Here we are again, the end of a month! I feel like I have no time and once I get the time and sit down to rest a bit, it is the end of month.
Time to report my options trading income!
April 2017 was very successful month.
I made a lot of money while eliminating losing trades! That was the greatest achievement of the last few months and April 2017 excelled in it.
I could close many losing trades (my skeletons in the closet) and yet come out with big income.
My plan for April 2017 was to make $1,837.56 dollars of income.
I am happy to announce that we were able to make $3,716.77 dollars of option income in April 2017.
· Options Trading Strategy
Over time since I learned trading options I went from trading spreads, single naked puts, later added naked calls and landed on trading strangles. Many people are afraid trading strangles. They do not know how to protect themselves when having naked calls trades. I was afraid too until I found out that it is not as dangerous as others say.
I am not saying that there is no risk, but if you know how to handle the risk, you will be able to navigate through strangles with no fear.
Over time I developed my own rules and strategy. You can review it in this section.
I trade primarily weekly strangles against dividend stocks. A strangle is a strategy where a trader sells OTM naked puts and OTM naked calls with the same expiration day. It is a neutral strategy, so you want the underlying stock to ideally stay between the two strikes.
It is though a manageable trade even when the stock is not staying in between the strikes. You can successfully trade strangles when the stock goes down in a decent decline or up in a decent upward move.
What hurts strangles a lot is a sudden strong (violent) move either direction. Managing strangles when the prices drops suddenly becomes a hard work. It is doable, but it can be frustrating.
Here are my rules for trading strangles:
- I trade aggressive strikes (one or two strikes near the money).
- I also trade strikes based on expected move for the given expiration day.
- I trade weeklys only (longer terms only when rolling and roll is not possible for the next week).
- A stock to trade must be a dividend stock (I want to get paid if I get assigned and have to hold the stock).
- A stock to trade must have weekly options (I do not want to give Mr. Market too much time to go against me).
- A margin requirement for a weekly strangle trade must be less than $1,000 dollars (I want the most bang for as little money as possible).
- A premium for a new weekly strangle trade must be 0.40 or $40 or more.
If you want to learn more about how I trade strangles, read my previous post about it.
With the rules set above I trade every week. Every Thursday, Friday, or Monday I open near the money strangle and as the stock moves one direction, I close the untouched side for 0.05 debit and roll the touched side down (if puts) or up (if calls).
Therefore, I am closing winners for profit and roll losers to avoid a loss.
By rolling, I try to improve the losing trade and make it a winner again.
Over the years I worked on my strategy to make it mechanical as much as possible to eliminate any emotions or second guessing.
I know what I want to trade, how I want to trade it, and when to trade it. And I do it every week. And I do always the same thing every week, same trade methodology, and same execution process.
This allows me to ignore any noise in the market and not tremble in fear “what if I open a trade and it goes against me”.
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· Options Trading Results
As stated above our trading in April was really great and we made $3,716.77 dollars.
Below you can see all data and progress in our trading account:
Month-to-moth trading results
(The red dots on the chart indicate income estimate, blue bars actual earnings.)
|In April 2017 we made:||44 trades|
|Total trades in 2017:||180 trades|
|April 2017 options trading income:||$3,716.77 (108.48%)|
|2017 portfolio Net-Liq (net)*:||$4,256.13 (24.22%)|
|2017 portfolio Net-Liq (gross)*:||$24,756.13 (6.67%)|
|2017 portfolio Cash Value (net)*:||$29,494.13 (4.80%)|
|2017 portfolio Cash Value (gross)*:||$49,994.13 (2.78%)|
|2017 portfolio Equity (net)*:||$33,707.13 (1.13%)|
|2017 portfolio Equity (gross)*:||$54,207.13 (0.70%)|
|2017 Liability/Debt:||$20,500.00 (0.00%)|
|2017 overall trading account result:||32.67%|
* The numbers marked as “net” and “gross” are results with loan (liability) included (gross) or excluded (net).
We are presenting you our month-to-month business performance review:
April 2017 was a great month.
It could have been even better and bigger income if I had no bad trades which I decided to close rather than keep rolling them.
Our account grew well during last month and we even saw our netliq growth again. We saw our netliq growing all the way up to $27,000 +/- until we got hit by X and STX earnings report which sent the stocks down (X by 25% and STX by 8%).
I do not think it was a justified drop (its depth) and I think these stocks will do well again. Also at the end of the month we were assigned to STX stock @ $47.50 a share. Not great, but I am OK holding this stock for some time and be paid the dividend while holding and selling covered calls. The assignment was a result of my mistake. I advocate to trade deep in the money having them far away from expiration (normally we trade weeklys, but when an option gets deep in the money, go more r=than 30 DTE to prevent early assignment). I neglected to do this and let deep in the money put option with only 13 DTE sit instead of rolling it. I got assigned.
· Our Options Trading March 2017 rank
I am also happy to announce that our company account (or our blog reporting our trading results) is listed on a blog Easy Dividend run by Christopher (Chri) from Germany, a valuable member of our Facebook trading group, who lists dividend and options income achievement of a small community of traders and investors.
Every month he publishes results according to income of each member.
Our trading revenue in March 2017 resulted in #6 position among the community traders/investors.
You can review Revenue in March 2017 – Community Edition results here.
· Options Trading April 2017 outlook
The stock market seems to become a range bound and oscilating between $2,340 and $2,400:
On one hand this is definitely an improvement from last month when the market broke up from a descending triangle and we moved higher again.
But I have one fear and that is that investors are likely realizing that Trump will not deliver his promises and that will have a negative impact on the stock market.
If we break up above resistance of the channel, we will see new highs, but if we reverse from here and continue down and even break the support, we may see correction.
Also note, that if we stay in this channel long enough, it will become a consolidation channel for another leg up.
I do not predict the market though, so do not ask me what happens. I do not know it and I do not care.
As a dividend investor I will continue investing into dividend growth stocks and as an option trader I trade strategies where it doesn’t matter which direction the market or stocks go.
What do you think about options trading? What do you think about today’s market amid the weak GDP data? Will Trump be able to positively affect the stock market?
We all want to hear your opinion on the article above:
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