Pete’s Options

Wow – February is over for me already and we are still in January!  Due to holidays here in Australia, family visiting at xmas time, etc, etc, I just did not get the opportunity to put on many positions during the last month or so.  As a result, I only had 2 RUT trades on for Feb expiration, and they have now both closed out at my profit targets.  Both were winners (albeit small ones!) so I am not unhappy about that.

The new year now starts back into normal routines, so I am looking forward to a slightly more active March expiration cycle.

Hmmmm, August is all over for me, and the month hasn’t even started yet!!  As can be expected, with this massive rally over the past few weeks (18% over the last 20 days with very little break) my iron condors have been massively hurt.  So, the results for August expiration are NOT GOOD for me!!  I tried to contain my losses as best as possible, but in the end the momentum of the market just went against me all the way.

I had 4 trades for August – 3 IC’s on the RUT, and 1 IC on NDX.  The 1st IC trade on the RUT was the only winner, netting me $115.  The rest were all losers, with the other RUT trades losing just over $200 on each and the NDX being the worst with a loss of $507.

Sometimes, after months like this I feel like giving up altogether!  I suspect that these months happen at least twice each year, and so statistically if I hang in, I should be able to claw back – it still doesn’t help the emotions!  So, my total net loss for the month was $821 (or 6.7% of my trading capital).  Aaarrrggghhh……

So May is over for me now, and as far as results go it was not a good month!  Basically I have now partly paid for the mistakes I made late last year when I sold 2 vertical spreads on the RUT thinking that the bottom was in – how wrong was I!  AND I did not put any stops in place if I was wrong – so in May I closed one of those verticals and took a $616 hit to my P&L.  The only other trade closed in May was my long OIL position, where I made only a very small profit of $34. 

Therefore, my net result for May was a loss of $582 net of commissions.

I was inspired by a post Mojo wrote a few days ago, and also by Bill’s question on this post, to analyse my results for the time since I have been blogging. What I found was very interesting! The question in my mind was “what strategy has worked best for me over the last 12 months? And, what strategy should I possibly use/call my bread and butter?”. Anyway, here is a full analysis of what each strategy has earnt or cost me:

Verticals – $1,074 loss
Singles – $21 profit
Flys – $87 loss
Time Spreads – $1,162 loss
IC’s – $2,206 profit

What do you reckon? Here is a further breakdown of the IC trades, since I have used a few different strategies since I started:

LongIC (around 70 or more days out) – $365 profit
BMIC – $950 profit
LPIC – $694 loss
Normal IC (just putting them on without any particular strategy) – $1,428 profit
60/50/40 Day IC’s (been doing this since December) – $157 profit

So, IC’s are my best strategy – steer away from Time Spreads until I know how to manage them better! I am also not good at verticals!!

I am going to be on holidays with the folks for a few weeks through April, so I have decided not to put any more IC trades on until hoildays are over…

January is now all finished for me, and it was another profitable month!  I had on 3 IC positions for January which all made profits (around $70 to $90 each), and then I tried out that TLT vertical which I exited last night for a loss of $240 – so that means I only ended up with a net $11 profit for the month!!  Oh well, better than a loss…

Yay, I had a profitable month!  Not huge though….  I only had 3 trades that I closed in the December expiration period.  1 trade was an IC which was only marginally profitable ($7 profit before commissions, $8 loss after commissions!) and then there was one good IC which I netted $134 from and then the last one I closed last night which cost me a net loss of $75 – that gave me a total profit of $51 (or 0.4%) net of commissions for the month.

I am happy with that – better than a loss!!

I did not have a good November!  Hmmm, this is starting to become a theme which is a bit worrying…!  Once again, I did not stick exactly to my rules, and so I am now clear that I will not do that again – I made a plan and rules to go along with that plan, so I am going to trade that plan with those rules.  Otherwise, how can I know that my plan will ever work?  I was happy that with the trades that fit my plan (IC’s in this case), I DID follow my risk management rules, and rolled then closed them as required.  This meant my losses on those trades were limited to a degree.

