February was a really good month for me, as it was for most investors. After the first couple of months of 2015, my returns are essentially in line with the large cap and small cap indexes and more than made up for the paper losses from January. I stopped my bleeding BABA position and I’m still letting my winning TLT position run. After selling the TLT covered puts at the end of February, I’d like to be able to get out of the position in March with a solid profit. I only have one other March option (MDY $265) in play and I’ll probably close it early to lock in the profits. I might close an April option or two also.
I ended February with a Net Liquidation Value (NLV) of $102,106.02 and a Net Asset Value (NAV) of $102,199.39 according to Interactive Brokers (IB) after finishing January with an NLV of $97,276.61. That gave me a gain of $4,829.41 (~4.96%) on paper for February and a realized loss for the month of $1,287.30 on seven closing trades. (Note: BABA and my TLT long calls that expired worthless accounted for this loss.) I paid $195.31 in dividends in February due to my short TLT position. Quicken reported that I have $102,199.39 (after subtracting $32.02 in negative interest accruals to be paid this week). This total is the same as Interactive Brokers.
If all of my naked puts were assigned, I would be 85.3% invested in this account (85.0% without the spread). At the end of January, I was invested 6.08 percentage points higher than I am now. I’m certainly underinvested right now with a little more than $15,000 sitting in cash unused. However, my short TLT position doesn’t play into this calculation very easily. I actually have more at risk now than I have in a long time, just not in stocks. Since I’ll probably take some profits soon on some March and April options, I need to go shopping for some new trades this week and/or next week.
This is my asset allocation in my IB account as of the end of February:
- Large-cap ETF: 24.48%
- Mid-Cap ETFs: 25.95%
- Small-Cap ETF: 26.35%
- International: 0.0%
- Oil: 0.0%
- Individual Stocks & Other Sector ETFs: 10.58%
- Bonds: -88.80% (Short TLT)
- Short ETFs: 0.0% (not including TLT)
These are my returns according to Quicken through February 28, 2015:
- YTD Return: +2.30%
- 1 Year Return: +11.35%
- Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +8.55%
According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, February 27, 2015:
- Dow Jones Return: YTD change +2.22%, 1 year change +13.70%
- S&P 500 Return: YTD change +2.57%, 1 year change +15.51%
- NASDAQ Composite Return: YTD change +4.80%, 1 year change +15.21%
- Russell 2000: YTD change +2.53%, 1 year change +5.63%
- S&P Midcap 400: YTD change +3.94%, 1 year change +11.14%
The VIX ended the month at 13.34 and the VXN ended at 14.62. Both of these are down 7 points to around 2/3 of their readings from the end of January. This difference highlights the big change in sentiment and while below the historical averages, the readings aren’t to extreme levels yet.
The CBOE SKEW Index finished February at 126.40, 1.04 points above its January close. These readings shows that big money doesn’t expect a major sell-0ff to hit us soon.