It looks like time is moving faster and faster every month. I feel like I have written a September report just yesterday and it is already time to write it again for October.
I was busy trading (besides my other less loved activities) and dealing with violent markets struggling to find direction. People in Wall Street are torn apart on who has a bigger influence on the future market direction – Fed, Trump, Clinton, weather, or oil, and many pay a little attention to macro and micro economic data coming from the economic and earning reports.
At least, I am slowly progressing to a state of being independent from the market direction. It is a beauty of trading options that a trader can make money in any market. You won’t get such privilege with stocks only.
October 2016 options trading was successful again. We made money as per the plan. I planned to make $3,500 in premiums in October 2016 and we made $3,446.50 in premiums!
Of course, according to the Wall Street earnings obsession we missed earnings this month. If I had a publicly traded company, investors would be spooked and selling our shares like crazy as of now.
I am happy for October results. Income wasn’t as good as last month, but within expectations and goals. And that’s what counts.
October dividend income came out as a surprise to me. I noticed a few dividend cuts on my MLPs and oil companies (AGNC and COP seemed to lower their dividend), yet my dividend income came larger than previous month. This month, the dividend income was $85.75 which was higher than the last month income of $80.24 dollars. I still have dividend investing a bit dormant as we are now focusing on reaching our options goals which would greatly pay for our dividend investing.
That was my plan from the start. Trade options and reinvest income into dividend paying stocks. And we are successfully reaching that goal.
Options Income = $3,446.50 (account value = $14,762.53 +481.27%)
Dividend Income = $85.75 (account value = $20,237.26 +33.67%)
If you wish to see details about each account, continue reading below.
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· October 2016 trading results
Trading in October was once again more on autopilot rather than active trading. I didn’t like it, but I can’t do much about it. Originally we wanted to be opening at least one trade (and contract) per day and this showed up as a mistake.
Now our account is over-invested and I am only managing it to keep enough buying power and stay out of the money with the trades (so we do not get a margin call or any similar disaster).
Every month I re-position our trades in a hope that that month those trades can either expire worthless or be bought back for a profit. And as soon as I think about it the market gets into a turbulence forcing me to roll those options again and postpone so desired day of reckoning and closing those trades.
In September I had a plenty of trades set to expire, many in October to be closed and yet I had to roll them into November, December, and some even into January and March next year.
I am not happy about it, I wish I could close those trades for a profit so this constant rolling makes me tired. But this happens and it is a part of our trading plan. I like to roll as long as I get it right. Some investors do not agree with this strategy. They would tell you that if the trade doesn’t cooperate, close it, take the loss and move on. Deploy money elsewhere where it will work. I don’t like taking losses.
Once again below is a quick review of all trades we made this month.
I also post those trades in real time in our Facebook trading group although lately not much since I am a sitting duck now waiting for our trades to finally end so we can trade again.
But when I post a trade I try to write down reasons for taking that trade, our expectations, and a plan for that trade for every possible situation. Sometimes, it is not easy to write about trading (what do you want to say about such a boring topic, right?), but I do my best so others can learn from it. If you are a member of the group, you can always ask a question what was I thinking. Or you can ask about your own trade if you need help.
You can join our Facebook group for free. However, membership in the group is limited to 250 members only. Once all the seats are full new members are admitted only if any old member leaves the group or are removed by administrators.
There are also other traders in the group and they post their own trades and ideas, too. They are willing to help and provide their view and input for everyone to learn.
You can follow our trades (mirror them), paper trade them, or just watch them and learn.
Here are our trading results for the month:
|October 2016 options trading income:||$3,446.50 (135.70%)|
|2016 portfolio Net-Liq:||$14,762.53 (6.41%)|
|2016 portfolio Cash Value:||$21,927.03 (5.61%)|
|2016 overall trading account result:||481.27%|
In the past, I had a few readers and traders asking me a question how I could generate an income of $5,000 or $3,000 a month with only $13,000 dollar account and to do so, I would have to take enormous risk.
The truth is that I am not trading $13,000 dollars account only. I trade a lot more than that.
At the beginning of the year when we returned to put selling against dividend stocks strategy we decided to take a loan and trade the borrowed money.
Some people may see this crazy and a no no move. I do not see at it like that at all. I was always looking for possibilities (and I am still looking for them today) how I could raise money for trading. And I met a few traders who did the same thing and took a loan, or sold their property, etc. so they could trade. I still chat time to time with a few via my Twitter account.
I understand that this makes our account very leveraged. Such leverage may pose a lot of risk. But the risk is not in the options trading. There must be a risk involved if you want to make money. If you want a riskless trading, you must put money in a bank. But do not expect any excellent results.
