Weekly Newsletter   Challenge account

September 2015 trading, investing, and dividends results

Another month is over and it is time to summarize it and review how my trading and investing did. This month wasn’t good for me from the trading perspective. In June 2015 I created my new options trading strategy, but I was overconfident about so I neglected defense.

I didn’t expect at all that the market could drop 390 points in three days and stay low. I thought that if it drops this fast, it would also recover fast, similar to October 2014 when we saw a huge drop but even bigger V-shape recovery.

The drop left me with a few trades in bad shape and I tried to manage them into closure with a minimal loss. This month I wasn’t successful and one trade ended at almost a full loss.

So I learned my lesson. The hard way.

And I also adjusted my strategy a bit.


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How to Cut Your Grocery Bill in Half – Week Four Report By M with There’s Value
Is this the end for “old media” ? By Integrator with Get Financially Integrated!


 · September 2015 trading results

During the violent days I realized that it was inconvenient for me to manage two accounts with many trades. I was trading on my regular trading account and ROTH account. I had a hard time to manage my ROTH account and be fully focused on my trading account.

I decided to reduce my ROTH trading to have open only one or two trades at a time in my ROTH IRA account. I will be opening a new trade only after the old one is closed.

I also created a stop loss order system using OCO order (one cancel other). I will be capturing 50% of the credit or close the trade if my stop loss gets hit.

To set a trigger price, I will be using an underlying price in lieu of the multiple of collected credit. I will set the trigger price 1% below the short call strike or 1% above the short put strike. When the stop is hit, the touched spread will be closed and I will move on. I may roll the opposite spread down (or higher) to collect more credit, but that’s all. Then I will move on.


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Develop A Financial Plan For Your Life Already By Financial Samurai with Financial Samurai
Living For The Moment – Not Spending It By Sam Lustgarten with Frugaling
How Student Loan Interest Works By Debt Hater with From Debt to Dreams
Good Money Habits as an Evolutionary Advantage By NMW with No More Waffles
A Not so Frugal Opportunity By Weenie with Quietly Saving


Here is my trading result for the month:


September 2015 options trading income: -$1,325.00 (-11.32%)
2015 portfolio Net-Liq: $5,903.77 (-5.36%)
2015 portfolio Cash Value: $7,963.77 (-16.13%)
2015 overall trading account result: -49.57%


Although September wasn’t my worst month it definitely contributed to it. My new trading strategy is now showing a loss. I have three months until the end of the year to improve my results, but I expect this year to be a losing year.

Here are the results of my options trading:

Options Income
(Click to enlarge)

Here are the results of my new options strategy:

Options Income
(Click to enlarge)

I still hold a trade against AGU, but I decided to deal with this trade later and either close it or move it. Besides that trade I now only trade options against SPX.

Here is the entire account value from the beginning of tracking it up to today:

TD Account Value

I hope that my next trading month will be a lot better than those last two months which literally erased all my gains this year. But it happens and it will be happening. You need to be ready for situations like this that you will have a drawdowns at some point.


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Defining my uniform By Leigh with Leigh’s Financial Journey
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 · September 2015 dividend investing results

My dividend investing strategy has been adjusted too this month. I decided to add DRIP to my ROTH IRA account and reinvest all dividends. Before, I used dividends for trading in my ROTH IRA account and after that use trading proceeds to buy new dividend stock. But this process showed up slower than what I expected. And I didn’t want to miss some stocks which are now fairly cheap after current selloffs. And if the market continues selling, many dividend stocks will offer great entry price. With DRIP I could participate on this and be buying good quality dividend stocks as they go down.

I use the DRIP strategy in my other accounts such as Scottrade where I use FRIP dividend reinvesting program. This time I am using DRIP in all my investing accounts and from now on I will be also reporting my DRIPs here.


Dividend stocks added or removed from portfolio:


September 2015 dividend stock buys: none
September 2015 dividend stock sells: none



Dividend stocks DRIP:


September 2015 DRIP: none


Here are my ROTH IRA trading/investing results:


September 2015 dividend income: $70.27
September 2015 options income: -$866.00
2015 portfolio value: $16,442.20 (8.87%)
2015 overall dividend account result: -5.78%


Here my dividend income:

ROTH IRA account value

Here is the entire account value from the beginning of tracking it up to today:

ROTH IRA account value


You may be interested in:

August 2015 YTD Progress Toward Goals By Stocks and options

End of the Month Summary – August 2015 By Alexander Fotopoulos with My Trader’s Journal

Dividend Stocks Do Worse By DivGuy with The Dividend Guy


Below is my dividend income review for the entire year:

Dividend Income
My ROTH IRA dividend income breakdown per month and per company.

 · All accounts

Besides trading and dividend accounts I also have 401k account, emergency savings account, etc., which I do not report in detail. You can review those accounts in my “All Accounts Value” table at the bottom of My Trades & Income page.

My accounts dropped from previous month and are losing -4.36% (up from previous month) for the year. Considering how bad the market was this month I think, this is not a bad result. I believe, that this is just a temporary drop which in 6 months nobody will remember.

What do you think?

How about your investing or trading result?

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Posted by Martin September 26, 2015
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To Raise, or Not To Raise,

When Will The United States Federal Reserve Tell Us?

