September 2016 Option Trading

IMG_20150629_110453618[1]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).

Option Strategy

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.

Mistakes

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… 😛

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8 thoughts on “September 2016 Option Trading

  1. Hey Stal, nice progress and learnings in the options space. We went through a similar path: I also moved away from the hard rule “stocks I would like to own”.
    And yes, rolling is not always as you want it to be..

    Keep learning.

    As for the visual: I have an old that tracks my position and profit loss. I have a simple graph with monthly realised results. I do not report on open trades .

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    1. Ciao ATL,
      Thanks for the comment! The way the excel sheet that I have is set up (considering that I am adding everything to the tracker fund) it makes it hard to separate closed deals from ongoing ones… I’ll have to stick to what I open and what it’s “closed”, but either than I’ll probably add some more graph in the future… On reporting 67 trades… No way. Better stick to the things that I am doing and strategies and of course all the mistakes that I make… 😛
      ciao ciao
      Stal

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  2. I thought I was busy in September. I only had 27 option transaction is September. you beat me by a bunch. Great learnings here. I like how you close out contracts at 50%. I do this sometimes, and lately I’ve been doing it more.

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    1. Ciao OH,
      Actually most of those trades are closed positions, so let’s say that I might have traded around 30 NEW positions… And on that, most of the new trades were same trades as the ones that I have closed by with longer expiration. I have been very methodical recently, not sure if that is good at all but time will tell… 😛
      ciao caio
      Stal

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  3. Ciao Stal,

    Wow, 1K euro from options in September? You are doing amazing things there. That is helping your income so much.

    It’s interesting your strategy has changed a lot since your first started, it’s clearly working well for you!

    Tristan

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    1. Ciao Tristan,
      Well yes strategy had to change, not because the dividend thing is not working, but because I do not see many options to enter now (prices are too high) and I really do not want to start averaging “up” on core stocks… Options came along, I still need to test the model I might have some answers and results only in 1 year, but the start is pretty good I just need to to make too many mistakes… 😛
      I do not mind to change approach on things, but I also realise that there are a lot of issues that I do not know and where I can get hurt really easisy if I am not careful. 😛
      Ciao ciao
      Stal

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  4. Ciao Stal,

    Nice Option income here. you are rocking. My own options income was a little bit lower this month.
    But i know there will be more months to earn more income on trading options.
    I am excited when I think about a possible first 2000 in 30 days next year 🙂

    keep up the great work 🙂

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    1. Ciao Chris,
      Thanks for the support, this was a busy month, but I guess that October will be much more lower key. First of all because I will be traveling for work and I will not have much time to follow options, secondly because I have 3 positions now ITM that might depress income a little… We’ll see, but I am quite happy so far with the positions that I am trading…
      Ciao caio
      Stal

      Like

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