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How much can you make trading options?

That’s a question people ask often. I did ask that question too. Many times. I still do ask that question. I want to know whether my trading is aligned with others, expectations, and goals of mine. The answer is not simple and results really vary based on your account size, trading strategies, and risk you are taking. So, it is not easy to say a number and call it a day.

But there are new traders and investors who want to know whether it makes sense to spend time and learn trading options despite many so called experts telling them that options are risky and that they should stay away.

So what can you expect?

Before I get to my numbers, let me first ponder on the general expectations.

I browsed the Internet to find out what others say and what other traders told people what to expect from options trading. All I could find was that you should be lucky to see 20% annual growth of your portfolio. Yes, 20% was their number, on average. I didn’t find anything better than that. If you could find others telling a better expectation than that, please, let me know in the comments below.

They also say, that anything above it is unrealistic and if you go and aim toa number larger than 20% then you are assuming a large risk and you will probably lose money.

On this website (and my Facebook group) I have a motto “making 45% annually trading options against dividend growth stocks” and people were telling me that this is a ridiculous claim and not achievable unless I am taking a huge risk. Yes, I was taking a huge risk in the past few years but that was trading SPX options, not dividend growth stocks.

So, is 20% a good number and 45% a bullshit?

Let’s take a look at S&P500:

Dec 31, 2019 – 29.44%
Dec 31, 2018 – 20.49%
Dec 31, 2017 – 16.21%
Dec 31, 2016 – 9.27%
Dec 31, 2015 – (15.42%)
Dec 31, 2014 – 2.11%
Dec 31, 2013 – 15.82%
Dec 31, 2012 – (0.51%)
Dec 31, 2011 – 12.41%
Dec 31, 2010 – 51.76%
Dec 31, 2009 – 242.54%
Dec 31, 2008 – (77.52%)
Dec 31, 2007 – (18.81%)
Dec 31, 2006 – 16.73%
Dec 31, 2005 – 19.27%

Can you see the gains of the SPX per year? Yes, there are a few years with some serious declines, but mostly the growth is around 20%. Some years are 29%, 51%, or even 242% after a recession.

So, if you think, 20% gain trading options is reasonable expectation, and everything above it is a gamble, then I have an advice for you. Save yourself all the hassle, buy SPY index and sit on it for years. You will get more than 20% in many years (yes, you will also see some serious loses, but that’s the nature of the game).

Then let’s get to my numbers. I started diligently recording my trades at the beginning of 2018. I know, it is only 2 years of records and it may not be long enough to claim it relevant. But, unfortunately, before I didn’t keep records of trade by trade results. I wish I did record them but I didn’t know how to do it efficiently.

In the 2 years of options trading, I averaged 8% gain in 15 day long trade (average days in trade). That translates into 16.20% monthly return, and 197.05% annualized return. You can go to check my spreadsheet and see all recorded trades and averages. Check my math, maybe I made some algebraic mistakes. But, if I didn’t make mistakes, you can expect definitely more than 20% annual gains. My 45% annual gains are definitely achievable.

1 response to “How much can you make trading options?”

  1. John Bos says:

    I have a $ 50,000 trading fund and I trade covered calls and condors. All trades are weekly. Condors are placed on a set of high value stocks (AMZN, TSLA, SHOP, GOOG, GOOGA, LMT, ORLY, SHW, MELI, CMG and Travelocity). These are chosen as they give me the best premium because of their high share price. I risk typically $5.00 each way and only take the trade if I am making $1.25 premium (25%) and there is less than a 15% chance of going out of the money. Trades are placed Monday morning. Wednesday afternoon I check on them and if any look to be in trouble if so I ditch Thursday morning. I repeat next week. On my holdings I sell covered calls each week or month depending on the holding. 5% or greater per week and 12% or greater per month. I was, before the crash, averaging about $1200/wk (2.4%). I lost 35% in the February melt down but am slowly ramping back up as I feel more confident in where things are going. Of course all I am saying is this has worked for me for 20 months but always do your own research and find a way which is correct for you.

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