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Making 45% Annually Trading Options Against Dividend Growth Stocks
May 2018 trading, investing, results
S&P 500 2,779.03 +8.66 (+0.31%) Dow 30 25,316.53 +75.12 (+0.30%) Nasdaq 7,645.51 +10.44 (+0.14%)
May finished so fast! I had a very little time to post and update my trading results and dividend investment progress.
May 2018 finished well as we made nice cash trading options and purchased a new dividend stock positions increasing our future dividend income. Click below to read more!
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Entering a trade
A reader of mine recently sent me a question: “…is it possible to show me step by step a trade you have recently made with puts?” I decided that it may be a good idea to write a post depicting the entire process step by step with pictures and show how I decide and place a trade.
Although, it may be difficult to do as no trade is exactly same and there will always be the “human factor” in each trade. I try to eliminate as much the “human factor” as possible but it is not always bad idea to have the judgment the computer doesn’t have. Some emotions and fear is good to have, some trade adjustments may be OK to let run or roll earlier than what a computer would do; and there will never be enough space to show all variations a trade may have.
Trading options is not same for every market. It is different when trading equities and when trading indexes. In this post I will explain why and how I trade options using SPX and stocks.
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Weekly results May 25, 2018
S&P 500 2,721.33 -6.43 (-0.24%) Dow 30 24,753.09 -58.67 (-0.24%) Nasdaq 7,433.85 +9.42 (+0.13%)
This post actually contains results from the last two weeks as my internet modem refused to work last week so I was dependent on my phone only.
Last week trading was good for neutral trading. Opening Iron Condors paid the most as the markets got pretty much nowhere. Last week we rolled a few trades which needed attention and opened a few new trades which mostly ended successfully.
We also collected nice dividends last week and added a few new dividend aristocrats to our account. I consider the last two weeks successful.
If you wish to see details and our results on Net-Liq, options income and new dividend stocks we added to our portfolio, please continue reading.
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Is the market going to fall or rise next?
When we broke the resistance level last week and rallied up to 2742 level on Monday, we basically reached my previous rally target.
There fore I added a “buy” signal to my chart.
Of course, it is not a buy signal meaning I would be rushing to be buying everything and anything at that time but that expresses my bullish bias. I use it to eventually navigate my trades and it helps me to reverse the existing trades if the trend reverses.
Yesterday, I hoped for renewed rally although I knew we reached a Fib target and thus it would be unlikely.
Yet I believed…
And I added my “buy” signal to the chart. Today, I was proven that my original expectations were correct and my new enthusiastic beliefs were wrong.
I am expecting retracement now, so I reversed to “sell” (and I also reversed a few of my put trades into call spreads) to ride this thing down.
But it wasn’t as easy as I would thought. The market was a bit choppy during the day and I noticed that I had a bullish bias although I saw the market as being “bearish” for the time being.
Note that “bearish” doesn’t mean that I expect a bear market or any other catastrophe to happen. This is just a normal short term reversal, retracement, or a pullback after a week long rally. This market needs to take a rest before it continues higher, And I still see this market as bullish which is on its path to make yet another all time high. I do not know when it happens and how long it would last, but I expect it to happen.
And due to a lack of conviction on my side, I was reversing my trades a few times before I decided to leave it as is and trust my observations.
Above you can see my “craziness” reversing my trades from put spreads into call spreads, back to put spreads and call spreads again.
So what’s next?
Well, to my disappointment, the market decided to hold the 2700 (actually 2707) level. It can be promising for the market. We held the level, we stayed above the previous resistance, now a new support… so, we should be good. We may go a bit lower to retest that upper trend of the original triangle we broke from but then we should resume the uptrend, or shouldn’t we?
It is thus promising to see the buyers stepping in and hold this market up. If we were poised for a selloff, we would already crash and followed violently down. It didn’t happen.
My only concern is that we have returned into the sideways channel (see the dashed lines in the above chart). If that’s the case, this breakout will be a fake breakout. Then we will be returning back to 2585 level. And my trades are not prepared for that eventuality. Reversing them would cost some buying power I am becoming short of.
