End of Month Summary – October 2012

Not every month can bring a higher account value.  My end of the month account balance ended lower for only the second time this year.  On the positive side, my streak of realized gains for the month continued.  I also extended my lead over the indexes for the past year.  My year-to-date comparisons are a mixed bag.  I’m ahead of some indexes and some are beating me.  Longer periods tend to favor my investing style that misses the extreme ups and downs.

ended October with a Net Liquidation Value of $110,740.22 (and a Net Asset Value of $110,495.07) according to Interactive Brokers after finishing September with a balance of $113,115.02.   That gave me a loss of $2,374.80 on paper (~2.1%) for October and a realized gain for the month of $882.03.  I received no dividends in October.  Quicken reported that I have $110,494.73.  After all of these years of not knowing why Quicken didn’t sync with IB correctly, I finally noticed the difference between the numbers reported.  I use the Net Liquidation Value when I report my headline account balance each month, but in another of IB’s report, I found Net Asset Value (NAV).  The NAV aligns with Quicken to within pennies.  I’ll check this again next month to see if it’s accurate again.  I don’t know what the difference between these two numbers is, but assume it’s a difference of what is used for the mark to market value.  If nothing else, it shows me Quicken is not reporting bad numbers.

If all of my naked puts were assigned, my spreads all lost 100% and my covered calls expired worthless, I’d be 95.89% invested in this account.  That’s lower by a few percent from last month.  My spread percentage dropped back from 15.42 to 9.93%.  I backed off from adding more exposure when I saw the index charts looked less favorable, but I might start easing back in deeper soon.  My November realized gains should be a little better than October’s, but that depends on when I close some of my spreads.  CVS and AAPL could turn on me quickly to change that scenario.  TLT and AMT look pretty safe for now.  My IWM puts could finish in the money, but that’s moot for my realized gains, because I plan to let them be assigned or expire worthless.

This is my asset allocation in my IB account as of the end of October.

  • Large-cap ETF: 12.82%
  • Mid-Cap ETFs: 16.43%
  • Small-Cap ETF: 22.21%
  • International: 0.0%
  • Oil: 30.03%
  • Individual Stocks & Other Sector ETFs: 24.45%
  • Bonds: 1.18%
  • Short ETFs: 0.0%
  • Various Option Spreads: 9.93% (these numbers also included in the above percentages)

These are my returns according to Quicken through 10/31/12:

  • YTD return: +11.64%
  • 1 year return: +18.19%
  • Annualized returns since November 18, 2009 (when I opened my IB account): +2.77%

According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last day of trading, October 31, 2012:

  • Dow Jones Return: YTD change +9.51%, 1 year change +12.56%
  • S&P 500 Return: YTD change +14.29%, 1 year change +15.21%
  • NASDAQ Composite Return: YTD change +14.28%, 1 year change +10.91%
  • Russell 2000: YTD change +11.75%, 1 year change +12.08%
  • S&P Midcap 400: YTD change +12.87%, 1 year change +12.11%
The VIX ended the month at 18.60 and the VXN ended at 20.33.  Both of these are up a few points from last month’s close.  Higher volatility helps increase premium prices, but sometimes the reward isn’t worth the risk.  So far, it doesn’t appear we’re going to sail off the end of the world and if that stays true, now isn’t such a bad time to sell puts.  Selling calls might pose more risk from missed upside.  Selling both sides can lessen the total risk of upside and downside swings.

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