My account continues to have lower volatility than the markets in general due to my use of options and my (small) diversification into bonds.  August pulled me ahead of the S&P 500 by a little bit more than previous months which is always a good feeling, but a big broad market rally could move me back to even quickly.  With only four months remaining a lot can change, but I prefer being in the lead rather than working on a comeback in the final third of the year.  I still don’t want to take too many chances as I think this market is teetering still.  At the same time I want to stay as with somewhat of a close beta to the major indices, of course with the lead going to me.  I’ve made it a full year now with a realized gain each month, but my paper losses on INTC, ITRI, MSFT, GES, JPM and UCO will have to be taken at some point, assuming I don’t ride them back to a profit (not including premiums).

If all of my naked puts were assigned and my covered calls expired worthless I’d be around 132% invested.  That would put $30,421.89 on margin for me in my IB account.  I don’t see that as a big risk with some of my naked puts still fairly far out of the money, but then again a lot can happen in two and a half weeks before September options expiration.

These are my returns according to Quicken through 8/31/10:

My 1 year return: +1.62%
Year to date (YTD): -3.04%
Annualized returns since 4/8/07 (my blog’s beginning): -10.29%
Deposits for month: $2,000 on August 6th, 2010

According to Morningstar, here’s how I compare to the major indices through 8/31/10:

Dow Jones Return: 1 year +8.39%, YTD -2.11%
S&P 500 Return: 1 year +4.91%, YTD -4.62%
NASDAQ Composite Return: 1 year +9.01%, YTD -5.42%
Russell 2000: 1 year +6.60%, YTD -2.97%
S&P Midcap 400: 1 year +4.91%, YTD +0.24%

The VIX ended the month at 26.05 and the VXN ended at 27.45.  Both are up from last month showing the increase in fear and downward movement in the markets.  At some point I expect a little bit more of a slide lower for volatility.  We might see a pop before that if the August payroll numbers aren’t good, but as long as companies continue to make decent profits with fewer employees any selloff should be somewhat mild and possibly short lived which would return the VIX to the lower 20s fairly quickly.

In April VXX went as low as $17.84 intraday before recovering.  I don’t see any time it has closed below $18 yet, but I assume that eventually it will, but doubt it’ll stay down too long.  Even if/when it gets down into the $17-18 range again, the shares that I might buy at $20 won’t be very deep in the money and I still think I’ll be able to sell $20 strike covered calls all day long for a good return. 

For example, as I’m writing this post VXX is trading at $23.00.  The October $28 strike calls are showing a $0.75/0.85 bid/ask.  I’m assuming a limit order at $0.80 would hit pretty easily.  Based on a cost per share of $22.21 (after premiums are deducted and commissions are added on) that would give me a 3.5% return in a little over seven weeks before expiration.  Even if I had longer until expiration and repeated this once every two months, six times per year that would annualize out to a 21% return using a strike that’s $5.00 out of the money and doesn’t include any potential gains in the underlying shares that are possible too.

My current exposure to VXX is worth $16,600 (3 Sept 20 puts + 3 Oct 20 puts + 200 shares trading at $23.00), not including premiums received.  My account balance with Interactive Brokers is down to $96,000.  That makes VXX worth a touch over 17% of my account.  I like it a lot, but I’m not willing to go any heavier into it yet.  Once I’ve had a good year of trading it I might go as much as 20-25% of my account, but that’s still pushing it for something that isn’t guaranteed.  If it works, I look great.  If it doesn’t I’m an idiot for putting so many eggs in one basket.

Heads up, I won’t be posting an index chart this weekend.  My brother is getting married and I’ll be with family and friends all weekend.

While ITRI was trading at $56.84 I sold one October $60 covered call for $2.15 and received $213.99 after commissions.  If these shares are called away I’ll take a big realized loss on the shares, even when accounting for the premiums I’ve taken in.  I didn’t want to completely exit the position yet because I still believe in ITRI longer term and taking in $200+ on $5,684 backing it is a nice return on its own, assuming ITRI doesn’t keep falling.

While AVAV was trading at $23.00 I sold two October $22.50 covered calls for $1.70 each and received $338.57 after commissions.  AVAV is below where I started and I have a paper profit on it already, but think the risk is somewhat low that I’ll take a loss by stretching this position out for another couple of months.  Taking in $1.70 while $0.50 in the money is basically the same as taking in a $1.20 premium at the money, but with a higher probability the option will be assigned.  $120 on $2,250 is also a good return in eight weeks which is why I decided to keep it in my portfolio for now.  I sold in the money to increase my chances for a profit and hopefully to exit the position in October and free up some more cash. 

While CSX was trading at $48.84, more than a dollar off its high of the morning, I sold two October $50 covered calls for $1.90 each and received $379.07 after commissions.  I really debated holding off on these options because CSX is at the bottom of its trading channel and I won’t be surprised to see it pop back into the low to mid $50s before too long.  I decided to go ahead and take some early profits in the form of covered calls based on my concern that I could be wrong and this correction could go deeper than I expect.  If CSX does rise to the occasion and make it back above $50, I’ll still end the series of trades with a profit, even after buying my shares at $52.50.

I’ve yet to pull the trigger on MSFT, INTC, CVS, JPM and MS.  The latter two I’ll probably sell another strangle on this week.  The first three all seem to have room to move much higher in the near term and I’m trying to be patient.  I was close to selling covered calls on CVS because the premiums aren’t too bad, but it kept climbing and I didn’t want to get in its way.  Now I’ll have to hope that wasn’t a one day event, but the start of something longer term.  I have little doubt I’ll end my series of trades on CVS with a profit, but don’t want to just give it away.  That said, I’m close to being in the mood to wipe the slate clean with my losing positions and starting with a new batch to work higher.

The first thing I noticed when I looked at the S&P 500 chart this week was that even after what felt like a painful slide lower, it’s still trading within the same trading channel that it’s been in for months.  A lot of bears out there will scream for the reasoning that it’s going for a double dip now and although they could be correct, the chart doesn’t say give up yet.  Until this trading channel breaks, there’s no reason to abandon ship completely yet.  Lightening up when resistance hits on the upper limits (around 1,130) and reloading when support is found on the lower limits (around 1,040)  is still the game that works.  At some point that will stop being a winning strategy, but nobody can say with certainty when.

For the nearer term we could see another 30 points to the downside which is less than 3% from Friday’s closing levels unless we retest the lower low (around 1,010) from July instead of the May and June lows again.  Going back down to test the July intraday lows would equal more than 5% to the downside from here.  I drew two trend lines using lower highs and lower lows from the past few weeks.  These lines are set to converge before either of the previous lows is reached.  If we stick with the line of lower lows we’ll get there eventually, but will have broken the quick pace of decline from the past two weeks.  If the trend line of lower lows breaks it could possibly be the sign of a minor capitulation as the rate of descent speeds up quicker than the past three weeks has allowed.

Longer term, it still comes back to the index is trading below its 200 day moving average and most of us view that as a bearish indicator worth respecting.  Throw in the fact that the 50 day moving average and the 10 day both acted as resistance and the bears have the edge still.  The longer the index stays below its moving average the quicker said moving average will decline giving lower resistance and a lower bar to hurdle when its time to reach for new highs.  Williams %R has moved back to oversold for the 14 day period, but not yet for the 28 day period.  While it’s still on the decline with room to move lower I give the edge to the bears on this indicator too.  By the time the S&P 500 makes it down to test its previous lows from the past few months %R should be ready to indicate higher days are to come.  Until then, there’s no reason to jump the gun and buy in again too soon.

• VXX, two August 24 Puts – I’ll be assigned 200 shares of VXX on Monday morning.  Instead of trying to roll these puts I sold covered calls on the shares I’m about to be assigned.  While VXX was trading at $23.07 I sold two September 24 covered calls at $1.25 and received $248.97 after commissions.
• AVAV, two August 25 calls – AVAV stayed below my covered calls strike and I’ll be holding onto my shares.  I plan to sell covered calls at the $22.50 strike on Monday or Tuesday.  I’d like to see a little bounce first, but won’t wait too long.
• CVS, two August 33 puts and 100 shares assigned as of this morning from my third option – I might just dump these shares for a loss.  I was expecting $28.40 to hold and it didn’t.  It looks oversold and due for a bounce, but I’m not sure I have the patience.  If the premiums were better I might extend my stay with it.  That might be what I do once the October contracts are posted next week.
• JPM, one August 37 put and one August 42 covered call – This strangle went well for me.  JPM went as high as $41.70 on August 2nd, but retreated all of the way down to $36.81 (in the money) today before finishing around $37.15.  I might write another strangle, but at lower strikes next week.
• CSX, two August 52.50 puts – I’ll be assigned 200 shares of CSX on Monday morning and might wait a few days before selling covered calls on it since it appears to be close to the bottom of its trading range.
• ITRI, one Aug 75 covered call – ITRI has fallen more than $10 in less than three weeks.  Therefore I’ll be holding onto my 100 shares and writing another covered call.  I’m still debating at what strike I should sell.  I like ITRI long term, but am starting to think I might have time to take in some more premiums at lower strikes before it rallies again.  I’ll decide next week.

