This year will end badly in all our accounts. But it is just a matter of a perspective. I do not feel bad or regrettable. I am actually enlighten about performance and ability to manage the trades in our portfolios despite losses of their values.
 

 

 · What am I looking at then?

 

First, I must admit that I refused to believe that our government would destroy the stock market. And yes I believe Trump administration really did it with his trade wars and later on Powell, the FED’s chairman, with his aggressive monetary policy.

I think, the market could eventually survive the tightening but in conjunction with Trump’s trade war we probably tipped over the edge and investors decided to run for exits. Today, we touched 17% correction from the market’s ATH and we are near the arbitrary 20% level where a bear market is supposed to start:
 

 

We collected over $66,000 dollars in premiums this year! Not bad, giving how bad this year was!

A 50% of that cash was re-invested back to great, high quality dividend growth stocks!

And I am very happy about that mainly when seeing tons of the great stocks on sale today!
 

So while others are panicking and selling, I am adding more shares to my portfolio. And I plan on doing so next year too. As long as my options trading keeps generating more cash, I will be buying stocks I deem undervalued (and I do not care what you think about their value, I have my methods and they work well for me).

However, our accounts’ net liquidation value is down about 40% as of today. But this doesn’t bother me. Trading options can be scary to many people, it is volatile, and the draw downs can be large.
 

 

But, I am not scared. I am actually delighted about what I have learned this year despite the draw down. During the entire market selling off I was able to roll all the trades and manage them to keep them all alive.

True, I admit, I believed in this market. All possible data pointed to a breakout in 2016 and a bright future in front of us. And I was opening bullish trades. And I opened too many bullish trades so when the market started tanking, these trades started to hurt.

But I learned how to manage them. I was rolling them away, down, adding hedges and making money, collecting more premium.

And that is why I am not afraid of my net liq loss. I keep trades up and our cash is up too. Roughly by additional 35%! And as time goes by the adjusted trades are expiring or being closed for profit. Soon, this will have impact on our net-liq, buying power, cash growth. Even today, we were able to close a large chunk of originally bad trades for a profit. Our buying power jumped up significantly allowing us opening new trades and generating more cash which can be invested into great dividend stocks.

 

 · What’s next?

 

I will keep what I am doing now. Rolling bad trades down, eventually, converting them into an opposite spread (e.g. put spreads into call spreads), adding hedges, generating cash, and buying undervalued stocks (no matter what you think about valuation, I consider them undervalued, and I have my own method which works for me well).

I also learned the significance of having enough capital. For years, I tried to convince myself that you can trade options successfully with a small capital. You can’t. If you can, and it works for you and you can turn $2,000 dollars into several thousands of dollars worth account, great, you are great and I am happy for you. But, I must admit, it doesn’t work for me, so my next plan is to save money to be able to trade in my smaller accounts.
 

And the market? I believe, we are now doomed to reach that magical but arbitrary 20% bear market level. We will reach it. We may even go a bit lower and stay there for some time but then we bottom out and start a path to recovery. It will be a long recovery which may take 6 months or even the entire 2019 year. But I am OK with and do not care where the market goes. I am not afraid of it. And you shouldn’t be either. Embrace this sell off and be buying more shares in smaller installments. And let it run higher!