Rescue My IRA: December 2016 Results

Last month during my catch-up post for October and November, I posted a strategy that I had begun to put in place for Rescue My IRA as we look forward to what 2017 holds.  I’ll start this month with a brief recap of those ideas, since I’m continuing to execute trades based on those assumptions.

Looking forward to 2017, I believe that the market faces headwinds from two factors:  first, the market has to come to terms with the American election; and second, we have to remember that we’ve been on an 8-year recovery since the end of the so-called Great Recession of 2007.  Even though the market appears to have responded positively to the election, it seems to me that we are due for a cyclical consolidation now, and that would have likely happened no matter how the election turned out.     

My focus for now, until we see how these variables play out, is to take money off of the table and hold it as cash reserves.  I started in August with about $34,100 in cash, and as of December 30, I had increased that amount to $72,000 – about 41% of the account value.  I will continue to work on getting this amount to 50% of the account value while simultaneously maintaining the other risk management strategy I have, keeping a portfolio of between 12 and 16 positions in play. 

The near-term downside of this strategy is that there is less money working for me in the market, so it is reasonable to expect that monthly results will fall short of the S&P 500 and SPY benchmarks I use to track performance.  That didn’t happen in December, thanks in large part to a tax-free spin-off from XRX (I counted the new shares as a dividend for tracking purposes) – and Rescue My IRA ended up slightly ahead of the market.  However, in the early months of 2017, I expect that the account will lag the benchmarks, no matter whether the market is up or down. 

I’m planning to do a 2016 annual recap next week, but meanwhile, here is the benchmark data for the account during December:     

Account Status:

·        Total Account Value, 12/30/2016:  $183,945.32, up from the November close of $180,605.81

·        Total Cash Reserve, 12/30/2016:  $72,046.12, or about 41%

·        Core Stock Positions (as of 12/30/2016):  AAPL (100 shares), ABBV (100 shares), CMCSA (100 shares), CNDTw (100 shares – this is the tax-free spin-off from XRX), CTL (300 shares), DIS (100 shares), FB (100 shares), GE (200 shares), GM (200 shares), IP (200 shares), KO (200 shares), MAS (300 shares), MDLZ (200 shares), MOS (200 shares), XRX (500 shares)

·        Cash Secured Put (CSP) positions (as of 12/30/2016):  None

Performance Metrics:

·        Option Premiums Collected (net, month of Dec):  -$624.02 (-0.37%)

·        Capital Gains Collected (net, month of Dec):  $848.87 (0.51%)

·        Dividends Collected (recognized on the ex-date): $1,796.25 (1.07%) – includes tax-free spin-off from XRX

·        Estimated Interest on Cash Reserve: $0.62

·        Total, Absolute Return:  $2,021.72 (1.21 % absolute return, estimated annualized return 14.47%) 

·        S&P 500 Index 2016 year to date performance as of 12/30/2016: 9.54%

·        SPY ETF year to date performance as of 12/30/2016:  9.64% 

·        Rescue My IRA year to date performance as of 12/30/2016: 9.75%

Next Month To-dos: 

In keeping with past practice, during 2017, whenever a percentage is shown in the monthly forecast, it is calculated using the December 31, 2016 account valuation.  Also, the forecast and actual returns are always calculated on a “net of commissions and fees” basis, since these are costs that lower the amounts I receive. 

For January, there are two positions that will go ex-dividend, ABBV and MAS, yielding an estimated $94.00 in dividends.  At the time of this writing, ABBV has an in-the-money January call written against it, so it is probable that the stock will be called away, reducing the dividend haul to $30.00 from MAS.  The expected yield from dividends is either 0.05% or 0.02% for the month – the balance of returns will need to come out of stock gains or premiums. 

The account’s continuing situation is that many of the covered call positions in Rescue My IRA are month-to-month contracts.  In January, seven positions face expiration dates:  ABBV, CMCSA, CTL, FB, GE, IP, and MOS.  Only four are in-the-money as I write this summary, but if all seven are called away, the account will recognize revenue of $759.02 from stock gains.   

