At the end of December I had a balance of $124,831.68 in my Interactive Brokers account. On January 3rd I moved $24,831.68 to my TD Ameritrade account and stopped blogging about that account.  I ended January with a balance of $105,764.26.  That gave me a gain of $5,764.26 on paper for January and a realized gain for the month of $5,340.34.  That’s even with a realized loss of $2,000 on my JPM shares and a $1,100.23 realized loss on my UCO shares, both not counting the gains I had from the options that expired in 2011.  I received $50.00 in dividends.  Quicken reported that I have $105,796.28, close to what I actually have.

If all of my naked puts were assigned and my covered calls expired worthless I’d be 80.98% invested in account, slightly above the 75.20% at the prior month’s ending percentage.  I had so many options expire in January that I haven’t been able to catch up to a fully invested account yet.  I’ve held back some because I thought Monday’s slip in the markets was going to be the beginning of a bigger fall.  Today has proven that wrong for now, although I’m still cautious.  If the bears don’t resurface tomorrow I’ll probably add to my exposure, although it won’t be too aggressive.  As a general guideline for the year I’m going to try to stay between 80-120% invested most of the time.  The shift might come from obvious cycle changes in broad based investor sentiment and from current positions falling farther out of the money.  Other than that I’m going to rely on time value to be my friend and continue to work higher probability trades as often as possible.

This is my asset allocation in my IBKR account as of the end of December.

These are my returns according to Quicken through 1/31/12:

In 2012 I plan to avoid such panic selling by not using ultra-ETFs as often and reducing my mistakes when we do see a sell-off.  I’m going to aim for more market timing trades and will take some profits early on occasion when I see a turn in the markets from where I was planning them to move.  I also don’t plan to sell such long dated ETFs.  The time value just doesn’t melt away fast enough outside of the final two months and any spike in volatility makes it hard (or at least expensive) to exit the positions, especially with such wide spreads.  If I worked them all like I did with UWM and let them last until expiration it wouldn’t matter as much, but I think being more nimble with shorted dated options will give me much better opportunities to profit.  Last year I planned for targeting bigger chunks of premiums with fewer trades.

In 2o12 I plan to revert back to my old winning ways of trading more often. A volatile market should be an advantage to those of us trading more frequently, but it wasn’t for me last year.  I say this even after my more passive AMTD account beat my more active IBKR account.  My IBKR side lost 5.13% and my AMTD account gained 16.31%.  This difference plays into why I’m moving more into that account too.  I’ll be more patient and take fewer risks there while I don’t have to worry about any withdrawals in my IB account for a few years at least, probably a lot longer – hopefully a couple of decades.

This is the breakdown of the numbers for me:

• I ended December with a combined balance of $154,931.43
• $124,831.68 with Interactive Brokers in equities
• $30,099.75 with TD Ameritrade in bonds and index options  (includes $3,000 deposit)

After ending November with a combined balance of $148,046.98, I gained $3,884.45 on paper for December and had a realized loss for the month of $2,221.37 due to finally dumping my 200 shares of MVV at a $3,900.19 loss, not including premiums received.  I received $72.30 in dividends and interest. Quicken reported that I have $124,762.38 with IBKR, close to what I actually have.  My AMTD balance in Quicken was $30,099.75, exactly what AMTD listed.  If all of my naked puts were assigned and my covered calls expired worthless I’d be 75.20% invested in my IBKR account, much lower than the 102.28% at the prior month’s ending percentage.  Part of the difference is that I was setting myself up for more available cash to be removed.

I sent in my request today to withdraw $24,831.68 from my IBKR account and will move it to my AMTD account this week.  As I’ve mentioned a few times, I’ll only be blogging about my IBKR account from now on.  I think it’ll be more interesting to see the more active account in action and not see the deposits in the first part of the year and the monthly withdrawals by the end of the year.  My plan is to start each year with $100k in the IBKR account, but if I go lower I won’t add to it.  This will keep me from throwing more deposits on an account that isn’t producing like I’m attempting.  My longer history is better with my IBKR account, but that’s because it doesn’t include the beating I took in 2008.

This is my asset allocation in my IBKR account as of the end of December.