I have a lot of options expiring in September, so any other new options I write in the coming weeks will probably be for October so I can continue to spread out my risk into different expiries.

——————– ——————– ——————–

Best Personal Financial Planning and Personal Investment Articles this Week from Personal Finance Blogs 

Welcome to the August 20, 2010 Edition #154 of the Carnival of Financial Planning.

The Carnival of Financial Planning takes a long-term view of personal financial planning for individuals and families. We focus on efficient and sustainable personal financial planning practices that can lead to lifetime financial security. 

This edition is arranged by subject heading, so that you can browse efficiently.

Enjoy!

The Skilled Investor, Editor

Budgeting and Economics

Jeff Rose, CFP presents 3 Unusual Ways to Save Money posted at Jeff Rose, saying, “Here goes, three unusual strategies that not only save you money but also improve the quality of your life.”

Roshawn Watson presents Economists Blame ME for the Slow Recovery posted at Watson Inc, saying, “We are responsible with our money, yet instead of admiration (or even understanding), these efforts garner contempt as the frugal once again get the blame for dismal economic activity.”

Craig Ford presents 20 Reasons to Start a Budget posted at Money Help For Christians, saying, “This post gives reasons why non-budgeters should consider budgeting.”

Roshawn Watson presents Why Is Debt Really Decreasing? posted at Watson Inc, saying, “In the first quarter of 2008, our debt to disposable income peaked at a staggering 131%. This means for every dollar we earned, we spent $1.31. As of March, our debt as a share of our annual income is presently 122%. If you think this change indicates that we have collectively been so scarred by the “Great Recession” that we are now behaving fiscally responsible, think again. There is a surprising and sad reason why our debt has gone down. Hint, it has nothing to do with frugality.”

Mike @ Green Panda presents The $7.27 Mistake Plus Ways To Avoid It posted at Green Panda Treehouse, saying, “How to make the most out of your money when going out.”

Joe Plemon presents The Real Estate Bubble: What Happened and What Can We Learn From It? posted at Personal Finance By The Book, saying, “Understanding how the real estate bubble inflated and popped may help us spot other financial bubbles before they pop.”

The Skilled Investor presents Save More Money posted at Personal Finance Strategy, saying, “Budgeting and self-control in consumption is far more important than clever investing. Expenditure control and budgeting works, while “clever” investing usually is counter-productive.”

Estate Planning

Peter presents No Estate Tax In 2010 Means George Steinbrenner’s Family And Others Will Save Millions In Taxes posted at Bible Money Matters, saying, “2010 is apparently a good year to die.”

Financial Planning

Paul Williams presents How to Create a Balance Sheet, or How to Calculate Your Net Worth posted at Provident Planning, saying, “A basic step in financial planning is to create your balance sheet. It gives you a snapshot of what you own and what you owe. You’ll need one if you’re working on your estate plan or if you just want to keep track of things.”

Sustainable Life Blog presents Prioritizing Goals? posted at Sustainable Life Blog, saying, “Wondering where to turn when starting to attack debt? Here’s a quick guide on how to help you prioritize your goals.”

Tom @ Canadian Finance Blog presents Will The Fee Only Financial Planner Model Ever Catch On? posted at The Canadian Finance Blog, saying, “Hiring a Fee Only Financial Planner is in the best interest of the consumer. To get unbiased advice you need someone who has no interest in selling you something.”

Ryan @ MFN presents What to Do With an Enlistment Bonus posted at The Military Wallet, saying, “What should you use a large cash bonus for? Pay down debt, invest, spend?”

Ashley Jacobs presents Clogged Cash Flow? 4 Tricks to Restart the Flow posted at Cash Flow Sherpas, saying, “There are so many things that stop us in our tracks financially. Why does getting stuck seem easier than making progress? Here are four popular places we get jammed and four tips on how to remove obstacles from your fiscal flow.”

Frank Knight presents Roth IRAFinancial Software posted at Financial Freedom Plan, saying, “Whether to invest in a Roth IRA or Roth 401k versus their traditional retirement account alternatives is one of the most complex personal financial decisions. Roth accounts do not make sense financially for most people. They are a good deal, for a minority, but you need to do the analysis.”

Dividend Tree presents Building Core Competency for Long Term Survival posted at Dividend Tree, saying, “whether it is running a business or individuals investment portfolio, it is important to build a core competency for long term sustainability. In my case, I focus on good quality companies that consistently pay or have potential to pay growing dividends over time.

jim presents Review Your Credit Reports Every Year posted at Identity Theft Wall.

Larry Russell presents No Load Mutual Funds posted at Top Index Mutual Funds, saying, “Superior past performance has simply not been shown to be a reliable predictor of superior future performance. However, low costs can lead you to the best mutual funds.

Financing a Home

Jeff Rose, CFP presents Rent Vs. Owning: When Does it Make Sense to Rent posted at Jeff Rose, saying, “I’ve seen too many cases where young people were so eager to “live the American Dream” and get their first home that they didn’t realize all the little things that come along with being a homeowner. Slow down and do your homework before you take the plunge.”

Jeff Rose, CFP presents Dave Ramsey FPU 12 Real Estate and Mortgages posted at Jeff Rose, saying, “the absolute best mortgage is the 100 percent down plan, but if borrowing is necessary, he teaches to get a 15-year fixed-rate loan with payments that do not exceed more than 25 percent of your take-home pay. He also reminded students to make sure they have a fully funded emergency fund”

Ben presents 5 Good Reasons Buying a House Requires Planning posted at Money Smart Life.

Financing Education

Ryan @ CML presents Where to Open a Coverdell ESA Plan posted at Cash Money Life, saying, “Coverdell ESAs are a college savings account that have great tax advantages. This info can help you find a great place to open your Coverdell ESA.”

Craig Ford presents How to Graduate from College without Student Loan Debt posted at Money Help For Christians, saying, “A step by step guide for those who want to graduate debt-free.”

Health Care

GrrlScientist presents Free Money? posted at This Scientific Life, saying, “I just mailed a letter back to the comptroller for Columbia-Presbyterian Hospital [now: New York-Presbyterian Hospital], which promises a refund for one of several duplicate charges that the hospital levied against me for medical bills that were “unpaid.” I know I should be happy about this, but instead, I am very very angry. Why?”

Money Beagle presents Flexible Spending Account Review posted at Money Beagle, saying, “It’s always good to do a check on where you’re at every now and then if you participate in an FSA or HSA plan.”

Income

MoneyNing presents Three Reasons Stay at Home Parents Should Consider Working Part Time posted at Money Ning, saying, “Working part time is not as bad as it seems, even for stay at home parents!”

MoneyNing presents 15 Ways to Earn Extra Money posted at Money Ning, saying, “There are lots of ways to make more money. Here are 15 to start you off.”

Paul Williams presents The Three Methods of Making Money posted at Provident Planning, saying, “Trying to think of ways to make more money? This article helps you consider the methods people use to earn money. It might just help spark that idea you’ve been waiting for!”

Alexander presents General Mills Pays Dividends posted at Dividend Stocks, saying, “General Mills General Mills is a good stock for fixed income investors looking to add some income to their portfolio.”

Investing

Mr. Money Smarts presents Personal Finance Basics: The Power Of Compound Interest posted at Smart On Money, saying, “The power of compound interest – just make sure you’re earning it!”

freefrombroke presents Investment Strategy For Beginner Investors posted at Free From Broke, saying, “Some ideas for the beginning investor in, what is for many, the confusing world of investing.”

Super Saver presents Faith in our Long Term Future posted at My Wealth Builder, saying, “I still believe it is right to have faith in the historical long term returns of the stock market.”