For now, these estimates add up to about half of my goal for the month, which is a net return of about 1%.  Given the cash reserve strategy in place, I expect some challenges – but I’m up for it, and I’m looking forward to seeing what the market holds.  My outlook is not quite bearish, but certainly aware of some potential risks in the market, so I don’t expect much for the first few months of the year.    

That is the December update.  I’ll post a 2016 wrap up later this week.  Until next month, happy trading!

Rescue My IRA: November 2016 Results

Well, somewhere around the middle of the month, I realized that I hadn’t written my monthly update for October 2016.  That’s the first time I’ve missed the monthly recap in five years on this blog.  The only pitiful excuse I can offer is that I was pretty fascinated by the last few weeks of the US election – fascinated then, and truly disappointed now, like millions of others – I don’t see how an embarrassment a day, as we have experienced over the last month, is going to “make America great again.”

America is already great, and I believe we’ll survive this election, despite the President-elect’s high school level understanding of the global economy and macro-economics in general.  My strategy going forward will simply be to hunker down in the near-term, and accept what is likely to be a lower than average return in Rescue My IRA, at least for the first year of the new administration.

It’s my sense that two factors will be setting up some market headwinds as 2016 ends: first, the market has to come to terms with the American election, and during November we saw that there appears to have been a relatively positive response.  More on my results in Rescue My IRA shortly.

We also have to consider that we’ve been on a long-running recovery, essentially throughout the 8-year timeline of the current administration.  There will be many who disagree with me on this characterization, but those folks will disagree with me on a whole lot more than that, and so be it.  If we simply step back from our disagreements and consider the probability of an economic slowdown, or even recession, after nearly eight years of growth, we need to take a sober assessment of the situation – and my conclusion is that we are due for cyclical consolidation now, and we would have been, however the election turned out.

So, I’m turning my thoughts to preparing for that situation by taking money off of the table.  During November I started to take money off of the table and build cash reserves so that I could watch and wait to see what will happen, and as I write this in early December, I currently have $62,500 in reserves.  To show the growth of cash reserves, in September, I had $34,100 or so in reserves, representing just about 17% of the account; that increased to $40,100, or 22.5% in October, and $53,200, or 30% by November.

My goal will be to get this amount to around 50% of the account value and hold it there until I can get a good sense of how things are going to go.  If the markets are positive during this time, Rescue My IRA will underperform, but if my hunch is correct, my account value will hold a little more of its value than the market overall.

That said, here is a summary of result highlights for October:

·        Total Account Value, 10/31/2016:  $177,497.69, slightly down from the September close of $178,312.12

·        Total Cash Reserve, 10/31/2016:  $53,161.61, or about 29.95%

·        S&P 500 Index 2016 year to date performance as of 10/31/2016: 4.0%

·        SPY ETF year to date performance as of 10/31/2016:  5.9% 

·        Rescue My IRA year to date performance as of 10/31/2016: 5.9%

Here is the benchmark data for the account during November:     

Account Status:

·        Total Account Value, 11/30/2016:  $180,605.81, up from the October close of $177,497.69

·        Total Cash Reserve, 11/30/2016:  $53,165.61, or about 30%

·        Core Stock Positions (as of 11/30/2016):  AAPL (100 shares), ABBV (100 shares), DIS (100 shares), FB (100 shares), GE (200 shares), GM (200 shares), IP (200 shares), JNPR (300 shares), MAS (300 shares), MDLZ (200 shares), MS (200 shares), SPY (100 shares), T (200 shares), TXT (200 shares), XRX (500 shares)

·        Cash Secured Put (CSP) positions (as of 11/30/2016):  None

Performance Metrics:

·        Option Premiums Collected (net, month of Nov):  -$533.01 (-0.33%)

·        Capital Gains Collected (net, month of Nov):  $1,975.69 (1.18%)

·        Dividends Collected (recognized on the ex-date): $179.60 (0.11%)

·        Estimated Interest on Cash Reserve: $0.20

·        Total, Absolute Return:  $1,602.38 (0.96 % absolute return, estimated annualized return 11.52%) 

·        S&P 500 Index 2016 year to date performance as of 11/30/2016: 7.58%

·        SPY ETF year to date performance as of 11/30/2016:  8.10% 

·        Rescue My IRA year to date performance as of 11/30/2016: 7.75%

Next Month To-dos:
During December, there are six positions that will go ex-dividend for the month, yielding an estimated $377.75 in dividends.  If all of these dividends are collected, the expected yield is 0.23% for the month. 

