The bull market showed it isn’t dead yet during February as the markets recovered (at least the main indexes did, except for the Dow) from recent lows and moved into positive territory. I maintained my lead over the indexes for the year-to-date, but the margin narrowed slightly. I have some in-the-money puts that can give me a better upside move if stocks continue to crank out new highs. I also have a few out-of-the-money puts that give me a better cushion if stocks retreat again. The puts that are out-of-the-money have some decent premiums left in them, so as long as the market only creeps higher or ebbs and flows, I’ll do well with them.
I ended February with a Net Liquidation Balance (NLB) of $102,277.82 and a Net Asset Value (NAV) of $102,321.26 according to Interactive Brokers (IB) after finishing January with an NLB of $98,739.07. That gave me a gain of $3,538.75 (~3.58%) on paper for February and a realized gain for the month of $1,900.98 on four closing trades. I received no dividends in February since I still don’t own shares of any stocks or ETFs. Quicken reported that I have $102,321.27. Once again, Quicken is off by a penny due to a rounding error. I’ll wait until next month to correct it to see if the error goes in the other direction next time.
As I wrote last month, I expect stocks to move higher by the end of the year than they are today. We’ve already seen some of that recovery, but I expect more upside still. We might not see stocks’ returns in the double digits again this year, but a steady diet of selling puts close-to-the-money should pay off nicely, even if prices drop a few times before 2015.
If all of my naked puts were assigned, I would be 86.97% invested in this account. This percentage is down roughly four percentage points from how I left it at the end of January. I had a period where I was over invested, but was able to profit on a few trades and clear out the excess risk. I plan to add more exposure soon, but would prefer to do it after the indexes retreat a few percent.
Ford (F) is my only put that’s sitting on a paper loss. The contracts have less than three weeks before they expire and I’m not sure what I’m going to do with it yet. The good news is that it’s one of my smallest positions and the current paper loss is only around $100. I could end up eating it and moving on if I don’t see a shift in momentum soon. My UCO puts have a good profit already and I might close the position before long since the remaining upside has a fairly small reward available.
This is my asset allocation in my IB account as of the end of February:
- Large-cap ETF: 18.08%
- Mid-Cap ETFs: 23.94%
- Small-Cap ETF: 27.76%
- International: 8.4%
- Oil: 4.89%
- Individual Stocks & Other Sector ETFs: 6.25%
- Bonds: 0.0%
- Short ETFs: 0.0%
These are my returns according to Quicken through February 28, 2014:
- YTD Return: 2.30%
- 1 Year Return: +21.04%
- Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +8.08%
According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, February 28, 2014:
- Dow Jones Return: YTD change -1.07%, 1 year change +19.01%
- S&P 500 Return: YTD change +0.96%, 1 year change +25.37%
- NASDAQ Composite Return: YTD change +3.15%, 1 year change +36.32%
- Russell 2000: YTD change +1.81%, 1 year change +31.56%
- S&P Midcap 400: YTD change +2.66%, 1 year change +26.58%
The VIX ended the month at 14.00 and the VXN ended at 15.01. These numbers are down by a few points from the end of January, but as I write this on the first trading day of March, they are moving higher again as equity prices fall. The S&P 500 hit an all time high on the last day of February, so even if stocks fall a few percent, the volatility gauge might not push higher by too much. I’d like to see a move into the upper teens for the VIX. A higher VIX will help increase option prices while I have some cash available to take advantage of it.
I read your ‘about’ page and LOL! I love your honesty!
I am currently reading through some of your other material and will definitely start following you.
I wish you all the best!