The risk is in you personally and how you trade, how you manage your trades, and how you manage your cash positions.
Our trading rules, strategy, trades and money management give us a lot of confidence in the process and the way I trade our account although I must admit, some time it is a difficult task.
But don’t mistake my confidence with over-confidence and reckless trading!
If you follow our blog for some time you may know that I do not believe in market predictions. I believe that trading is psychological and when trading you must be in a comfort zone. That means that no matter which direction the market goes at any moment in time and no matter what your open trades are doing whether making you money or losing it, you still must feel comfortable with it.
And once you reach that state of mind you will feel comfortable and confident in trading. And with that state of mind it is not a problem to take a loan and trade it to boost the income.
Therefore, I trade a lot bigger account than I am reporting here on this blog. Here, I am reporting our own money only and the loan is excluded.
But to put everything into a proper perspective, I will add the account cash and equity positions with liability/loans so you can see the whole picture.
As of this report, our account is:
$35,262.53 net liquidation value (net-liq),
our cash position is $42,427.03,
our total equity is $49,830.20,
and our overall initial buying power was a little over $70,000 dollars. I added these numbers to our blog to My Trades & Income section and you can review them there in real time.
In fact, we are trading approx. $70,000 dollars account! And thus making $3,446.50 this month is not such large leverage risk. It represents 4.93% of monthly income on the overall available capital.
We also use a portion of the monthly revenue to pay the loan off. Our monthly loan payments are $907 a month and the interest rate is 9%. If we make #3,450 a month we make enough money to pay the loan and reinvest the rest. with 4.33% of current monthly income, which is approx. 52% annual revenue, paying a 9% loan is acceptable. In other words, we pay 9% on a loan which allowed us to make 52%. Not a bad deal.
I plan on writing about this business financing (I call it bootstrapping, although it probably is not) in some of my future posts.
Here are the results of our options trading:
Here is our monthly income from options trading:
Here are the individual trades from the beginning of the year thruough this month:
The table above shows our real live trades up to date.
They are real trades we really traded with our own real money. Some people do not believe that it could be possible to achieve such results, and called me names, fake, liar, and fraud. But what you see in that table above, is the final result of our trading and our trade management. You want see the entire picture of what happened between opening a trade and closing it. There could be several rolls in between. However, it still indicates our ability to manage our losing trades into winning ones. And that sometimes take time (a lot of time) and additional buying power (if you are adding another leg or converting a trade into a different structure).
As I said, not all trades are immediate winners. Some turn bad the very next day and some require an extensive management and adjustments to end them in green. Mystics, Random Walk academics, and Efficient Market theorists are typically and equally divorced from the reality of the market and trading. Amateurs who love forecasting and mysticism (Alexander Elder, The New Trading for a Living), will not get it and will cal you names.
From our trading records we can report our average trade holding time to be currently 17 days, average P/L 1.54% and 86.73% annualized return.
We also have a plan for 2016 to create an average monthly income from trading:
I am happy to report that we completed our plan of creating an average income of $2,000 per month. That is a great achievement. This was always my dream to trade options to create a regular income. Although I made money in the past (I also lost them) it has never been a consistent and growing income. Finally, we reached this goal and we are generating a consistent income.
At this point our income is used to pay off the business debt and reinvest into business to grow the account. Today, I can update our goal and increase our monthly income goal:
2016 plan: $1,000 monthly income – COMPLETED in July 2016
2016 plan: $2,000 monthly income – COMPLETED in October 2016
2016/17 plan: $4,000 monthly income – IN PROGRESS ($2,057.50)
Note, these are monthly averages based on 12 month results. The individual monthly results month to month may differ.
We also have a plan for 2016/17 to increase our equity:
by August 2017 plan: $130,000 equity – IN PROGRESS ($49,830.20)
I am interested in applying for portfolio margin for our account. This would allow us to increase our trading (and leverage) and trade more trades and more often. That would allow me to increase income and start trading for a living as a full time trader.
Here are results of the individual trades we traded this month and my comments:
ESV is a waiting game. The stock rallied in September and I had to roll my covered calls higher for which I used a strangle strategy.
I got originally assigned to the stock at $11 a share. The stock is trading at around $8 share, but it was as low as $6 a share. That was the time when I was selling covered calls below the assignment price to collect income and improve cost basis.
But in September, the stock rallied and at some point it reached $9 a share. I had to roll my 7 strike calls to 8 strike calls and later to 10 strike calls. Since this stock isn’t a very good option trading candidate I had to use strangles to roll my calls. That means I had to be selling puts to offset the price for the calls.
Today I sit on a few calls and puts and waiting for them to either expire, be bought back for a profit, or roll them further away in time. Since all those trades have expiration in March 2017 I do not have to do anything with them and just sit and wait.
After I got assigned in September to the stock it looked like there was no bottom for LULU to fall to. In October it seems that LULU finally stopped its fall and is building a solid gound and consolidating at around $55 a share. However, the company is reporting on December 1st before market and their report may shuffle all the consolidation around and we may see another violent irrational reaction of Wall Street and the stock may resume its falling.
I was very active trading LULU in October. Not because I wanted, but I was forced by ever falling stock. I had a few naked puts and as the stock was falling I had to roll them.
Again I used strangles to roll the puts. Here, unlike with ESV, it worked perfectly.
I rolled a put and sold a new call against the new put to offset the cost. As the stock continued falling the calls lost value so I could buy them back worthless and I could roll the put again and sell a new call against it.
I plan on doing this as long as the stock gets back above my assignment price where I let my calls to be assigned and puts to, hopefully, expire worthless or buy them back almost worthless.
MNK was a bit turbulent in October before it finally decided to fall. Now it is in a constant decline. It follows LULU’s trend pattern – down. At first, I had to roll my calls higher. That was before MNK started falling like a rock. I had to roll my $75 calls to $77.50, then to $80 before the stock turned down. Since then I was rolling my puts down – from $65 to $55 and now to $50.
The stock also seems to be bottomless. However, if it continues falling I might be able to liquidate my calls for a profit and roll my puts further down. Same as with LULU until the stock stops and find its support.
TRGP is also a waiting game. I had $48 puts when the stock started falling. I rolled them to $46 puts and decided to add $50 strike calls to it. So I only did one roll this month and since then sitting on it waiting for the options to lose value so I can close them (the calls for sure, the puts may take a lot longer or I may need to roll them again). Since both trades have expiration in April 2017 I do not have to do anything.
I decided to close the trades for a profit this month and currently have no position in PSX. I did it to raise cash as my buying power was getting too low and I was basically closing all profitable positions. PSX was in that state. I also wanted to release money as PSX expiration was in February 2017 (thanks to many rolls I had to do) and I wasn’t willing to wait that long.
PSX is not a bad stock so I may be trading it again in the future, mainly when I release (close) some of my WYNN trades.
WYNN is a ride. A wild ride. It is sometimes driving me crazy. But I like to trade this stock. It has great premiums, it is volatile, it has nice price swings so it is possible to make nice money. Basically, since I started trading WYNN I collected over $16,000 in premiums so far. Much of that cash is not available yet to take out since I have many open positions, but WYNN has been a great cash cow for me.
Even during wild moves, the options positions we had in our account held the value of the account stable. I haven’t seen this much with my other trades. Also most of the time the stock was acting uncorrelated to the S&P 500 so when the market was falling, WYNN was going up and I was making money in a falling market.
Later on the stock started falling again and I could close many puts and open new calls so I was again making money. This was a brilliant example of my strategy of selling puts and calls and rolling it according to the market or stock behavior.
When the stock was going up, I was rolling my calls higher and selling puts against it. Then the puts were being closed for a profit and I could roll calls higher again and sell new puts against it.
When the stock reversed, I did the opposite. I started rolling my puts down and selling new calls against it. Then the calls were being back for a profit so I could roll puts lower and sell new calls.
My current put/call ratio is 9/13 and I am still closing my calls for a profit. Soon, I hope the stock finds its equilibrium and I will be closing only for a profit.
If you like these trades and want to trade them in your own account and start making money consistently every month, open an account with OptionsHouse and start trading trades we trade. It is called learning by doing. When I started learning trading I learned in real time from a trader who allowed me to mirror his trades and provided explanation.
When you open an account you will immediately gain access to a virtual account in which you can test all our trades for yourself and see if they are a real deal trades or just a bogus. But once you learn trading options you can enjoy a consistent monthly income!
But let me also warn you. Trading options is not a passive investing. It takes a lot of time and effort. You must learn a lot, study, practice, and pay attention to your account on daily basis. You must record your trades, review them, and eventually get ready to adjust them. Once you learn that, and become a trader, your income will be a well deserved and it will become easy for you to achieve it.
You will become your own boss. No more making someone else rich. No more deals with rude clients, angry boss, or begging for a raise so you can survive providing for your family or to make ends meet. You will work for yourself and if you ever decide to work for someone else it will be because you want and not because you must.
So, do not hesitate, open, and fund an OptionsHouse account, and receive up to $1,000 worth of commissions on online trades for 60 days. Then join our group and start learning your new career.
Here is the entire account value from the beginning of tracking it up to today:
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