End of Month Summary – May 2013

May looked like it was going to be a great month for me as equities of all shapes and sizes rose nicely.  However, I hit a snag with my growing oil position as prices dropped again late in the month.  I expect the oil dip to be short lived.  It might go a lower than May’s closing price, but I still like it long-term, so I’m staying invested.  If oil (WTI) stays between $90-95 a barrel, my UCO hedge could pay off nicely with a solid realized gain.  I’m ready to cut back on my exposure to the commodity, but I’m remaining patient for now.  Even with such a strong belief in the future of oil prices, I’m overly invested as it stands.  (See allocation percentage below.)

Oil isn’t my only spoilsport.  AT&T (T) and my Emerging Markets ETF (EEM) added to my paper losses.  T was my single dividend play and that’s the reason it’s down.  As Treasury yields rise, equities’ dividend yields rise too (which means the prices drop).  I considered dropping out of this position, but don’t think it’ll fall through the floor and plan to work it with covered calls while I collect the dividends.  I’m not sure what I’ll do with EEM.  I might let it run longer too and try to exit on the next rally.

I ended May with a Net Liquidation Balance (NLB) of $107,760.92 and a Net Asset Value (NAV) of $107,845.38 according to Interactive Brokers after finishing April with an NLB of $107,643.32.  That gave me a gain of $117.60 (~0.1%) on paper for May and a realized gain for the month of $1,634.36.  I received no in dividends in May.  Quicken reported that I have $107,844.15, just slightly below the NAV reported by IB.

My plan to hit a 15% return this year is still on track, but I could’ve done much better if I had been even more bullish.  I’m up 7.98% for the year and we’re not half way through it yet.  Not more than a few days ago, I was up more than 11% for the year.  My oil and T positions ate into those gains.  If both rally again by the time the underlying options expire, I could add another few percent to my account quickly.  Simply gaining on the time value erosion from my short options will add a chunk to my account, assuming the underlying positions don’t drop much.

If all of my naked puts were assigned, my spreads all lost 100% and my covered calls expired worthless, I would be 125.71% invested in this account.  That’s up about 5% from the end of April.  I’m still not expecting a ridiculous sell-off in stocks.  That outlook is keeping me invested deeply.  I could take some profits on my UWM and IWM positions, but don’t think small caps are going to fall hard enough that I can’t earn a better profit by waiting.  I’m content with my 200 QCOM shares too.  The covered call premiums remain good and I’ll continue profiting from selling them as long as I can.  If QCOM sees much more weakness, I might add a new naked put at a lower strike.

Due to my slump of basically two flat months, I’m lagging behind all major indexes for the year-to-date and only ahead of the NASDAQ for the past 12 months.  This is my asset allocation in my IB account as of the end of April, including hedges, but not factoring in covered calls that are in-the-money:

These are my returns according to Quicken through May 31, 2013:

• YTD return: +7.98%
• 1 year return: +22.41%
• Annualized (not cumulative) returns since November 18, 2009 (when I opened my IB account): +5.39%