Like many of my generational colleagues, the baby boomers, I've found that my best intentions about saving for retirement aren't always meeting the mark. In 2011, I took some old 401(k) accounts and combined them into a self-directed IRA with Scottrade, and established a strategy of using covered calls to stabilize and enhance my returns. Rescue My IRA chronicles the progress of my IRA rescue using this approach.
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
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
·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.
·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