Currently, many of the covered call positions have evolved into month-to-month situations.  In fact, at the start of December, a total of eight contracts had forecast expiration dates during the month.  At the time of this writing, the first weekend of the month, five positions are still in play.  Four are in the money, and one is out of the money, but the forecast gains from these stocks are $436.78 or 0.26% yield. 

With about half of my monthly goal of 1.00% return forecast from these activities, covered call premiums will need to make up the balance.  We’ll see how that turns out in light of my updated cash reserve strategy – it will certainly be a stretch.  The flip side of that risk, however, is capital preservation…I hope so, at least!

That’s it for the November update – as always, the results are reported net of commissions and fees.  I certainly hope that the markets will perform before than my prognostication.  In any case, until next month, happy trading!

Thoughts on Cash Secured Puts, Part 2

Last week in this post I wrote about the strategy of using Cash Secured Puts (CSPs) in Rescue My IRA to augment the five-year track record I have in that account with covered calls.  The post referred to the Options Industry Council (OIC) web page, summarizing the information there into an overview of CSPs:

…the risk profile of a CSP trade, while significant (as with any option strategy), is essentially equal to the risk of a covered call trade.  Both trades are focused on the prospect of owning the underlying security, which has market and equity value, rather than trading on the value of the financial instrument represented by the option.  

 

My plan for this second and final post in this introductory series about CSPs is to document what I’ve learned about these options so far, since I began trading them in June 2016.  So far, I’ve sold these options against eight underlying securities:  MOS, VLO, CMI, IP, SKX, FLR, TGT, and SPY.  For the record, my experience with MOS and VLO have already resulted in a refinement of the strategy:  never sell a CSP on a stock or fund that you don’t care to own!

My approach so far has been slightly contrary to the concept outlined on the OIC page.  Instead of using the CSP to discount the eventual price of owning shares, I’ve sought to avoid assignment and to collect premiums for a net gain, essentially trading the CSP as a security in its own right.  This means combining sell-to-open (STO) and buy-to-close (BTC) trades following the old stock market maxim of buying low and selling high, except in reverse.

Still, I’ve had my VLO and TGT trades result in assignment.  These price of these stocks dropped quickly in the days just before my CSPs expired, leaving my options in-the-money, so the shares were assigned.  Although I was able to quickly close those positions at a gain, it reminded me that I still have to do my due diligence research on these trades, and I have since then.

For future CSP assignments, my plan is to simply convert the trade into a covered call situation, writing new options against the same strike price.  In these cases, the CSP premium can be considered a discount, so being called away at the original strike will actually result in a stock gain in these trades.  The takeaway for me is that this is exactly what the OIC described.

Since August, most of my CSP trades used the exchange traded fund SPY as the underlying security, and I’ve evolved to using weeklies in the process.  The contracts were never assigned.  Here is the September record of the SPY trades:

• Three weekly CSPs at strikes between $212.50 and $216.00
• Net option premiums (includes STO/BTC trades and commissions and fees):  $274.00
• Absolute return against highest strike price:  1.26%
• Annualized return based on 21 days invested:  21.98%

Thus, at least for the month of September, I was able to achieve the investment goal that Rescue My IRA uses as a guideline:  seek an annualized return of 12%.  Some of my colleagues on the Yahoo Just Covered Calls board write about their goal of 24% annualized.  That goal seems feasible to me, although achieving it probably will require more research and experience than I have so far.

