April was a good month for me. I came out much better than the broad indexes and owe most of that to TLT moving in my favor finally and a small amount to my couple of hedges that moved to a profit. I only have three option positions set to expire in May. Two of them are on TLT and one on FEZ. If I have a chance and the prices work in my favor, I’ll roll FEZ a few days early. TLT is too volatile to predict with any certainty, but for now, it looks like I’ll be closing my position for a nice profit. I have a little more profit I can squeeze out of all three options, but not a lot.
I ended April with a Net Liquidation Value (NLV) of $106,524.10 and a Net Asset Value (NAV) of $106,560.22 according to Interactive Brokers (IB) after finishing March with an NLV of $102,866.27. That gave me a gain of $3,657.83 (~3.56%) on paper for April and a realized gain for the month of $2,505.07 on seven closing trades. I paid $191.15 in dividends and $49.38 in interest in April due to my short TLT position. Quicken reported that I have $106,607.63, but doesn’t account for the accrued interest to be paid (by me) of $50.02 that’s due in a few days. On my IB statement, the interest is already deducted, so the difference between what Quicken shows and what IB shows is $2.61, in my favor. I didn’t bother to reconcile the difference yet because I think it’s related to my short position and the interest accrued that was off by $2.58 last month and probably close to the same this month. I expect the discrepancy to clear up when the short position is liquidated and I make my final interest and dividend payments.
If all of my naked puts were assigned, I would be 91.56% invested in this account (96.06% without the spreads). At the end of March, I was invested 7.95 percentage points higher than I am now. Until I started writing this paragraph, I thought I had more cash to work with, but realized I had not entered my last SPY option trades into my spreadsheet. I am going to have to be careful with my next few trades until I can reduce some risk somewhere. My TLT position barely factors into my spreadsheet since it’s a short position and I’m not holding back or accounting for the cash for the most part. My two FEZ puts will be the only options I can roll soon that will affect my margin. I’d like to sell new TLT naked calls, but want to be careful about not selling low strikes while TLT is on a dip. There are only two weeks left in the May options, so things could shake up a lot by then with respect to TLT or bond prices could continue to slide and I’ll walk away with a great realized gain.
This is my asset allocation in my IB account as of the end of April:
- Large-cap ETF: 18.31% (I accounted for my SPY March 2016 put spread within this)
- Mid-Cap ETFs: 25.82%
- Small-Cap ETF: 37.36% (I accounted for my IWM January 2016 put spread within this)
- International: 7.13%
- Oil: 0.0%
- Individual Stocks & Other Sector ETFs: 20.28%
- Bonds: -82.77% (Short TLT)
- Short ETFs: 0.0% (not including TLT)
These are my returns according to Quicken through April 30, 2015:
- YTD Return: +7.15%
- 1 Year Return: +15.46%
- Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +9.02%
According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, April 30, 2015:
- Dow Jones Return: YTD change +0.78%, 1 year change +10.11%
- S&P 500 Return: YTD change +1.92%, 1 year change +12.98%
- NASDAQ Composite Return: YTD change +4.34%, 1 year change +20.10%
- Russell 2000: YTD change +1.65%, 1 year change +9.71%
- S&P Midcap 400: YTD change +3.74%, 1 year change +12.28%
The VIX ended the month at 15.29 and the VXN ended at 18.24. The VIX finished April only 0.74 points above its March finish. The VXN finished 1.73 points higher. Both indicators were up from their intra-month lows, but still below the historical average. This has helped keep premiums relatively low and if it continues, I’ll probably add another hedge into 2016.
The CBOE SKEW Index finished April at 115.96, 4.39 points below its March close. The low SKEW indicates a low level of fear among institutional investors. I’m actually surprised by that based on the past few days of stock prices trending lower. It’ll be interesting to see if the SKEW changes through next week as the “sell in May” mantra starts to build volume.