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August 2021 $100 Challenge account review

August ended for our Challenge account. It was a successful month though. Although our account is still very young and is growing slowly, it is already showing signs of speeding up. We still hold our option position which is affecting our net-liquidation value but as the trade progresses towards expiration, it will make our Net-Liq going up.

We keep saving cash and trading strangles to generate enough cash to grow our account on top of the dividends and deposits. This is the fate of every small account. Any investor who starts investing with little cash and little to invest every month must exercise a lot of patience. Today, people, young investors want to be rich quick, they dismiss the power of small steps and they want to jump to the big league right away. But small drops of water make the ocean.

What would you prefer? Have small steps, small deposits, and small safe trades compounding over time and growing to a large account, or risk everything at once and eventually blow it all off?

I was there myself. I started learning options from 2010 to 2013. I started trading as a business in 2014. But I wanted to grow my account fast. And I started trading risky trades, like SPX trades. It worked for a while and I quadrupled my money. But then a few bad trades wiped it all out. For five years I was fighting my pride and reality. Just browse through this blog. You will find the entire history of my trading here. My boasting and my failures.

In 2019 I finally came to the realization that everything I was doing was futile. For example, if you want to trade SPX trades, you must have capital available. If you think you can make it with just a $5,000 account, be prepared for a hard awakening. Yes, you may be lucky and you may double or triple your small account. It is called beginner luck. But I can almost guarantee you that at some point in time, you will lose it. Why? Because trading SPX will require trading Iron Condors, unless you have at least $100k or more account available (here come the capitalization question again). And it is no secret that no strategy works always all the time. There will be times when you will have to adjust your Iron Condor to a different trade in order to survive. If you have no capital, you will be doomed to close your trade for a loss. And you start compounding losses, one by one, little by little until you drop to zero. Call it a reversed compounding.

Here is how my account looked like back then:
 

Boom-bust history

 
As you can see, my account could go up for a few years before it went all bust. Two years of winning streak and I felt like a master trader. A master with a bitter end. The worst thing was that there was nothing I could do to stop the bleeding. I could close the positions to take the huge losses right away, or just prolong the bleeding over time. Inevitable end. It was not a matter of if, but how long.

So, you can repeat my mistakes, or learn from them. And that is why I started this challenge account. To show that it is possible to make money with a small account and grow it large, but most importantly, keep the winnings and not blow your account.

 

Accumulation phase

 
The account is slightly underperforming our goal but it is on the path to success. We are now trading small trades (strangles) and we will continue accumulating shares for our next options trade. The strangles are consuming collateral buying power but as they near towards expiration we will see a jump in BP and net-liq.

We are trading strangles because they are easier to manage compared to Iron Condors, but they are also a bit more expensive as far as capital requirements go. That is why choosing good stocks to trade is crucial. Choose safe, stable stocks, providing enough premium and stability. And that is what we are doing.
 

August 2021 Challenge account review

 

MONTH GOAL $$ ACTUAL $$
June 2021: $203.00 $202.67
July 2021: $306.00 $334.75
August 2021: $409.00 $397.71
September 2021: $512.00  
October 2021: $615.00  
November 2021: $718.00  
December 2021: $821.00  
January 2022: $924.00  
February 2022: $1,027.00  
March 2022: $1,130.00  
April 2022: $1,233.00  
May 2022: $1,336.00  

 

$100 Challenge account review

 
From the chart above, the red dot (line) indicates the current account value, compared to the blue line (plan). Our account is trailing our goal. When trading naked options, expect volatility in your net-liq. That can be seen by some as a disadvantage. When trading spreads, your net-liq will be stabilized by neutralizing delta. With naked options, you would have to choose other instruments to do so, for example owning stocks to neutralize your call side. We do not have this yet as our account is small, but we are building our position.
 

August 2021 Overall Challenge account review

 
The chart below indicates our account value compared to the overall goal and plan to grow $100 investment into a $75,000 portfolio. As of today, we are at the beginning of our journey.

YEAR CONTRIBUTIONS $$ GOAL $$ ACTUAL $$
Year 0: $100.00 $100.00 $100.00
Year 1: $1,300.00 $1,336.00 $397.71
Year 2: $2,500.00 $3,016.96  
Year 3: $3,700.00 $5,303.07  
Year 4: $4,900.00 $8,412.17  
Year 5: $6,100.00 $12,640.55  
Year 6: $7,300.00 $18,391.15  
Year 7: $8,500.00 $26,211.96  
Year 8: $9,700.00 $36,848.27  
Year 9: $10,900.00 $51,313.64  
Year 10: $12,100.00 $70,986.56  

 

$100 Challenge account review goal

 

August 2021 Cumulative return Challenge account review

 

As of today, our challenge account provided a -3.43% monthly cumulative return.
 

$100 Challenge account review goal

 
$100 Challenge account review goal

 

If you want to see what investments we take, what trades and strategies we will use to grow this small account join our program today and grow your money too. We engage in safe investments, select strategies to maximize winning trades, and grow our portfolio. And you can do it too, today! We do not provide quick rich promises, gambling, or reckless strategies. We want our portfolio to grow steadily and preserving our capital while maximizing returns.

 

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