The format of this report includes an options expiration report and summary, open position summary, closed position summary, average monthly return, total return since inception, year-to-date return, and yearly returns.
Performance is based on a Working Capital Model (see the bottom of this report for details). The three basic objectives are, growth of base income, profit production from trading, and overall growth in working capital. Market value, while monitored, does not play a role in meeting any of these objectives. The income generated by the assets in the portfolio is more important than their current market value.
Options Expiration Report for Jul 2009This month the S&P was quite volatile but ended up about 2%. My account value underperformed, up only 1.30%, however, on a YTD basis, my account value is up 6.96% vs 4.11% for the S&P. The income generated this month was 1.01%, right at my target of 1%/month, and better than that past two months, which only generated income of about .5%.
I established 5 new positions this month, 2 covered calls for Jul expiration (CAT & ABT), 1 covered call for Aug expiration (MMM) and 2 cash secured puts for Jul expiration (COP & NSC).
On Friday, I rolled 15 positions out to Aug, either to continue the CSP positions or to avoid assignment on the CC positions. For most of the month, many of my CC positions, which had strikes below my cost basis, were ITM. None were called away early, even though many had less than .05 time value remaining on several occasions. I waited until the last hour of trading on Friday to roll all of these positions.
Next week I'll look to adjust the 7 positions with expired options. Since I'm close to my asset allocation of 80% equities and 10% fixed income, I probably won't put on any new positions this month.
That's all for this months report.
Expiration SummaryTotal Open Positions: 37
Total New Positions: 5
Total Equity Positions: 36
Total Fixed Income Positions: 1
Total Closed Positions: 0
Total Rolled Positions: 15
Total Expired Options: 7
Asset Allocation Before Expiration (based on working capital)Cash Available: $33,724.03 (10.69%)
Equities: $248,170.99 (78.66%)
Fixed Income: $33,620.95 (10.66%)
Working Capital ResultsStarting Working Capital: $312,371.83
Deposits to Working Capital: $0.00
Withdrawals from Working Capital: $0.00
Net Invested Capital: $200,000.00
Total Working Capital: $315,515.97
Base Income: $243.46
Trading Results: $2,941.15
Total Income: $3,184.61
Ending Working Capital: $318,700.58
Base Income Return: 0.08%
Trading Return: 0.92%
Working Capital Return: 1.01%
Market Value ResultsStarting Value: $197,715.63
Ending Value: $200,288.64
Market Value Return: 1.30%
Open Position Summary After ExpirationTotal Open Positions: 37
Total Covered Call Positions: 31
Total Cash Secured Put Positions: 6
Total Equity Positions: 36
Total Fixed Income Positions: 1
Average Working Capital Per Position: 2.43%
Average Holding Period to Expiration: 591 days
Asset Allocation After Expiration (based on working capital)Cash Available: $36,908.64 (11.58%)
Equities: $248,170.99 (77.87%)
Fixed Income: $33,620.95 (10.55%)
Closed Position SummaryTotal Trading Period: 4 years 2 months
Total Positions Closed: 230
Positions Closed for a Profit: 223 (96.96%)
Positions Closed for a Loss: 7 (3.04%)
Average Holding Period: 110 days
Average Annualized Return: 18.51%
Average Monthly ReturnsAverage Monthly Return on Invested CaptialAvg. Monthly Return: 1.40%
Avg. Annualized Return: 16.85%
Standard Deviation: 1.42%
Sharpe Ratio: 0.98
Average Monthly Return on Working CapitalAvg. Monthly Return: 1.32%
Avg. Annualized Return: 15.94%
Standard Deviation: 1.35%
Sharpe Ratio: 0.97
Average Monthly Market Value ReturnAvg. Monthly Return: 0.19%
Avg. Annualized Return: 2.30%
Standard Deviation: 5.42%
Sharpe Ratio: 0.04
Total Return Since Inception (May 2005-Present Month)Working Capital ResultsStarting Working Capital: $50,000
Deposits to Working Capital: $150,000.00
Withdrawals from Working Capital: $0.00
Net Invested Capital: $200,000.00
Total Working Capital: $200,000.00
