End of the Month Summary – July 2016

I had another bad month in July. TLT was the main cause of my paper losses with $3,789.73 of lost value during July. DIS lost another $116.00 for me, but my IWM and MDY long positions returned more than $2,400 to help soften the blow. My TLT puts covered my TLT short interest and dividends, plus a few more dollars. TLT is lower at the open today and as I think each time, this could be the start of its longer-term decline.

I ended July with a Net Liquidation Value (NLV) of $75,272.47 and a Net Asset Value (NAV) of $75,178.51 according to Interactive Brokers (IB) after finishing June with an NLV of $76,299.67. The difference in month end values gave me a loss of $1,027.20 (~1.35%) on paper for July and a realized gain of $167.88 on two closing trades. I also received $279.91 in dividends and paid $383.48 in short interest and dividends for my TLT short shares. The net total was a realized profit of $64.31 in July. Quicken reported that I have an account value of $75,252.97, two cents more than IB’s reported NAV after accounting for interest and dividend accruals of -$74.44. I’m going to let the discrepancy run for another month to see if it corrects with a rounding error in the other direction. For the first time in a long time, I had to pay the Interactive Brokers commission minimum of $10.00 since I had no trades in June.

I’m turning into a broken record on my plans to sell covered calls on my long shares of IWM, MDY, and DIS. It’s a shame I didn’t do it mid-July when IWM flattened out and DIS peaked and started melting lower. Maybe I’ll get to it in August. I’ll wait until after Friday’s jobs data to make a decision on my IWM and MDY covered calls. DIS has their earnings call next week, so I’ll wait for any news out of it before selling DIS covered calls.

If all of my naked puts were assigned, I would be 82.00% invested in this account. I am invested 11.65 percentage points less than I was at the end of June since I sold 100 shares of IWM. This doesn’t truly represent my exposure because my TLT position skews my total risk. I have a lower risk of a margin call now compared to a month ago, but still don’t have room in my account to open much of any other new position.

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

  • Large-cap ETF: 0.0%
  • Mid-Cap ETFs: 37.70%
  • Small-Cap ETF: 32.17%
  • International: 0.0%
  • Individual Stocks & Other Sector ETFs: 12.75%
  • Bonds: -244.48% (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, July 29, 2016:

  • Dow Jones Return: YTD change +7.38%, 1-year change +7.01%
  • S&P 500 Return: YTD change +7.66%, 1-year change +5.61%
  • NASDAQ Composite Return: YTD change +3.09%, 1-year change +0.66%
  • Russell 2000: YTD change +8.32%, 1-year change 0.00%
  • S&P Midcap 400: YTD change +12.56%, 1-year change +5.53%

These are my returns according to Quicken through July 29, 2016:

  • YTD Return: -22.91%
  • 1 Year Return: -17.02%
  • Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +6.33%

The VIX ended the month at 11.87 and the VXN ended at 13.97. The VIX is 3.76 points lower than at the end of June and the VXN is 3.61 points lower than at the end of June. Both volatility measures drifted lower from their month opening levels as the summer doldrums created an incredibly boring second half to the month, outside of TLT. The low volatility readings make it harder to want to sell options while the premiums are suppressed. I might need to think about buying some options as hedges soon.

The CBOE SKEW Index finished July at 128.25, 12.33 points below the end of June. Last month, I questioned if the all-time high set near the end of June was a contrarian indicator. Now, we can see that it was. The S&P 500 gained nearly 7% over the month following the June 28 high. The SKEW is back in its normal range now and has barely moved since July 1.

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