My way forward is to continue with these trades and build on my experience of 12 or so trades to date.  I do use the portfolio concept of holding 12 to 16 positions as a way to mitigate the risk of trades going extremely south, and it’s inevitable that I will take some hits, but my sense of it is that by combining the due diligence approach I use with covered calls and limiting my picks to stocks I wouldn’t mind owning otherwise will make that risk manageable.

When I have cash sitting in reserve, that capital's return is negligible.  So these CSPs should lead to an improvement in that situation, and improve the annual results for Rescue My IRA in the process.

Thoughts on Cash Secured Puts, Part 1

After some background reading, and after several years’ worth of posts on the Just Covered Calls Yahoo board, I decided I might try incorporating Cash Secured Puts (CSPs) to set up trades in my Rescue My IRA account.  I started making CSP trades in June this year and have written contracts on eight different stocks.  In keeping with my goals for the blog, I thought I might write up a two-parter on what I have learned so far.

Before starting on this topic, I’ll recap the history of Rescue My IRA, which I started in October 2011 with the goal of generating positive returns in good and bad markets.  The trading strategy I chose used covered calls in trades that were initiated either as buy-write transactions or sold against portfolio holdings.  My objectives were to generate returns from three sources:  option premiums, stock gains, and dividends, and to manage capital risk with careful stock selection and account monitoring.

Except for 2016, which was remarkably precisely a break-even year, the account has had positive returns every year since its inception in 2011, and a simple average of the annual rate is about 6.50%.

At the suggestion of one of the members of the Yahoo board, I put together a trading plan to guide trading in this account.  I seek to have between 12 and 16 positions in play at any given time, a portfolio approach that means that I am likely to have some big winners and big losers, but the majority of my trades are likely to generate average returns.  Although each trade is set up to achieve an annualized return of 12 percent, the accounts growth reflects only six to seven percent annualized.

As far as stock picking goes, I tried to simplify the rules into a critical three or four elements:  must be a part of the S&P 500 Index, should be rated 4- or 5-stars by S&P, should pay a dividend at an annual rate of from three to six percent, and generally should be a mid-cap or larger.  There is a combination of liquidity in these rules, meaning I don’t get stuck in trades while trying to execute strategic moves, and the dividend yield rule of thumb combined with the 4-star rating tends to mean I’m picking stocks with more upside opportunity than downside risk.

Because I typically have anywhere from 10 to 30 percent of the account value sitting in cash reserves, and the interest paid on those balances is negligible, I began looking for a strategy I could incorporate to generate additional returns.  Then I learned that my fellow investors regard CSPs as substantially the same as covered calls, and Scottrade began allowing them in IRAs.  A severe price reduction in the underlying security could still create significant risks with any individual holding, but it seems to me that the liquidity aspect of these trades reduces the overall risk of any given contract.

Before I get into what I’ve actually learned from CSP trading already, I thought I would take a minute to cobble together an overview of CSPs, summarized from the Options Industry Council web page:

That web site notes that the risk profile of a CSP trade, while significant (as with any option strategy), is essentially equal to the risk of a covered call trade.  Both trades are focused on the prospect of owning the underlying security, which has market and equity value, rather than trading on the value of the financial instrument represented by the option.    

Rescue My IRA: September 2016 Results

Continuing with the recent trend of starting these monthly Rescue My IRA blog posts with a comparison of some benchmarks to the performance of my account, the covered call approach is holding its own for 2016 year-to-date through September 30.  The account has achieved 6.39% for the year so far, while the S&P 500 index is at 6.08%, and the SPY ETF is at 6.10% - that’s the first time the account has been slightly above the other benchmarks.

Some Cascade hops cones from the 2016 harvest.

On a side note, my home brewing hobby has now turned into a business.  Last year, I started a farming venture to grow hops, which I used in my hobby brews but have also sold to a few Virginia breweries.  This year I pulled the trigger on starting a Nano brewery in the Shenandoah Valley with a five-barrel brew house; all of the financing is in place, the equipment is being fabricated, the mechanical, electrical, plumbing, and construction contracts are in place, and we have submitted for licenses – we hope to open in March! 

I’ve added the second benchmark here, SPY ETF, at the suggestion of one of my colleagues on the Yahoo Just Covered Calls board.  While the ETF is one of my frequent covered call trades, and I have often written Cash Secured Puts (CSPs) against it since early this year, the hypothesis is that it may be a better benchmark than the S&P 500 tracker, since dividends are incorporated, and they are a key part of the strategy for Rescue My IRA.

It was a busy month for the account, with trading activities balanced between option premiums and stock gains.  The highlight was dividends, with eight positions hitting their ex-dividend dates and yielding almost $560 – that amount comprises the cash yield on the account. 

During the month I unwound two positions with the goal of settling back into the routine of having from 12 to 16 trades in progress (the month ended with 15 trades in place).  The cash balance is averaging about 20 percent, but I am using that as a way to write CSPs with about 10 percent of the account value.  To date, most of these trades are on the SPY ETF, as noted above; I think this may be my way forward on   

To keep moving forward in business and in life, we have to keep learning.  That’s where I’m coming down on the CSP question – it is adding value to Rescue My IRA.  I’ll put together a blog post about the approach I’m using later this month.

Here is the benchmark data for the account during September:     

Account Status:

·        Total Account Value, 9/30/2016:  $178,312.12, up from the August close of $177,642.51

·        Total Cash Reserve, 9/30/2016:  $40,066.12, or about 22%

·        Core Stock Positions (as of 9/30/2016):  AAPL (100 shares), DIS (100 shares), DOW (200 shares), FB (100 shares), GM (200 shares), IP (200 shares), MDLZ (200 shares), MET (200 shares), NUE (200 shares), PPL (200 shares), QCOM (100 shares), SPY (100 shares), T (200 shares), TROW (100 shares), XRX (500 shares)

·        Cash Secured Put (CSP) positions (as of 9/30/2016):  None

Performance Metrics:

·        Option Premiums Collected (net, month of Sep):  -$1,306.00 (-0.78%)

·        Capital Gains Collected (net, month of Sep):  $1,286.08 (0.77%)

·        Dividends Collected (recognized on the ex-date): $556.75 (0.33%)

·        Estimated Interest on Cash Reserve: $0.24

·        Total, Absolute Return:  $537.07 (0.32 % absolute return, estimated annualized return 3.85%) 

·        S&P 500 Index 2016 year to date performance as of 9/30/2016: 6.08%

·        SPY ETF year to date performance as of 9/30/2016:  6.10% 

·        Rescue My IRA year to date performance as of 9/30/2016: 6.39%

Next Month To-dos:
During September, I had to carefully manage six covered call trades that were expiring during the month.  I unwound two of these, and rolled out several of them, mostly to October, so this month starts with seven positions forecast to expire. 

Two positions are long-term under water:  NUE and XRX, so I am looking to roll them out and up; I’ve picked out some January strikes as my strategic targets for these.  If I am successful with those two, and the remaining five positions play out, the account will be most of the way to achieving my goal of 1% cash return during October. 

Four of the remaining five positions are narrowly out of the money, and one is in the money.  I can predict a busy month of either rolling out some of these or setting up new trades if they end up getting called away at expiration.

After all the dividends in September, there is only one position with an ex-dividend date in October.  The stock is T, and since the November contract I have on it is out of the money, I am forecasting that Rescue My IRA will collect that $96.00.

That’s it for the September update – as always, the results are reported net of commissions and fees.  Until next month, happy trading!

Rescue My IRA: August 2016 Covered Call Trading Results

As I have been doing this year, I will start the post with a comparison of Rescue My IRA year-to-date results with the S&P 500 figure, sourced from the Money Magazine web site.  and will continue to do so.  As of August 31, the year-to-date performance of the S&P 500 was 6.34%, and the year-to-date performance of Rescue My IRA was 5.44%, so we are staying close to the benchmark.

The performance gap closed a bit this month, possibly for two reasons:  first, I have started using cash secured puts (CSPs) in the portfolio, and second, I lowered the cash reserve I have been keeping to approximately 10 percent, although at month end I had my BAC shares called away due to an August 31 ex-dividend date so I am sitting at about 17 percent to start the month of September.

