End of Year Summary 2017

Bullish investors made a killing in 2017 and I made a decent gain (when not comparing myself to the benchmarks), but I didn’t keep my focus on trading last year as I wrapped up my divorce and dealt with my mom’s death. I highly recommend avoiding a divorce and losing a parent in the same year. Even though I get along great with my ex-wife and it was time for my mom’s suffering from cancer to end, the emotional toll distracted me, not to mention the actual days spent dealing with each event rather than being at my desk trading. Maybe I needed a break from trading my account every week. Maybe having a year with distractions will help me in 2018 as my focus on investing already seems better than it has been for a few years. Before I can get to a new year of trading, I need to reflect on the year that just ended.

My account ended December with a Net Asset Value (NAV) of $107,211.56 according to Interactive Brokers (IB) after finishing November with an NAV of $106,555.24. I had a gain of $656.32 (~0.06%) on paper for December and had $1,713.28 in realized gains from my three closing trades on my ADI, AAPL, and MDY naked puts. I received $52.67 in interest, but no dividends in December since I wasn’t long shares of anything. Quicken reported that I have an account value of $107,150.86, which is the same as what IB says I have with the $60.70 in accrued interest that IB is crediting for me. I entered my withdrawal request this afternoon for $7,211.56, my gains from 2017. I had $5,998.97 in realized gains for 2017. Now I begin 2018 with a balance of $100,000.

I’m 71.41% invested in this account, 8.52 percentage points below the end of November – and this percentage is after my withdrawal. The change comes from the expiration of my MDY that I didn’t replace one for one, but sold a NFLX naked put instead. My two January naked puts on IWM and QQQ are out of the money and need to be rolled, but I’m not rushing into closing these until I identify what my next trade should be. I might begin with a hedge that runs into mid-year or even into December. While I know it’s possible, I don’t think we’ll have another year without a 3% correction and would really like to see a solid 10% correction to let me load up at cheaper prices.

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

– Large-cap ETF: 0.0%
– Mid-Cap ETFs: 0.0%
– Small-Cap ETF: 14.80%
– International: 0.0%
– Individual Stocks & Other Sector ETFs: 57.80% (pretty much large cap really with AAPL, ADI, NFLX, and QQQ included here)
– Bonds: 0.0%
– Short ETFs: 0.0%

These are my holdings to start the year:

– IWM January $148 naked put
– QQQ January $153 naked put
– AAPL February $165 naked put
– NFLX February $175 naked put
– ADI March $85 naked put

According to Morningstar, here’s how I compare to the major indexes (including dividends) through the year’s last trading day, December 29, 2017:

– Dow Jones: 2017 change +28.11%
– S&P 500: 2017 change +21.83%
– NASDAQ Composite: 2017 change +28.24%
– Russell 2000: 2017 change +14.65%
– S&P Midcap 400:2017 change +16.24%

These are my returns according to Quicken from February 1, 2017 (when I established new account, albeit with very few trades for a few months leading up to my divorce in June) through December 29, 2017:

– 2017 Return: +7.21% (not annualized)
– 1 Year Return: +7.41% (annualized until I have a year of data)

The VIX ended the month at 11.04 and the VXN ended at 15.68. The VIX is 0.24 points lower than at the end of November and the VXN is 0.25 points lower than the end of November. The VIX topped out at 11.86 on December 4. The VXN made it as high as 18.08 on the same day. Both volatility indexes finished in the middle of their ranges for the month and have moved a little lower today to start 2018. Those of us who sell volatility need more than a few ticks higher in 2018 to have a chance of beating the averages if we use the same naked puts and covered calls strategy. If volatility drops any more, it could be smarter to just buy calls and maybe a put spread or two.

I’m coming into 2018 with a renewed focus on trading and wish each of you another profitable new year as we get some better volatility over these next 12 months that allow us to profit on the swings.

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DISCLAIMER: While I am a Registered Investment Advisor Representative, the information contained within this site does not constitue personalized investment advice. This material is meant as entertainment and is only a view into how I invest my own account, but not necessarily how you should invest your own funds. Trade using your own research at your own risk. This is impersonal investment advice which means the material written here, in email exchanges, on Twitter and/or other social networking sites do not purport to meet the objectives or needs of specific individuals or accounts.

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