Sorry about the radio silence for a few months. After my injury and recovery I have been too busy at work to post. Does not mean I have not been trading, just did not have time to post. I am finally caught up to the point I can contribute again.
So anyway, hope everyone is doing well. I sorted out how to separate my personal trades from the service and will start posting again. Most trades will be posted end of day but they are usually good for a few days. I also have too many on for update so will just start fresh and post as we go. I mostly trade on Thursdays so that is when updates should occur.
As some of you know I traded full time for 5 weeks as I was recovering. I am also part of the Traders Reserve family and have been working with them professionally. While I was off I binged watched tastytrade, looked at all of the research we have been doing, and experimented with several new tactics that have all been very successful. I will try to keep this short but some of the things I have learned have changed my trading techniques.
So here we go as a summary. Took the case study account from 50k to $75,983 from Jan 1 to June 30. It was more than that but this weeks pull back dropped it a few thousand. Regardless, a 50% increase in 6 months is not too shabby. This included some losing trades, I am not cherry picking here and will attach a screen shot to show this is legit and you can see I am up another 10k from June 30.
So here is what I have and have become very mechanical in my trading. Some people may think it is boring but I trade to make money, not for excitement. If I want excitement will go ski, kiteboard, bike race, or mt bike and hopefully not break any bones again.
- Selling options works. The only thing is have to be able to control those big losses that can occur from selling naked options. If you control that you win in the long run.
- I am not a directional trader. Congratulations to those that can do it, but even full time trading I could not make it work. However, adding a directional component to option selling has increased my win/loss ratio which improves returns.
- Keeping a portfolio hedge on at all times allows you to be much more aggressive selling options. That way if SPY goes to zero the hedges will be worth way more than the accounts. I target hedging each account for a 10% correction meaning that much of a drop will result in no losses. Any more than that and I have a winning lottery ticket. I will explain next time I roll my hedges but have been using /ES. SPX or SPY also work. I also hedge using a risk twist or ratio write so it does not cost as much or a debit spread if I am hedging a fixed amount.
- I finance the hedges by selling options so they only cost me house money.
- I usually start a position by selling puts. If it moves against me will roll. If that does not work will convert to a #jadelizard. After a few rolls of the jade lizard if that does not work will convert to a LEAP spread and manage it from there.
- A position may last a week or several months to years. Depends on what I am trying to accomplish but the end goal is steady income.
- TT found 45 DTE opening to managing at 50% returns or 21 DTE closing is ideal for theta decay. We have found 21 DTE may be even better (not in all situations). Our research has found that most OTM options will crush 90% in 10 days after opening at 21-22 DTE. Allows recycling capital quicker, faster decay, but less trades have to be adjusted. Has been the sweet spot this year. As market conditions change that may change as well.
- Jade lizard trades allow skewing, flexibility with adjusting, and huge income up front.
- Trading through market volatility increases returns once the market rebounds because you are always recycling your cash and adding to positions and basically hyper compounding.
- Keep margin balance to no more than 25-50% of total available that way you don’t get margin calls when the market is melting down.
- Don’t be emotional when trading (hard to do when your account is down) but must be done. Most people sell at the absolute bottom or buy at the top because of emotions. If they just stayed in the market they would be better off. It is only money, not your life, or face 🙂
- Be willing to adapt to what the market is doing. Too many people trade the same way no matter what the market is doing. Different tactics work in different markets but you have to trade the market you are in.
This community helped me realize a lot of this. Most of you are willing to take a chance, experiment with new tactics, and stay in the market even when the proverbial sh#$ hits the fan. Thanks for the help and happy to be back!
Cheers, Chris
Took me a while to figure out how to post a screen shot, but here are the returns for the year so far.
Options Bistro 