The world awaits. To raise or not to raise interest rates, that is the question for the United States Federal Reserve. For months now, forecasters and traders all around the globe have been reacting to the hint that the United States will enact their first interest rate hike in nearly a decade. Seven of Wall Street’s top banks were expecting a hike in September. According to a poll conducted this week by Reuters, forecasters were betting on a sixty percent chance that the Federal Reserve was going to raise rates. Now according to a poll taken this week by Reuters, 72 of 93 forecasters have chosen December as the month the prices will lift off. Those that are certain about the hike were also as confident about a rate hike forecasted to occur last June.



According to Fed Chair Janet Yellen, both the global markets and China’s vast stock market selloff were solid reasons to take the wait and see approach. Just weeks earlier she was urging the US Central Bank to raise rates. Now it seems she is making long strides in the opposite direction. So what exactly is Yellen waiting for?

Think of it this way. The United States full growth economy is at around 2.2%. U.S. unemployment has improved by almost 50 and held at 5.5% in February. If the United States had specific financial goals before enacting a rate hike, it looks like most fiscal goals have been met. So why does Janet Yellen keep the cost of borrowing money at virtually zero in her country?

Janet Yellen

What The Federal Reserve might be skittish about is the falling prices of commodities. While China became one of the largest importers of world commodities, their inflation ran sky high. Still China didn’t want to adjust their currency. The truth is the problem for China was exacerbated by the Chinese government trying to hold currency low and fastening it to the American dollar. As Chinese stocks have begun to rally slowly these recent weeks, limp Chinese manufacturing data released Wednesday triggered a drop in U.S. markets. Obviously worries about the state of the global economy are being given more weight than realized.

Increasing U.S. interest rates, will also raise rates on U.S. government borrowings. When this happens there is plenty to be concerned with if you are Yellen. A study done this year by the Center for Economic and Policy Research estimates that increased interest rates it will add $1 trillion to $2 trillion dollars to the U.S. debt factored over the next decade. Naturally, a debt increase of this magnitude could lower infrastructure spending or require raising taxes or cutting government programs. The result would have a negative effect on the U.S. economy.

As Yellen sits in her wait and see holding pattern, fiscal scholars are blogging about how her inactions will cause additional global instability. In some cases, her indecision has prompted outright condemnation. None of the pressure seems to have had any effect on her. As it stands now, The U.S. Central Bank will continue to loan cheap currency at rates of zero to .25 percent.
If you take a look around the globe, it seems many economies are slowing down. Europe is deep in recession. China was not able to make their GDP estimate. Low oil prices spell a coming disaster for Middle East countries, and also Russia and Brazil. Not so in America. The low price of petroleum has helped to keep inflation rates down in the U.S… With inflation held low, the Federal Reserve does not have to rush to raise interest rate at the moment. So they haven’t. If the Federal Reserve moves interest rates higher, it will surly strengthen the American dollar. The higher cost of money, on the other hand, will make it more difficult for the United States to export their goods. It’s a quandary for certain.

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Posted by Martin September 26, 2015


How to create options spreads using delta

When I started trading options a few years ago I used all sorts of analysis, predictions, chart reading, but mostly my trading was based on direction prediction. It was all wrong. No one could ever predict where the market or any particular stock will go nor ends up in any particular day in its life span.

There are many traders out there who use all sorts of analytics to enter a trade. Some use unusual options activity others volatility value, or technical analysis only.

In the past I always struggled with one task, how do you choose your strikes when trading options? You do not want to be too close to the underlying price and you do not want to leave money on the table to be too far away.

I wanted my trading simple and easy. I wanted a process which could be simply defined and repeated every day, week, or month. A system, which has given rules or steps and it is easy to implement.

Lately, I finally created such system. It is so easy that I always question myself why it took so long to create this strategy.

Here is my way of trading Iron Condors or spreads against SPX. It can be used against any optionable stock, not just the index. I trade index only because I want to focus on one trade, one market, be in tune with it and not be distracted by other trades.

Here are my steps.

 · Find Delta

To find delta to trade I use my Cash management strategy. Deltas used in the table are arbitrarily chosen. I simply decided to trade 0.10 delta when the market is closer to all-time high, for example 5% – 10% below all-time high. You can choose your own level. If you want to be more aggressive, you can trade delta 15 or delta 20!

But I look at it this way, if the market is at all-time high, the risk of a decline or crash is higher than after the crash and the market is for example 20% below all-time high.

The table showing deltas I decided to trade is on the Cash management page. If you go there, the spreadsheet inserted in there tells you the current delta I will be trading (see “Traded Delta” line). As of this writing it is Delta 0.10.

 · Example of creating a put spread

  1. Once you know the Delta you will trade, the process is very simple. Go to your trading platform, find the delta you want to trade for the short put strike.
  2. When you find delta 0.10 you want to trade, it will tell you its corresponding short put strike price.
  3. Sell the put option from the Bid column of that strike.
  4. Determine how wide spread you can trade.
  5. Let’s say you can afford to trade 10 dollar wide spread, subtract 10 dollars from your short strike to get your long strike.
  6. Now you know your long strike, go and buy that option in Ask column.

Now you are done. Because pictures are worth thousand words, below is the above described process shown:

Creating put spread

The picture above shows how to create a put spread. You can follow the exact same steps to create call spreads, or if you do both together, you create an Iron Condor.

