August 2016 Option Trades

IMG_20150815_181447As you all know I am new to options and it’s hard to come out with a decent reporting system that will not create too many headaches to follow, so this new section might change in time.

Right now the strategy that I am following is to trade options of companies that I want to own, that I already own and that pay dividends.

In August I betrayed this path on 2 occasions and ended up loosing quite a bit of money because of that. I guess that’s a good lesson learned on my side.

The first betrayal was on a unknown stock on which I did no research, that was paying no dividends and that tanked immediately after I sold the PUT, which was set to expire 2 days after. The annualised gain was 300++% but the result has been a disaster that almost wiped out 1/4th of my TOTAL option trading activities since I started (-1823% on AR%). I did well closing the trade with the loss, because the stock price continued it’s downward spiral, but this will serve me as a lesson: research, dividends, decent businesses. (XON)

The second trade was somewhat similar, but I wasn’t greedy and closed the deal with a profit before Yellen spoke. Eventually the stock did not reach the strike, but it was so close that I thought that I didn’t want to risk it. In this case the company did pay a dividend, but it’s in biotech and I do not trust that segment all that much, and if I got it assigned it would have taken away a big portion of my cash as the stock price is around 50USD… (TEVA)

Third case this month was GME, on this one I did more research and decided to get the option assigned, so I now have a new stock against which I am going to sell calls aggressively. I’ll try collecting premiums that I can, if I can dispatch it with a modest 10% increase in price I’ll be happy, but in the meantime I can collect premiums and dividends. This was a good play because it goes ex-div next week, a particular that I studied very well to time my trades.

The rest of my positions are not very aggressive, AR% is about 7.5% at the moment, including those major failures that I hit this month, so I am still on track. For the remind of the year I will not set targets to this baby, but from 2017 I’d like to try to hit 10% AR% on option trades. It’s going to be hard though, and I must remember NOT TO BE GREEDY!

Addendum on reporting

It came to my attention that although I get immediately the money of any sale I make on options the trade is far from over. As the few experiences here above underline a trade is not over till is either Closed or Expired. When reporting dividends and premiums I will report them when the “happen”, but in my option posts I will always refer to cash secured and cash unsecured.

As of today I have traded 933 Euro worth of options, but only 425 Euro are “closed deals”.

I am stressing this out because it might seem that it’s easy to get money with options, but it’s much more risky than simply trading stocks. Until the expiry date I will not know if the result that i am posting is going to be met or if it’s going to be MUCH LESS (if not a loss). For sure it cannot be more, unless I trade other option contracts in the meantime.

 

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6 thoughts on “August 2016 Option Trades

  1. Lesson learned. We all do it. Greed and not following your options trader constitution are dangerous things. I’ve learned the hard way as well. I don’t sell options on stocks I don’t want to own anymore. I was greedy earlier this year, which led to several losses. Since I’ve refocused on my constitution, my trades have worked out for the most part. It’s risky, but so is stock ownership.

    Liked by 2 people

    1. Totally agree with you there IH, stocks are risky too, and also moving away from the track that one has established is never a great idea especially when using a new instrument like options. But as we all say, bad experiences make you stronger, so I take it as a lesson and move on! 🙂

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    1. Ciao ATL, will wait for the post, but I guess in a relatively flat market where value and yield are hard to come by it’s easy to get greedy with options and stuff like that… Still, as long as we draw some teaching from our mistakes the loss is not so big 😛

      Liked by 1 person

  2. Ciao Stal,

    You learned an important lesson.
    i think a little different. if you understand what the option is doing if the price of the stocks changes, and what to do if it gets against you trading options is less riskier than trading stocks alone.

    I think the most important thing in trading option is to know about every possible rolling strategy. so you dont have to predict market directions. now you are prepared. 🙂

    have a nice day Stal!
    Ciao

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  3. Ciao Chris,
    As I always say I think that you are much ahead of me in understanding options, I have only recently started to assess delta on the options that I take, and I agree too that having no plan is devastating, while having a plan when the trade goes bad can save the day (maybe in time but it can save it). I do not think that I am prepared to go 100% options, but I agree that they are potentially less risky than owning stocks, surely they optimise capital as you can always be trading them while a dividend stock sits there doing nothing much for most of the year to pay something to you. I give myself 1 year and then I will decide how to act, I also need to assess the tax implications of trading options…
    ciao ciao
    Stal

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