These are my returns according to Quicken through 12/30/11:

Just as I said last month, the speed at which the markets change directions continues to make selling options the less than ideal tool to use.  I’ve proven that I’m not a good day trader, so I don’t see a major change in my approach coming.  The only change that I’ve made so far that seems to be working is using more inverse ETFs and selling puts on these when I see the market starting to roll over.  This is an art and I’m just getting started on it, so doubt I’ll go full steam with it any time soon, but as long as the market’s move are so violent I will probably have to start taking some profits sooner than expiration to make sure I lock them in before we get a reversal and those profits turn into losses.

This is the breakdown of the numbers for me:

• I ended November with a combined balance of $148,046.98
• $121,879.16 with Interactive Brokers in equities
• $26,167.82 with TD Ameritrade in bonds and index options  (includes $6,000 deposit)

If all of my naked puts were assigned and my covered calls expired worthless I’d be 102.28% invested in my IB account, not much of a change from the 103.96% at the prior month’s ending percentage.  That number is misleading though because almost 17% is allocated to out of the money inverse ETF puts.  I’d like to let these bearish puts expire worthless, but will have to see how the market plays out over the next two weeks leading into December options expiration.

As I alluded to in a post recently, I’m making a change to my account set up and therefore to this blog too.  At the end of December or the very beginning of January I’m going to withdraw all but $100,000 from my IB account and move it to my TD Ameritrade (AMTD) account and will only blog about what I trade in my IB account.  In nine months from now I’ll be without my w-2 income and might need to start making regular withdrawals from my AMTD account by 2013 and would rather keep that separate from my regular/active trading account.  I’ll manage the AMTD account differently with lower risk and fewer trades.  By keeping my goals for each account separated I can focus on staying aggressive with my IB account without worrying about needing this money for years into the future.  For the past few years I’ve traded this account with a hedge of fear influencing my trades too much and I should’ve made this change earlier.  I should have close to $50k in my AMTD account and will make all future deposits to that account.  This will make my IB account cleaner to follow without deposits shading my gains or losses in either direction.  I’m not sure yet, but I might make this an annual rebalancing so that every year I start with $100k in my IB account, assuming I don’t lose money.  It’ll also be interesting to see how my actively managed account does when compared to my more passive AMTD account.

This is my asset allocation in my IB account as of the end of November.

These are my returns according to Quicken through 11/30/11:

The biggest challenge with the markets over the past few months has been the speed at which they change directions.  A nice, normal market would lose or gain 5-10% over months.  Now we can do the same in days.  I was considering selling more covered calls on my few long positions that aren’t covered yet, but after losing 5% in less than three days (though mid-day 11/1/11) I have to wonder if the worst is over or if we’re on the road back to 1,100 again.  I put the chances of a move back down to 1,100 in the near term around 10-15%.  Earnings have been too good for that to be very likely.  However, Europe is such a wild card for our markets that the chances of another nose dive still exist.  If Greece would just pick a policy and stick with it the markets could adjust, take a hit (lower or higher) and move forward from there at a more controlled even pace.

This is the breakdown of the numbers for me:

• I ended October with a combined balance of $141,607.70
• $122,099.89 with Interactive Brokers in equities (no deposit for the month)
• $19,507.81 with TD Ameritrade in bonds and index options

If all of my naked puts were assigned and my covered calls expired worthless I’d be 103.96% invested in my IB account, a big decrease from the 121.53% at the prior month’s ending percentage.  Last month I noted that my account was becoming less actively managed as I remained patient.  It looks like that idea was short lived as I made more trades in October than the average of the months leading up to it this year.  I ended up not sending in a deposit during October since we finally started our kitchen remodel I talked about at the beginning of the year.  I think we’re only about $1,500 over our planned budget, but thought it wise not to send money into the investing accounts until the dust settles, figuratively and literally.  Hopefully I’ll be able to double up in November before I start increasing our cash reserves for my impending lack of a w-2 salary at the end of next summer when my contract ends at AT&T.

This is my asset allocation in my IB account as of the end of October.

