Cashflow Report – Portfolio Income During April 2012

Welcome to the Investing for Cashflow Report – April 2012 Edition!

Each month, I review the portfolio income (i.e. paper income or income from investments) created from trading covered calls and create a “cashflow report”.  Analyzing trades is something every investor/trader should do on a regular basis, so this is my attempt to practice what I preach. The reports 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!)
  4. Get your feedback on ways to improve


Overview of April 2012

For most of the month, the markets were in a correction, so I avoided new positions in ERX and EDC.  TMF was beginning to rebound.  And oddly enough, DRN continued higher.  Towards the end of the month, the markets confirmed a new uptrend.  It was the not the strongest start, but enough to send FAS and DRN above my strike prices.

I bought back into DRN and FAS, as they had held up well in April, regardless of the correction.  I decided to keep my powder dry with regard to ERX, EDC, and TMF, because I wasn’t convinced the rally had legs.

**UPDATE: May 4th brought about the end of the April 25th rally attempt.  This could be good news for TMF, but I’m glad I stayed away from ERX, and EDC.  Hopefully, DRN and FAS continue to hold up well, but I’ll let me trading program do the talking.

Lessons Learned in April

One the strategy front, I’ve decided to take advantage of the weekly options on FAS to refine my trading techniques.  With 4-5 expirations per month, I can get feedback on performance much more quickly, and the time my money is at risk is considerably lower.

Historically speaking, I sell in/out of the money calls based on market conditions. In the money calls were the order of the day when markets were in a correction.  This gave me some downside protection if the ETF fell, in the form of higher premiums.  If the ETF rose, I still received a decent cashflow, even though I was selling at a slight capital loss.  In April, I decided to sell only out of the money calls, even though the market was in a correction.  I want to see if this rule modification could improve my ability to capture capital gains.  Unfortunately, most of my gains in April were wiped out when FAS rebounded in price towards the end of the month.

Cashflow Report – Portfolio Income During April 2012 – Breakdown:

Realized Paper Income Gains

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

Premiums = $394.36
Dividends = $0.00

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

Premiums = $0.00
Dividends = $0.00

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

Premiums = $0.00
Dividends = $0.00

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

Premiums = $1,200.17
Dividends = $0.00

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

Premiums = $0.00
Dividends = $0.00

Realized Cashflow = $1,594.53
Capital Gain = ($1,464.29)
Profit = $130.24

Goal Not Achieved

Bar Graph of Portfolio Income from Covered Calls - April 2012

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

TMF could make some headway now that the markets are back in a correction, that is where I’ll be focusing my attention (in terms of new positions).  As for DRN and FAS, I’ll be watching my stop-loss triggers closely.  More than likely, I’ll be saddled with some capital losses next month (May) because I bought FAS and DRN shares when the market was rallying.

Related Posts

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

One Response to Cashflow Report – Portfolio Income During April 2012

  1. Pingback: Cashflow Report – Portfolio Income During April 2012 « Investing for … | Cash Flow

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