January turned out to be a good month after I came into it expecting some give back, but from what I’ve read on the S&P 500, it has never had a streak of four straight down months for January. 2011 ended the streak at three and kept the rally’s momentum going. I’m still expecting some sort of pull back of at least 5%, but we’ve seen some good numbers come through that make that tough right now. For example, yesterday Chicago PMI came in with its best reading since 1988. One of the reasons I switched to using LEAPS and longer term options is that it removes some of the second guessing from my trades. I’m forcing myself into keeping exposure for longer periods instead of trying to time every dip. I’ll continue to try to time dips, but not with my full account – just for some added spice. I really should be more heavily invested right now than I am. I was hoping the drop on this past Friday was going to turn into something bigger so I could really load up more. I still want to see a solid move over SPX 1,300 and INDU 12,000 before I get too anxious and jump the gun. Today has it so far, we’ll see if we can get a follow through tomorrow.
Based on my current LEAPS only, I should end the year with a gain of around 9.67% if all work out. Without taking on any margin and assuming my other positions earn 10% I’m in line for a total gain of 14.55%. That, of course, is in a perfect world with no more stupid moves like I had on VXX last year. To even out that uncertainty I’m going to continue to add more exposure most weeks throughout the entire year if we stay flat or move higher. If we see the markets move lower I’ll buy some on dips, but won’t chase too far. Right now I have the luxury of not having to chase much to get the return I’d like by year’s end. If the markets end positive I’d like to be able to make 20% for the year, so to get there I need to keep working my account. If they flatten out I’ll be happy with 7-10%. That’s the area I’m on track for so far since some of my options need some more growth in their underlying ETFs before I can claim a full profit. Before long I’ll be back on possible margin with new trades and won’t have to take many risks to increase my return for the year.
- I ended January with a combined balance of $128,598.19.
- $112,317.60 with Interactive Brokers in equities.
- $16,280.59 with TD Ameritrade in bonds and far OTM index LEAPS (including the deposit of $3,500 I made in the first half of the month).
- After ending December with a combined balance of $123,258.53, I gained $1,839.66 on paper for January (not including my deposit) and had a realized loss for the month of $1,650.61, mostly due to realized losses on the actual shares of UCO, JPM and CVS. VXX is the only big paper loss sitting in my account still that I haven’t taken.
- My combined balance in Quicken remains slightly off some as it reported that I have $112,221.46 with IBKR. My AMTD balance in Quicken was $16,590.59 due to the different methods for valuing current option prices. Quicken uses the last trade price and AMTD uses the ask price. It all works out by expiration.
- If all of my naked puts were assigned and my covered calls expired worthless I’d be almost 86% invested in my IB account. That gives me$15,688.43 to invest before I’m on margin with any positions.
These are my returns according to Quicken through 1/31/11:
- My 1 year return: +5.56%
- Year to date (YTD): +1.62%
- Annualized returns since 4/8/07 (my blog’s beginning): -6.22%
- Deposits for month: $3,500 on January 5, 2011
According to Morningstar, here’s how I compare to the major indexes through 1/31/11:
- Dow Jones Return: 1 year +21.35%, YTD +2.85%
- S&P 500 Return: 1 year +22.19%, YTD +2.37%
- NASDAQ Composite Return: 1 year +25.74%, YTD +1.78%
- Russell 2000: 1 year +31.36%, YTD -0.26%
- S&P Midcap 400: 1 year +33.46%, YTD +2.00%
The VIX ended the month at 19.55 and the VXN ended at 21.88. While volatility continues to fall the chance and severity continues to increase. When that’s going to happen is anybody’s guess. The VIX and VXN have more room possible to move to the downside before they come close to their previous lows. I guess the ride will continue for now.
vxx heading to $24 as predicted in earlier post.
$24 might end up being a high estimate by the end of the year.