Monday, April 8, 2013

ICC Q1 Results: It was the best of times, it was the worst of times

It was the best of times:  Stock market performance was exceptional in Q1
It was the worst of times: As often stated in this blog, covered calls are anticipated to  make less in an up market, make more in a sideways market, and lose less in a down market.  The unaudited results for q1 2013 shown an under performance for covered calls for the markets that went up a lot in q1. However, the diversification of indexes used in the combined ICC portfolio provided a  lower volatility, decent, mix of results.

Index                Buy and Hold          Covered Calls            Relative Perf
SPY                        10.5%                        7.9%                         -2.6%
IWM                       12.2%                        4.9%                         -7.3%
QQQ                        6.1%                        6.6%                          0.5%
EEM                       -4.2%                       -0.7%                          3.5%
TLT  (bond)             -2.8%                       -0.8%                          2.0%

  • A portfolio consisting of equal weighting of these ETFS (i.e. 80% equity/20% bond) results would be
    •  4.4% for buy and hold
    •  3.6%  for covered calls
  • Q1 Performance for PBP the Powershares ETF for the S&P BuyWrite was 4.6%.  That was substantially less than the SPY or CCI's covered call approach.   I guess that is either because of the way the covered calls are managed and/or extra fees, but it is interesting how similar strategies can generate different results. 
  • It would seem the 10-12% performance of SPY and IWM is an excellent quarter for a broad market index.  While the actual results of a covered call approach are impacted a lot by the volatility of the market in additions to its performance, it is hoped that this might be about as bad of under performance this approach will generate...but as they say "past performance is no guarantee of future results"

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