End of the Month Summary – January 2015

January wasn’t too bad.  I lost money on paper, but I’m in the middle of the indexes’ losses and view my holdings as having much more upside potential.  My account looked pretty good for most of the month, considering the broad based losses across the indexes.  By the end of the month, TLT moved another leg higher and BABA dropped like a rock.  I’m down more than $1,600 on BABA and that loss includes the premiums I’ve received.  I’m also down around $1,550 on my TLT spread.

I ended January with a Net Liquidation Value (NLV) of $97,276.61 and a Net Asset Value (NAV) of $97,485.32 according to Interactive Brokers (IB) after finishing December with an NLV of $100,000 (after I subtracted last year’s gains of $11,321.02).  That gave me a loss of $2,723.39 (~2.72%) on paper for January and a realized gain for the month of $2,953.53 on five closing trades.  (This sum does not including the $460.04 that I used to reduce my cost of BABA when assigned.  I’ll report this $460.04 with my eventual BABA profit or loss.)  I received no dividends in January.  Quicken reported that I have $97,485.32, the same as Interactive Brokers, but only after I added $0.02 to cover rounding errors on a couple of trades.

If all of my naked puts were assigned, I would be 91.38% invested in this account.  At the end of December, I was invested 3.92 percentage points higher than I am now.  My February naked puts on BA and FB have a paper profit right now and I could end up closing them early to lock in the gains.  My TLT position is in flux since I was assigned shares yesterday.  As I mentioned in my post about the option assignment, I expect it to turn into a good profit this year.  I still don’t think we’re headed into a recession and bear market this year, but I might start being more cautious than I originally planned in case I’m wrong.  I wouldn’t be surprised to get a 10% correction in the first half of the year and I’d love to have some cash available to put to work when that happens.

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

• Large-cap ETF: 11.82%
• Mid-Cap ETFs: 27.24%
• Small-Cap ETF: 15.42%
• International: 0.0%
• Oil: 0.0%
• Individual Stocks & Other Sector ETFs: 23.64%
• Bonds: 1.56% (TLT Vertical Call Spread)
• Short ETFs: 0.0%

These are my returns according to Quicken through January 30, 2015:

• YTD Return: -2.65%
• 1 Year Return: +10.32%
• Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +7.93%

According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, January 30, 2015:

• Dow Jones Return: YTD change -3.58%, 1 year change +11.91%
• S&P 500 Return: YTD change -3.00%, 1 year change +14.22%
• NASDAQ Composite Return: YTD change -2.13%, 1 year change +12.95%
• Russell 2000: YTD change -3.22%, 1 year change +4.41%
• S&P Midcap 400: YTD change -1.12%, 1 year change +10.89%

The VIX ended the month at 20.97 and the VXN ended at 21.59.  Both of these are up about 1.5-2 points from the end of December.  Some traders view 20.0 as the line in the sand to watch for volatility.  As volatility gets above this mark it might be overdone and could revert to a lower mean before long.  I like selling options with the VIX higher because the premiums are better, but only on stocks and ETFs I’m willing to buy since it could signal bigger swings to the downside before the reversion happens.

The CBOE SKEW Index finished January at 125.36, roughly 7.5 points below its December close.  This reading shows that fear hasn’t taken over and big money doesn’t expect a big sell off from current levels.