Month End Summary – October 2008

This was a horrid month for my account, again.  I’m down a little more than last month and that means it was a bigger percentage loss for me in October too.  I’m sitting on huge paper losses as, just like in September, I had a lot of options expire for a profit and have not sold the underlying stocks for the realized losses yet.  Get this – I ended October with a realized gain of $9,764.40.  For the year to date I have a realized gain of $3,652.09.  I’ll be selling something in the next two months to make sure I end the year with a loss for tax purposes and then I’ll have enough to write off for the next few years it looks like too.

According to Quicken, my account balance is $58,809.63.  Ameritrade lists me at $58,992.82.  That’s down more than $21,000 from last month.  Even scarier is that I dipped below $50,000 a couple of times during October.  This past week’s rally brought me up nearly $10,000 from my lows.  I don’t know if my slide is coming to an end soon, but I like to think I’m in a much better place to move up now than I was a month ago.  I have around $5,500 in time value left on my options I’ve sold.  This means that if my underlying stocks drop 9% from their current levels again I’ll be able to stay flat.  If my underlying stocks stay flat, I’ll be up 9% in three weeks.  I’m not even going to entertain the idea that my underlying stocks could actually gain more and hold it. 

Commodities had their worst month in 50 years and I was in on too many plays that hinged on their staying up.  This is why I’m so far below the indices now, but also why I have more room to gain in the next bear market rally (I’m not even whispering bull market).  Eventually I’ll exit these positions and start over with a clean slate, with much less money to work with, but a lot more experience to work with too.

Here’s exactly how I compare the major indexes:

• 12 month Return: -49.25%
• Year to date: -53.91% (not quite double the Dow’s 28.18% loss)
• Annualized Since 4/8/07 (blog’s beginning): -34.29%
• Deposits for month: None

According to Morningstar, here’s how the major indexes have done over the past 12 months:

• 1 year S&P 500 Return: -31.24%
• 1 year Dow Jones Return: -39.81%
• 1 year NASDAQ Return: -39.81%
• 1 year Russell 2000: -34.16%
• 1 year S&P Midcap 400:  -36.10%

The VIX ended the month at 59.89 and the VXN ended at 60.30.  Historically those are both astronomical levels, so it’s weird to realize they are off their highs.  It’s a great time to be selling options, but only if you can figure in which direction the markets could move.