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

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About T. Knight
Blogging about my journey to financial independence via investing for cashflow.

6 Responses to Cashflow Report – Paper Income during May 2011

  1. Carmon Deloe says:

    How’s things…nice item. Ecstatic I came across it by using Google, to bad that it was on page four of search results. It appears as if your using WordPress with your website, you really should get this plugin for WordPress at it’s significantly aided me with my web site rankings in Google Search. I would hate to see your useful written content not be observed by other folks. Best of luck with your website.

  2. Shane Germain says:

    Hey, just found your site … your progress is interesting. Are you following a program to learn covered calls or self teaching? Are you just paper trading at the moment and what sort of capital are you assuming?

    • T. Knight says:

      I’m self-teaching, with the intent of creating my own investing program.

      This site contains my actual trades. I did some paper trading several years ago in order to get familiar with options.

      With DRN at ~$70 and EDC at ~$36, $11,000 is needed to sell 1 covered call on each. It took a while to work my way up the “capital” ladder so to speak. There are psychological hurdles to overcome as you increase your trade sizes.

  3. Pingback: May 2011 Contest « Income Report Contest

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