Praveen presents Caveat Emptor: If An Investment or Opportunity Appears Too Good To Be True, Beware! posted at My Simple Trading System, saying, “Beware of investment opportunities that seem to be too good to be true.”

Sun presents Watch Those Fees to Improve The Performance of Your Portfolio posted at The Sun’s Financial Diary.

Dividends4Life presents 3 Signs of an Impending Dividend Cut posted at Dividends Value, saying, “Most investors are not surprised when a company cuts its dividend. They saw the early warning signs well in advance of the actual cut. Here are three signs that a company is heading toward a dividend cut:”

Tushar Mathur presents Can’t Control the Markets? Try controlling the Costs posted at Everything Finance, saying, “The financial markets are prone to unpredictable periods of turbulence. That can make investing feel a bit like a roller-coaster ride. The disappointing results may have left you feeling concerned over your financial future. You’re not alone.”

FMF presents Invest in All Six Asset Classes posted at Free Money Finance, saying, “Here are the six areas where you should be investing your money.”

The Skilled Investor presents Market Timing posted at Investment Portfolio Management, saying, “Always stay invested to earn risk premiums. You must have your money invested and at risk to get risk premium returns. Jumping out and in or “timing the markets” doesn’t work.”

Super Saver presents Profiting from the Bond Bubble posted at My Wealth Builder, saying, “Over the past two years, our bond investments have done very well. Lately, I’ve been thinking that results are not sustainable, and that this may be a bond bubble.”

marc ryan presents The Vanguard Group, Inc. and Canadian investors – IndependentInvestor.info posted at IndependentInvestor.info, saying, “One of our readers, Eileen B., recently wrote to us: ‘’There are Vanguard ETFs now available from Canadian online banking/investing sites. These do not get the same positive recommendations in the Canadian media as do the iShares or Claymore offerings. Can you think of a reason for that? Why do Canadian investors not hear more about Vanguard? ‘’This commentary seeks to explain and help fill that information gap. Even though it is a US entity, there are many reasons why Canadian investors should take the time to learn about Vanguard and its products.”

Zach Scheidt presents Solar Selloff Close To Exhaustion? posted at ZachStocks, saying, “Solar stocks are off sharply due to Euro-Zone concerns. Trina Solar could end up being an exceptional value if earnings remain somewhat stable and management is able to calm investor fears.”

Dividends4Life presents 16 Confident and Secure Companies Boosting Dividends posted at Dividends Value, saying, “Are you confident and secure in your investing process? It appears many people are not. We must follow a process we are 100% confident in. Doubt is the gateway to destructive behavior. For me, dividend growth investing is what I am confident and secure in.”

The Financial Blogger presents Best 50 Canadian Dividend Stocks posted at The Financial Blogger, saying, “With the plethora of dividend stocks out there, here are the best 50 canadian dividend stock picks.”

Intelligent Speculator presents Of course Amazon (AMZN) results are terrible!! Blame Apple (AAPL) posted at Intelligent Speculator, saying, “Amazon isn’t doing so well with the iPad now out in the market.”

Frank Vertin presents Top Index Funds posted at Noload Mutual Fund, saying, “Top ten no load index funds that track the Standard and Poors 500 composite index in terms of lowest costs.

Dividend Tree presents Dividend Investing and Businesses with Moat posted at Dividend Tree, saying, “In general, companies with moats in their business are very good dividend growth providers. However, the opposite may not be true.”

Frank Knight presents Municipal Bond Financial Software, posted at Personal Finance Software, saying, “Municipal bond investments and your state and federal marginal income tax rates: Some investors hold municipal bonds in an attempt to reduce their tax burden. This article discusses the relationships between tax-exempt municipal bonds, bond market returns, marginal tax rates, and investment asset tax location.”

Silicon Valley Blogger presents Where To Invest Extra Cash and Savings Today posted at The Digerati Life

Tomas Escent presents Stock Trading Automation posted at Nerds on Wall Street

Managing Debt

Tim Chen presents Costco TrueEarnings: the Best Credit Card for Well-Rounded Spenders? posted at NerdWallet Blog – Credit Card Watch, saying, “When you, as a credit card user, are hunting for ways to maximize rewards, attention-grabbing 5% cash back offers can be tempting. But we’ve made no secret of our view that these cards rarely offer the best deals. If you just want to find the one card that fits your spending habits the best and move on with your life, the Amex TrueEarnings Card from Costco might be exactly what you’re looking for.”

The Smarter Wallet presents Are Debt Counseling Services The Way To Debt Relief? posted at The Smarter Wallet, saying, “On debt counseling services.”

Jeff Rose, CFP presents How Important Is Your Credit Score posted at Consumer Boomer, saying, “If you have bad credit or no credit at all, you have undoubtedly run into trouble getting approval for credit or good terms on the credit for which you are approved. Here we look at the importance of your credit score and how you improve your score to better your life.”

freefrombroke presents Sure-Fire Tips To Renegotiating Your Credit Card Debt posted at Free From Broke, saying, “Ways a person can re-negotiate their credit card debt.”

Big Cajun Man presents Found Money Trap posted at Canadian Personal Finance Blog, saying, “Found money should go on debt no matter what!”

Tim Chen presents Amex is Hiking Fees on the Starwood Preferred Guest Nearly 50%, and it?s Still a Good Deal. posted at NerdWallet Blog – Credit Card Watch, saying, “American Express has started sending out letters to its cardholders, informing them that it plans to raise the annual fee from $45 to $65 starting October 14th, and it’s modifying the rewards program a bit. If you’re a cardholder, you may be considering canceling the card in anger at the prospect of a higher fee, but we don’t think you should.”

Learn Save Invest presents 5 Steps To Debt Reduction posted at Learn Save Invest, saying, “Here are 5 tips you need to master in order to reduce your debts.”

Miscellaneous

Joe Plemon presents Should You File That Insurance Claim? posted at Personal Finance By The Book, saying, “There are times when filing a legitimate claim can earn you a penalty from your insurance company.”

PT presents Investment Properties: Should You Buy One? posted at Prime Time Money, saying, “Should a rental property be a part of your portfolio?”

Mike @ Green Panda presents Stop Waiting For The Big Idea posted at Green Panda Treehouse, saying, “Just thinking about the next big thing might just be a complete waste of time. Take that step towards your goals.”

The Wise Squirrel presents How Much Money Would it Take for You to Relocate? | Squirrelers posted at Squirrelers, saying, “When planning out your financial future, where you choose to live can be very important. How big of a role does money play?”

Pasadena Financial Planner presents Vanguard Investment Performance posted at Top Mutual Fund, saying, “Compares Vanguard’s actively managed mutual funds and Vanguard’s passively managed index mutual funds. Vanguard investors should read and understand this study.”

nissim ziv presents What are your career goals? How do you plan to achieve these goals? posted at Job Interview Guide, saying, “When you are asked about what are your long term career goals, consider it as a chance to speak about how you are stable in your professional and personal life, and how you would like to grow with the company that you are working for.”

Joe Plemon presents This Family Paid Cash For Their Car; You Can Too! posted at Personal Finance By The Book, saying, “A story about some friends who are excited about paying cash for their car. Turns out they are doing lots of things right.”

Ryan @ CML presents Best Business Credit Cards posted at Cash Money Life, saying, “Best business credit cards for small business owners who need credit cards to help manage and run their business.”

Mike Piper presents Replacing the 2% Schwab Credit Card posted at The Oblivious Investor, saying, “2% cashback on all purchases is hard to beat. Unfortunately, the card is no longer available to new users. What’s the next best thing?”

Retirement Planning

FMF presents How to Catch Up on Retirement Savings posted at Free Money Finance, saying, “If you’re behind in saving for retirement, this post will give some suggestions on how to catch up.”

Jules Wells presents Retirement Calculator-Retirement Savings Software, posted at Retirement Financial Planning, saying, “This article helps you understand the trade-offs between traditional and Roth tax-advantaged retirement plan contributions, including Roth 401k and IRA retirement plans. It helps with the 2010 Roth conversion decision.”

FMF presents Three Good Reasons for Retiring and Three Good Reasons for Not Retiring posted at Free Money Finance, saying, “Three times you should and three times you shouldn’t retire.”

Jeff Rose, CFP presents Basic Rules of the Traditional IRA posted at Consumer Boomer, saying, “It is important to understand how each type of IRA account that will best meet your current and future needs. Here we look at the traditional IRA which is a popular personal savings plan and the basic rules of this type of account.”

studenomist presents Is Retirement Becoming Obsolete? posted at studenomics.com.