 · How to choose selling price

Once you build your Iron Condor or spread, you need to choose the selling price. When you create a Condor or spread in your platform, it will offer you a price you most likely will not be able to get. So I typically lower the asking price. For Iron Condors I usually want 6% – 15% of the spread width.

For example, if I trade 10 dollar spread or $1000 wide spread, my selling price will be between $100 – $150 dollars. I start with $150 (1.50) and if it doesn’t execute I lower it a bit, let’s say to $130 (1.30) all the way down to $100 (1.00), etc. This also depends on the delta you are trading and time of expiration. The lower the delta and longer expiration the harder it will be to get the desired price.

If you only trade separate spreads, then I usually go for 5% of the spread width, but not less than $30 dollars (0.30) per trade. The $30 dollars premium is my absolute minimum I am OK to trade for. If I cannot get it, I skip the trade whatsoever and wait for the next week.

 · What to do after you place an order?

After you are done, send the trade to your broker and if it executes don’t forget to place your stop loss order and 50% credit capturing order (OCO order) to protect your trades or collect gains as soon as they occur.

You can place your stop loss order based on the underlying price or spread value. The goal is to get out of the trade quickly before you get trapped in never ending battle with the market.

Hope this helps you to start trading. Let me know if you have any questions or need help. You can also subscribe to my free newsletter and follow my trades I trade in my account.

Good luck!


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Posted by Martin September 25, 2015
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Money For Nothing: Inside The Federal Reserve

I knew that FED was messing up our economy, but didn’t know the extend of it.

This movie is worth watching. It takes 1 hr 45 min but I recommend seeing it. It makes me think that I should trade call spread and omit puts untill all this crashes.



Money For Nothing: Inside The Federal Reserve is an independent, non partisan documentary film that examines America’s central bank in a critical, yet balanced way.
Narrated by the acclaimed actor Liev Schreiber, and featuring interviews with Paul Volcker, Janet Yellen, Jeremy Grantham and many of the world’s best financial minds, Money For Nothing is the first film ever to take viewers inside the world’s most powerful financial institution.

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Cash Management section added

For easy trade setups I decided to add a new section to my menu > Cash Management. This section can help me (and all of you following my trades) to quickly assess how much cash and what metrics to use to create a new trade.


My trading in the past was based on “coulda, woulda, and shoulda”, mostly. You can guess what impact it had to my results. Yes, I was making money, but I was also losing them. Not in the far time ago I doubled my account from $11,000 to $21,000 and as of this writing, I lost it almost all, and I am back to $9,000 level. I am slowly working it back up, but this roller coaster way of trading made me think, how to change my trading to eliminate emotions and make the trading automated or at least semi-automated.

To get better in trading and achieve a consistent winning trading, I worked hard to shape a strategy and set of rules which would eliminate my second guessing, wishful thinking, miracles, prayers, or obituaries from my trading.

I came up with a new strategy of trading options, set rules how to defend my trades and cash management.

This post is based on my cash management post and placed here as a quick reference on how to trade my money in an account. I created this table:


Market off all-time high Money invested Delta Strategy
<5% 40% 0.08 Iron Condor, Call Spreads
5% – 10% 50% 0.10 Iron Condor, Call Spreads
11% – 20% 60% 0.15 Put Spread
21% – 30% 70% 0.30 Put Spread
31% – 40% 80% 0.45 Put Spread
41% – 50% 90% 0.55 Put Spread


It basically tells me how much cash I can use at any time whenever I want to open a new trade and what delta I should use for my short strikes.

For example, if the market is 8% below all-time high price, based on the table above I can use up to 50% of all my available cash in the account for trading. The rest must stay as reserves. I can then create Iron Condors or Call Spreads with short delta at 0.10 (or less of course). The goal here is to automate that process of creating a trade. No second guessing, no predicting, or no opinions.

When you know what to trade and how to trade it, then even a caveman can do it.

If you know that you can trade delta 0.10, you just go to your options chain, find that delta, and that tells you the corresponding strike. Easy!

And of course, after you create a trade, you must follow with your protective order and 50% credit capturing strategy to eliminate emotions while waiting for results. It then all works by itself and you can have a good night sleep.

The chart at the very top is an automated spreadsheet calculating all this for me based on the table above. So all you want to do (if you want to use this as your reference too) is just come here and see how much of your cash and what delta you can trade.

Good luck!

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Posted by Martin September 15, 2015


How to manage and defend SPX Iron Condors

I created a great strategy for myself and I thought that the strategy was completely invincible. And it was running great and I was making money.

I also created a defense strategy in case something would go wrong however, I never expected to use the defense.

Until the recent sell off and market crash.

Then I realized how weak my defense was and how vulnerable I was. I decided not to believe in the crash, not to react and take a small loss. By doing so, I decided to swap a small loss for an even bigger loss I am dealing with now.

I found out, that the biggest enemy during violent markets was myself. Thanks to my emotions I was unable to react or reacted at the wrong time and wrong price.

How many times have you heard or read that a trader must eliminate emotions? Dozen, right? How many times have you heard or read how to do it?

I haven’t heard of any great advice. All was just a gravy beating around the bush and no advice was applicable.

The recent market moves made me to sit down again and think about my defense strategy to make it bullet proof and eliminate emotions, so all trading would happen automatically and without me.

And here are my findings and adjustments to my strategy.

