Rescue My IRA: December 2015 Results

Rescue My IRA ended the month very near the starting point for 2015 – so we had a sideways year.  The noncommittal year was often a theme of these monthly posts – I will take some time over the next few days to have a look back at the year and do an annual summary post. 

Between dividends, stock gains/losses, and covered call premiums, we were able to generate cash returns of more than $1,700, or 1%, during the month, which was right on the goal.  That these returns don’t automatically translate into the account being more valuable is one of the complexities of investing that I don’t work too hard to understand – I just take comfort in knowing that I held my own. 

Dividends were key to the December results – the month started with a forecast of seven positions going ex- during the month, including GE, which was called away.  The total return from dividends was $450 for the month, or about 0.27% on the account basis. 

Notable options transactions during the month included unwinding USO for a stock loss of $809, and having my GE and MSFT positions called away for offsetting gains of $113 and $587 respectively, providing a net of -$104.

With a new year beginning and election news preparing to dominate mindshare even more than it has in the last six months, I don’t hold out much hope for a strongly positive market during 2016.  I remember the terrible market of 2000 as my point of reference, when Bill Clinton was incumbent and could not be re-elected – the response anticipating George Bush was horrendous.  While the market hasn’t yet thrown in the towel as it did back then, there are rough roads ahead, enough to lead me to think we’ll be sideways for a while until it begins to look like there is a clear front runner between the two sides. 

Hopefully that’s when we’ll see a growth phase return.  I’ll continue to build cash reserves to the 30% level through the election.  Meanwhile, here is a summary of benchmark results for December 2015 – as always, these amounts are net of commissions and fees. 

Account Status:

·        Total Account Value, 12/31/2015 Market Close:  $167,609.77, which is down from the November close of $170,104.40; it’s also down slightly from the account’s 2015 starting point of $167,659.68.

·        Total Cash Reserve, 12/31/2015 Market Close:  $40,173.77, or about 24%; that’s up from the November balance of $33,272.30. 

·        Core Stock Positions (as of 12/31/2015):  AAPL (100 shares), CMI (100 shares), CSCO (500 shares), DIS (100 shares), DOW (200 shares), FB (100 shares), GM (200 shares), IP (200 shares), JPM (100 shares), NUE (200 shares), QCOM (100 shares), SBUX (200 shares), SPY (100 shares), XRX (500 shares)

Performance Metrics:

·        Option Premiums Collected (net, month of December):  $1,417.22 (0.85%)

·        Capital Gains Collected (net, month of December):  -$104.120 (-0.06%)

·        Dividends Collected (recognized on the ex-date): $450.00 (0.27%)

·        Interest on Cash Reserve: $0.29

·        Total, Absolute Return:  $1,763.39 (1.05% absolute return, estimated annualized return 12.62%) 

Next Month To-dos:

While December was a great month for dividends, January is relatively quiet:  there are only two positions with ex-dividends this month.  In fact, the ex-dividend date for the two stocks, CSCO and JPM, is January 4, which are out of the money at the time of this writing.  It looks like I can count on that $149.00 return in dividends, which represents about 0.09% on the account’s 2016 beginning value of $167,659.68.

This month there are five covered call contracts set to expire.  Of the five – DIS, FB, JPM, NUE, and XRX – only FB is in the money at the strike price of $100, which will generate a $138.00 stock gain on this position.  Both NUE and XRX would show losses at the current strike, so I will plan to roll them out when I have the opportunity.  If the remaining contracts are called away, the account will generate $307.00 in stock gains, about 0.18% return; it’s more likely that only FB will be called away for a gain of $138.00, or a 0.08% return.

That means that I can plan for at least four roll-outs during the month ahead, with call premiums needing to make up the difference between my monthly goal of a 1% cash return and the forecast returns from dividends and stock gains, which ranges from 0.17% to 0.27%.  So those transactions will keep the month interesting.   

That’s it for the December update.  I’ll put together a year-end summary for 2015 in the next week or so.  Otherwise, until the January results post, happy trading!