April didn’t offer much to write home about, but I pulled out a tiny gain on paper and locked in more realized gains before the month ended. I’m still not being too aggressive in my trading. While I was more active than my March count, I only made five trades in April. I’m torn about the market direction. I don’t see a ton of downside, unless some macroeconomic event trips the market (Russia or China?). At the same time, I don’t see a huge swing to the upside coming soon either. Earnings have been OK across the S&P 500, with some companies doing much better than expected and others not fairing so well. The biggest shift has been away from high-multiple stocks like FB, AMZN, LNKD, TSLA and NFLX. Since I’ve avoided those big names, I’m still hanging in with gains for the year-to-date, but starting to trail the average run rate for my goal to earn a minimum of 10% this year. I’d like to have a 15% return and will be able to do that only if the market gains more than 5-7%.
I ended April with a Net Liquidation Balance (NLB) of $103,233.51 and a Net Asset Value (NAV) of $103,171.56 according to Interactive Brokers (IB) after finishing March with an NLB of $103,046.79. That gave me a gain of $186.72 (~0.02%) on paper for April and a realized gain for the month of $1,581.91 on three closing trades. I received no dividends in April since I still don’t own shares of any stocks or ETFs. Quicken reported that I have $103,171.56, exactly in line with IB’s reported NAV.
If all of my naked puts were assigned, I would be only 78.33% invested in this account. This is 15.08 percentage points lower than how I closed out March. I still plan on increasing my exposure, but I’m not going to throw caution to the wind and make a trade just for the sake of trading. I’m ahead of the major indexes for the year-to-date and should be able to maintain that lead if we don’t see a quick surge in prices. Flat to lower price movements favor the strategy I’m using. Even slow price gains are fine, I just don’t beat the indexes by as much when prices increase at the same rate I’m targeting with my options.
XLF is my only position that finished April in-the-money (ITM), but a few others are close. F is only $0.15 out-of-the-money (OTM) and wavers every day. I thought about closing my May $16 puts early, but my four options each have $0.20 in time value remaining. I wouldn’t gain a lot by rolling it before expiration since the July contracts (2 1/2 months away) are only $0.30 more. I’d rather let the time value erode for the May puts before moving on. My MDY June $245 puts are only 0.7% OTM. That can be lost in a day, but mid-cap stocks could rise and I’ll have a good gain if I stay invested.
My other positions have better cushions. My two UWM July $77 puts might be the riskiest I have in play. They are 3.26% OTM, but fell ITM on four different days during April. The underlying leveraged small-cap ETF moves like it’s on fire, in both directions. Since I’m under-invested, I’m going to try to hold onto the risky asset for a while to see if the small-cap beat down is closer to an end than it is to rolling over worse. My calculations show that IWM (a large Russell 2000 Index ETF) fell 9.87% from its 2014 peak to nadir. That’s very close to a technical correction and should be enough to satiate the bulls who have remained patient, waiting for a pull-back. As long as UWM doesn’t fall below $72.50 (my strike minus the current price I’d have to pay to exit), I will have done the right thing by waiting.
This is my asset allocation in my IB account as of the end of April:
- Large-cap ETF: 0.0%
- Mid-Cap ETFs: 23.72%
- Small-Cap ETF: 13.56%
- International: 8.33%
- Oil: 0%
- Individual Stocks & Other Sector ETFs: 20.38%
- Bonds: 0.0%
- Short ETFs: 0.0%
These are my returns according to Quicken through April 30, 2014:
- YTD Return: +3.15%
- 1 Year Return: +19.3%
- Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +8.00%
According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, April 30, 2014:
- Dow Jones Return: YTD change +0.72%, 1 year change +14.44%
- S&P 500 Return: YTD change +2.56%, 1 year change +20.44%
- NASDAQ Composite Return: YTD change -1.49%, 1 year change +23.61%
- Russell 2000: YTD change -2.80%, 1 year change +20.50%
- S&P Midcap 400: YTD change +1.43%, 1 year change +18.61%
The VIX ended the month at 13.41 and the VXN ended at 17.68. Both closed April within a point of where they closed at the end of March, down from their mid-month peaks. The VIX made it to 17 and the VXN had a single day above 22. The calm mid-teens reading shows the lack of fear, while not quite complacent mood on Wall Street.