 · 50% credit capturing

This is nothing new. Many experienced traders use this strategy. Tom Sosnoff from Tasty Trade advocates very strongly this strategy of taking profits off the table. Tasty Trade even performed a study which proved that when you take 50% of the original credit, you will be better off. You will hold a trade shorter period of time and you will eliminate a negative gamma effect as the expiration approaches.

Within the same period of 45 days cycle if I capture 50% credit, I can make 2 to 3 trades for about the same credit as the first trade and actually make more money. Look at it this way, if I make a trade #1 and get 1.50 (or $150 dollars) credit, then I can close it in 15 days for 0.75 (or $75 credit) and immediately open a new trade, again for $150 dollars credit, close it again in 15 days for $75 dollars, I still can open another $150 dollar trade for the remaining 15 days in the entire 45 day cycle. If all goes well, I can actually make $225 dollars instead of the original $150. And reduce risk.

Of course the projection above is theoretical and the best case scenario which may never happen. For example Tasty Trade results show average holding period 27 days instead of my 15 days. I could close a trade in 15 days due to a recent drop in volatility. Also the premiums may differ and will not be same in all three trades. But the point has been made. It is safer, you may make more money, and your probability of success is larger.

50% profit capture

In the picture above you can ignore the first column as we do not use that strategy and pay attention to the column 2 and 3. As you can see, we hold shorter period of time, make more money ($1,235 dollars more than in unmanaged trades) while our risk is same.

That’s what we definitely want.

 · Protecting Iron Condors against downside risk

The next step is to protect our trades during sell off, crashes, panic, freak-outs and similar disasters Wall Street time to time suffers. As of this writing, we are heading towards a possible interest rate hike in 7 years. Next Thursday the FED will hold an FOMC meeting and may or may not announce a rate hike or not. Nobody knows. And market may react violently to this event.

It may crash again or it may spike up. If I had a crystal ball I would reposition all my trades accordingly. But I do not have one. I can postpone my new trades after the meeting, but what about the running trades? Close them with a loss? Let them run and risk even bigger loss?

A crash would be nice. I can open many new put spreads collecting fat premiums. But what to do with the existing trades and not to repeat the same mistake of being inactive when I was supposed to act?

There is a strategy to remove the put spread if the price to buy it back doubles the credit received. For example, if we open a new trade and receive 1.50 or $150 premium. I would close the put spread if its price gets to 3.00 or $300. I will limit my loss to $150 dollars only. I can then use calls and roll them lower to collect another credit to offset this loss a bit to make it even smaller.

Now we know, what we want to do. We want to take profits if the trade goes with us and close it quickly if it goes against us.

But how to do it to eliminate emotions?

 · Create closing orders to eliminate emotions

There are three methods known to me how you can protect your downside of a trade – be it just a put spread or the entire Iron Condor.

You can hedge the Condor by adding more long puts to your short puts (for example to each one short put you add another long put, so you will have 1 short and 2 long puts). But with SPX hedging with long puts can be quite expensive and in many cases you may end up with no profit at all.

The second method is to buy VIX calls, but VIX not always acts rationally and in correlation to the hedged index, so I actually see this as adding risk or worsening my risk/reward ratio.

The third method is to take the put portion off the Condor out when the value of puts reach two and a half of the received credit. I like this method better and I am going to use it.

Why puts only and not the entire Condor? The risk to the downside is bigger than to the upside. I have seen the market crashing down violently many times but never to crash to the upside. There is a saying that the market takes stairs up, but elevator down. If we close puts only for a small loss, we still have calls to play with and by rolling them down, we can make the loss even smaller.

Therefore, we want to place an order with our broker to achieve the following strategy:


  1. Right after a new trade executes we want to place an OCO order (One Cancels Other).

  3. The order will consist of two parts – one closing the entire Condor, the second closing put spread only.

  5. If the price of the entire Condor drops down to 50% of the original credit, the first part of the OCO order executes and the second part is canceled.

  7. If the price of puts rises to two and a half of the original credit the second part of the order executes and the first part of the order is canceled.

  9. If only call spread are left, we lower them to collect more credit.


Since picture is worth 1000 words below are screen shots of how to create above described order in Think or Swim application. If you trade with a different broker at a different platform, you may contact your broker and ask them for help how to create such order. If a broker you trade with doesn’t support OCO orders, then you have to watch your trades mentally and act manually. But that’s something I failed to do myself in the past, so I like to place those orders after opening each trade and forget about it. If you are like me, I would change a broker which allows OCO orders.

The pictures below are based on actual trades I had in place. It was against trade #13, trade #14, and trade #15.

1. Cancel the original closing trade

SPX cancel the original trade

Originally, I had a 50% capture order in place. Such trade couldn’t be replaced with an OCO trade, so I had to cancel the old trade order first.

2. Select the trade to be closed for profit or loss

SPX selecting all legs

Then go to the “Monitor” tab, select the trade you want to close for a profit or a loss, highlight all four legs of the Iron Condor (yellow highlight), right click on the selection and from the menu select “Create closing trade > select the top option to buy back the entire Condor”.

3. Modify the closing ticket

SPX ticket modification

The closing order is added to the trade ticket. Change the “Single Order” to the OCO in the lower left drop down menu. Also change the limit debit price to 50% of the original credit. If you originally received $80 premium, change the price to 0.40 limit or $40 debit. In the example above I has a trade which I wanted to close for $10 only as this was a 5 dollar wide spread only. Change TIF (time in force) to GTC (good till canceled).

