October was a wild ride. My account value fell to around $102,000 before rebounding more than $7,000 to finish the month. I had a lot of churn in my account thanks to my attempts to trade weekly TLT options, but avoided falling prey to panic selling. My one decent mistake was dumping my 400 shares of FEZ $1.20 below how it finished the month. I trimmed that loss a little by selling a new DIS naked put near the bottom. Put it all together and I ended the month with a realized loss and a paper gain.
I ended October with a Net Liquidation Value (NLV) of $109,267.77 and a Net Asset Value (NAV) of $109,429.57 according to Interactive Brokers (IB) after finishing September with an NLV of $106,646.05. That gave me a gain of $2,621.72 (~2.46%) on paper for October and a realized loss for the month of $205.49 on 22 closing trades. I received $16.79 in dividends in October from FEZ. Quicken reported that I have $109,429.57, after I subtracted $0.06 due to rounding errors. I thought Quicken might be off by a little since I saw a handful of trades come through that had fractions of pennies as the entry and exit prices. Quicken doesn’t seem to handle partial cents very well.
My shift towards more individual stocks continued in October with my percentage of options on stocks increasing again. DIS, BA and BABA account for a greater percentage of any size sector I track. The main reason for this shift has come from better risk/reward opportunities in the individual stocks versus chasing the herd with my usual index ETFs. I’m sure the balance will swing back before long, but as long as I can sell rich out-of-the-money naked puts on quality stocks, I’ll seize the opportunity.
I think TLT has a lot of downside left in it, but I quickly found it consumes my time far more than I should allow. I need to stick to my basic plan of one-to-three month out expiration options and avoid chasing nickels. If I had more time, I think TLT offers some good opportunities to profit without much risk, but so do many other stocks and ETFs that require less maintenance.
I only have one option set to expire in November (BA $125). I might exit my long shares in DIS before the end of this month and expect to close my far out-of-the-money DIS December $82.50 naked put too. Outside of DIS, I have two other naked puts with December expirations and would like to add another for December if the risk/reward lines up, otherwise I’ll start adding more to my January options.
If all of my naked puts were assigned, I would be 84.48% invested in this account. At the end of September, I was only invested 1.09 percentage point lower than I am now. I’ve been running a cash surplus for most of this year and keep saying I need to push the envelope a little harder. Maybe I’ll get to it this month since I only have one option set to expire in November. It’s a shame I didn’t add more during the dip.
This is my asset allocation in my IB account as of the end of October:
- Large-cap ETF: 0.0%
- Mid-Cap ETFs: 24.25%
- Small-Cap ETF: 27.09%
- International: 0.0%
- Oil: 0.0%
- Individual Stocks & Other Sector ETFs: 35.36%
- Bonds: 0.0%
- Short ETFs: 0.0%
These are my returns according to Quicken through October 31, 2014:
- YTD Return: +9.39%
- 1 Year Return: +13.09%
- Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +8.34%
According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, October 31, 2014:
- Dow Jones Return: YTD change +6.86%, 1 year change +14.48%
- S&P 500 Return: YTD change +10.99%, 1 year change +17.27%
- NASDAQ Composite Return: YTD change +10.87%, 1 year change +18.14%
- Russell 2000: YTD change +1.90%, 1 year change +8.06%
- S&P Midcap 400: YTD change +6.89%, 1 year change +11.65%
The VIX ended the month at 14.03 and the VXN ended at 15.81. These month-ending levels are below September’s final reading, but mid-month spikes hit 31.06 on the VIX and 31.17 on the VXN before cooler heads prevailed. With the SPX’s morning high today just 2 points below its all-time high, it is interesting to see the volatility tracker a couple of points above where it was the last time SPX was in this neighborhood.
The CBOE SKEW Index finished October at 124.75, just below levels seen at the end of the past two months. This indicator continues to show a lack of mass fear. Only three days in October showed SKEW pushing above 130, even when the VIX spiked.
Looks like your October was good. Although it was wild for me too I only lost 100 bucks this month. Considering the huge sell off it is not a bad result.