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Monday, January 1, 2018

Options Trading reflections (2017 Edition)

2017 was good Options Trading wise. Prior to it (2016), it was my actual passive investing activity that excelled, and earlier it was Forex. So, it looks like every year the "leading" component of my money that is at risk in the markets tends to change. But in 2017 the results I got from Options were fairly good.

The final performance number is +20.27%. The SPX benchmark was up 19.42%. Now, if we include dividends, then the number is 21.7%. Strictly comparing starting and ending prices, I outperformed the index. Comparing against the ETF that pays dividends, I under-performed it. Of course the pure SPY holder does not get that return due to broker commissions plus the ETF's management fees, but that aside, it is undeniable that the markets had a spectacular year for passive investors.

I like to go back through the track record every year to see patterns in my behavior and things that can be improved upon. Of course, only because a particular strategy failed during a given year, it doesn't necessarily needs a re-design, nor do we need to be always radical and stop using it. The strategy that didn't work during a certain period, may be your savior the next year. So, careful consideration is necessary before making final decisions. But with that said, there are always aspects of your track record that show you so much about yourself. Not to mention items that quickly stand out, screaming for a slight tweak.

Below are my recent results broken down by strategy and my comments on each.




In terms of commissions, $2867 dollars were spent. Less than 3% of the portfolio. I like to keep this kind of control over trading costs, which traders many times don't pay too much attention to. But consider that if you spend 20% of your portfolio in commissions, then you need at least a +20% performance just to break even. If you are going to be truly active in the markets, better be with a strategy with a solid edge that allows you to clearly overcome the increased trading costs.

I will not be making changes to my trading style in 2018, unlike any previous year where something always was tweaked. I feel comfortable dealing with two positions per month (an Iron Condor and an Elephant),  applying individual hedges when necessary, and above all: being conservative on the Call side.

2017 was challenging (again) due to the persistence of the uptrend, naturally accompanied by record low volatility. I am not super happy with my final numbers. I know I never will be. But at the same time I'm also proud of the work that was done. I feel it has been my best year in terms of mechanics and being disciplined. Also coming to the end, looking back and saying "Yep, I don't think I should have done anything differently, in any position that I played, to have a better year than I had". That kind of dissatisfaction is not present this time, which feels great.

If there is anything you learned in 2017, any frustration you have, or any lesson you think might be valuable to others, feel free to leave your thoughts in the comments sections. I'll reply to every one of you.

Thanks for following me in the journey. Here's to a better 2018!
Cheers,
LT

Check out 2017 Track Record

Related Articles:
Options Trading reflections (2016 Edition)

 
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