4. Add put spread to OCO

SPX puts closing only

Go back to the “Monitor” tab and go to the same trade. This time, instead of selecting all four legs, select (highlight) puts only.

5. Create OCO closing trade on puts

SPX puts closing only

Right click on your selection and from the menu select “Create closing order” and select the top line to buy back vertical spread. This is a similar step as in number 2 above.

6. Modify the added closing trade

SPX puts closing only

The new vertical spread closing trade is added to the order ticket as shown on the picture above. Now, change the limit price to the double of the original credit. In the example above I originally collected 0.50 or $50 premium, so my trade above is set to 1.00 or $100 debit (Note, I changed this to 2.5 of the credit, so it should be 1.5 or $150 in my next trades). Change the LIMIT order to STOP order from the drop down menu. Also change the TIF (time in force) to GTC (good till canceled).

Now you can send the order to the broker.

7. Final result

SPX puts closing only

If you did everything as described above, your order should look like the one on the picture. You should have two orders linked together. For example the highlighted Iron Condor is currently trading at 1.474195 (see the price next to the “WORKING” tag. The highlighted order says, that if the price drops down to 0.70 the entire Iron Condor will be closed and the put spread order will be canceled.

If the price of the put spread rises at or above 2.80 the put spreads will be closed and the first order to close the entire Iron Condor will be canceled.

 · Rolling calls

When the puts spread is taken away from the trade at a loss I roll down my calls. If the puts are taken off with break even or gain, I just place a buy order on the calls to buy them back for the desired 50% total gain.

For example, I had a trade where I received $140 credit. My 50% credit capturing strategy would dictate to buy back the entire Iron Condor for $70 dollars. During the volatile market my puts happen to be closed for $35. So I placed a buy to close order for calls for the remaining $35 dollars.

If my puts are taken off for a loss instead, I then lower (roll down) call spread to collect additional credit. I roll calls down with the same expiration and I do it a week prior to expiration (usually on Monday/Tuesday). This allows me to collect additional $40 – $50 dollars to offset the loss.

For example, if I originally collected $140, my stop loss is placed to 2.5 times (updated) of the credit higher, thus to $350 (or 3.50). If the stop loss trade executes, my loss will be $350 – $140 = $210. If I lower my calls down and collect additional $50 dollars, my loss will be $160 or 18% (860 total risk). Instead of losing the entire risked amount of $860 dollars, with this strategy I could limit the risk to $160 only.

What if the SPX price slices thru both put strikes?

This is tricky to deal with, in this case you have to assess whether the market recovers or not. Hard to say. If it does recover, all your adjustments will go against you. If it doesn’t you salvage your trade. So you decide what you want to do.

If that happens and there is no prospect of recovery, All you can do is lower you calls to match your puts. It is called an Iron Clad trade. Let’s say you have the following put spread:

– 1950 puts
+ 1940 puts

You ten roll your calls lower to the following strikes:

+ 1960 calls
– 1950 calls

With this strategy you collect more premium. You may collect 50% or more (if done in time) to offset majority of your loss. I had a trade where I risked $1,500 dollars total. With the original credit and Iron Clad adjustment I could collect additional $980 dollars, the trade recovered a bit and closed with short put ITM only leaving the long puts OTM for partial loss of only $200 dollars. With all the collected credit the trade was a winner ($980 – $200 = $780 profit).

 · Conclusion

With the closing OCO orders as described above I will be able to capture profits if they occur and close potentially losing trades when the losses are still small before they become big. Remember, there is a saying, “if you are not willing to take a small loss now, you will take a mother of all losses later.”

The protective trade above will eliminate my guessing whether the market recovers or not. It will eliminate my emotions, hope, wishful thinking or prayers from trading. With those order I take a small loss compared to the entire risk. I trade 10 dollars wide spreads, thus I risk $1,000 dollars for the entire trade. With the closing order I limit the risk to approx. $100 – $150 dollars per trade. And that is something what we can afford if the market goes against us.

We can take the released cash and sell a new Iron Condor with better strikes and offset the loss. If we lose $500 or even $1,000 in one trade, we basically liquidate a year of profits. So why let our guesswork and hopes whether the market returns back up or not ruin our trades, right?


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Posted by Martin September 07, 2015
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How to use cash when options trading during market panic or complacency

This post is about money management I apply in my trading account to be aggressive and safe when trading and be a true contrarian when using cash for trading options.

When I modified my strategy I was so confident that it was an invincible strategy that I decided to go all in when trading. Yet Mr. Market taught me a lesson. Even with a great strategy it is a bad idea to use all cash available. What if something unexpected happens?

I preach to use only up to 70% cash in my posts or newsletters but I have never followed that advice. And I pay dearly for breaching that rule whenever the market turns against me.

I realized during this market slump that this has to change.

I was thinking and searching for a way how to manage my money in the trading account.

 · How retail investors think

Unfortunately, regular investors tend to act irrationally. When markets are rising they are buying with all their money, and when markets are panicking they are selling everything they have bought at the top.

SPX Overhead resistance

As the chart above indicates, investors, who bought their stock at the top, when the market was at 2100 – 2130 level are now scared and hoping for recovery. When the market recovers, they will sell eagerly to get out break even.

