This has been a fun start to the year for sure. You’d be hard pressed to be losing so far this year if you made any bullish trades/investments. We still haven’t had that give-back I was predicting for the beginning of the year and now that we’ve seen such a strong start to the year I could see a slightly bigger correction than I was thinking of before, but I’m actually still bullish longer term. I expect any dip to be bought. I’ve been holding back some for that dip, but since it hasn’t happened I’m back to trailing the major indexes for the year to date. The difference for me though is that since I have more than half of my account allocated to longer term, out-of-the-money (OTM), options with bigger premiums than shorter term contracts I have a good cushion built in for any correction. I should still be more heavily invested than I am at this point, but just haven’t gotten there yet. I will.
As I’ve mentioned with most of my ETF option trades this year I’ve changed my model from focusing only on individual stocks to more of a balanced asset allocation model with some individual stocks to “juice up” my returns a little more. This is my allocation in my IB account as of the end of February:
- Large-cap ETF: 17.62%
- Mid-Cap ETF: 15.04%
- Small-Cap ETF: 16.33%
- International: 8.59%
- Oil: 7.56%
- Individual Stocks (mostly large-cap): 19.64%
I’ll continue to slowly add to each group as I see fit. I’m still interested in adding more to my oil exposure, but was hoping for it to come down a little more from its highs. I might not wait much longer though and start as far OTM as possible with the new option strikes based on the post reverse split UCO prices. With the recent volatility increase I’m starting to shy away from too risky of a new trade. That doesn’t mean I won’t keep picking up pieces along the way each week, but might keep my strikes farther OTM for a little longer on my index trades too.
Based on my current LEAPS only, I should end the year with a gain of around 10.27% if all work out. Without taking on any margin and assuming my other positions earn 10% I’m in line for a total gain of 14.79%. This is a slight bump higher than I predicted last month since the LEAPS I added are schedule to gain more than the 10% bar I set for my shorter term contracts.
I think my shorter term contracts will do better than 10%, but I’m keeping a touch of reality in there with the expectation that I’ll lose money on some of these trades which will bring down my return some. Although I’m starting to fall behind of the market’s return year to date I still feel I don’t have to chase too hard to catch up yet. If we don’t see a down month before summer I might change my stance on that though. I’m still going to push for a 20% return by the end of the year, but doubt I’ll take too many large risks to get there.
- I ended February with a combined balance of $133,150.17.
- $116,399.90 with Interactive Brokers in equities (including the deposit of $2,000 I made mid-month)
- $16,750.27 with TD Ameritrade in bonds and far OTM index LEAPS
- After ending January with a combined balance of $128,598.19, I gained $2,551.98 on paper for February (not including my deposit) and had a realized gain for the month of $662.05.
- My combined balance in Quicken is still a little off, but is closer to right than last month. It reported that I have $116,539.38 with IBKR. My AMTD balance in Quicken was $16,740.26.
- If all of my naked puts were assigned and my covered calls expired worthless I’d be just over 88% invested in my IB account. That gives me$13,915.97 to invest before I’m on margin with any positions.
These are my returns according to Quicken through 2/28/11:
- My 1 year return: +5.59%
- Year to date (YTD): +3.53%
- Annualized returns since 4/8/07 (my blog’s beginning): -5.33%
- Deposits for month: $2,000 on February 16, 2011
According to Morningstar, here’s how I compare to the major indexes through 2/28/11:
- Dow Jones Return: 1 year +21.6%, YTD +6.11%
- S&P 500 Return: 1 year +22.57%, YTD +5.88%
- NASDAQ Composite Return: 1 year +24.31%, YTD +4.88%
- Russell 2000: 1 year +32.60%, YTD +5.21%
- S&P Midcap 400: 1 year +32.76%, YTD +6.75%
The VIX ended the month at 18.21 and the VXN ended at 20.51. These aren’t rock bottom levels, but in no way could be considered high at all either. There’s no telling when we’ll get a true, lasting spike in volatility, so I’m just planning to trade with what we have, not what I’d like to have.