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Weekly results May 12, 2018
S&P 500 2,727.72 +4.65 (+0.17%) Dow 30 24,831.17 +470.97 (+0.37%) Nasdaq 7,402.88 -2.09 (-0.03%)
Last week was good. Our net-liq grew up again as the market went up. We did a few adjustments only of the existing trades. Last week we could close a few “long term” trades (trades which I was dragging along for some time), there fore last week was successful and I was happy about it.
The market was behaving well, we broke out of the triangle and rallied. This could be good for the market and we could rally further although as of Friday we were a bit overbought. On Monday, we may see a small retreat, which hopefully won’t turn into a new sell off. We are on the resistance level and it may not hold. Time will show.
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What’s next?
The market created a reversal hammer candle last Friday and retesting the 2600 support. Since then the markets rallied higher.
Today, we broke a triangle resistance and we also broke above the previous lower highs resistance which I deem as a very good sign for this market.
Now we still have a few resistances to break.
One is a resistance slightly below 2720 and a larger triangle at 2705. If both resistance get broken I expect a rapid move higher to 2800 level. This will be fueled by short squeeze as unbelievers will rush closing their losing positions and those who sold the market (sold low) will rush to chase the market (and buy high).
This can take another month to develop in my opinion which would mark a third or fourth month of recovery (remember my older posts where I posted that in the last 20 years, it took the market 1 to 6 months (or 1 to 3 months in average) to recover a 10% correction and create a new all time highs. If this develops as expected, it would be 4 months of recovery.
However, I also expect that this market has about 2 years (well now only about a year and a half) of bull trend, then we may see a bear market rolling in. One reason is economic data as the world economy is showing signs of slowing down.
I think beginning or half of 2019 the market may look completely different. But who knows, my crystal ball is a bit foggy to predict the market…
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Can you trade options super-safe?
Recently, a fellow investor and trader asked me the following question:
“I don’t want to trade any longer. It’s not that I don’t have time as I am retired and have all the time in the world. But just lately, I have been giving up everything that I am making, and sometimes more. I understand why this is happening and its all due to the volatility. I have a plan and that plan is based on Tasty trade style of trading but doesn’t seem to work right now and so I am fed up. I want to make 1.5% per month, or about 18% per annum. Is that too much to ask for? I think I can get by with 1% per month (12% per annum) as all it will mean is that I inject more capital in my account. With this modified requirement, I think I can get away by looking at the screen less frequently than I am doing now, what do you think? I am thinking of spending few hours a week, if that’s going to enough but it would have to be a strategy that does not require me to “trade”.”
Here is what I think can be a great strategy for this investor and everyone who wants to boost their income but not to trade:
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Weekly results May 04, 2018
S&P 500 2,663.42 +33.69 (+1.28%) Dow 30 24,262.51 +332.36 (+1.39%) Nasdaq 7,209.62 +121.47 (+1.71%)
I am trying to get back on track posting regularly our trading and investing results.
Why are we posting our results and financials when we are not a publicly traded company? Can it hurt our business and me personally? Does it make sense and can our readers be interested in these posts which some people consider boasting? And if it is a boasting, should we continue?
What do you think the stock market is going to do next? My outlook is mixed though. I can see bullish pressures but I also see bearishness in the market. Who will win this battle? Bulls or bears?
And at the end review our investing and trading results for the last week.
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April 2018 trading, investing, results
S&P 500 2,669.91 +2.97 (+0.11%) Dow 30 24,311.19 -11.15 (-0.05%) Nasdaq 7,119.80 +1.12 (+0.02%)
April is over and it is once again a time to review our investing and trading through the month. It was a volatile month when our accounts were tosses around like a small boat in a stormy ocean.
But it was just a temporary storm like it usually is in the stock market. No sell off lasts forever and it will eventually recover one day. All it takes for a small retail investor is to have a plan and stick to it.
And I have such a plan and I strive sticking to it. Although our net-liq is still down, we had a great income this month.
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