March flew by me before I even realized that I only made three trades for the month. Actually, I traded three different contracts, but only made two trades since I closed and opened Ford puts in a calendar spread. XLF was the only new position that I opened and it finally moved to a paper profit today after trailing lower soon after I sold the puts. My account gained ground during a so so month, so that’s a good thing. I’ve maintained my lead over most of the major indexes for the year-to-date, but won’t be able to hang onto that if I don’t start rolling some of my positions higher.
I expected the most recent retreat to push lower before it reversed, but this bull market doesn’t want to give up much ground yet. That’s more unnerving than reassuring to me. I’d much rather have a couple of 10% corrections than a 20-25% beating six-nine months later. However, I’m up about 3% in three months and will be happy if I can end 2014 on that pace, for a 12% gain on the year.
I ended March with a Net Liquidation Balance (NLB) of $103,046.79 and a Net Asset Value (NAV) of $102,973.67 according to Interactive Brokers (IB) after finishing February with an NLB of $102,277.82. That gave me a gain of $768.97 (~0.08%) on paper for March and a realized gain for the month of $13.44 on only one closing trade. I received no dividends in March since I still don’t own shares of any stocks or ETFs. Quicken reported that I have $102,973.67. For the first time in many months, the regular penny error reversed the prior month error by rounding in the other direction.
A lot of the index charts I watch have started looking iffy lately and I think we have a decent shot at a move lower, but it might not be by much unless there is a real catalyst. The upcoming earnings reports should get stocks to move in one direction or the other. I was happy to see Ford (F) sales rose nicely in March. Hopefully, that’s a sign that consumers are ready to start spending again after a cold winter of saving. Some strong earnings guidance will stave off any sizeable correction for stocks and will push bond prices lower at the same time.
If all of my naked puts were assigned, I would be 93.41% invested in this account. This is almost 6.5 percentage points higher than my February ending. I’d love to get my exposure up to more than 125%, but won’t do so until the S&P 500 corrects at least 5%. Until then, I’ll keep my allocation a lot more conservative. At the end of March, I had three (June XLF, May FEZ, May F) of my eight positions sitting in-the-money. This gives me better upside potential if these three can gain back their losses before each one’s option expiration.
If three of my positions are in-the-money, it means five of my eight positions are out-of-the-money. Only two of those are close to their strikes and three are far out-of-the-money. These three that are getting cheap (April UWM, July UWM and July UCO) are the contracts I need to replace soon. I have limit orders on all three and will sit patiently while the trade comes to me. I’ll probably add something new even if these don’t sell in the near-term because I’m getting more and more confident that they’ll go my way, especially the April UWM puts.
This is my asset allocation in my IB account as of the end of March:
- Large-cap ETF: 18.05%
- Mid-Cap ETFs: 23.78%
- Small-Cap ETF: 27.56%
- International: 8.35%
- Oil: 4.85%
- Individual Stocks & Other Sector ETFs: 12.91%
- Bonds: 0.0%
- Short ETFs: 0.0%
These are my returns according to Quicken through March 31, 2014:
- YTD Return: 2.95%
- 1 Year Return: +18.91%
- Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +8.08%
According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, March 31, 2014:
- Dow Jones Return: YTD change -0.15%, 1 year change +15.66%
- S&P 500 Return: YTD change +1.81%, 1 year change +21.86%
- NASDAQ Composite Return: YTD change +0.54%, 1 year change +28.51%
- Russell 2000: YTD change +1.12%, 1 year change +24.90%
- S&P Midcap 400: YTD change +3.04%, 1 year change +21.24%
The VIX ended the month at 13.88 and the VXN ended at 18.12. The two different volatility trackers moved in different directions by the end of the month when compared to the end of February. The VIX moved down by a hair and the VXN moved higher by three points. Both cooled down from their spikes hit earlier in the month, but the NASDAQ hasn’t rebounded as strongly as the SPX, so the VXN remained more elevated. This leaves the VXN on the higher end of its past year of readings and the VIX is closer to its average for the past 12 months.