End of the Month Summary – June 2015

We reached the halfway point of the year in a weird spot.  Stocks are basically flat for the year to date, but with some worrisome headlines messing with the mindset of investors.  I don’t think the issues in Greece or Puerto Rico will be big enough to hurt the US stock market for more than a couple of months, if even that long.  I’m extremely happy to be up as much as I am this year.  (See the comparison of my account to the indexes below.)  My account balance broke above $111,000 in June, but fell back over the last week or so to leave me with only a slight gain for June.  Thanks to my out of the money options and my TLT trade, I didn’t lose money like all of the broad indexes did in June.  I have a decent amount of time value and intrinsic value left to move in my favor over the next two and a half weeks before options expiration.  At the same time, I’m fairly well set on my positions and don’t know how much trading I’ll have to do in the next few weeks.

I ended June with a Net Liquidation Value (NLV) of $109,769.30 and a Net Asset Value (NAV) of $109,706.26 according to Interactive Brokers (IB) after finishing May with an NLV of $109,008.95 .  That gave me a gain of $760.35 (~0.7) on paper for June and a realized gain for the month of $3,236.03 on five closing trades.  I didn’t pay or have to pay any in dividends since I closed my TLT short position in May.  I did have to pay $24 in interest in June accrued from my short TLT position that ran through part of May.  Quicken reported that I have $109,706.26, but that was after I deducted $0.03 from Quicken that appears to be from rounding errors over the past few months.

I only have four options set to expire in July and one of those is a long position that’s a hedge on my short TLT calls.  Together, I have roughly $610 in time value left to erode and about $930 in intrinsic value I could gain on a solid rally.  Obviously, my other later dated options could gain or lose more during this time too, but the July contracts will be my major focus in the near-term.

If all of my naked puts were assigned, I would be 89.62% invested in this account (94.00% without the spreads).  At the end of June, I was invested 1.65 percentage points higher than I am now.  The amount I’m invested is somewhat misleading.  The percentage is correct, but since I have two positions hedged, I won’t incur losses on two of my IWM and one of my SPY puts until they fall close to 10%.  In a shallow correction, my losses will be less than my percentage shows.  In a bear market, my losses will be close to 95% of the market’s losses after that first ~10%.

This is my asset allocation in my IB account as of the end of June:

  • Large-cap ETF: 17.76% (I accounted for my SPY March 2016 put spread within this)
  • Mid-Cap ETFs: 25.05%
  • Small-Cap ETF: 36.62% (I accounted for my IWM January 2016 put spread within this)
  • International: 7.29%
  • Individual Stocks & Other Sector ETFs: 8.65%
  • Bonds: 0.0% (not including my TLT call spread)
  • Short ETFs: 0.0%

These are my returns according to Quicken through June 30, 2015:

  • YTD Return: +10.52%
  • 1 Year Return: +15.21%
  • Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +9.25%

According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, June 30, 2015:

  • Dow Jones Return: YTD change +0.03%, 1 year change +7.21%
  • S&P 500 Return: YTD change +1.23%, 1 year change +7.42%
  • NASDAQ Composite Return: YTD change +5.30%, 1 year change +13.13%
  • Russell 2000: YTD change +4.75%, 1 year change +6.49%
  • S&P Midcap 400: YTD change +4.20%, 1 year change +6.40%

The VIX ended the month at 18.23 and the VXN ended at 19.34.  The VIX finished June 4.39 point above May’s close while the VXN closed 4.59 points higher.  Both of these closing levels were a couple of points below the peaks hit a day earlier when stocks fell hard.  Having the volatility metrics well above their lows will help those of us who sell options, but only if we’re willing to take the risks of a steeper decline in equity prices.

The CBOE SKEW Index finished June at 123.88, 1.38 points above its May close.  I was actually surprised to see this relatively calm outlook mid-summer with so much uncertainty around the world.  It helps to show what matters, the US economy is fine and won’t be brought down by Greece and Puerto Rico debt problems, probably.



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