All in all, there is not much to report in terms of activity during August, except it was a steady, busy month of trading.  At one point during the month Rescue My IRA had 17 covered call positions in play and two CSPs – that is three trades higher than what I might usually have.  The goal has been to maintain a portfolio of between 12 and 16 positions, but I’ll rationalize this exception by saying it does appear that the trading has set the account up for a good September, which I will describe after the benchmarks:   

Account Status:

·        Total Account Value, 8/31/2016:  $177,642.51, up from the July close of $176,729.72

·        Total Cash Reserve, 8/31/2016:  $30,089.51, or about 17%

·        Core Stock Positions (as of 8/31/2016):  AAPL (100 shares), CSCO (500 shares), DIS (100 shares), DOW (200 shares), FB (100 shares), GM (200 shares), HST (300 shares), MDLZ (200 shares), MET (200 shares), NUE (200 shares), OXY (100 shares), PPL (200 shares), SPY (100 shares), TGT (100 shares), TROW (100 shares), XRX (500 shares)

·        Cash Secured Put (CSP) positions (as of 8/31/2016):  None

Performance Metrics:

·        Option Premiums Collected (net, month of Aug):  -$1,084.83 (-0.65%)

·        Capital Gains Collected (net, month of Aug):  $1,786.40 (1.07 %)

·        Dividends Collected (recognized on the ex-date): $125.00 (0.07%)

·        Estimated Interest on Cash Reserve: $0.24

·        Total, Absolute Return:  $827.61 (0.49% absolute return, estimated annualized return 5.93%) 

·        S&P 500 Index 2016 year to date performance as of 8/31/2016: 6.34%

·        Rescue My IRA year to date performance as of 8/31/2016: 5.44%

Next Month To-dos:

As of this writing, there are six covered call contracts expiring in September:  CSCO, DOW, MDLZ, MET, OXY, and TROW.  If all of them are called away on expiration (they are a mix between the 2 Sep weeklies and the conventional contracts), the account will net stock gains of $602.11, or 0.36% absolute return on the account.  A number of these stocks go ex-dividend during September, so the likelihood of assignment and receiving these gains is high.

September is always a good month for dividends, and 10 of the current positions will go ex-dividend this month.  If I collect the dividends on all of them – DOW, GM, HST, MDLZ, NUE, OXY, PPL, SPY, TROW, and XRX – the haul is $692.75, or 0.41% absolute return.   However, there is significant overlap with the expiring contracts this month, and I am forecasting that the total of dividends will be more like $259.00, due to the likelihood of having many of the stocks called away.

The lower dividend factor will be fine with me if the stock gains are achieved – it’s a total of $851.11, or around 0.51% absolute return.  I’ll need to make up another $850.00 or so to cover my monthly goal of 1.00% absolute return – but, hey, bring it on!

So that’s my update for August.  Until next month, happy trading!

Rescue My IRA: July 2016 Results

For the last couple of months, I have begun the monthly update post with a comparison of year-to-date results from the S&P 500 and Rescue My IRA.  I have been sourcing the S&P 500 figure from the Money Magazine web site and will continue to do so.  For July, the year-to-date performance of the S&P 500 was 6.34%, and the year-to-date performance of Rescue My IRA was 5.44%.

I’ve noted before that I expect Rescue My IRA to earn a little less on an annual basis than the S&P 500 return in positive years, or lose a little less than the index in negative years.  This is the result of my status as a small time investor, unable to monitor the market on a constant basis (and to act immediately because my IRA is in a retail account), because I pay fees on each trade, and because I make mistakes.  I believe my mistakes are typically because I don’t follow the stock selection criteria I established in my trading plan – I try to have the discipline to avoid this problem, but I’m not always successful.

Since June, I have been working on learning how to incorporate cash secured puts (CSPs) in my portfolio, a trading approach now allowed by Scottrade in IRAs.  A number of colleagues on the Yahoo “Just Covered Calls” board have used it. 

