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September 2014 results

September 2014 was a very bad month to me. It was a month when I destroyed my account once again. I did it back in 2011 and I thought I learned my lesson. Apparently I didn’t.

This is what happens when you do not follow rules or have none in your investing/trading. Trading options can be very beneficial and rewarding unless you break rules you set up. Then it can hurt a lot.

Long story short – I blew off almost $15,000 of profits this month.

How could that happen?

If you are subscribed to my options trading newsletter, in the “welcome letter” and at the bottom of each letter, I have an advice for all my readers about money management. I advise trading only 50% – 70% of your available cash in options. Then keep the rest in reserves in case the trade goes against you and you need adjustment.

I broke that rule. After I made almost $5,000 in a single month trading options I became greedy and overinvested my account. September was a very volatile month and that broke my ability managing my account. I suddenly run out of cash and was forced closing my positions due to margin calls. I was closing with a loss. A huge loss.

That was a painful slap into my face from Mr. Market. A painful reminder that the rules are here to protect me and not to be broken.

New trading plan

This experience made me think again how I want to trade options. I was thinking start trading indexes only. Start trading SPX only. But always I was telling myself that I will start trading SPX after “this trade ends and then that trade ends, and this or that one”; and I have never ended any trade. As soon as one trade ended, I immediately opened a new one. My cash reserves were close to zero.

I deserved the blow.

But it was good for one thing. I closed all risky and volatile trades, increased my reserves and decided to trade SPX indexes only with a few exceptions of strong stocks showing a good opportunity. I also was thinking that if I take small trades, risking no more than $500 a trade and collect $30 – $100 per trade premium, it will one day compound into a robust money making machine. I also wanted to shorten my waiting time and decided to go with weekly options.

It would be very rewarding if I can trade and collect $30 – $100 a week. One day, as my account starts growing again, this can easily grow into #300 – $1000 a week or even more. That would be a sufficient income.

I will also gain a better control over my margin requirements than when sitting in a long term trade.

So what my trade plan would look like?

 

  1. Trade weekly options against SPX – spreads and condors (later maybe touch butterflies).
  2. Risk no more than $500 per trade (I would rather take two different trades than multiple contracts of one trade) – 3% per account.
  3. Increase risk per trade (number of contracts) once the account starts growing again – keep it at 3% however.
  4. Collect minimum $30 per trade. This would equal to 6% gain weekly per trade.
  5. Reach 2% weekly gain of the account (as of this report I have 1.6% weekly gains.
  6. All trades shall be set up to be out of 1 standard deviation as close as possible to the 2 SD.

 

Newsletter

Do you want to follow those trades? I decided to start a newsletter in which I would place a new trade idea whenever I am going to open a trade as described above. What that means for you if you subscribe?

Any time I am about to open a new trade, you will receive a newsletter in which I describe the trade. I explain why I am taking the trade and show all legs of the trade and how it should be entered. I will show probability of success, risk, and reward, so you will see what you will be risking and what you can make. The good thing is that each trade is a real trade I open myself, so I watch it carefully and send out a newsletter any time adjustment or exit is needed to protect four (and my money). And as a subscriber, you can ask me anytime, if you need explanation in regards to that trade.

And the best thing is that the subscription to the newsletter will be free for the next three years (until the end of 2017). Then I will start charging a fee.

But by then, you will already learn well trading on your own and making money without the newsletter.

Sounds good? Then subscribe here.

 

September 2014 results

And now let’s proceed to those miserable results I am ashamed of:

 

January 2014 premiums: $156.10 (1.55%)
February 2014 premiums: $139.26 (1.38%)
March 2014 premiums: $746.62 (7.41%)
April 2014 premiums: $421.63 (4.19%)
May 2014 premiums: $803.32 (7.98%)
June 2014 premiums: $230.21 (2.29%)
July 2014 premiums: $4,602.44 (45.69%)
August 2014 premiums: -$172.58 (-1.71%)
September 2014 premiums: -$14,399.60 (-142.96%)
   
January 2014 dividends: $25.87 (0.26%)
February 2014 dividends: $167.02 (1.66%)
March 2014 dividends: $68.77 (0.68%)
April 2014 dividends: $25.91 (0.26%)
May 2014 dividends: $168.51 (1.67%)
June 2014 dividends: $68.81 (0.68%)
July 2014 dividends: $25.96 (0.26%)
August 2014 dividends: $150.49 (1.49%)
September 2014 dividends: $68.86 (0.68%)
   
Total 2014 income: $8,283.15 (82.24%)
2014 unrealized premiums: $-6885.98 (-68.85%)
   
Account Equity: $17,329.61 (00.00%)
Account Net-Liq: $15,555.66 (-31.83%)
December 2013 balance: $10,072.25

You can see my dividend and options income on My Trades & Income page.

What about you? How was your September 2014 and the entire year so far? I hope better than mine! Post a link to your website or write down your results to encourage other investors!

Have a great October 2014!!
 
 





4 responses to “September 2014 results”

  1. Scott says:

    I haven’t written about it yet, but I also had a trade in September turn bad on me. Prior to the iPhone announcement I sold 2 naked puts on GTAT at a strike price of 15, expiring in October. Everyone “knew” that the iPhone was going to have a sapphire screen and GT Advanced Technology had just signed a $400+ million deal with Apple and had furnaces running like crazy in Arizona.

    Well, the announcement came and went and other than sapphire covering the camera lens and the new Apple Watch, no mention of sapphire. The stock dropped from around 18 or so down to 11 and had been hanging out near there until today when it dropped to less than a dollar after the company declared Chapter 11 bankruptcy.

    So, other than the $105 in premium, I’m out the rest of the $3000. I guess I’ll just hang on to the stock once I get assigned and hope for the best. That or use the capital loss to offset some huge gains in Apple.

    The lesson for me is to only trade well-known stocks from now on.

    Hoping that you’re able to recover as well. I’ll be interested in following your SPX trades. Good luck!

    • Martin says:

      What?!! GTAT filed for bankruptcy? I have heard many speaking about them how great the company it was and that it was better than GLW and so on. Now I understand why GLW was dragged down too. I even wanted to invest into GTAT at some point. Glad I didn’t as it would be yet another memento of my failures for September’s disaster.
      That’s exactly why I decided to go with SPX and limit stocks to a minimum. No earnings, no bankruptcies, no shocks which can kill your options within seconds. The worst thing is morning openings with a huge gap where you have no chance to react.

      I wish you good luck with your situation and hopefully you recover it soon too.
      I feel optimistic about my trading. Although it hurt a lot loosing everything I was building during last year and a half, but that’s the life of trading, right? At least my dividend stocks are holding well being a secure base for my portfolio.

      Good luck man!

  2. DivHut says:

    Ouch. That hurts just seeing all that red. But such is life and I think once (twice) bitten thrice shy applies here. You have a good grip on the options game and cannot win every trade. I’m you’ll go back to your trading plan and not veer from your rules again. Thank for sharing a hard month with us.

    • Martin says:

      Keith, yes it was a painful lesson. I was so mad at myself like never before. But as you said , that’s the life of trading. Now I must focus on how to protect my winnings not to give them up again by being stupid.

      Thanks for stopping by.

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