End of Month Summary – October 2011

October was nothing but beautiful for my accounts.  I gained more than 17% for the month while the major indexes were closer to 11% higher on the month.  That leverage I have in place to create such a positive month is also the reason I’m trailing the markets for the year to date.  It’s a volatile time and I’m riding it all up and down.  I have a chunk of time value left to expire over the next two and a half months and a decent amount of intrinsic value left in some of my options that are in the money.  That gives me a lot of upside, but I’m still overextended slightly and might have far too many bullish positions after such a good run has ended.  If I didn’t have that little panic when the S&P 500 dipped below 1,100 at the beginning of September I’d be much better off, but can’t be too upset after such a nice paper gain for the month.

The biggest challenge with the markets over the past few months has been the speed at which they change directions.  A nice, normal market would lose or gain 5-10% over months.  Now we can do the same in days.  I was considering selling more covered calls on my few long positions that aren’t covered yet, but after losing 5% in less than three days (though mid-day 11/1/11) I have to wonder if the worst is over or if we’re on the road back to 1,100 again.  I put the chances of a move back down to 1,100 in the near term around 10-15%.  Earnings have been too good for that to be very likely.  However, Europe is such a wild card for our markets that the chances of another nose dive still exist.  If Greece would just pick a policy and stick with it the markets could adjust, take a hit (lower or higher) and move forward from there at a more controlled even pace.

This is the breakdown of the numbers for me:

• I ended October with a combined balance of $141,607.70
• $122,099.89 with Interactive Brokers in equities (no deposit for the month)
• $19,507.81 with TD Ameritrade in bonds and index options

If all of my naked puts were assigned and my covered calls expired worthless I’d be 103.96% invested in my IB account, a big decrease from the 121.53% at the prior month’s ending percentage.  Last month I noted that my account was becoming less actively managed as I remained patient.  It looks like that idea was short lived as I made more trades in October than the average of the months leading up to it this year.  I ended up not sending in a deposit during October since we finally started our kitchen remodel I talked about at the beginning of the year.  I think we’re only about $1,500 over our planned budget, but thought it wise not to send money into the investing accounts until the dust settles, figuratively and literally.  Hopefully I’ll be able to double up in November before I start increasing our cash reserves for my impending lack of a w-2 salary at the end of next summer when my contract ends at AT&T.

This is my asset allocation in my IB account as of the end of October.

These are my returns according to Quicken through 10/31/11: