March was a fantastic month for nearly everyone who was long stocks. My gains were cut by my short position on TLT, the 20-year Treasury ETF, but I still had a really good month. My stock ETFs produced all of my gains. My TLT shares that I’m short cost me $3,884, but my options on TLT cut that loss by $3,578 to give me a net loss on TLT of $306. TLT actually fell a few cents in March, but I was forced to buy 600 shares for a loss to start the month.
I ended March with a Net Liquidation Value (NLV) of $84,650.40 and a Net Asset Value (NAV) of $84,341.63 (not counting $8.16 in interest accruals not yet paid) according to Interactive Brokers (IB) after finishing February with an NLV of $80,095.43. That gave me a gain of $4,554.97 (~5.69%) on paper for March and a realized loss for the month of $3,198.06 on six closing trades. I received $97.99 dividends in March and deducted it from my realized losses. Quicken reported that I have an account value of $84,305.32, the same as IB’s reported NAV after accounting for dividend and interest accruals of -$81.62 and +$45.31 respectfully.
My account is still very biased towards my TLT short position. I only have shares of IWM, MDY and DIS in my account outside of TLT options and short TLT shares. I got a taste of how big of a swing up my account will take when (not if) TLT falls, but also felt the pain of the reversal. I was up more than $9,000 for the month at one point, but gave more than half of it back. I don’t have any options expiring in April, just the time value and hopefully the intrinsic value of my TLT puts to decline and raise my account value before May expiration.
If all of my naked puts were assigned, I would be 74.4% invested in this account. I am invested 16.01 percentage points lower than I was at the end of February, but this doesn’t truly represent my exposure because my TLT positions are so complicated and overlapping that I haven’t taken the time to work out my spreadsheet to show how every twist and turn should be represented. In short, if it wasn’t for TLT, I would still have 25.6% of my account balance available to invest without going on margin. However, I’m at risk of being forced into another margin call if TLT climbs much further.
This is my asset allocation in my IB account as of the end of March:
- Large-cap ETF: 0.0%
- Mid-Cap ETFs: 31.04%
- Small-Cap ETF: 39.20%
- International: 0.0%
- Individual Stocks & Other Sector ETFs: 11.73%
- Bonds: -200.58% (not including my TLT options, just the short shares)
- Short ETFs: 0.0%
According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, March 31, 2016:
- Dow Jones Return: YTD change +2.20%, 1-year change +2.08%
- S&P 500 Return: YTD change +1.35%, 1-year change +1.78%
- NASDAQ Composite Return: YTD change -2.75%, 1-year change -0.63%
- Russell 2000: YTD change -1.52%, 1-year change -9.76%
- S&P Midcap 400: YTD change +3.78%, 1-year change -3.60%
These are my returns according to Quicken through March 31, 2016:
- YTD Return: -15.19%
- 1 Year Return: -1.17%
- Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +7.45%
The VIX ended the month at 13.95 and the VXN ended at 16.85. The VIX is 6.6 points lower than at the end of February and the VXN is 6.7 points lower than at the end of February. This drop has pulled option premium prices down, but it doesn’t really mean risk has been cut, just the perception of risk.
The CBOE SKEW Index finished March at 122.03, 4.35 points above the close of February. The index started lower, peaked at 133.3 in the middle of the month and then came down some to finish March near the lows of the month.