End of Month Summary – November 2011

November showed how good October was.  It made flat feel like a loss after having such easy money the month before.  I gained a little, but was essentially flat.  I could’ve done better if I didn’t pull back on my risk exposure as much as I did, but sometimes it’s better to reduce risk and wait for a better day to trade than lose money.  I have roughly $3,500 in time value left to melt away between now and the December and January expirations.  The vast majority of that is from my puts, so a flat to higher market will help me on that front.  I still have a good chunk of intrinsic value in my MDY put and most of my UWM puts, so any gain there would obviously help too.  Oil can pull back some and I’ll still be fine.  Other positions like DSX, CSX and JPM will probably be closed out before the end of the year so I can start fresh and clear up some more cash.  However, I’ll hold on for now to see if we get a good Santa Claus rally by the end of the year.

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: