Month End Summary – January 2020

January was a blah month by the end. It began with what appeared to be a missed opportunity for me, but I remained cautious and waited for a better entry point. The result was that my account barely moved and is in between the losses of the Dow and S&P 500, which is not much. I’m still wary of what might cause the market to move in either direction. The coronavirus is developing still and we don’t know how much of an economic impact it will have. I expect a few more rough days in the near-term and then maybe the market will reset after a solid consolidation phase. If we have a relatively calm week, I might start dipping my toe deeper into the water. The impeachment uncertainty (which wasn’t ever a real threat to the economy) will end this week, but then we have election concerns that will cause random bouts of selling through the fall (again, with no lasting threat to the economy other than fear mongering from both sides talking their books).

My two option positions on TLT and QQQ are both sitting on a paper loss for now. My TLT naked calls are out of the money and I’m not worried about them. My QQQ naked put is in the money and finished January close to even without time value – meaning my premium received is roughly equal to the amount that is in the money. As of this morning, I would take a profit if it expired today.

My account ended January with a Net Asset Value (NAV) of $99,683.66 according to Interactive Brokers (IB) after beginning the year at $100,000 after I withdrew $623.55 on January 3, to bring my balance to a round $100,000, which I think makes following my annual progress easier to follow for this blog. I had a paper loss of $316.34 (-0.32%) on paper for January (less than the Dow’s 0.99% loss and more than the S&P’s 0.16 loss). I had $490.91 in net realized gains in January from my IWM and QQQ naked puts that expired worthless, minus my loss on my IWM covered call that was assigned. (IWM is trading below my sale price now.) I received $64.78 in interest and received no dividends.

Quicken reported that I have an account value of $99,614.66, which is the same as what IB shows after I add in the $69.00 in interest accruals that IB credits in advance of the actual payment.

I’m only 20.82% invested in this account as of the end of January, 31.02 percentage points below the end of the year. I have $78,931.11 left in uninvested cash and only one option contract scheduled to expire in February. These figures don’t include my TLT short calls because there isn’t an easy way to factor in shorting an ETF into this summary, especially while the naked calls are still out of the money. Worth pointing out, I have $101,231.11 in cash. If my QQQ and TLT options are not assigned, this will be my account balance since it removes time value and the $0.35 of intrinsic value that is still part of my QQQ position.

This is my asset allocation in my IB account as of the end of January 2020:

• Large-cap ETF: 22.37% (including QQQ)
• Mid-Cap ETFs: 0%
• Small-Cap ETF: 0%
• International: 0%
• Individual Stocks & Other Sector ETFs: 0.0%
• Bonds: 0.0% (not including my 5 TLT naked calls)

Morningstar stopped updating the page I’ve been using for the past decade to show a comparison of the indexes. I was able to dig up individual Morningstar pages for the Dow Industrials, S&P 500, and NASDAQ returns, so the list of indexes is shorter than it used to be. Anyway, here’s how I compare:

• Dow Jones: YTD change -0.99%, 12-month change +13.03%
• S&P 500: YTD change -0.16%, 12-month change +19.28%
• NASDAQ Composite: YTD change +1.99%, 12-month change +25.67%

My return according to Quicken through January 31, 2020:

• YTD Return: -0.32% (not annualized)
• 1 Year Return: +14.39%

The VIX ended the month at 18.84 and the VXN ended at 21.33. The VIX finished January 5.06 points higher than the end of December. The VXN finished 4.44 points higher. The VIX peaked on January 31, when it hit an intraday high of 19.99. The VXN peaked on January 27, at 21.87. Since volatility has picked up, so has what we can earn from selling premiums. With so much cash on the sidelines, I’ll have to get some more skin in the game to profit from the fear on the Street, but I don’t want to be stupid about it and go all in just yet in case we get more of a sell-off soon. It won’t hurt to ease in more than I have already.