Cashflow Report – Paper Income during May 2011

First Financial Independence Goal: Achieved!

What happened in May?

Cashflow May was even less active than April (from an personal attention standpoint), with the exception of trying to get my June covered calls executed. Sort of a silent victory, as I don’t yet have goals related to the amount of time spent on executing my strategy each month.

As far as the ETF’s are concerned:
After the April blast off, DRN quietly floated back to technical support levels. The June call premiums were slightly lower than May. One of these days, I will need to plot the call premiums I capture verses the price movement over the next month. No one can predict the future, but it will be interesting to see if there is any actual correlation showing up in my results.

EDC broke the intermediate uptrend I mentioned last month, but is still “range-bound” between $35 and $45 (since last October/November timeframe). EDC premiums also decreased slightly.

What I learned in May

I learned that I am not good at guessing!

If I had to guess, there is a good chance I’ll be in all cash when May expiration rolls around.

Also, I need to make sure that I check the open interest and volume of options traded for any new covered call. This may seem like common sense, but that’s because IT IS common sense. Common sense went out the window in favor of multi-tasking (stupid day job). I had a mental lapse when thinking about expanding the number of ETFs I use for this strategy. I came across CZM, which is Direxion’s 3x leveraged China fund. Long story short, my stock order went through, but my call order did not. That’s not uncommon, when I set my limit orders incorrectly. What IS uncommon is seeing a bunch of ZEROs for option volume/interest! Oops.

To make matters worse, I purchased the shares of CZM with unsettled funds. This means that I had to wait for the funds to “settle” before I could sell CZM. It all worked out, but it is something to think about after an “all-in” month of trading.

Cashflow Report – Paper Income During May 2011 – Breakdown:

DRN-Direxion Daily Real Estate Bull 3X (ETF)

Premiums = $1478
Dividends = $0.00
Commissions/Fees = ($12.63)

EDC-Direxion Daily Emerging Markets Bull 3X (ETF)

Premiums = $1586.00
Commissions/Fees = ($14.63)

Net Cashflow – May 2011 = $3036.74

GOAL ACHIEVED! (Whoa! That was close!)

I exceeded my cashflow goal for the third straight month, but not as I had planned. June option premiums were down across the board, and I made a couple mistakes along the way.

As promised, meeting this month’s cashflow goal was cause for some changes (and celebrations). Meeting a goal once is a great accomplishment, but not the end of the road in terms of achievement; it is only the first step. That is why I wanted to achieve my goal 3 months in a row. A properly set goal has 5 traits:

  1. The goal is specific; it is described in detail
  2. The goal is measurable; performance can be recorded
  3. The goal is achievable; it is within the realm of possibility
  4. The goal is realistic; it is within my power to achieve
  5. The goal is timely; there is a duration of achievement, along with a deadline

Financial independence requires consistency; a steady stream of income. That means a history of repeatable, consistent cashflows. 3 months is not a big enough sample size to say that I achieved independence. But it is large enough to tell me that I am on the right track, and that I can move on to the next goal in my vision of financial independence.

GOAL: Create cashflow greater than or equal to $3,600 USD per month for 3 months straight by executing my covered call strategy.

Paper Income from Covered Calls

Investing for Cashflow – Performance – 2011-05

Related Posts

May Option Investing – EDC Covered Calls

I was not expecting my EDC position to expire, given the price performance in April.

But that’s why we play the game.

I ended up selling June $36 calls for $2.30 and $2.18.

May Option Investing – DRN Covered Calls

My May $66 calls were all exercised, so I reduced my position size a bit for this month. I am thinking of adding another leveraged instrument to my option trading, but haven’t decided which one yet. With the general markets in a correction, I’ll sell calls slightly below the strike price.

**May 24 update**
Option premiums on DRN are down this month (May calls were selling at $4+). I purchased shares at $72 and sold June calls at $72 for $3.70.

**May 26 update**
I sold an additional June call on DRN: $74 strike price for $3.68.

May Technical Analysis – DRN and EDC

All of my DRN options were assigned over the weekend, so as of this morning, I am sitting on my shares of EDC and nothing else. So lets check the tape.

DRN


April’s assessment of DRN:

The longer term support levels held, and DRN meandered its way higher. Slow and steady, all the way from last July.

DRN consolidated for a majority of the May timeframe, within the $70-$80 price range. The uptrend since last October is also intact.

EDC


Here’s what I said in April:

EDC rocketed up to $45/share (a measly 28% gain). It appeared that EDC found support at the 20 DMA, broke below it, then found support near the 50 DMA. EDC bounced around quite a bit, but hasn’t made much progress from the high 30’s of last October.

EDC was able to reclaim the 20 DMA for a short period of time, then failed to find support there or at the 50 DMA. It appears as though there is some support at the $33 level, which pushed EDC back above the 200 DMA.


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