Sunday, May 29, 2016

Rescue My IRA: May 2016 Results

Let’s start the May 2016 post with a check of our year-to-date results with where the S&P 500 stands – both as of Friday, May 27:  RMI 2.30%, S&P500 2.70%.  The hypothesis is that Rescue My IRA will earn slightly less than the S&P500, given the inefficiencies I face as a small investor; however, this performance should be offset by a smaller loss in down times.  I’ll continue to track these performance indicators to test the hypothesis, but also to benchmark the account’s performance.

I’m posting the May entry a few days early this week, since I am just getting back from a week of business travel (Phoenix!  “Dry Heat!”) and I’m looking forward to a week of vacation coming up.  Squeezing this write-up in here before what I expect to be a pretty full 4-day week of work before we head up to Maine.

For most of 2016 I have run the account at 15 or 16 positions, but at the close of May there are 14.  Cash reserves are slightly up from the April balance, this component of the account now sits at around 29%, versus 27% at the end of last month.

The big trade of the month was unwinding the FB position I had opened last July with a basis of $98.44 per share.  The first option I sold on these shares was a 95 Aug 2015, well in the money, but a trade that would earn a good short-term return despite the loss on the share price.  Eventually I rolled the shares out and up, settling on a final covered call with the 105 May 2016.

When I unwound the position in early May, the share price was over $117, so the net profit on the trade was nearly $2,000.  That’s an absolute return of 20% on the original investment of $9,844.  Since I do calculate an annualized return for comparison purposes, this one works out to almost 26% on the holding period of 285 days. 

That’s how you want all the trades to work out, but of course they don’t!  I’ll take this one, though, and I’ll look forward to making it work this well again sometime.
That’s the update for May. The benchmark results are below, and they are net of commissions and fees, as usual. 

Account Status:
·        Total Account Value, 5/27/2016:  $171,457.29, which is up from the April close of $169,909.66
·        Total Cash Reserve, 5/27/2016:  $49,447.29, or about 29.10%; that’s up slightly from last month.    
·        Core Stock Positions (as of 5/27/2016):  AAPL (100 shares), ABBV (100 shares), CSCO (500 shares), DIS (100 shares), DOW (200 shares), GM (200 shares), HST (300 shares), INTC (200 shares), IP (200 shares), NUE (200 shares), PFG (200 shares) SBUX (200 shares), SPY (100 shares), XRX (500 shares)

Performance Metrics:
·        Option Premiums Collected (net, month of May):  -$462.03 (-0.28 %)
·        Capital Gains Collected (net, month of May):  $1,895.74 (1.13%)
·        Dividends Collected (recognized on the ex-date): $212.00 (0.13%)
·        Estimated Interest on Cash Reserve: $0.20
·        Total, Absolute Return:  $1,645.91 (0.98% absolute return, estimated annualized return 11.78%) 
·        S&P 500 Index 2016 year to date performance as of 5/27/2016: +2.70%
·        Rescue My IRA year to date performance as of 5/27/2016: +2.30%

Next Month To-dos:
June is always a good month for dividends, and there are seven ex-dividend dates declared or expected for the month:  DOW, GM, HST, NUE, PFG, SPY and XRX.  Forecast dividends are $524, but the last three positions have in-the-money covered calls against them, two with June expiries and one with a July expiration, so the potential is for a reduction in dividends to around $300. 

The stocks – PFG, SPY, and XRX – have been taking a little bit of a beating during my holding period and I have rolled them down.  There is the potential of a loss of $1,521 if the shares are called away, so I’ll watch for a chance to make some corrections.  That’s not quite a 1% loss, but it seems like there will be some opportunities to roll the shares up without going too far out into the calendar, and that will be my goal for June, along with finding one more position to invest in, bringing the working total back up to 15.

So that’s my June update.  We’ll be traveling for the first week or so, so I’ll be away from the blog.  Until next month, happy trading!

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