Month End Summary – September 2020

September wasn’t a good month for my account, but wasn’t as bad as the major indexes, so that’s something. In another rare move, I made no trades in this account in September, as I missed the opportunity to sell a QQQ covered call before the sell-off in Tech. The silver lining on QQQ is that I didn’t panic at the bottom of the correction and sell a covered call then, more than $20 below the current trading price. Before long, I’ll take the risk of capping my gains to lock in some profit. I’m still working my TLT position, but might not replace my naked calls immediately when they expire in October. I’m expecting bonds to push higher with some election turmoil and don’t want the extra exposure for the few weeks between options expiration and the election.

My account ended September with a Net Asset Value (NAV) of $106,759.82 according to Interactive Brokers (IB) after ending August with a balance of $108,108.24. I had a loss of $1,348.42 (~1.24%) on paper for September (better than the Dow’s 2.28% loss and the S&P’s 3.92% loss). I had no realized gains in September since I didn’t make any trades and had no options expire.  I had to pay $91.46 in dividends and $19.65 in short interest for my short TLT shares.

Quicken reported that I have an account value of $106,739.50, which is the same as what IB shows after I subtract the negative $18.50 in interest accruals and add in the net positive $38.82 in dividend accruals that IB adjusts in advance of the actual payments. I’ll be paying short dividends on TLT, but receiving dividends from my long QQQ shares.

I’m only 25.82% invested in this account as of the end of September, 033 percentage points less than the end of August. I have $79,189.50 left in uninvested cash and three legs of TLT option contracts (five October $155 puts, three October $170 calls, and one October $165 call). This cash total is definitely off some since I’m still sitting on a $14 paper loss per share on my 500 short shares of TLT, not including the premiums I’ve received. Along with my constant plan to sell a QQQ covered call sooner than later, I might buy some SPY and/or IWM puts that run into December or maybe even January. Interactive Brokers sent out an email to say they were going to tighten margin restrictions through the election to reduce their risk exposure. I don’t want to get caught off guard due to a margin call during a dip and have to cut a position that would’ve turned profitable within a few more weeks.

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

• Large-cap ETF: 26.02% (Only QQQ for now)
• Mid-Cap ETFs: 0%
• Small-Cap ETF: 0.0%
• International: 0%
• Individual Stocks & Other Sector ETFs: 0%
• Bonds: -76.46% (not including my TLT October covered puts and naked calls)

Here’s how I compare to the major indexes:

• Dow Jones: YTD change -2.65%, 12-month change +3.21%
• S&P 500: YTD change +4.09%, 12-month change +12.98%
• NASDAQ Composite: YTD change +24.46%, 12-month change +39.61%
• Small-caps: YTD change -11.08%, 12-month change -3.80%
• Mid-caps: YTD change -1.79%, 12-month change +4.56%

My return according to Quicken through September 30, 2020:

• YTD change: +6.76% (not annualized)
• 1 Year change: +12.70%

The VIX ended the month at 26.37 and the VXN ended at 35.42. The VIX finished September only 0.04 points lower than the end of August The VXN finished 0.87 points higher. The VIX peaked on September 4, when it hit an intraday high of 38.28. The VXN peaked the same day at 47.63. Volatility remains well above the mean (and above most of the monthly peaks) of the past five years, but could still move higher. I expect volatility to ramp up into, and possibly through, November if the election results drag out for weeks. We could also see a company or two announce they have a viable vaccine in November or December. Such an announcement might override all other economic reports, but then the reality of how slowly the majority of the population will take it will hamper the euphoria.