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BookingAlpha Option Trading Advisory

Wednesday, July 13, 2016

Options Trading Monthly Digest (June 2016)

Well, the time has come once again to go over the Options Trading performance for the most recent month: June 2016.

The goal of these articles is to recap and determine what went wrong, what went well, mistakes that were made, things that could have been done better.

Although the main focus is the long term viability of our strategies and not the month to month seesaws, hopefully these monthly updates will provide confidence and serve as an authentic guide of what can be achieved with a realistic and sustainable approach to the business of Selling Options.

It's important to realize that we don't need to double our accounts every year, which entails unsustainable risks. With a simple 2% monthly return, money grows at a rate of +26.82% per year. Start trading with $10,000 and obtain those returns annually while investing 5,000 additional dollars out of your own pocket every year and you get close to the 1-million-dollar mark in 15 years. And you don't even need to get that far to make it worth it. Relatively small portfolios can consistently generate $400, $500, $600 a month, a meaningful help in the budget of the average family. Whether you want to trade for a living or only as a side activity for supplemental income, you are only truly limited by your own will. How much are you willing to dedicate to studying and training hard? That's all there is to it.

And while there is absolutely no guarantee that anyone will achieve any arbitrary numerical return in the future, the fact is: the power of compounding is truly remarkable and can do wonders even with small amounts of money.

The Trades

This month's wrap up will be a short one as there wasn't much activity: Only two positions closed, both Credit Put spreads and both profitable.

I finally got to close the August SPX 1760/1750 Credit Put spread. This was the last very long term position remaining in the portfolio. Remember that during the first months of the year, I was trading positions 4 months out in time. So, on April 21, I had initiated an August SPX 1750/1760/2250/2260 unbalanced Iron Condor, and this is how the market was looking back then:

(Click on image to enlarge)
The Call side was successfully closed on May 13. Ancient history. The Put side, on the other hand, took forever. I had a GTC order to close for 0.15 debit for months, that never got filled. Finally I decided to exit the last day of June at 0.25 debit in order to reduce exposure and enter new positions. An $800 dollar gain, that coupled with the Call side gains, totals $1,780, a little above 10% return on risk on the whole position.

The one regret I have with this position is not having closed earlier for the same 0.25 debit. It would have allowed me to re-enter during the Brexit sell-off. Taking profits at less than 80% of max, may very well make a lot of sense. I'm talking 50% - 60%. My fear generally is, that if the market doesn't move in the opposite direction, I just won't have the opportunity to redeploy the same spread and therefore will see my dollar returns diminished. But, this deserves serious testing. Yes, taking profits earlier increases your % of winners and reduces the number of losers, but I don't care about those numbers. My real concern is total $$$ at the end of the month and the year. That's why building a flexible, custom options back-testing solution is my most important project this year (more on that in a future post).

In addition to this position, I also traded a June SPX 1865/1875 Credit Put spread. This was the cleanest, easiest trade I have made this year. The trade was entered on May 19 when the market reached oversold levels:

(Click on image to enlarge)
Never took any heat, and the position eventually expired for max profit on June 17. A $1200 gain.

Overall it was a decent month. 2 wins, 0 losses, +$2000 gross.

Final balance for the month +1.98%. Subtracting commissions, +1.86%

YTD Results for 2016
Up +2.77% at the end of June, whereas the SPX closed at +2.69%.
The first half of the year is gone my friends. We have fought the good fight and we're in good position to kill it in the second half.


If you are interested in a responsible and sustainable way of trading options for consistent income and a smooth equity curve, consider acquiring LTOptions, my options trading system to the last detail.

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