Base Income: $7,585.21
Trading Results: $111,115.37
Total Income: $118,700.58
Ending Working Capital: $318,700.58
Base Income Return: 3.79%
Annualized Base Income: 1.05%
Trading Return: 55.56%
Annualized Trading Return: 15.39%
Working Capital Return: 59.35%
Annualized Working Capital Return: 16.44%
Projected vs Actual ResultsProjected Total Income: $88,972.79
Actual Total Income: $118,700.58
Percent of Goal: 133.41%
Projected Working Capital: $288,972.79
Actual Working Capital: $318,700.58
Percent of Goal: 110.29%
Market Value ResultsStarting Value: $200,000.00
Ending Value: $200,288.64
Market Value Return: 0.14%
Annualized Market Value Return: 0.03%
2009 YTD Annual ReturnWorking Capital ResultsStarting Working Capital: $300,574.83
Deposits to Working Capital: $50,000.00
Withdrawals from Working Capital: $0.00
Net Invested Capital: $200,000.00
YTD Total Working Capital: $300,574.83
YTD Base Income: $2,480.28
YTD Trading Results: $15,645.47
YTD Total Income: $18,125.75
YTD Ending Working Capital: $318,700.58
YTD Base Income Return: 0.83%
YTD Trading Return: 5.21%
YTD Working Capital Return: 6.03%
Projected vs Actual ResultsYTD Projected Income: $18,506.78
YTD Actual Income: $18,125.75
YTD Percent of Goal: 97.94%
YTD Projected Working Capital: $288,972.79
YTD Actual Working Capital: $318,700.58
YTD Percent of Goal: 110.29%
Market Value ResultsYTD Starting Value: $187,257.83
YTD Ending Value: $200,288.64
YTD Market Value Return: 6.96%
2008 Annual ReturnWorking Capital ResultsStarting Working Capital: $230,383.52
Deposits to Working Capital: $50,000.00
Withdrawals from Working Capital: $0.00
Net Invested Capital: $200,000.00
Total Working Capital: $280,383.52
Base Income: $3,429.18
Trading Results: $16,762.13
Total Income: $20,191.31
Ending Working Capital: $300,574.83
Base Income Return: 1.22%
Trading Return: 5.98%
Working Capital Return: 7.20%
Projected vs Actual ResultsProjected Income: $24,499.71
Actual Income: $20,191.31
Percent of Goal: 82.41%
Projected Working Capital: $270,466.00
Actual Working Capital: $300,574.83
Percent of Goal: 111.13%
Market Value ResultsStarting Value: $236,676.52
Ending Value: $187,257.83
Market Value Return: -20.88%
2007 Annual ReturnWorking Capital ResultsStarting Working Capital: $210,627.78
Deposits to Working Capital: $0.00
Withdrawals from Working Capital: $0.00
Net Invested Capital: $150,000.00
Total Working Capital: $210,627.78
Base Income: $852.50
Trading Results: $18,903.24
Total Income: $19,755.74
Ending Working Capital: $230,383.52
Base Income Return: 0.40%
Trading Return: 8.97%
Working Capital Return: 9.38%
Projected vs Actual ResultsProjected Income: $21,019.70
Actual Income: $19,755.74
Percent of Goal: 93.99%
Projected Working Capital: $195,966.29
Actual Working Capital: $230,383.52
Percent of Goal: 117.56%
Market Value ResultsStarting Value: $181,185.77
Ending Value: $186,676.52
Market Value Return: 3.03%
2006 Annual Return Working Capital ResultsStarting Working Capital: $117,840.28
Deposits to Working Capital: $50,000.00
Withdrawals from Working Capital: $0.00
Net Invested Capital: $150,000.00
Total Working Capital: $167,840.28
Base Income: $762.75
Trading Results: $42,024.75
Total Income: $42,787.50
Ending Working Capital: $210,627.78
Base Income Return: 0.45%
Trading Return: 25.04%
Working Capital Return: 25.49%
Projected vs Actual ResultsProjected Income: $18,842.40
Actual Income: $42,787.50
Percent of Goal: 227.08%
Projected Working Capital: $183,415.96
Actual Working Capital: $221,094.78
Percent of Goal: 120.54%
Market Value ResultsStarting Value: $157,659.27
Ending Value: $181,185.77
Market Value Return: 14.92%
2005 Annual Return (May-Dec)Working Capital ResultsStarting Working Capital: $50,000.00
Deposits to Working Capital: $50,000.00
Withdrawals from Working Capital: $0.00
Net Invested Capital: $100,000.00
Total Working Capital: $100,000.00
Base Income: $60.50
Trading Results: $17,779.78
Total Income: $17,840.28
Ending Working Capital: $117,840.28
Base Income Return: 0.06%
Trading Return: 17.78%
Working Capital Return: 17.84%
Projected vs Actual ResultsProjected Income: $6,104.19