Unfortunately, they have it all backwards. And I understand that. If I tell you that you should be actually buying and not selling, many will say, “but the market may crash even more and we can lose even more!”

Yes, the market may crash more, but to me it would be even better opportunity to trade more. And how long would a market stay crashed?

Of course, your actions should depend on your strategy, time horizon and type of trading or investing you apply.

If you are a long term investor, buying great dividend stocks, and having next 25 years to wait, then definitely, this is a time you should be buying. As a trader, I have a slightly different approach, yet similar.

Should I stay aside and wait for the market to calm down? The answer is a resounding NO! As a premium seller, this mess and high volatility is a great time to be selling more options for more premium. Staying aside for the market to calm down is wrong again.

You should act as Karen the Supertrader, who actually loves high volatility, who lives trading more during the time like this. When Tom Sosnoff asked her about VIX and what value she loves to see, she mentioned to have VIX ideally at or above 20. When, now we have VIX at 30 it would be the best for her to trade.

Watch the video below what she says about volatility:



It is difficult to be trading and stay in the market when everybody is running away, panicking, screaming, and predicting the end of the world. It is the hardest part ever. I myself had a stomachache when trying to convince myself to stay in the market and actually open new trades. My whole mind and body was telling me to get out and stay out until the market calms down.

Yet it is a wrong approach.

So, how do you trade in the market like this?

 · My money management during panic or complacency

The hardest question for me to solve was how do you stay solvent when markets go belly up so you can stay in the market and actually be buying more stocks or selling more options for premium? If you ask long term investors, many of them are all in when investing and when the market tanks they do not have enough cash to actually buy more.

This was exactly my problem too. I love the current market environment when VIX is at 30 and in my posts I encouraged readers to invest or trade more. But I couldn’t do it myself because I didn’t have enough cash.

The second issue I was facing with was that some of my open trades were in bad shape and I wanted to roll it rather than closing it. But I couldn’t do it, because I didn’t have enough cash.

Then I found on Facebook an information about money management from an experienced trader. I was thinking about it and realized that it was exactly what I was looking for.

In plain English, the strategy is simple:

If the market is high, invest only 30% or 40% of your available cash. If the market is low, invest up to 90% of your cash.

The best way how to determine when the market is high and when it is low is to measure a distance from the all-time high price. Then the calculation is easy:


Market off all-time high Money invested Delta Strategy
<5% 40% 0.08 Iron Condor, Call Spreads
5% – 10% 50% 0.10 Iron Condor, Call Spreads
11% – 20% 60% 0.15 Put Spread
21% – 30% 70% 0.30 Put Spread
31% – 40% 80% 0.45 Put Spread
41% – 50% 90% 0.55 Put Spread


Today, as of this writing, the market is 10% off (1921.22) of the all-time highs (2134.72). If I use the table above, I can use 40% of all my available cash for trading, I can use Iron Condors or Call Spreads only and the trades can have short Delta 0.08.

Below is a picture of the current setting:

Money Management

As the markets go lower during panicking I can trade more money and be aggressive (higher delta). Why? Because the risk is in the upside rather than downside. If the market falls 40% or 50%, it is more likely that it will go higher than lower, don’t you think?

Same goes with the market at all-time high. You should involve less cash, be cautious (more to the downside).

Of course, now I need to bring my account up to that cash levels and stay trading within those rules.

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August 2015 trading, investing, and dividends results

August is gone and it is time to review my investing and trading effort again.

This month was bad as far as results go. First in my trading account I was getting rid of bad trades from the beginning of the year I no longer wanted. I had a question from one investor why I was getting rid of those stocks when I was so enthusiastic about them in the first place.

The reason wasn’t that I no longer liked them (for example LGCY), but they no longer fit into my new trading strategy. I still continue investing into these stocks in my ROTH IRA account and in my Scottrade account where I use FRIP program and currently reinvest all my dividends into LGCY. In my Motif account I still invest into Conoco Phillips (COP) and plan on adding more shares.

I still expect the energy stocks perform excellent when all this mess ends. That’s why I rebalanced my 401k just today and trimmed gains from REITs, S&P 500 (yes, I was surprised too that the SPX fund was showing a significant profit even after the market slump) and moved it into Energy sector and precious metals funds.


You may be interested in:

Investing: What You Can Control By Jon Dulin with Money Smart Guides

How much I spent on coffee my first three and half years of grad school By Dylan with Mr Modern Millennial

Naturally Frugal? Try Passive Budgeting By Thias with It Pays Dividends

What Is The Point Of Private Banking? By RUDDIGAR SIMPSON with Faithfull With A Few

Investing Series: What is Investing, exactly? By Save. Spend. Splurge.


This month was definitely interesting and scary at the same time.

But it also offered a great opportunity to invest more money contrary to what others said about the market during the selloff.

If you are a long term investor, this is a great opportunity. And don’t be worry seeing your portfolio down a lot. It is OK when everybody is selling and panicking that your account will be down. But as a dividend investor, it doesn’t matter. If you hold good quality stocks, they still pay you dividends every month, or quarter and if you are reinvesting dividends (dripping) you are buying cheaper and cheaper every day the market drops more.

And that’s what I love!

And if you are a trader, yes, it may be a bit frustrating if you get caught on the wrong side of the market, but if you have a plan and strategy, you do not have to worry either.

