End of Month Summary – November 2013

November surprised me a little.  Stocks had a better gain than I expected and only the shallowest of dips with no spikes in volatility.  In hindsight, I should’ve been more aggressive.  Since I kept a safer stance, I trailed the indexes again.  It’s hard to complain about a month where I earned more than 1.65%.  If I maintained that pace every month, I’d have almost 20% in annual gains.  Oh wait, I have more than that this year.  I’m definitely not going to complain.

I had no losing trades, but only took a profit on three closing trades.  I’m trying to walk the line of making a good/reasonable profit while keeping some space for the next sell-off.  My mindset is starting to shift some.  I still think we’re due for at least a 5% correction, but I’m starting to believe it won’t be until January before it hits.  Investors have such big paper profits on positions now that it could make more sense to wait until January before making those realized gains.  The idea in waiting is to delay having to pay taxes for another year.

I ended November with a Net Liquidation Balance (NLB) of $121,942.90 and a Net Asset Value (NAV) of $121,945.65 according to Interactive Brokers (IB) after finishing October with an NLB of $119,968.80.  That gave me a gain of $1,974.10 (~1.65%) on paper for November and a realized gain for the month of $1,176.86.  I received no dividends in November since I still don’t own shares of any stocks or ETFs.  Quicken reported that I have $121,945.65.  This matches what I have according to IB, but only after I added a $0.02 fake deposit to square the balances.  This trend of being a penny short each month in Quicken is from a rounding error when I download trades each month, but one would think over enough trades it would even out.  It’s only a penny and it’s in my favor, so I’m not sweating it.

If all of my naked puts were assigned, I would be 101.37% invested in this account.  That’s up two percentage points from the end of October.  I have two naked put contracts on two different leveraged ETFs that that are 14.88% and 26.25% out-of-the-money.  Both are set to expire in January.  I don’t see large-cap stocks dropping more than 7.5% and small-cap stocks dropping 13% before then.  If I’m right, I could use the $30,000 that’s backing those puts on other trades.  I also have a single December put on MDY that’s 5.5% out-of-the-money.  I plan to roll this one soon.  In short, rather than being 101.37% invested right now, it might be closer to 58%, assuming I close these three options mentioned here early.  My only hesitation in closing the leveraged January puts comes from wanting to delay paying taxes on the gain a little longer.  It’s only another $1,000 or less if I close these early, but that’s another $250 or so I won’t have to pay for another year if I wait.

This is my asset allocation in my IB account as of the end of November:

• Large-cap ETF: 29.11%
• Mid-Cap ETFs: 18.45%
• Small-Cap ETF: 37.72%
• International: 6.56%
• Oil: 0.0%
• Individual Stocks & Other Sector ETFs: 11.07%
• Bonds: 0.0%
• Short ETFs: 0.0%

These are my returns according to Quicken through November 29, 2013:

• YTD Return: +22.09%
• 1 Year Return: +24.49%
• Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +7.69%

According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, November 29, 2013:

• Dow Jones Return: YTD change +25.65%, 1 year change +26.63%
• S&P 500 Return: YTD change +29.12%, 1 year change +30.30%
• NASDAQ Composite Return: YTD change +34.46%, 1 year change +34.87%
• Russell 2000: YTD change +36.14%, 1 year change +40.99%
• S&P Midcap 400: YTD change +29.50%, 1 year change +32.33%

The VIX ended the month at 13.70 and the VXN ended at 13.93.  These are both slightly below where they were at the end of October.  Sometimes when we look at the month end levels it misses the story that happened in the gaps.  This is not one of those cases.  The VIX stayed in a low and tight range between 12 and 14.  Low volatility is one of the reasons I didn’t find an opportunity to sell many new puts in November.  Sometimes the trades are easy to find and sometimes they take more legwork.  I believe when you have to start chasing too hard, it’s getting close to a time when you shouldn’t be chasing at all.  I might be wrong for a month or two, but eventually there will be a better entry point.  I won’t be surprised if we see stock prices ascend a little further only to fall below current levels again within a few months.