I fared better than the broader markets in August, but still lost a few bucks on paper. It wasn’t a bad month in that view, but felt like a wasted month in some ways. I barely traded and had a puny realized gain for the month. In other ways, it seemed like a good consolidation month. I gained a little on the year-to-date differences from my returns to the indexes’ returns and a small realized gain is better than any realized loss. This blah August, coming after a fantastic July, is not so bad when you average the two. It seems a little less stellar since my account value topped out higher than it finished, but comparing peaks to month end levels is a fool’s game. (No comments please on the fact that I tend to make this comparison often.)
I ended August with a Net Liquidation Balance (NLB) of $114,121.14 and a Net Asset Value (NAV) of $114,065.88 according to Interactive Brokers after finishing July with an NLB of $$114,884.25. That gave me a loss of $763.11(~0.66%) on paper for August and a realized gain for the month of $19.81. I received no in dividends in August. Quicken reported that I have $114,065.86, two pennies less than the NAV reported by IB. This difference is a cent more (or double if you like a more pessimistic sound to it) than last month’s discrepancy. Just like last month, as I write this entry on the first trading day of the month, I’m back above $115,000 again. Let’s hope I keep it above this round number (aka my initial year end goal) in September and beyond.
In previous month end summaries, I’ve broken down my goals for the end of the year into what I need to earn on average each month. I’m skipping that today because I expect this to be an up and down last few months and rather than try to make something work on an average, I need to concentrate on timing my entries and exits correctly. That’s the mentality I ran with for most of August. I sold fewer options and kept them out-of-the-money. While the market looks shaky, I don’t want to get overextended, but when older options expire worthless, I’ll be rolling them out to stay invested. I have four options set to expire in September and need to write more for October and November.
If all of my naked puts were assigned and my covered calls expired worthless, I would be 127.00% invested in this account. That’s up 11.5 percentage points from the end of July. If I removed my UCO ratio spread, I’d still be over-invested at 104.22% invested. I’m still not planning to let UCO fall enough to assign me the shares before I close the ratio spread for a profit. The way oil is trading, I don’t think I’ll even have the opportunity for the extra trade. I expect the long puts to expire worthless, but I’m hanging on to all 30 contracts for now.
The small and mid-cap indexes are still beating my 12-month returns, but I’m still holding onto my slight lead over the NASDAQ and DJIA. The SPX pulled ahead of me by less than 1%. I’m still trailing all five of these indexes for the year-to-date, but I gained a little ground through August. Three of the four final months of last year were good for me. If I can avoid losing as much as I did last October (it was slightly more than I made in the prior month), I’ll be very happy with my full year results four months from now.
This is my asset allocation in my IB account as of the end of August, including hedges, but not factoring in covered calls that are in-the-money:
- Large-cap ETF: 13.14%
- Mid-Cap ETFs: 19.28%
- Small-Cap ETF: 35.40%
- International: 6.31%
- Oil: 17.53%
- Individual Stocks & Other Sector ETFs: 5.70%
- Bonds: 0.0%
- Short ETFs: 0.0%
These are my returns according to Quicken through August 31, 2013:
- YTD Return: +14.2%
- 1 Year Return: +17.21%
- Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +6.46%
According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last day, August 30, 2013:
- Dow Jones Return: YTD change +15.02%, 1 year change +16.13%
- S&P 500 Return: YTD change +16.15%, 1 year change +18.70%
- NASDAQ Composite Return: YTD change +18.89%, 1 year change +17.05%
- Russell 2000: YTD change +20.03%, 1 year change +26.27%
- S&P Midcap 400: YTD change +17.13%, 1 year change +23.71%
The VIX ended the month at 17.01 and the VXN ended at 17.53. Both of these volatility measures are up a few points from the end of July and are helping make options a little more valuable. If the markets get a real sell-off, there is still a ton of room for volatility to spike, so be careful selling too much volatility if you can’t afford to accept the share assignments at or before expiration.