Year End Summary – 2019

After such a rough ending to 2018, 2019 was an amazing year to be an investor. I can imagine that most of you would agree with me that it was a relatively easy year to be a bull. We had some nice dips in stock prices that were buying opportunities and never faced anything that looked overly frightening. 2020 has a lot of uncertainties built into it, but we’ll prepare and adjust as needed.

From an overall view, my main mistake in 2019 was not being aggressive enough. I’d like to think I’ll be better about it in 2020, but it really depends on how busy my job is and what external distractions keep me away from trading my own account. My son turns 16 next week, so after he gets his license and starts driving himself to school, I’ll have an extra 60-90 minutes every day to trade and exercise.

From a specific nit-picking view, I should’ve held my AAPL shares longer. Once the shares rallied from their 2018 lows, I exited and left over $20,000 on the table. Not that I would’ve carried 200 shares all year with that much of a gain, but it would’ve been cooler if I had.

On the positive side, my strategy to keep my covered calls farther out of the money paid off and allowed me more gains from my share price improvement and not just from the premiums I received. I’m planning to work my naked put assignments the same way this year unless I start expecting a bigger and longer lasting sell-off to hit stocks.

My account ended December with a Net Asset Value (NAV) of $100,623.55 according to Interactive Brokers (IB) after ending November with a NAV of $99,594.46. I had a gain of $1,029.09 (~1.03%) on paper for December (less than the S&P 500’s 2.86% gain for the month and the Dow’s 1.74% gain). I had $1,104.35 in net realized gains from my MDY naked put that expired worthless and my FEZ covered call that was assigned. For FEZ, I lost on the stock price, but the option premiums turned the series of trades into a net realized gain. Also, I paid $6.44 for the monthly fee minimum. Interactive Brokers charges $10 each month as a minimum for trading fees on accounts that have less than $100,000. If all goes as planned, that won’t be an issue again in 2020.

Quicken reported that I have an account value of $100,560.94, which is the same as what IB shows after I subtracted a penny from a rounding error last month and added in the $62.61 in interest accruals that IB credits in advance of the actual payment.

As I do every year that my account balance is over $100,000, I entered a withdrawal request this morning to bring my account back to $100,000. I’ll move the $623.55 to my other brokerage account so it can keep growing there. I just like to have this account start the year at the round $100,000 number so it’s easier to follow my growth here on the blog.

After ending 2018 with a balance of $83,609.34 and ending 2019 with $100,623.55, I had a gain of $17,014.21 (20.35%) on paper for 2019. Thanks to my realized losses from selling AAPL too early and taking some losses on ADI and IWM in February and March, my realized gains for 2019 were only $3,144.48. That seems weird doesn’t it? I had to look back at what I was holding at the end of 2018 to see that I had huge paper losses that I carried into 2019 and most of my gains were simply recovering what I had lost on paper in 2018. I’m carrying only $158.25 in unrealized gains into 2020, so my gains or losses for this year should be close to whatever my paper gains/losses are.

I’m 51.84% invested in this account as of the end of the year, 39.1 percentage points below the end of November. I have $48,429.17 left in uninvested cash and three different option contracts set to expire in January. My December options have about $200 worth of time value left in them and my January options have roughly $250 in time value remaining. Clearly, I coasted into the end of the year without setting my account up for a good start to 2020. I expected to see more weakness at the open today based on my expectation that investors would start taking profits early this year. I’ll start adding more exposure soon, either tomorrow or more likely next week.

This is my asset allocation in my IB account as of the end of 2019:

• Large-cap ETF: 19.89% (including QQQ)
• Mid-Cap ETFs: 0%
• Small-Cap ETF: 32.38%
• International: 0%
• Individual Stocks & Other Sector ETFs: 0.0%
• Bonds: 0.0%

According to Morningstar, here’s how I compare to the major indexes (including dividends) through December 27, 2019 (they don’t have the last two trading days posted yet for some reason):

• Dow Jones: 12-month change +26.84%
• S&P 500: 12-month change +32.83%
• NASDAQ Composite: 12-month change +36.89%
• Russell 2000: 12-month change +27.15%
• S&P Midcap 400: 12-month change +27.41%

My return according to Quicken through December 31, 2019:

• 2019 Return: +20.35%

The VIX ended the month at 13.78 and the VXN ended at 16.89. The VIX finished December 1.16 points higher than the end of November. The VXN finished 1.05 points higher. The VIX peaked on December 3, when it hit an intraday high of 17.99. The VXN peaked on the same day, at 21.18. The 2019 peaks for both indicators were in the first week of January with another (smaller) spike the first week of August. Those spikes, that were roughly double today’s levels, show how high volatility can move when fear hits the market. Since volatility is currently below the past year’s average, I might couple any short puts with a long put further out of the money on my next trades. This might be a better time to buy options than sell, but I don’t want to short stocks yet. Hedging is different and is often the right move after such a run higher for stock prices.