s probably better to stay in a hands-off mode until the summer is over.

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

Account Status:
·         Total Account Value, 7/31/2015 Market Close:  $166,516.56 – that’s down from the June ending balance of $169,438.04, and down from the account’s 2015 starting point of $167,659.68.
·         Total Cash Reserve, 7/31/2015 Market Close:  $30,090.56 – just less than 20%, and I am still looking to move up to 50% by October.
·         Core Stock Positions (as of 7/31/2015):  AAPL (100 shares), CSCO (400 shares), DDD (500 shares), DOW (200 shares), EMC (400 shares), FB (100 shares), GE (500 shares), HPQ (400 shares), MSFT (200 shares), NUE (200 shares), SPY (100 shares), TXN (200 shares), XRX (500 shares)

Performance Metrics:
·         Option Premiums Collected (net, month of July):  $1,296.46 (0.77 %)
·         Capital Gains Collected (net, month of July):  -$339.25 (-0.20 %)
·         Dividends Collected (recognized on the ex-date): $152.00 (0.09 %)
·         Estimated Interest on Cash Reserve: $0.20
·         Total, Absolute Return:  $1,109.41 (0.66 % absolute return, annualized return is estimated at 7.94%) 

Next Month To-dos:

August is no better for dividends than July was, with only two ex-dividend dates forecast:  AAPL and MSFT, for a total of $114.00, or a 0.07% return on the portfolio.  September will be better, but this forecast leaves a lot of work to be done in August to make my goal of an overall return of 1% monthly. 

The forecast of covered call contracts set to expire this month include an August 28 FB strike of $95 and an August 21 MSFT strike of $46.50.  As of this writing, MSFT is in the money, and FB is just out of the money; because I set these contracts up with in the money contracts I’ll take a small capital loss on both of them if I let them get called away, which I am inclined to do, as I am still trying to grow the cash reserve through October.

On a further point of clarification:  the MSFT position is set up to yield an absolute of 3.33% over the 30 day holding period, even with the stock loss.  With the ex-dividend date of August 18, even if the August contract is called early and I lose the dividend, the position will have earned an absolute return of nearly 3%, so I’m good with that.

Similarly, on the FB position, the position was set up in the money to yield just about 3% over the course of the 35 day holding period.  The position is about $1 out of the money as of this writing, but there’s enough volatility that I have no worries – and the benefit of this approach is that I will simply roll-out if the call is not assigned.

That’s it for the July update.  I hope everyone is enjoying their summer, despite the market.  Until next month, happy trading!