Unwinding AAPL

We had a volatile month, but as October comes to an end, the markets have returned to the levels they started with.  Most of the activity for Rescue My IRA consisted of roll-outs and adjustments during the correction that took place mid-month; I did try to set up a couple of new positions with DIS and QCOM – I was successful with DIS but passed on QCOM for now; and yesterday I unwound my AAPL position, which is the topic of this post. 

With the stock well above my strike price of 100 for the November calls, and an ex-dividend date coming up in early November, the timing was opportune to take profits with an eye towards setting up another position.  I haven’t decided what that will be yet, but I’m working on it. 

In the meantime, here is the final analysis of the AAPL trade, net of commissions and fees:

AAPL

Shares:

Bought 100 shares in June 2014 at an average price of $93.81, total position basis $9,380.99

Sold on unwind 100 shares at $10.701.76. 

Total stock gain:  $1,320.77

Options:

Total options income:   -$458.31 (By unwinding, I exchanged the option premium for additional stock gains in this trade)

Dividend:

Total dividends collected:  $47.00

Net Profit:
Total Net Profit after Unwinding:  $909.46
Absolute Return on Investment: ($909.46/$9,380.99) = 9.69%
Annualized Return (130 days):  9.69%*(365/130) = 27.22%

Forecasting More Choppy Seas for the S&P 500

When I wrote my monthly summary a couple of weeks ago, we'd already seen a couple of downward trading days - and I summed it up to the effect that October would likely be spent sailing choppy seas.  So far this month, that's exactly how it has turned out.

I have rolled out all of my October positions, so my plan is to wait it out.  Over the last few days, I have considered rolling out some November contracts, but with the market trading in this direction I would either have to go farther out - say to March contracts, or begin rolling down my strike prices.  Instead of attempting to outsmart things with those kinds of reactions, I will simply stay put and deal with my November expirations in November.

Also, starting last February, I had been building a cash reserve that ranged from 25% to 35% of the account - on October 1 it was around 30%.  Now I have begun to think about putting some of that cash into some quality stocks, which appear to be bargains at the moment.

Two choices I have done well with before are QCOM and DIS.  Two 100-share positions in these stocks would put about a third of my reserves back to work with good prospects for meeting my annualized return goals.

On the other hand, the S&P is not yet down 10 percent from its highs.  That's a rule of thumb I've been using as I think about next steps.  So I may wait a few more days before I pull the trigger with a few more buy-writes.

Rescue My IRA - September 2014 Results

I was traveling on business on September 30 and October 1, so I didn’t catch my account values on the monthly close.  I’ve had to wait for my statement to do the monthly update – I received it last night, so at last I can put up the monthly post.

At the close of last month’s post, I forecast the results from having seven positions expiring during the month of September…all seven were in the money at the time, but not all seven ended up being closed.  The positions were AAPL, CRUS, DIS, FB, JPM, PSA, and SPY; I had forecast gains totaling $2,318.09, or 1.50% of the starting account value this year, or 18% annualized.  I actually came in pretty close to the forecast, with 1.51% returns for the month and 18.17% annualized – not bad, and not something you see very often! 

In the days since September 30, we’ve had some down days and up days.  In my post yesterday I wrote up three trades I’d completed last week on Thursday and Friday, after the market declined by one percent in a day – it was up by just about that much the next day, so I was able to make a little bit of money on adjustments.

Here is the monthly summary of Rescue My IRA statistics for September, based the monthly statement I just received.       

