Sunday, May 1, 2016

Rescue My IRA: April 2016 Results

This year is the fifth year of Rescue My IRA, and as I continue to learn about the covered call strategy and refine my approach, I’ve added a statistic to the performance metrics I track – the S&P 500 Index year to date data.  It’s in the monthly “Performance Metrics” section of this write-up, and I’ll track the portfolio year to date performance there along with it.  For the record, the S&P was at +1.05% for the year on April 29, and the account was at +1.37%. 

The account is up for the year, but it is down slightly on a month to month basis from March.  The month ended with a 10-day string of bad earnings news; earlier in the month the results were showing a month to month basis gain.  But such is life in the market for the short-term – long-term we’re up, and hopefully that trend will continue!

As far as specific activities in the Rescue My IRA account, at the start of April there were 15 positions and a cash reserve of 24%.  One position (T) was called away on the ex-dividend date for a small profit, and I unwound a second (BAC) at the end of the month, also for a profit, so we closed the month with 14 positions and a 27% cash reserve. 

I set up the T position in March to be a short-term trade, lasting only 21 days.  Between covered calls premiums and the small stock gain the trade yielded 1.17% over those 21 days, which works out to 20.42% on an annualized basis – I calculate that strictly for comparisons and use it as a tie-breaker when considering multiple trades.

As far as the BAC trade goes, that one also was set up to be a short-term position back in February.  After one month roll-out and collecting the dividend, it began a climb.  I decided to unwind it at the end of April, collecting a 7.94% yield over 60 days, for an annualized gain of 48.30% - that may be the best of the year so far. 

There was another adventure this month – one of my colleagues on the Yahoo Just Covered Calls board suggested a pharmaceutical stock, so I set up an ABBV position.  His recommended stock offered what appeared to be a nice opportunity, but since it was not tracked by S&P it didn’t meet the criteria I use in Rescue My IRA, so I substituted with ABBV (for a sense of what my criteria allow in this industry, I have rotated between ABBV, MRK, and PFE during the last five-years). The position plan for this trade (I have it on the 60 May contract) offers a hat trick, which means it collects covered call premiums, a dividend, and a stock gain, with an absolute yield of 4.9% over 39 days, and an annualized yield of 45.81%. 
So that’s the news for April. The benchmark results are below, and they are net of commissions and fees, as usual. 

Account Status:
·        Total Account Value, 4/29/2016:  $169,909.66, which is down from the March close of $170,565.96
·        Total Cash Reserve, 4/29/2016:  $46,522.58, or about 27.38%; that’s up from last month’s balance of $38,275.96. 
·        Core Stock Positions (as of 4/29/2016):  AAPL (100 shares), ABBV (100 shares), CSCO (500 shares), DIS (100 shares), DOW (200 shares), FB (100 shares), GM (200 shares), HST (300 shares), INTC (200 shares), IP (200 shares), NUE (200 shares), SBUX (200 shares), SPY (100 shares), XRX (500 shares)

Performance Metrics:
·        Option Premiums Collected (net, month of April):  -$1,473.041 (-0.88%)
·        Capital Gains Collected (net, month of April):  $1,216.79 (0.73%)
·        Dividends Collected (recognized on the ex-date): $187.00 (0.11%)
·        Estimated Interest on Cash Reserve: $0.20
·        Total, Absolute Return:  -$69.05 (-0.04% absolute return, estimated annualized return -0.49%) 
·        S&P 500 Index 2016 year to date performance as of 4/29/2016: +1.05%
·        Rescue My IRA year to date performance as of 4/29/2016: +1.37%

Next Month To-dos:

The dividends forecast for May includes four positions yielding a total of $212.00:  AAPL, INTC, IP, and AP.  None of them have May covered calls written against them, so it is likely that all of these dividends will be collected.

The May covered call contracts are ABBV, CSCO, and FB.  I’ll look at CSCO for a roll-out and up this month, as the contract price is slightly below the purchase price, but if that doesn’t work out the net gain on these positions is $501.02.  That increases by $214.99 if I am successful rolling out the CSCO.

We’ll see how May goes, but that’s my April update.  Until next month, happy trading!


  1. Thanks for sharing Jim, I look forward to your insight each month

  2. Thanks - I appreciate and enjoy having the opportunity to share it. Best of success in your trading!

  3. Jim, look at DVAX. They have a vaccine under review with an FDA decision set for December. Buy it and sell OTM CC's. These positions are akin to printing money.

  4. Thanks for the tip! I had a look at this one - among the criteria it would have to meet before I choose it for Rescue My IRA is an S&P rating of 4 or 5 stars, an annual dividend yield of 3-5%, and a market cap of over $1B. Since it doesn't meet those, I have to go with other stocks in that industry, as discussed in the post, such as PFE, MRK, and ABBV. Good luck in your trading!