August brought bad results a few-fold. Once when I got rid of the bad trades, second, when I got caught in bad trades which turned against me quickly, and third, by increased volatility which sent even good trades into a red territory.

 · August 2015 trading results

There was a significant lesson to be learned in my trading account.

I had a great strategy which worked so well that when SPX started falling I refused to believe that the drop would go so far that my trades would be in danger. I was in such disbelief that I didn’t act and didn’t close suddenly endangered trades.

Now I am stuck in trades which I am forced to take loss and manage them carefully to minimize that loss. Originally, all those trades were profitable and showing more than 70% profit before the market collapsed.

You probably already see the pattern here and what my lesson was.

Yes, I waited too long (until expiration) and let those trades turn into losers. And yet I refused to act and close those losers before they turned into even bigger losers.

Modifying my strategy

To avoid this mistake I decided to apply a 50% credit capturing strategy. What is a 50% credit capturing strategy?

Per Tom Sosnoff and his Tasty Trade study it is actually more profitable to take 50% of your gain off the table and move on. For example, if I originally open a trade and collect $180 credit, I will be better off closing that trade at 50% of that credit (pay $90 to close the trade) and move on. Yes the total credit received will only be $90 instead of $180, but the probability of profit is larger.

Why is it? The main reason is that this typically occurs around 15 days to expiration. After that the gamma risk starts increasing and the trade may turn against you. So not only I will block my money for only around 15 days instead of 45 days, I will be able to trade more often.

Tasty Trade

At first I refused to use this strategy as I was looking at credit size but later I realized that if I will really be able to close a trade every 15 days, I will be able to make 3 trades instead of one in my 45 day cycle. If each will be $90 credit, I will actually make more money than with only one trade.


You may be interested in:

How to Start Investing When You’re Young By John Schmoll with Wise Dollar

Should We Consider Giving Our Kids An Allowance? By Money Beagle with Money Beagle

5 Steps to Financial Education for Adults By Evan with My Journey to Millions

How Do You Invest When You Don’t Have Much Money? By DivHut

Step 2: Create a Passive Income Stream By Bryan with Just One More Year


My August trading results were not as I would like them to be. Partially due to closing old trades with a loss, partially due to volatility, and partially due to a few of my trades being now ITM and showing a loss.

But I am positive and understand that a drawdown is a part of the trading business and that I will be able to move over it and have more profits than losses.

Here is my trading result for the month:


August 2015 options trading income: -$3,417.74 (-29.20%)
2015 portfolio Net-Liq: $6,238.30 (-27.95%)
2015 portfolio Cash Value: 9,495.80 (-26.55%)
2015 overall trading account result: -46.71%


Although the results are not anything great this month, I believe I will be able to manage this account into a positive territory later this year.

Here are the results of my options trading:

Options Income
(Click to enlarge)

I also write about my new SPX trading strategy selling spreads for a premium, mostly Iron Condors. Many times I mentioned that the strategy worked well so far and makes me money. You may ask, why is then your account down almost 50% if your trading strategy is making you money?

The reason is a consolidation of my account I decided to take. I decided to close losing trades instead of rolling them and dragging them behind me like a steel ball on a chain. I also didn’t have enough money to drag those trades further and I wasn’t willing to commit the rest of my money for that. So in July but mostly in August I closed those trades.

However, here is my trading journal to show how the new strategy performs.

Here are the results of my new options strategy:

Options Income
(Click to enlarge)

I still hold a trade against AGU, but I decided to deal with this trade later and either close it or move it. Besides that trade I now only trade options against SPX.

Here is the entire account value from the beginning of tracking it up to today:

TD Account Value

 · August 2015 dividend investing results

Since I decided to trade my new options strategy to trade it in my ROTH IRA account too, this now has impact on the account volatility. The cash value is now swinging up and down more than when I only held stocks.

However, my primary goal is dividend investing in my ROTH IRA account.

This month, I only traded options against SPX and I had no new stock addition or removal from my portfolio. The portfolio is down because of some oil exposed companies I added in the previous months. I still will be accumulating oil and energy companies to my portfolio if my money management rules allow it and as long as those companies will be depressed.


Dividend stocks added or removed from portfolio:


July 2015 dividend stock buys: none
July 2015 dividend stock sells: none


Here are my ROTH IRA trading/investing results:


July 2015 dividend income: $91.75
July 2015 options income: $0.50
2015 portfolio value: $15,101.29 (-15.33)
2015 overall dividend account result: -13.46%


Here is the entire account value from the beginning of tracking it up to today:

ROTH IRA account value


You may be interested in:

August 2015 YTD Progress Toward Goals By Stocks and options

End of the Month Summary – August 2015 By Alexander Fotopoulos with My Trader’s Journal

Dividend Stocks Do Worse By DivGuy with The Dividend Guy


Below is my dividend income review for the entire year:

Dividend Income
My ROTH IRA dividend income breakdown per month and per company.

 · All accounts

Besides trading and dividend accounts I also have 401k account, emergency savings account, etc., which I do not report in detail. You can review those accounts in my “All Accounts Value” table at the bottom of My Trades & Income page.

My accounts dropped from previous month and are losing -6.25% for the year. Considering how bad the market was this month I think, this is not a bad result. I believe, that this is just a temporary drop which in 6 months nobody will remember.

What do you think?

How about your investing or trading result?

