But, I still want to believe in the dream. Let me leave in my bubble. Beating the market is certainly tough, specially in years like this one, where the market just shot higher from the get go. It won't be too complicated for mutual funds out there to have a positive return in a year where the markets went up so much. But beating that 28%, forget it, just the minority, once again. But when you look at periods like 2000 - 2010, where the American markets went no where, man it is scary to think you could have spent the best decade of your life following an index investing approach and having nothing to show for it in the end,...That's why it also makes sense to find a strategy that works for you regardless of market direction. This strategy will outperform my passive long term investing one in Bear markets and less Bullish environments than what we saw this year.
36 winners, 11 losers.
Trading balance +$2242, which represents +22.42% for a $10000 portfolio before commissions.
Final Portfolio balance $11222, representing a +11.22% performance after commissions (Assuming commissions of $1.50 per contract).
Equity curve growth
In the last ten months of the year, that is after February expiration, the model portfolio went from $8578 up to $11222, which represents a spectacular growth of +30.82% in ten months. And that is after fees. I definitely feel much more comfortable with this style. And even though the performance in 2012 was +36.47% versus +12.22% in 2013, I can say I was definitely a better trader in 2013. 2012 was simply easier to trade, but the 36.47% was more influenced by luck than technique and appropriate risk management. I'm a much better options seller right now.
2013 is, without a doubt in my mind, the toughest scenario for an options premiums seller. A market where implied volatility is very low, limiting your opportunities, yielding less premium for selling options and forcing traders to sell spreads that are closer to the price action at the moment in order to obtain decent returns, thus increasing the risks. What are the other two markets to face? 1- Sideways markets. But those are heaven for a credit spread seller. 2- Bear markets, which are good too. Implied volatility expands, and suddenly not only are options more expensive, which is good for the sellers, but also you can go farther out of the money and still obtain decent credits, thus playing safer. So, yes, 2013 in my mind is as challenging as it gets for a credit spreads seller. And if I managed to end up in positive territory, I'm only destined to do better in the other two scenarios.
I'll keep sharing my trades for 2014. I believe selling out of the money premium is a viable strategy and that it can be a great weapon to outperform in negative years and years where the market is more range bound and doesn't reach double digits growth.
Thanks for dropping by and reading the site. Thanks for the comments, suggestions, fun interaction on Twitter and thanks for your support all this year!
Check out 2013 Track Record trade by trade
Analysis of Investing results in 2013
Analysis of Forex trading results in 2013