These are my returns according to Quicken through 10/31/11:

• NFLX – Bear $130/140 Call Spread – This one worked even better than planned.  I could’ve been more aggressive, but am happy to have been able to ride this one to the end without stressing much about the potential of a snap back high enough to cost me any profit.  I don’t think I’ll make this same trade again unless NFLX gets another silly rally that is senseless.  I still think they are doomed.  The model change broke them and pushed away too many subscribers to look for alternatives such as AMZN.
• T – October $28 Naked Put – This one was in the money briefly, but I wouldn’t have minded buying it at $28.  T is still chugging along and even added wireline subscribers last quarter for the first time in years.  As long as they sell iPhones they’ll keep bringing in customers, even with the competition having iPhones too.
• UWM – October $42 Put – This is my loser.  I’ll be buying 100 shares of UWM at $42 and will have a cost per share of about $39.36 after deducting the put premiums.  I think I’ll let these shares run for a while to see what ground I can make up before selling covered calls.  I don’t want to sell my shares for a loss since I have more UWM puts set to expire in January and might be buying more shares by then.  I could trade myself into the wash rule if I’m not careful.
• BA – October $60 Naked Put – This one never caused too much worry either and the way BA has been going looks like it will probably be one I get back into again.  The November $60 puts don’t look bad, but BA hasn’t closed above $65 more than once since September 1st and might be up against tough resistance soon.  For now, I’m thinking of waiting for a dip closer to $60 again or a solid break above $65 before re-opening my BA exposure.
• QLD – October $75 Naked Put – I got out with another full profit and will trade this again, but like BA I see potential resistance brewing nearby and it might be wise to wait for another dip.  Yesterday’s dip might have been the last really good buying opportunity for a while though.  It looked like a healthy step back during a longer rally.  Maybe we’ll know as early as Monday or Tuesday if that’s the case.
• QCOM – October $52.50 Covered Call – I rolled this one out for another month.  While QCOM was trading at $51.97 I bought to close one QCOM October $52.50 call and sold to open one QCOM November $52.50 call for $2.05 and received $203.50 after commissions.  Earlier this morning QCOM was trading around $52.50 when I started debating this trade and I decided to let some more time value run out.  I could’ve sold the calendar spread for $2.30 at that point, but after stepping away for a lunch appointment I came back to a $2.15 spread price.  I waited again and finally broke down for the $2.05 trade after starting my limit order at $2.10.  I’ll be charged an extra buck or two by IB for changing my order, but still think it was the right thing to do.  I only paid two cents to close my October trade, but as volatile as today has been I thought it wise to spend the few bucks to avoid the risk of it shooting higher.  QCOM was above $55 just a few days ago and could be below $49 before this new contract expires.  With today’s premiums added in to the other premiums and dividends I’ve received, my cost per share is down to $46.66.  I’m happy to keep selling the premiums as long as I can since I’m still a fan of QCOM’s long term.  Even if the covered call isn’t exercised, I’m still looking at a 50% annualized return on this option, assuming QCOM stays flat (which it won’t).
• TWM – October $48 Naked Put – This was a fun one for me.  Partly because I made a profit, but also because I was using a double inverse ETF which lost money.  This meant my long positions I was hedging against profited at the same time the hedge itself did.  I decided to close this before it expired this afternoon to ensure my little profit.  While TWM was trading at $46.87 I bought to close one TWM October $48 naked put for $1.25 and paid $125.42 with commissions.  I only made $99.15, but did it in a week when my UWM positions gained value.  I’ll make a similar trade again before long.  I just want to see a better chance for the market to turn lower again before I do it.  Then again, the premiums are so good, that the risk isn’t too great if I sell far out of the money puts while short UWM shares in the money and own other UWM shares outright.

Since most stocks have been caught in a trading channel for the past couple of months I would’ve done better by selling some covered calls closer to the money, but I didn’t and I’m afraid that opportunity has passed.  I’m hesitant to sell calls close to the current low prices, but also don’t want to say the same sob story at the end of October.  More than likely I’ll ease into some of these calls and while I cap some potential gains I’ll bring in some cash to help reduce my losses and will also leave other shares free to ascend without calls covering them.

This is the breakdown of the numbers for me:

• I ended September with a combined balance of $120,703.59
• $104,314.84 with Interactive Brokers in equities ($6,000 deposit on September 9, 2011)
• $16,388.75 with TD Ameritrade in bonds and longer-dated, index options

If all of my naked puts were assigned and my covered calls expired worthless I’d be 121.53% invested in my IB account, another increase over the prior month’s ending percentage.  Like last month I have more options, deeper in the money than the previous month.  I took some losses in September to get rid of a couple of dogs and avoided further losses, but just didn’t sell enough early enough in this correction and that caused me to trail the indexes.  I’m banking on the fourth quarter being positive and I’m staying long most of my positions.  Since I have so much exposure in ultra ETFs I could have a huge end of the year if the markets cooperate or I could fall further as my patience was ill timed.  My account is turning into a less actively managed portfolio, not by plan, but by the desire to stay long and not take the losses I’ve already incurred on paper.  I’m sure I’ll take some more losses before the end of the year just for tax purposes, but just not quite yet.