Actual Income: $17,840.28
Percent of Goal: 292.26%
Projected Working Capital: $106,104.19
Actual Working Capital: $117,840.28
Percent of Goal: 111.06%
Market Value ResultsStarting Value: $100,000.00
Ending Value: $107,659.27
Market Value Return: 7.66%
Definition of TermsWorking Capital is the total cost basis of the stocks and cash in the account. Working capital is increased by dividends, interest, realized capital gains, and deposits. Working capital is decreased by realized capital losses and withdrawals.
Working Capital Return is the percent of income, from option premium, dividends and interest, and net capital gains/losses, on Working Capital since the beginning of the reporting period.
Net Invested Capital is the net result of all deposits to and withdrawals from the working capital.
Base Income is the income from interest and dividends only.
Trading Return is the net capital gain/loss from the sale of securities, including option premiums.
Market Value is the market value of the stocks, options, and cash in the account if all positions were liquidated (i.e. the mark-to-market value).
Market Value Return is the percent change in Market Value since the beginning of the reporting period.
Measuring PerformanceThe following information is from "
The Brainwashing of the American Investor
" by Steve Selengut and is based on his Working Capital Model.
Performance is the functional effectiveness of efforts to produce a desired effect, expressed either as objectives or goals. An objective is something that is aimed at and a goal is an end result that you are striving to attain. None of this speaks if indices or averages, calendar quarters or years, or even competition. Therefore, the only valid performance analysis is one that compares your personal results with your own personally stated goals and objectives. Monitoring investment performance the Wall Street way (e.g. market value) is inappropriate and problematic for goal-oriented investors.
The following is all the data you need to analyze the performance of your investment portfolio:
Line 1 - Working Capital: the total cost basis of the stocks and cash in the portfolio. Working capital is increased by dividends, interest, realized capital gains, and deposits. Working capital is decreased by realized capital losses and withdrawals.
Line 2 - Base Income: the income derived from dividends and interest only, without including that received from capital gains. One of the key objectives is to produce annual increases in base income at a rate that beats inflation.
Line 3 - Trading Results: the net realized capital gains from trading activities, including the sale of stocks, options and other securities.
Line 4 - Market Value: the total market value of the portfolio (i.e. mark-to-market value).
Line 5 - Net Invested Capital: the net result of all deposits to and withdrawals from the portfolio.
Lines 1-3 should slope steadily upward regardless of what Line 4 is doing. Line 4 will rarely be above Line 1. During the accumulation phase, Line 5 may stay flat or move upward, if deposits are being made. During the withdrawal phase, Line 5 should slope downward. If you're withdrawing less than the portfolio is generating, Lines 1-3 will continue to go up. However, if working capital moves lower, it's likely that you've crossed into negative cash flow territory and some tighter expenditure controls could be necessary.
Using this performance measuring method you'll know exactly where you are, where you've been, and what you need to do without even once bothering to ask how the market is doing. Remember, as long as you're meeting your income objectives and have positive cash flow, it doesn't matter what the market is doing. Ultimately, the income generated by your assets is more important than their current market value.
NOTE: Returns are calculated on a fiscal basis, not on a calendar month/year basis. Monthly returns are from one options expiration to the next. Yearly returns are from Dec options expiration to Dec options expiration of the following year.
