Short-term memory can be deceiving sometimes and that’s one of the many reasons I find it important to keep a trader’s journal. If I had not looked back to see my balance at the end of April, I would’ve thought I had killed it in May. Instead, I simply came back strong from the mid-month lows, but actually lost a little over the month.
I ended May with a Net Liquidation Value (NLV) of $87,347.84 and a Net Asset Value (NAV) of $87,284.27 according to Interactive Brokers (IB) after finishing April with an NLV of $87,801.47. The difference in month end values gave me a loss of $453.63 (~0.52%) on paper for May and a realized loss for the month of $2,238.16 on five closing trades (four trades if you count my two TLT May $125 puts trades as one) and the $370.55 in short interest and dividends for my TLT short shares that I paid. Quicken reported that I have an account value of $87,329.65, a penny more than IB’s reported NAV after accounting for interest accruals of -$45.37. I could see the difference in one trade that must be a rounding difference, so I’m leaving it for now and will fix it in July if I don’t get a rounding discrepancy in the other direction.
By removing some of my TLT exposure, I’ll have less volatility in my account, but I’ll change that soon when I add new calls or puts to my portfolio. I’ve been talking about selling covered calls on my IWM, MDY and DIS shares for a while and will probably get to it in June.
If all of my naked puts were assigned, I would be 81.00% invested in this account. I am invested 4.44 percentage points higher than I was at the end of April, but this doesn’t truly represent my exposure because my TLT positions skew my total risk. Since cutting some of my TLT options, I have more room for new trades and need to get to it sooner than later.
This is my asset allocation in my IB account as of the end of May:
- Large-cap ETF: 0.0%
- Mid-Cap ETFs: 31.12%
- Small-Cap ETF: 39.49%
- International: 0.0%
- Individual Stocks & Other Sector ETFs: 11.36%
- Bonds: -193.72% (not including my TLT options, just the short shares)
- Short ETFs: 0.0%
According to Morningstar, here’s how I compare to the major indexes (including dividends) through the month’s last trading day, May 31, 2016:
- Dow Jones Return: YTD change +3.34%, 1-year change +1.39%
- S&P 500 Return: YTD change +3.57%, 1-year change +1.72%
- NASDAQ Composite Return: YTD change -1.19%, 1-year change -2.41%
- Russell 2000: YTD change +2.28%, 1-year change -5.97%
- S&P Midcap 400: YTD change +7.48%, 1-year change -0.42%
These are my returns according to Quicken through May 31, 2016:
- YTD Return: -11.47%
- 1 Year Return: -3.83%
- Average Annual (not cumulative) Return since November 18, 2009 (when I opened my IB account): +7.78%
The VIX ended the month at 14.19 and the VXN ended at 15.25. The VIX is 1.51 points higher than at the end of April and the VXN is 4.05 points lower than at the end of April. Without looking back at previous month end summaries, I can’t recall a month that has had such a divergence in volatility between the VIX and VXN. Through May, the VIX rose and the VXN fell. Both peaked higher than they finished, but two weeks apart. Both volatility measuring sticks are in the middle of their past five-year ranges showing no extreme complacency or fear.
The CBOE SKEW Index finished May at 127.70, 1.21 points above the end of April. After bottoming at 120.82 on May 6, the SKEW finished May near its high of the month of 129.61. Even at the peak, SKEW wasn’t screaming fear, but like the VIX/VXN was in the middle of its recent historical range.