As I mentioned in a post near the end of July, times seemed too good to last and I expected the July rally to fizzle. And fizzle it did along with my balance. I didn’t fall as hard as the broader markets, but certainly lost. I ended August with a combined balance of $108,954.79 ($95,553.87.87 with Interactive Brokers and $13,400.92 with TD Ameritrade) and that’s after making a deposit to AMTD of $2,000 during the first week of the month. After ending July with a combined balance of $112,122.50, I lost $5,167.71 on paper for August, although I had a realized gain for the month of $1,782.95. My combined balance in Quicken was a little off as usual and said I have $108,883.36.
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.