Cashflow Report – Portfolio Income during January 2012

Welcome to my Investing for Cashflow Report – January 2012 Edition!

Every month, I create a “cashflow report” to review the portfolio income (i.e. paper income) I’ve created from trading covered calls. Analyzing trades is something every investor/trader should do on a regular basis, and I use these reports to do the following:

  1. Help me track my progress towards financial independence
  2. Maintain my focus on increasing paper income and meeting my goals each month
  3. Provide an example of creating an income from investing/trading (actually making money – hopefully!)
  4. Get your feedback on ways to improve

Enjoy!

January 2012 Overview

The stock marketing continued to move higher despite the “weakness” associated with the start of the rally, Greek debt, etc. With DRN, EDC, ERX, and FAS testing or breaking through longer-term resistance levels, I decided not to fight the trend, sit on my hands, and try to capture some capital gains before locking into any covered call positions. I also decided to sell out of my TMF position because it broke long term support.

Lessons Learned in January

I’m still experimenting with the best way to report cashflow AND capital gains. Options include balancing my books based on an ETFs closing price at the end of the month, the strike price of the covered call, or avoiding reporting an capital gains until they are booked.

Right now, I’m leaning towards dealing with capital gains the way that a corporation does, since I can’t really “book” gains until I sell a stock. Any time I have money in the market, I’ll have a negative capital gain based on purchase price. For a company, cash and stocks are seen as assets with a value on the balance sheet at a specific point in time. As far as cashflow goes, the positive amount shows up in “cash” and a corresponding liability added because I “owe” someone an ETF at the strike price per the covered call.

My account statements calculate a the total account value, which includes the value of investments at the end of the month, similar to a corporate balance sheet. I also have the value of my outstanding options shown as a negative value. The caveat with the options negative value is that it is overstated; the negative value will slowly dwindle away as we head towards expiration due to the time value of the option.

I’ve also tried to make these reports a little less time intensive by showing capital gains and cashflows net of commissions and fees rather than having a separate line item. This will remove some of the calculation steps I go through at the end of the month and hopefully avoid one of the issues I discovered at the end of last year.

Cashflow Report – Paper Income During January 2012 – Breakdown:

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

Realized Capital Gains = $70.00
Premiums = $194.36
Dividends = $0.00

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

Realized Capital Gains = ($734.70)
Premiums = $324.36
Dividends = $0.00

ERX-Direxion Daily Energy Bull 3X Shares(ETF)

Realized Capital Gains = $3.11
Premiums = $423.72
Dividends = $0.00

FAS-Direxion Daily Financial Bull 3X Shares(ETF)

Realized Capital Gains = $836.94
Premiums = $380.46
Dividends = $0.00

TMF-Direxion Daily 20+ Yr Trsy Bull 3X Shares (ETF)

Realized Capital Gains = ($1,180.03)
Premiums = $0.00
Dividends = $0.00

Cashflow = $1,323.36
Realized Capital Gain = ($1,004.68)
Unrealized Capital Gain = $4,716.62
Estimated Profit = $3711.94

Goal Achieved!

Bar Graph of Profits from Covered Call Trading

GOAL: Execute a covered call trading strategy that creates cashflow profit greater than $3,600 USD per month, and deposits $3,600 USD per month into an expense account, for 3 months straight.

The Road Ahead

I’m sitting on some nice paper profits right now, but until the calls are executed I can’t actually “spend” the money. The good news is that 2012 is off to a good start!

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

9 Responses to Cashflow Report – Portfolio Income during January 2012

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