End of Month Summary – February 2012

February surprised me and stocks stayed healthy all month.  I’m still trying to avoid flat out stupid moves and have held back in some respects.  That allowed most of the indexes to move ahead of my returns for the year so far.  With 10 months remaining I’m not too concerned.  Eventually stocks will stop moving higher every single month and I’ll gain back some ground.  I think keeping my options’ expiration periods to the two front months will continue to give me better liquidity and flexibility once I see a turn lower starting and need to exit some positions.  As a sign of my caution, I’ve stayed almost exclusively in ETFs rather than using any individual stocks.  I got sick of a random one-off story spooking a single company’s stock and decided I could be more aggressive with ETFs with less longer term worry.

I ended February with a balance of $108,103.65 after finishing January with a balance of $105,764.26.   That gave me a gain of $2,339.39 on paper for February and a realized gain for the month of $708.30.  I received no dividends in February.  Quicken reported that I have $108,143.04, close to what I actually have.

Last month I ran the numbers on what it would take me to reach a 20% return this year.  After such a strong January the mountain didn’t look so big and the strong gains in February shrunk that amount even more.  I only need 11% ($11,896.35) more from here or the equivalent of 1.10% ($1,189.64) a month for the next 10 months.  Even more so than at the end of January, I don’t need to take large risks to stay on track each month.  I still think we’ll get at least a few months where prices move lower, so I need to get as far ahead of the game as possible before then.  It might be a better goal to target three months of losses or at least breaking even.  That would leave me with seven months to make another $1,699.48 or the equivalent of 1.57% per positive month.

I like to break figures down to the ridiculous to better illustrate what steps I need to take to reach goals.  I only have to make 15 trades every two months and average $158.62 per trade to reach my goal.  In comparison, I made 17 opening trades (puts and calls) with an average of $255.82 per trade in the first two months of the year.  This doesn’t include any positions I’ve closed early which take this average down very slightly.

If all of my naked puts were assigned and my covered calls expired worthless I’d be 122.07% invested in this account, far above the 80.98% at the prior month’s ending percentage.  As I mentioned above, I don’t mind taking on more risk/exposure when I’m using ETFs.  We’ve all seen index ETFs fall quickly in the past few years, but not to the extent many individual stocks have.  That’s why I don’t mind selling out of the money puts when my account gets past 100% invested.  Also, I expect my bond allocation in TLT to move inversely to my stock positions, so it’s highly unlikely everything would be assigned at the same time.

This is my asset allocation in my IBKR account as of the end of February.

These are my returns according to Quicken through 2/29/12: