I had another good month in May and continue to claw my way back up from my lows last year. I ended May with a balance of $74,238.76 according to TD Ameritrade and $74,528.50 according to Quicken. I’m still not fully invested, but continue to maintain a good annualized return by not overextending myself. If all of my naked puts were assigned I’d have to pay $50,900 to buy all the underlying shares. I have $76,018.26 in cash still, so I have two or three good trades left in me to just be fully invested. I’m trying to hang back some and not put it all on the line yet, but know I have missed a lot of potential gains by staying on the sidelines as long as I have. Eventually the market will take a breather and I hope I haven’t lost patience and gotten in too deep before then. I am easing in that direction though and will be hedging along the way.
In my April summary, I said I needed to reach $71,152.91 to stay on target for my lofty goal of 30% gain for the year. I added $3,000 to my account on May 8th, so that’s throwing my target off by a little. At a minimum my new target should have been $74,152.91 and if I include a rough estimate of the time value of that $3k I would need to raise my target to around $74,210. Either way you cut it, I reached my goal for May and remain on track for the year, but see some tougher days coming. While I’d love to end the year up 30%, my more realistic goal is just to beat the indices to make all of this worth my time versus just sticking my cash in index ETFs.
Turning to my June target, I need to earn another $1,855.97 to reach $76,094.73 to stay on my 30% annualized return target. At the end of May I had $933 left in time value in my current options that have three weeks remaining until expiration. If all of those go my way (which they can’t because I have an option strangle mixed in there and will close one or both legs early and I have some intrinsic value on another I could gain from) I still need to make a few more good trades to move me up. I’ll also be adding more to my account once I figure out what irregular expenses we have coming up this summer.
Here’s how I compare the major indexes. I’m trailing for the 12 month returns, but I’m ahead on the year to date returns. June and July were down months for me last year, so my 12 month trailing return should start to improve for each of the next two months as the bad months of 2008 start fading away as long as I don’t go the wrong direction again. Once I get past September through November, my 12 month returns will look great again.
- My 12 month Return: -38.9%
- Year to date (YTD): +13.11%
- Annualized return since 4/8/07 (blog’s beginning): -16.49%
- Deposits for month: $3,000 on 5/8/09
According to Morningstar, here’s how the major indexes have done over the past 12 months and the year to date (YTD):
- Dow Jones Return: -30.45% 1 year, -1.61% YTD
- NASDAQ Composite Return: -29.66% 1 year, +12.51% YTD
- Russell 2000: -31.79% 1 year, +1.14% YTD
- S&P 500 Return: -32.57% 1 year, +2.96% YTD
- S&P Midcap 400: -33.50% 1 year, +7.80YTD
The VIX ended the month at 28.92 and the VXN ended at 29.44. With volatility ebbing lower, option premiums are dropping and so are returns. Also, I could see the lower volatility, sometimes associated with a fear factor, signally a correction coming sooner than later. As my S&P 500 chart this weekend showed, a big change is coming, be wary. Some more upside might be in front of us before the down, but down is coming again, one day.