My account did fine for most of September, but the last week knocked me lower for the month. The S&P 500 and the NASDAQ Composite are still ahead of me for the year-to-date, but I’m ahead of the other major indexes with room to spare. If it were not for my MDY and UWM positions’ recent slide, I’d be on par with the S&P 500, but that’s the downside of diversifying and I knew that going into my current holdings.
I ended September with a Net Liquidation Value (NLV) of $106,646.05 and a Net Asset Value (NAV) of $106,822.50 according to Interactive Brokers (IB) after finishing August with an NLV of $107,446.23. That gave me a loss of $800.18 (~0.75%) on paper for September and a realized gain for the month of $676.85 on three closing trades. I received no dividends in September, but do have a payout of $16.79 due today from FEZ that went ex-dividend on September 19. Quicken reported that I have $106,822.50, exactly the same as IB’s reported NAV.
I’ve started to find a few individual stocks to work into my portfolio instead of sticking with index ETFs completely. I’ll probably get back into AAPL soon and might have some more to add before long too. I tried another limit order on a TLT bearish put spread again yesterday, but couldn’t find a taker. I might have missed my easy opportunity, but will probably try again soon.
I have five options (13 contracts) set to expire in October with a net paper gain of nearly $1,000 as of the end of September. Eight of the contracts come from the two sides of my YHOO vertical put spread that is virtually worthless. I might close the short puts this week, just to get it off my books for a couple of cents. My long YHOO puts aren’t worth selling because the commission would be equal to the penny I could exit with. I have four UWM naked puts at two different strikes. They are still out-of-the-money, but only by a slim margin after the past seven days of weakness for the Russell 2000. Both legs have a paper profit still. I’m considering rolling them out further on the calendar and keeping the same strikes. I don’t have to rush into a panic trade today, but I’m starting to weigh my options (no pun intended) before it’s a panic situation.
After months of being under-invested and missing out on gains, I was finally rewarded in September by losing less than the broader indexes. October could be a good time to make a more bullish move while stocks are lower. I’d like to see some of the technical indicators reverse before I get overly aggressive. I have plenty of upside left in the positions I’m already holding and don’t have to try to catch a falling knife.
If all of my naked puts were assigned and my YHOO put spread lost 100%, I would be 85.39% invested in this account. At the end of August, I was only invested 2.11 percentage point lower than I am now. If I remove the YHOO put spread, I’d be 84.88% invested. It’s not much of a difference, but is more of a realistic picture of what I have at work now.
This is my asset allocation in my IB account as of the end of September:
- Large-cap ETF: 0.0%
- Mid-Cap ETFs: 24.85%
- Small-Cap ETF: 27.76%
- International: 7.45%
- Oil: 0.0%
- Individual Stocks & Other Sector ETFs: 19.22%*
- Bonds: 0.0%
- Short ETFs: 0.0%
* Does not include put spread hedge on YHOO.
These are my returns according to Quicken through September 30, 2014:
- YTD Return: +6.79%
- 1 Year Return: +13.17%
- Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +8.04%
According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, September 30, 2014:
- Dow Jones Return: YTD change +4.60%, 1 year change +15.29%
- S&P 500 Return: YTD change +8.34%, 1 year change +19.73%
- NASDAQ Composite Return: YTD change +7.59%, 1 year change +19.14%
- Russell 2000: YTD change -4.41%, 1 year change +3.93%
- S&P Midcap 400: YTD change +3.22%, 1 year change +11.82%
The VIX ended the month at 16.31 and the VXN ended at 18.26. The VIX moved higher by four points and the VXN jumped six points when compared to the end of August. Volatility has returned, but it’s still not at high levels. If the various equity moving averages continue to break support, the VIX will continue to rise. This helps premiums, but also means a higher perceived risk of the underlying stock/ETF falling below a put’s strike. If creating a long-term position, selling puts in the current market could be a good trade. If looking for a quick buck, waiting for a better opportunity might be smarter.
The CBOE SKEW Index finished September at 127.73, almost even with the end of August level. This indicator shows the big money people aren’t out hedging in huge quantities right now, possibly because they don’t expect the selling to get out of control.