Jacob A. Irwin presents What Percentage of My Salary Should I Save for Retirement? posted at My Money Blog – Personal Finance and Investing, saying, “A look at a spreadsheet tool I created to assist readers in figuring out how much they should be saving for retirement.”

Larry Russell presents Roth IRA Conversions posted at Best Financial Planning Software, saying, “Trying to decide about a traditional IRA to Roth IRA conversion without first having a comprehensive lifetime financial plan in place makes absolutely no sense. Without such a plan, you cannot figure out whether or not you are likely to achieve the tax savings in retirement that would warrant paying higher taxes now.”

Michael Pruser presents How Much Dough Does A Roller Need to Retire? posted at The Dough Roller, saying, “Wonder what the magic number is to retire comfortably? We can help you out.”

Risk Management and Insurance

Jeff Rose, CFP presents Term VS. Whole Life Insurance- Which Is Best For You? posted at Consumer Boomer, saying, “Knowing which option is better for your unique situation depends on your understanding of what term life and whole life insurance policies are and how they differ.”

Big Cajun Man presents Self Insured Company Disability Plans posted at Canadian Personal Finance Blog, saying, “Sometimes insurance is not as safe as you might think (in Canada at least)”

FMF presents How to Know Whether or Not You Need Long-Term Care Insurance posted at Free Money Finance, saying, “Some tips on how you can determine if long-term care insurance is for you or not.”

Savings

Madison DuPaix presents 9 More Ways to Maximize Back to School Savings posted at My Dollar Plan, saying, “Great tips on saving during the back-to-school season!”

Joe Plemon presents You CAN Afford That Baby – Ten Money Saving Tips posted at Personal Finance By The Book, saying, “I want to assure you that you can afford to bring that baby into this world even if you aren’t sitting on a huge nest egg. These ten tips will help.”

Madison DuPaix presents How to Pay Your Mortgage with a Credit Card posted at My Dollar Plan, saying, “Here’s a great idea for saving on your recurring bills!”

Ryan @ MFN presents Military Savings Deposit Program (SDP) posted at The Military Wallet, saying, “The Savings Deposit Program is a government sponsored savings account that guarantees 10% return on interest for deployed military members.”

KCLau presents Are You Rich in Internal Assets? posted at KCLau’s Money Tips, saying, “pay attention to the internal assets”

Jim & Martha presents Royal Caribbean Cruise Lines Shareholder Benefits posted at Wanderlust Journey.

Taxes

Intelligent Speculator presents Please do not let the Bush tax cuts expire posted at Intelligent Speculator, saying, “It may be easier to take the popular position and have the Bush tax cuts expire, but I personally think otherwise.”

Brenta Bevis presents The Pros and Cons of Hiring a Professional Tax Preparer posted at Jeff Rose, saying, “As with most things in life, taxes are not always so black and white but can be extremely complicated and dependent on each person’s unique financial situation. While tax season is still far from the near future, I have learned that it is never too late to start preparing for your next tax return and doing so in advance will save you not only money, but perhaps more importantly, time. Unfortunately this is something that took me years to learn.”

Jeff Rose, CFP presents Things to Know About Paying Taxes on Earned Income posted at Jeff Rose, saying, “While there are many different forms of taxation, we are going to focus on income tax. This is the tax you pay on earned income. Here are a few things you should know about paying income tax.”

Jeff Rose, CFP presents Simple IRA Rules For the Small Business Owner posted at Consumer Boomer, saying, “The SIMPLE IRA is designed with small business owners and employees in mind. Where many smaller companies lack the resources to offer retirement plans to their employees, the SIMPLE IRA makes it possible for contributions to be made through salary reductions (for employees), while the employer can provide a matching contribution.”

Darren presents How To Determine If Your Social Security Benefits Are Taxable posted at MORE than Finances, saying, “You may think it’s unfortunate enough that social security taxes are already taken out of your paycheck each pay period. But did you know that when you receive your social security benefits in retirement, they may be taxed again?”