Account Status:

·         Total Account Value, 9/30/2014 Market Close:  $ 166,533.55 , down slightly from the August close of $166,992.83)

·         Total Cash Reserve, 9/30/2014 Market Close:  $60,942.02

·         Core Stock Positions (as of 9/30/2014):  AAPL (100 shares), BA (100 shares), CNP (400 shares), COP (100 shares), CRUS (400 shares), EMC (400 shares), FB (100 shares), GE (300 shares), IP (200 shares), KRFT (100 shares), T ( 300 shares), TGT (100 shares)

Performance Metrics:

·         Option Premiums Collected (net, month of September):  -$1,298.37 (-0.84 %)

·         Capital Gains Collected (net, month of September):  $3,526.29 (2.28%)

·         Dividends Collected (recognized on the ex-date): $112.00 (0.07%)

·         Interest on Cash Reserve: $0.38

·         Total, Absolute Return:  $2,340.22 (1.51% absolute return, annualized return

18.17%) 

Next Month To-dos:

As the month began, I had five positions set to expire with October contracts.  I have already rolled out three of them: BA, COP, and CRUS; leaving two: FB and IP.  This looks to be a shaky month trading-wise, but if the two positions are called away in the money, they’ll earn about $300, or .19% of the account value.

That means I will have another .81% of the account value to make up with call premiums and dividends.  The roll outs on BA, COP, and CRUS generated $409, or .26%, and I am forecasting dividends of $264 or .17% from COP, KRFT, and T this month.  Totaled up, that’s .62% - so still some work to do if I am going to make my goal of 1%!

That’s it for the September results of Rescue My IRA.  Not bad at all, but we’re looking at heavy seas ahead.  I guess I’ll stay with the covered call strategy for another month. 

Until my October results post, happy trading!

Adjusting BA, COP, and CRUS

I was traveling last week on September 30 and didn’t have the chance to check my account values at the market close – so my monthly status report will have to wait until I get my statement in a few days.  In the meantime, the market kept trading, and we had a volatile day or two.  I used the down day on Thursday to make some adjustments to a few positions – BA, COP, and CRUS – which all had Oct covered calls written against them. 

In BA’s case, I rolled out from the 130 Oct to the 130 Nov, and netted $129.  For COP, I rolled out from Oct to Jan – the sector is getting beaten down a bit, so I had to go further out on this transaction – netting $75.  Finally, with CRUS, I rolled out from Oct to Nov and netted $200. 

One of my goals with Rescue My IRA is to use covered calls to make money in down markets as well as up markets…which is exactly what happened on this trading day!

Here are the position plans for BA, COP, and CRUS after the most recent trades, as always net of fees and commissions and assuming I collect dividends through the holding period:

BA

This is a 100-share position with a basis of $12,937.00, or $129.37 per share.  The current covered call is $130 Nov 2014, I opened the position in September with the $130 Oct. 

Total covered call premiums:  $287.23

Total dividend payments (assumes I collect November):  $73.00

Total stock gain at $130:  $45.00

Total, absolute gain on the position:  $405.23

Total, absolute return percentage ($405.23/$12,937.00):  3.13%

Annualized total return percentage (approx 60 days if held to expiration):  19.06%

COP

This is a 100-share position with a basis of $8,050.00, or $80.51 per share.  I started by selling $80 covered calls, in the money, with the intention of having a short holding period.  Thursday’s dip gave me a chance to roll out the October contract, so I did.

Total covered call premiums:  $225.23

Total dividend payments (forecast October and January 2015 ex-dividends):  $146.00

Total stock gain at $80:  -$68.99

Total, absolute gain on the position:  $302.24

Total, absolute return percentage ($302.24/$8,050.00):  3.75%

Annualized total return percentage (held approx 120 days):  11.42%

CRUS

This is a 400-share position, established in February 2014, with a basis of $8,038.00, or $20.10 per share.  I started by selling $20 covered calls, in the money, but have gradually rolled up to $22 covered calls.  I’ve also been able to roll this position out on a monthly basis and it has been a rewarding experience so far.

Total covered call premiums:  $1,000.333

Total dividend payments (no dividend on this stock):  $0.00

Total stock gain at $22:  $744.00

Total, absolute gain on the position:  $1,744.33

Total, absolute return percentage ($1,744.33/$8,038.00):  21.70%

Annualized total return percentage (held approx 270 days):  29.34%

I am very happy with the returns to date on CRUS, but should note that it is a position that does not meet my usual criteria for a Rescue My IRA trade – it is a 3-star stock with S&P and doesn’t pay dividends.  Still, things are working out, but it is definitely an exception to my rules.