Sunday, July 21, 2013

ICC Q2 Performance Summary

CCI's accounting department (i.e. me) has been busy putting together spreadsheets of q2 results for the five index covered call positions.  After running these results past our staff auditors (me again), the technical staff (yes, me again) have posted q2 results for the ICC results and Buy & Hold below.

                                                      ICC                B&H
                                                Q2      YTD          YTD               Variance
SPY                                        2.1%     9.9%         13.7%           -3.8%
IWM                                      -0.5%    6.1%         15.1%           -9.0%
QQQ                                      3.1%     7.6%         11.8%           -4.2%
EEM                                      -8.7%   -9.1%       -12.1%           + 3.0%
TLT(10 yr Bond)                     -4.6%   -5.3%        -7.8%            + 2.5%

Some Observations

  • As expected the covered call approach has over performed in down markets and under performed in up markets (i.e less volatility). 
  • The under performance of the IWM covered call position is troubling. Perhaps the higher volatility of this index requires an adjustment in strategy to either shorter duration options being sold or quicker position exits.  Stay tuned.
  • Over the past 6 months the stock market has basically gone straight up. That is the best environment for B&H.  If the stock markets continue to climb at double digit rates, hedging via covered calls will continue to under perform.  However, "trees don't grow to the sky" so  it would seem like a pull back and/or sideways market movement might occur sometime this year.  In this case, the covered call strategy should be beneficial. 
  • FYI, YTD performance for an etf offering a covered call strategy for the S&P 500(PBP) is up 4.2%.  That is substantially less than the ICC SPY position (up 9.9%).  I'm not sure what exactly is causing that difference, but it does appear that investors should be aware that all covered call strategies are not exactly the same.

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