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Posted by Martin August 31, 2015
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Buy and hold, sell? Well buy more! How to deal with China Crisis

The futures are down big and Tuesday opening will be another rout as many investors will rush to exit selling their stocks.

If you are one of them, you are making a big mistake.

As I wrote some time ago, you always need to have a plan and remember your trading strategy, but most importantly have your time horizon on mind when rushing towards exit.

If you have 20 or more years ahead there is absolutely no reason for panicking and selling any of your stocks. There is also no need to reducing your contributions to your 401k retirement account or moving it into cash.

A lot of investors are now nervous fearing that we will be repeating 2008 collapse and they panic. But if you didn’t sell your stocks three weeks ago, it is already too late selling now and you will be selling low. And maybe a few days or weeks later you will end up buying back high.

Unfortunately this is what majority if investors or even traders end up doing. Sad.

It takes a lot of guts to act contrarian in times like this when everything is falling apart around you and talking heads are predicting the end of the world. But that is something, you really want to learn! You want to learn ignoring gut wrenching behavior sitting in front of your computer screen, following every move, get emotional and actually learn to act the right opposite.

It is a long lived market cliché, but it works. When all is red out there, when all people panic out there you want to be buying.

You may have heard that this time it is different and that buying this dip will not work.

It is not different. People are same as they were many years ago and their behavior is always the same. And it is people who participate, behave, and panic in the markets. And so you do not want to get influenced by the crowd hysteria and stay above the herd.

In times like those we are undergoing always look back and see what happened in the past.

In 2008, or 2003, or 1987, the markets collapsed. Yes, it was painful. But how those collapses correlated to your investment strategy and time horizon?

In 2008 the market collapsed from 1500 level (SPX) down to 600 level. Then it took about two years to recover all losses. Two years! And if you were buying dividend stocks, for example, you actually doubled or tripled your money as of today.

If an average collapse and recovery take about two to three years, what is it compared to your 20 year time horizon you have available? And if you do not have that time, you probably do not have such big exposure to the stocks anyway.

Panicking in this market is irrational and wrong. If you are about to do it, you will lose money big way. Instead, calm down, review your available cash (you have some free cash, right?) and start buying some good stocks. But do not use all of your available cash. Buy small, step by step. For example, make a rule that you would buy a small position every Tuesday. Or buy anytime your selected stock drops by a certain percent. You will see, how beneficial your investing will be.

Good luck!

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Posted by Kristen August 26, 2015
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Credit Not Money Rules Today’s Global Markets

Money may not rule the world, but today’s news headlines would have us all believe that credit does. After a glum day for global markets on Monday, China stocks tumbled an additional seven percent Tuesday morning.

Chinese markets are in bear territory. The Chinese stock market has been on a roller coaster ride for the past two months which has experts asking “what is going on in Shanghai?” Stalled Beijing construction projects, depressed auto sales, global economic problems since 2007, all have played a small part in the Chinese market adjustment. Should other world economies be concerned?

Imbalances can’t go on forever, right? If you are Greece, you might answer “yes.” The Greek Economy Minister Giorgos Saatsakis announced a few months ago that Greece would default on its payment to the IMF. The IMF International Monetary Fund loaned Greece over $264 billion at today’s exchange rates after the 2008 market crisis. Greece, Europe’s epicenter of debt, continues to operate their economy using an astounding sleight-of-hand. While the bailout money was intended to pay down Greece’s international debt, the Syriza party did not use it in this manner. Instead, they promised their citizens that they would renegotiate new bailout terms. Why pay a creditor when you don’t want to? An excuse was needed of course. Greece opened up their hands and asked fellow Euro countries to give them more money for what they now refer to as a charity for their “humanitarian crisis.”

The Western half of the globe also runs on credit instead of money. While the United States has been preaching that China’s undervalued currency was in need of an adjustment, China’s response was to gobble up U.S. Treasury bills to strengthen their dollar. While the rest of the world singles out the huge American fiscal and trade deficits and blames this situation on global economic instability, other countries have been procuring American debt.

According to the CIA Fact Book, Luxembourg owns $144.7 billion in U.S. debt. Luxembourg offers tax-free banking to all. Of course, it has become a banking ally of many global companies including Apple. It is well known that Apple’s proceeds from Itunes downloads are funneled through Luxemburg banks to avoid U.S. taxes. Now Luxembourg is beginning to battle its market problems.
Let’s not overlook Belgium, who also has purchased a large share of American Treasury Bonds and other U.S. debt. A nation of bankers, Belgium’s government, has been shrewd in offering superior tax breaks for foreign companies, kept under a veiled secrecy.

There are other ways to own U.S. debt. Russia has been successful in converting oil exports into U.S. Treasury bonds, and Brazil has followed suit.Here is where our story comes full circle. While most countries have not invested in China, Brazil has invested heavily in Chinese markets. China imports massive amounts of raw materials like iron ore and crude oil from Brazil. While Brazil’s political problems are making headlines this week, Brazil’s economy has been struggling the past twelve months. The Bovespa stock index has dropped 21 percent and the Brazilian commodity index has declined. The devaluation of China’s currency will make matters worse for Brazil.

With weak growth in emerging markets, and decent growth in America and Europe the Fed is destined to raise rates. This is bad news for struggling countries with growth numbers. China is creating the drag and plunging their trading partners with them. It used to be that money made the world go round, but today it is credit that keeps the global market turning.

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