April was almost a non-event for my account. After missing the first two weeks due to my surgery/recovery I fell behind and quickly lost ground to the major indices as they rallied and I did nothing. By selling options I have somewhat of a low beta account anyway, meaning when the markets are up, I’m up less, when they are down I’m down less. This type of investing lags by having such a long rally over the past three months. I still expect some weaker weeks to hit us sooner than later probably and think that’s when I’ll do some catching up. If not I’ll still be content making more than 10% over the year with reduced risk.
Of course I’d rather beat the indices, but in such an odd year where the bulls and bears can both make strong cases for their preferred directions, I find it wise for me to continue to work the low beta approach. Wealth preservation still weighs on my mind more than growth. I still fall in the camp of expecting any correction not to be more than 5-10% before it rebounds and that keeps me more heavily invested, but not too much that a 10% correction would cause me to go on margin much, if any. Technically, I’m 116.5% invested overall when I combine my two accounts and 118.4% invested in my IB account alone. That’s if every naked put was assigned over the next two months I’d be committed to 118% of the cash I have backing it. I don’t expect that to happen which is why I’ve spread myself a little more thinly than I’ve been over the past year. I have a little more than $2,500 left in time value set to erode over the next seven weeks. That’s equal to about a 14% annualized return if the underlying stocks don’t fall below their strikes before expiration. As always, I’m limited on my upside and have a cushion for the downside. If we get a slow melt down I’ll make money on time value while the markets as a whole lose value.
I ended the April with a combined balance of $107,589.47 ($96,433.64 with IB and $11,155.83 with AMTD). This gives me a loss for the month on paper from the previous month’s end. I finished March with a balance of $108,043.97 ($96,935.22 with IB and $11,108.75 with AMTD) which means my decrease for the month was $454.50. My realized profit for April was $1,630.44. Two of my options are in the money, INTC and JPM. I’m comfortable with INTC, but I’m starting to question JPM with all of the finance reform going on. Long term I think they’ll both be OK and plan to stick with them for now. That little penny stock I mentioned a couple of months ago that I’m playing with, SNRV, is down $0.40 from the end of last month and I didn’t trade it all in April with my attention diverted elsewhere. Although I’m up a few hundred dollars on paper since I got in on it, I’m down $600 from the end of March. That’s the difference in having a gain for the month and not although JPM and INTC didn’t help either. I wasn’t going to be shooting fireworks without SNRV, but it helps explain the odd paper loss I’m sitting on during a positive month for the markets. It’ll continue to bounce around and when it’s back up and I’ll sell probably in May, but for now I’m reporting it as it is, something I should’ve taken profit on earlier. If it drops further I’ll look stupid and if it rallies I’ll look smart. With about $2k invested, I’ll take the risk.
Here’s exactly how my returns compare to the major indices as of the end of March.
My 1 year return: +16.61%
Year to date (YTD): +3.44%
Annualized returns since 4/8/07 (my blog’s beginning): -9.09%
Deposits for month: None
According to Morningstar, here’s how I compare to the major indices through 4/30/10:
Dow Jones Return: 1 year +38.69%, YTD +6.42%
S&P 500 Return: 1 year +38.84%, YTD +7.05%
NASDAQ Composite Return: 1 year +43.32%, YTD +8.46%
Russell 2000: 1 year +48.95%, YTD +15.01%
S&P Midcap 400: 1 year +48.92%, YTD +13.74%
The VIX ended the month at 22.05 and the VXN ended at 22.06. The losses last week woke up volatility which is only a good thing for those of us selling new options. I’d like to see the VIX back into the mid-20s to help with increasing premiums, but being out of the teens is enough for now. Having a little more fear in the markets is healthy to me. Complacency can lead to bigger market corrections.