This is my most of allocation in my IB account as of the end of September.  I have a few like VXX, VNQ and QLD that didn’t fit nicely into these broad categories:

These are my returns according to Quicken through 9/30/11:

• SSO – September $45 Naked Put – I sold this put in late January when SSO was trading at $49.78.  This morning while it was trading at $43.94 I bought back my one SSO September $45 naked put for $1.15 and paid $115.34 with commissions.  Since I used an option instead of just going long 100 shares at the time, I made $283.97 rather than losing $584.00.  I’m not saying making less than $300 over nearly eight months is going to make me rich, but making money while the market falls sure does help the cause.
• VNQ – September $61 Put – Goes Ex-Dividend next week so I’ll collect a little more cash for holding it.  My cost will be $59.01 per share, so I’m down on it, but not by enough that I can’t be back to a paper profit with the sale of a covered call.  I’m waiting to see what the November premiums will be and then I’ll pick my strike.  There’s an outside chance I’ll end up selling December expiration calls if I decide to go further out of the money with the strike.
• DSX – September $11 Covered Call – I’m glad I only have 300 shares of DSX.  I’m down by close to $2.00 per share after subtracting the premiums I’ve received so far.  I’m going to wait until next week to sell new covered calls so I can see what the November premiums look like.  I might end up going as far out as December anyway, but waiting another day won’t work me much to see if I can do OK just two months out instead of three months away.

A few hours after buying my SSO September $45 naked put back I figured out how I wanted to continue with my SSO position.  I’m still short one SSO January $50 put and two January $55 puts, so I have plenty of room for upside movement should this week’s bounce turn into a bigger rally.  I have 100 shares long too, but I sold a covered call at the October $42 strike which is now in the money.  While SSO could easily fall back below this line, I think there’s a bias to move higher in the near term.  With that in mind, I sold one SSO October $42 naked put for $2.46 and received $245.35 after commissions.

This gives me a straddle on SSO at the October $42 strike which means one side is destined to “win” while the other “losses”.  Both legs cannot finish in the money, but SSO could finish close enough to $42 that I could close the side that is in the money and make a profit on both sides.  Just this trade alone stands to make 6.19% or 63.0% annualized.   SSO would have to fall 9.44% for me to take a loss on this trade.  That sounds big at first, but this week saw nearly 5% to the upside for the S&P 500, so a reversal would get me half way there quickly.  I still expect support to hold at the August low and if it does I’ll be somewhat safe on this new leg into SSO since I’ll be able to sell covered calls on it easily to keep me at a profit.

After the drop in equity prices, a larger portion of my account is in puts that are in-the-money.  Luckily for me, I didn’t panic at the August lows and when I was assigned shares from my options I stayed long and didn’t even cover most of these stocks and ETFs with covered calls.  That simple patience allowed me to ride the bounce higher into the end of the month and I regained more than $12,000 from the low.

One of the reasons for my change (previously I would have been prone to sell covered calls immediately after being assigned) was that I’m actually trading more based on a market timing model.  I’ve been posting a chart of an index nearly every weekend almost since the beginning of this blog, but rarely made many trades based on my own technical analysis.  That has changed.  Now I’m combining my own technical analysis with another market timing system run by a friend of mine.  Of course I pay attention to fundamentals somewhat and have a growing interest in dividend paying stocks, but the charts have tended to be better indicators for my trading style than most other methods.  I just have to act when they “speak”.

This is the breakdown of the numbers for me:

• I ended August with a combined balance of $136,647.78
• $118,133.21 with Interactive Brokers in equities (No deposit in August)
• $18,514.57 with TD Ameritrade in bonds and longer-dated, index options

If all of my naked puts were assigned and my covered calls expired worthless I’d be 117.83% invested in my IB account, a little more than August’s ending percentage.  Since more of my options are in the money than not, I might not add a lot more exposure yet, but I am tempted to sell some more, far out-of-the-money puts while volatility is still high.  I’m not sure the risk is completely worth it yet.  If I do add more exposure it’ll probably be coupled with selling some covered calls on the shares I’m already long.  All of this mindset could change if the jobs data throws in a surprise to either side tomorrow.

