Sunday, July 5, 2015

Rescue My IRA - June 2015 Results

For much of the month of June, the market moved in a sideways direction – until the last week, anyway, when the financial community collectively became very afraid of what might happen in the Euro-zone.  While this was all going on, I remembered my studies in business school about country-level bankruptcies and their short-term impacts on world markets, so I decided to take advantage and buy to close some of the most impacted covered calls. 

Now I feel like I am poised to make a little money off of a down market, which was one of my goals with the Rescue My IRA strategy in the first place.  That will happen when I sell those covered calls back into a rising market.  Meanwhile, overall, the account value closed out the month down a bit due to the market duress, but not so far down to have given back all of its gains for the year.

Looking forward now, I was reminiscing about how the 7th year of a US president’s administration is generally pretty good for the market, but the 8th is often bad.  I’m planning to gradually lighten up my holdings through October until I’m at 50% cash – this will allow me to watch and wait for trends, and it will give me some flexibility about a new strategy I am considering.  More on that in a future post.

It was a busy trading month, focused on pruning the portfolio.  I made a few more of those “wash trades” I have been working on – VLO for COP, GM for F, and HPQ and XRX for CA.  These trades improved the quality of the portfolio and they should result in gains that make-up for the southward tendency of the original holdings.

For example, the net loss on COP after unwinding it last month was about $1000 – over the course of a 240-day holding period.  It looks as if VLO will be called away from me during July, generating a net gain of almost $400 after just 60 days.  That sums up what I’m after in these trades, to get back most of the loss quickly – and while I’m writing this, I’ve just realized that given the perspective of all of this trading, the loss on the original doesn’t bother me so much anymore, as it might have earlier in my Rescue My IRA career.  There are just too many trades, and the good results outnumber the bad enough to convince me to keep on keepin’ on…

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

Account Status:
·         Total Account Value, 6/30/2015 Market Close:  $169,438.04 – that’s well off of the May ending balance of $174,180.54, but most of the paper loss can be attributed to the Eurozone market impact; the account has already recovered $1K of the lost value by the end of the week.
·         Total Cash Reserve, 6/30/2015 Market Close:  $34,565.54 – back up to 20%, and looking to move up to 50% by October.
·         Core Stock Positions (as of 6/30/2015):  AAPL (100 shares), CSCO (400 shares), DDD (500 shares), DOW (200 shares), EMC (400 shares), GE (500 shares), GM (200 shares), HPQ (400 shares) NUE (200 shares), SPY (100 shares), TXN (200 shares), VLO (100 shares), XRX (500 shares)

Performance Metrics:
·         Option Premiums Collected (net, month of June):  -$133.66 (-0.08 %)
·         Capital Gains Collected (net, month of June):  $1,337.02 (0.80%)
·         Dividends Collected (recognized on the ex-date): -$1,495.07 (-0.89 %)
·         Estimated Interest on Cash Reserve: $0.18
·         Total, Absolute Return:  -$291.43 (-0.17% absolute return, annualized return is negative) 

Next Month To-dos:

Rescue My IRA begins the month of July with only one covered call position set to expire:  VLO.  The stock is currently in the money and has held up in that status despite the Eurozone shenanigans.  The current trading plan for VLO will yield a gain of $217.00, or 0.13% on the portfolio.    

While June was a heck of a month for dividends, July is dismal:  only CSCO and TXN have ex-dates this month, for a total of $152.00 or 0.09% return on the portfolio.  CSCO had its ex-date on July 1, so that is already in the bank, but I still have my work cut out for me to make a 1% gain this month. 

To make plan, this analysis shows I need to sell covered calls for about $1,400.00 or so.  That’s a lot of trading, and doesn’t seem likely, but I’ll make a solid go of it.  Meanwhile, should see things crawl out of the temporary blip from Greece, so the portfolio value will recover its paper losses from June.

…so that will be fun, and give us all something to look forward to.  That’s it for the June report…until next month, happy trading!