One of the advantages of CSPs is that the cash stays in the account unless the stock is put to you by the option holder.  I see some advantages in that it should be easier to enter and exit positions with the cash balance there – avoiding larger losses on the stock itself, that the cash will earn (miniscule) interest during the option’s term, and that as long as the stocks you are working with otherwise meet your selection criteria, there is the potential of buying them at a discount to the market price when you first make the trade.

As I wrote last month, for the most part, I’m using the same criteria for CSPs as I do for covered calls – the stock should be a component of the S&P 500 index, the stock rated as 4- or 5-stars by S&P, and it should offer a dividend yield ranging between 3-6%.  For CSP candidates, I added a criterion, setting a goal for the stock to be within 25% of its 52-week low to be considered, suggesting that there is more upside than downside in a given trade. 

My first two trades were in the energy sector, where there are many stocks that meet all of these criteria.  It’s a beaten-down sector though, and I don’t want to end up holding these stocks, so eventually I closed out the three trades that I had made there with a slight gain overall.  Now, one of the CSPs I have now is with CMI, which has been a favorite of mine for covered calls – I hope to settle in to a strategy that will find me investing in familiar names like this.

For now, the market has shaken off Brexit and the other bad news from June, so the account value of Rescue My IRA stands at an all-time high.  I used the paper gains as an opportunity to do some roll-ups and position maintenance that was overdue from the long months of sideways trading.  That’s why the current results are more or less breakeven this month, even though the account value is up nearly $6K from last month.

 

That’s a summary of my July results.  The benchmarks are below, net of commissions and fees, as usual:   

Account Status:

·        Total Account Value, 7/29/2016:  $176,729.72, up from the June close of $170,976.96, and a new high for the first time since mid-2015

·        Total Cash Reserve, 7/29/2016:  $54,071.72, or about 32%, note that this includes reserved balances for CSPs

·        Core Stock Positions (as of 7/29/2016):  AAPL (100 shares), ABBV (100 shares), CSCO (500 shares), DIS (100 shares), DOW (200 shares), FB (100 shares), GM (200 shares), HST (300 shares), NUE (200 shares), PFG (200 shares) SBUX (200 shares), SPY (100 shares), XRX (500 shares)

·        Cash Secured Put (CSP) positions (as of 7/29/2016):  CMI 110 Aug 2016, SKX 23 Aug 2016

Performance Metrics:

·        Option Premiums Collected (net, month of July):  -$633.02 (-0.38%)

·        Capital Gains Collected (net, month of July):  $529.03 (0.32%)

·        Dividends Collected (recognized on the ex-date): $258.00 (0.15%)

·        Estimated Interest on Cash Reserve: $0.20

·        Total, Absolute Return:  $155.01 (1.06% absolute return, estimated annualized return 12.72%) 

·        S&P 500 Index 2016 year to date performance as of 7/29/2016: +6.34%

·        Rescue My IRA year to date performance as of 7/29/2016: +5.44%

Next Month To-dos:

There are three contracts expiring in August:  ABBV, FB, and PFG, with the potential of netting stock gains of $932.02, or 0.56% absolute return on the account.  I’ll have gains on ABBV and FB, but since I sold an at-the-money call on PFG, I will show a $1.00 loss on the stock value for this position, compared to an overall return netting dividends and option premiums in excess of 5% over the course of the 100-day holding period. 

Also, I’m doing the analysis to determine whether a roll-out and -up of FB would be profitable at this time – the current option has a $120 strike price and I have no doubt the stock will go higher.  If I can construct a good trade with a back month horizon (November-December) that allows me to meet or exceed a 12% annual return, I will probably execute it.       

August will provide a light dividend haul, which I’m estimating as $125.00, or 0.07% absolute return.  Three positions go ex-dividend this month:  AAPL, INTC, and SBUX.  All of my contracts are safe from assignment, so I will most likely collect all dividends.

So that’s my July update.  August looks steady – I hope so.  In any case, until next month, happy trading!