Financial Freedom Plan presents Roth IRA ConversionFinancial Software, posted at My Financial Freedom, saying, “The Roth tax optimization puzzle for asset conversions, as well as for annual Roth contributions during working years, is one of the most complex decisions that the ridiculously complex US taxation and retirement planning system forces upon individuals.”

That concludes this edition. Submit your blog article to the next edition of Carnival of Financial Planning using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: carnival of financial planning, blog carnival.

After checking the chart I also looked at Ford Equity Research’s Valuation Bands to see how AVAV was looking from a value perspective.  The Ford information is from August 13th and already since then AVAV has gained almost a dollar.  The big take away from the second chart is that AVAV is at the bottom of its valuation band.  Couple that with the fact that AVAV has a forward P/E lower than its trailing P/E and it looks inviting to just stay long. 

My average cost per share is down to $22.17 including all of the premiums I’ve taken in so far.  If I want to increase my chances for a profit and exit I should sell $22.50 covered calls, but if I want to go for a much bigger gain I should aim for the $25.00 strike covered calls.  I’d like to go with the October expiration calls, but they aren’t posted yet, so I can’t get a jump on the game.  The premiums for the September calls make the $25 strike options not worth the trade, but the $22.50 aren’t so bad.  I’d take a $2.50 loss on the shares, but my average cost would come down low enough to let me exit with about a $2.00 profit per share. 

I started with AVAV four months ago with naked puts.  If I sell my shares in October (that’d be six months total) from $22.50 covered calls I will have made better than a 9% gain in 6 months (aka 18% annualized).  That’s hard to resist pocketing that gain on a stock that I made a mistake on based on it being lower priced now than when I started with it.  If AVAV continues to slide then I will have made the right move by lowering my cost per share even further.  Now that I’ve written all of this I seem to have made up my mind.  I just need to wait for the October option contracts to post. 

——————  —————— —————— 

I have a mixed bag of how August options expiration could end up for me.  AVAV looks like it’ll stay below my covered call strike, so I’ll re-write covered calls on my long shares.  CSX could go either way.  It’s under my strike now, but that can change any day.  CVS is well below my strike and I’ll end up buying the shares unless I close it for a loss before the close on Friday.  ITRI is well below my strike, so if I keep it I’ll write a new covered call.  JPM is close to my naked put strike which means my higher strike covered call will expire OTM and I’ll keep my shares and might even buy more if my naked puts come into play.  VXX is close to my August strike.  If it stays under $24 I’ll take the assignment and sell OTM covered calls in the hopes of it selling higher than I bought it.  That’s in addition to the premiums.

Some of these decisions might go down to Friday afternoon as I continue to be patient and wait to see how the week pans out.

Two weeks ago I questioned if the DJIA chart had just swung its third strike and was heading lower.  We’re only about 160 points below that mark now, but we are below it with a scared group of investors looking for exits.  Now the DJIA has fallen below its 200 day moving average (dma) even deeper too.  The 50 dma held support on Friday, but only after breaking intraday on Thursday before recovering.  Failing at the 200 dma was a pretty big technical event for the index, but we did have multiple warnings it was coming. 

Along with the break of the 200 dma came the break of the trend line of higher lows that started with this recent rally at the beginning of July.  Breaking this trend line opens the door to an even deeper fall still, as if the 200 dma break wasn’t enough.  I drew two other somewhat horizontal lines in the chart below to highlight potential speed bumps the Dow could face.  The first line is only about 215 points below the current Dow level.  The next is not quite all of the way down to the July 1st intraday low, but could’ve been.  I went with the more popular low from the past few months instead though.

Possibly more bearish than any of the trend lines and moving averages is the break of Williams %R below overbought on the 14, 28 and 56 day indicators.  Such a breakdown doesn’t come often and now that we’ve seen a couple of confirmation days after it the warning bells have certainly rung now.  Volume came up above average on Wednesday and Thursday on distribution (down) days which helps to pain the bearish picture.  All of this together makes the lowest horizontal line look like it could be the most likely expected line of support in the near term with the DJIA giving up another 5%+ before it finds any solid footing.  A fall that low would put the DJIA about 6% below its 200 dma which could help to limit its downside from there.  The only potential line of hope could come from the 50 dma.  As mentioned above it broke intraday on Thursday, but recovered.  If it can continue to hold now, even after the warning shot, the Dow will have a good chance to move higher.