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

These are my returns according to Quicken through 8/31/11:

These are the 11 options I was short going into the day.

• CSX – 1 August $25 put - Expiring in the money CSX rallied nicely for a few days from its lows, but then fell off a cliff again this week.  I like the stock long term and am going to take the assignment and not even sell covered calls yet.  I think it’s going to pull itself back up before long and when it’s closer to $25 (or at least closer to $24) I’m going to sell a covered call then.  It’s a solid company with good revenue and earnings, a forward P/E ratio of 10.38 and a dividend yield of 2.1%.  I’d be happier if the chart showed a better picture, but the downside looks like it might be limited to $20.00, the low from 8/8/11.
• DSX - 10 August $11 puts – Expiring in the money, DSX had a chance to work out for me if it stayed closer to the money, but it dropped sharply and I lost any chance of selling my long puts’ time value.  Since the underlying shares were so far below the strike (in the money) the intrinsic value took over the whole premium and left virtually no time value to sell.  I have a limit order in to sell my straddle for $0.00, just to get out, but I can’t find a taker yet.  I’m not at risk for more downside since I’m long 10 puts with the 1,000 shares I’m about to buy, but want to exit the position and be done.
• ITRI – 1 August $50 call - Expiring out of the money, ITRI has been a dog for me, so I sold my 100 ITRI shares for $35.30 and received $3,529.00 after commissions.  The series of trades cost me a realized loss of $1,423.44.  I only had $3,530 left to lose if ITRI went to $0 (which I don’t think it will), but I opted to cut my losses and move on to better opportunities that I understand better.  With the European troubles and US government debt issues ITRI’s prospects might not be as bright as they claim them to be.  Maybe they are, but I won’t be around to profit from it.
• JPM - 1 August $40 put – Expiring in the money, JPM hit $33.69 twice recently.  I expect that low to hold.  I’m staying long JPM for now with my 200 shares (including the 100 about to be assigned.  JPM has a forward P/E ratio of 6.25 and a dividend yield of 2.7%.  Assuming they don’t take too big of a hit in the near term to earnings I think JPM will be a strong long term hold.
• JPM - 1 August $41 call – Expiring worthless, see above
• QCOM – 1 August $52.50 put – Expiring in the money, QCOM hit a low of $46.70 recently.  I’m expecting that low to hold support and am staying long these new 100 shares without a covered call yet, but I’m considering a $52.50 strike covered call for October.  That would let me get out at the price where I’ll be buying and the premiums are worth pocketing.  My hesitation is due to my expectation QCOM will recover quickly and I can do better by waiting.
• SSO - 1 August $50 put - Expiring in the money, not only do I have this SSO naked put and the one listed just below, but also I have a September $45, January $50 and $55.  That leaves me in a situation where I don’t want to add more SSO exposure yet.  At the same time, I’m not really in such a bad hole that I can’t sell my way out of it with new covered calls.  Any new covered calls will have to be long dated and far out of the money, but with my puts expiring later I took in enough premium up front that I’m fine with my cost per share.  I want to see how the next couple of days trade and then maybe sell a couple of December $45 covered calls.  If we get a bounce in the S&P 500 I might make the calls September $45 strikes to go with my September $45 naked put.  That would force one side to finish in the money while the other expired with a full profit.
• SSO – 1 August $53 put - Expiring in the money, this put might go down as one of my worst timed trades ever.  I have a friend (another advisor here in Atlanta who runs a market timing service) who warned me against going long when I did, but I didn’t listen and am paying for it.   See above for more on my SSO plans.
• UCO – 1 August $34 put - Expiring in the money, I’ll sell a covered call at $34 on these 100 shares.  I’m not sure when I’ll get to it. The downside in oil really seems limited from here though.  I’m up to a half position in UCO so far and plan to sell new naked puts with any covered calls I sell.  I might even sell puts first.
• UCO – 1 August $43 put - Expiring in the money, see above.
• UCO – 1 August $47 call - Expiring out of the money, see above.