I feel that I really need to make some visual report of my option trading efforts, I really need to work on it, I find rather difficult to go through each trade (there are many), so it’s easier to round up things and maybe discuss some strategy/teachings that I get every now and then.
In September my Options trading probably saw the highest point in terms of transactions, with a grand total of 67 orders (between buying and selling). Total premiums collected (since inception) amount to 1877 Euro (of which 1014 were in September), but only 826 are actually closed deals. It’s too early to make comparisons and so on, but this is a very interesting return that complements perfectly with the dividends that I am getting from the main strategy. Return-wise (assuming that I will trade like that for 1 whole year) I am hovering around 8.75% before taxes (commissions included).
When I started I only wanted to sell PUTs for strikes on stocks that I wanted to own and that would be less or equal to my average price (if I have the stock already). In 3 months now this approach has changed considerably, mostly because some prices are too distant from the strikes and I have decided to still invest in stocks that I am comfortable with owning, but I try to target options that would return me at least 7% (on annual bases), commission included.
This means trading options at around -0.20 delta (so about 20% chances to have a loosing trade). Of course where i can trade at the price I like I do not care too much about delta, I set the price (Generali, Boskalis, Starbucks are all examples that are hovering close to the point where I would buy in).
If the trade goes bad I try to roll both calls and puts, depending on the stock of course. Rolling is not that easy unfortunately (as I am experiencing recently), and you are not guaranteed to be able to roll for profit on near expirations, so it takes longer to roll than to simply buy a put.
I try to close all trades with 50% margin, if done at least 10 days before strike it improves profitability and frees up resources for another trade to be placed.
First mistake that I keep making is to enter trades that look good on paper but of which I know little, or I know very superficial points. XON in August was like that, I soon replicated this month with FRA:DBK selling a call on a stock that it’s experiencing a joyride in terms of stock price. Long story short, 20 days to expiry the call is not ITM, while it was meant to be a “safe play”… I guess that I will have to watch closely that one, so far no action has been taken although rolling could be an option.
What I have learnt from XON (don’t act on panic) has been put to good use though! This time I am taking my time to evaluate the situation… 😛