BEAT ME TO IT

My Bad - I assumed Safeway (SWY) was going ex-D on the 21st, but did not check - it went on the 18th, so my positions in two accts. were called away before rolling out to Seps after its nice runup recently. Final tally: Bought 300 for $6819, 1Q dividend for $53, sold 21-strike calls for 778, called away the day before ex-D at $6291 (after comm.) - Net $ 303 after 4 months, or 13.33% annualized.  

DITM UPDATE: June 10,2013

After more than two weeks without a DITM update, now is a good time for one. For the first time in 2013 the portfolio took its first loss of the year, albeit a minor and voluntary one - QRE. This had been a profitable trade in 2012 but, not doing the best effort in Sector selection, I was too heavily weighted in Energy/Natural Resources (since that was where the yields were). Previous loss in 2012 was PGH, also a high-yielding Energy stock.

Although I still feel the DITM is the optimal strategy for zero interest rates, at least for seniors, retirees and other prudent investors - at least with a portion of assets- the reason for fewer updates is being fully invested in DITM, there is not much activity or monitoring needed- a plus.

Although a four-year wrapup of DITM testing yielded @ 10% annual results (the longtime historical yield of stocks), it has underperformed the four-year Bull market from March 2009 ( DITM started in May 2009). The four year record of my small IRA (sans contributions and RMD withdrawals) consisting of 5-6 stocks, hit a record high earlier this year, averaging 11%/year since 2009. Coupled with the safety net and riding through a dozen or so "Corrections" (one near-Bear), so far 2013 closed trades (opened in 2012 and 2013) averaged 15.3% annualized. Without the loss of QRE it would have been 17.1%.

The 2013 winner (not recommendations) were LINE,KKR, SIX,INTC,STX,GE,BBY.

Current positions include HRB,NEM,UVV,CLMT,LMT,LO,ESV,DVY.

Disclaimer: If the nasty Bear market that Garrett Jones predicted last weekend at the Bloomberg HQ meetup with TSAA/MTA actually occurs, or any Bear market - DITM will also lose money, if not hedged or exited - but not as much as an index fund (please see my last Examiner.com column on Garrett's excellent Technical presentation at:

http://www.examiner.com/stock-market-in-san-francisco/brent-leonard

SELLING IN MAY

Option expiry saw the call-away of a long held stock - WMB (Williams Cos.). Like the aforementioned MCHP (previous column), it was held over a year, and called in two lots, which makes for ugly FASB accounting. But called after 12 and 14 months, respectively, I averaged it to 13 months, making the 13.12% return become 12.11% annualized.

Not too bad, considering this week's Barron's reports the average hedge fund returned 4.3% the past 3 years, and 8.25% in 2012. The unhedged S&P 500 is up 10.9% over the past 3 years, but only 8.6% annual since 1992.

Despite the historically poor May-Nov. semi-cycle, I am looking for both more DITM and LEAP trades - please see my Examiner.com article for the rationale:

http://www.examiner.com/stock-market-in-san-francisco/brent-leonard

BIRTHDATE PRESENT

Last week marks the anniversary of not only DITM (four years of testing), but my Silver one on the planet (75). As a reward, the DITM gave me a super present - calling away my Seagate Tech stock (STX) with a Sept.(??) 28 call option.

As mentioned in an earlier column, this event is more frequent and likely than a rare torpedo stock, and makes up for the latter. Metrics on STX were:

Bot 200 stock on Dec. 2012, sold 2 March 28 ITM calls , which were rolled up to the Sep. 28s on a rising market. Although DITM doesn't participate directly from a cyclical Bull market it does have a cushion expanded, and the good possibility of an earlier call-away, heightening the annualized profit by freeing up money for another trade.

Profit from dividends, calls and resale: $592 on a $5809 investment for 5 months - annualized return: 24.46%. Also called away last week - DIA for a lot less (4.5% ann.), and MCHP, which I did in two lots. The first was three months which returned 13.78% ann., and the recent trade - 15 months- only 9.19% ann. - typical, that the longer the holding, the less the return (and monitoring as well).

Four year small IRA return - just under 10%, no thanks to gold and oil/resource stocks, which are still providing dividends and call decay.

Advancing LEAPS

One of the "trade-offs" I mentioned in my last blog update was the surprise call-aways that more than balance out the rare tanking torpedoes. As I prepare for my usual Tahoe vaca, I just got my INTC called away with a JULY call - only $3 ITM. Bottom line is an annualized (after 6 months) return of 12.94%. Better than MMFs and probably just as safe. It'll fund my activity at the tables at Stateline.

I also did a LEAP trade this week. Could net 80% total; involves buying AMD Advanced Micro, a D rated stock by Schwab, but up 40% this week - should be around by Jan. '15.  51% annualized over less than 7 Qs until 2015.
Bot the stock at $3.47, sold the 3 1/2 call and 2 1/2 put  for $1.78.
Also bot another thou and just sold the $4 call of 2015 ( no  put, as I don't want the risk of taking on another 1000 shares.
So far my no-monitoring LEAP plan includes: BAC, F, ACI, SWC, IAG, AA, AMD, NOK - Not great stocks (not a recommendation for the faint of heart), but they should still be around by 2015. If below, strike, I take on shares via Put, and write another set of LEAPS!!!