July was a slow trading month for me, but my account gained ground and I’m ahead of all major indexes for the past year and the year-to-date (double the Dow for the past 12 months). The S&P 500 had a better month than the other indexes, so I was happy to see my results closer to the broader large-cap returns than the losses seen in the Russell 2000. China will continue to be the biggest distraction for a while and then we’ll get back to watching the Fed and potential interest rate hikes as soon as September. My account balance made it above $11,000 again in July, but I slipped a few bucks at the end of the month to finish just below the mark. TLT continued to be my biggest moneymaker in July while SPY and FEZ helped some too. TLT has run higher recently and pushed my latest naked calls to a paper loss, but I have nearly $1.50 before TLT breaks above my strike. If/when TLT retreats again, I’ll see my account balance push towards new highs for the year, assuming my other stock and ETF positions don’t tank in the meantime.
I ended July with a Net Liquidation Value (NLV) of $110,959.24 and a Net Asset Value (NAV) of $110,999.68 according to Interactive Brokers (IB) after finishing June with an NLV of $109,769.30. That gave me a gain of $1,189.94(~1.08%) on paper for July and a realized gain for the month of $1,124.63 on four closing trades. I didn’t receive or have to pay any in dividends in July since I’m not long or short any stocks or ETFs. Quicken reported that I have $110,999.70. I left the $0.01 error in place to see if it corrects next month as the rounding errors occasionally do.
I only have three options set to expire in August, a DIS August $115 naked put that is $5.00 out of the money and two IWM puts (two at the $124 strike and one at $126) that are in the money a little. I’ll probably roll the DIS put higher soon, up to the $120 strike and would prefer to do it on a down day for DIS, but those haven’t been coming very frequently lately. I might roll the IWM puts out further, but don’t see me raising the strikes at all anytime soon. I could sell more TLT naked calls at higher strikes, but want to wait more than a few days on that decision to see if the 20-year Treasury ETF can lose some momentum before I get overextended.
If all of my naked puts were assigned, I would be 88.85% invested in this account (93.18% without the spreads). I am invested 0.77 percentage points lower than I was at the end of June. As with last month, the amount I’m invested is somewhat misleading. The percentage is correct, but since I have two positions hedged, I won’t incur losses on two of my IWM and one of my SPY puts until they fall close to 10%. In a shallow correction, my losses will be less than my percentage shows. In a bear market, my losses will be close to 95% of the market’s losses after that first ~10%.
This is my asset allocation in my IB account as of the end of July:
- Large-cap ETF: 17.57% (I accounted for my SPY March 2016 put spread within this)
- Mid-Cap ETFs: 25.23%
- Small-Cap ETF: 36.23% (I accounted for my IWM January 2016 put spread within this)
- International: 7.21%
- Individual Stocks & Other Sector ETFs: 10.36%
- Bonds: 0.0% (not including my TLT call spread)
- Short ETFs: 0.0%
These are my returns according to Quicken through July 31, 2015:
- YTD Return: +11.82%
- 1 Year Return: +18.58%
- Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +9.31%
According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, July 31, 2015:
- Dow Jones Return: YTD change +0.55%, 1 year change +9.34%
- S&P 500 Return: YTD change +3.35%, 1 year change +11.21%
- NASDAQ Composite Return: YTD change +8.28%, 1 year change +17.36%
- Russell 2000: YTD change +3.54%, 1 year change +12.03%
- S&P Midcap 400: YTD change +4.34%, 1 year change +11.30%
The VIX ended the month at 12.12 and the VXN ended at 14.59. The VIX finished July 6.11 points below June’s close while the VXN closed 4.75 points lower. These are both sizeable drops and highlight what a difference a handful of positive S&P and QQQ points can do to volatility. It’s hard to imagine we’ve heard the last of China’s woes and I expect volatility to pick up substantially again over the next couple of months.
The CBOE SKEW Index finished July at 124.20, 0.32 points above its June close. The SKEW continues to be tame still. That might not change until September when expectations of volatility should pick up.