I had 6 trades for November, and all 6 were losers (bit depressing!).  Of those, 2 trades were simply buying insurance (which is not part of my plan) and I closed that insurance as the market went up – boy I wish I had kept them now of course!  Those 2 insurance trades cost me $184 in losses.  I also had  speccie December put spread I put on earlier (which didn’t fit my rules!) and it ended up costing me $261.  The remainder of my losses was $318 which related to 3 IC or verticals which did fit my rules and I lost due to the huge moves in the market.

I am glad I am trading this market, because it is teaching me to be very careful, stick to my plans, and take the losses as I need to.  My total loss for the month including commissions was $763 which represents a 5.5% loss on my trading capital.

It is also worth noting that part of my trading capital has also been consumed with the movements on the FX hedge I have in place for my Aussie dollars in US.  The currency has also moved huge, so that has reduced the amount of actual dollars I have available for trading – probably a good thing in this environment!

18/9/08 – I have now closed out all my positions, and I am all in cash.  It wasn’t a particularly great month for me – I made a loss of $325 (or 2.3%) including commissions – this included closing 4 October positions I had on that I decided I did not want to leave on while I went on holidays, which I had to close during the market meltdown at the start of this week.

The most interesting aspect of this cycle for me was that I had 10 losers and only 4 winners – the biggest loser was $200 on the multi-calendar on RTH that I had rolled forward previously.  I also lost $150 on the 830/810 call vertical of a RUT IC I tried to leg into and had to roll up, and I lost $180 on the 660/640 put vertical I closed out this week after the market had melted down!  My biggest winner was a profit of $340 on the Sep NDX trade, and I also made $140 on one of the September RUT IC’s.  I definately learnt I do not like legging into IC trades!

The biggest dissapointment I suppose was that last week I was looking like bringing in a small profit of around $200 for September, and all my October positions were looking like being fairly profitable as well (if I wasn’t going on holidays, I would still have those October positions on, although I would probably have had to roll a couple of them out of trouble by now!).  On the plus side, I am happy not to have lost much more than I did, especially considering that the majority of my loss related to the calendar trade I should not have had on in the first place.  I did a reasonable job of capital preservation, and I followed all my rules for the month, so I am happy!

 I am seriously considering staying out of the market until after the US elections are done – I am not sure, but I have this feeling that election season could only add to the unpredictability of the market so I am happy to steer away from that at the moment.  I will re-asses that after I return from holidays.

August is now over for me.  I exited my last August options last night – again, it was not a great month.  I had some hangovers from the time spreads last month, and I did not do well again with the LPIC strategy.  I also could not get many of my standard IC trades to work well with the large moves in the RUT.

 I lost (net after commissions) $316 on a 2 contract RUT LPIC trade very early which I only had on for 7 days before it got stopped out, and I also lost $173 on a RUT IC where I had gotten too greedy and done too many rolls therefore putting myself in too much danger.  And then at the end of the month I closed down the EEM time spread (rolled from last month) for a $281 loss. 

Overall, I lost  $698 on a starting capital base of $15k, giving me a -4.7% return for the month.  Not my worst, but not good all the same!

 Lessons learnt:

 1. Don’t be greedy on the IC trades, especially in this environment of large moves both up and down of all the underlyings.

2. Time spreads still don’t work well for me – I would love them to, but they don’t, and I can’t yet figure out why not – I will therefore only papertrade them from now on until I am confident again of what I am doing with them.

3. LPIC trades are not good in this large move environment, so I will stay out of them for a while until the market has steadied for a couple of months.

 Till next time!

Peter.

Hmmm, I did not enjoy July very much!  I gave a few time spread (calendar) trades a go, and none of them have really helped me feel like I know what I am doing there…  I have rolled most of them forward into August (because when I opened them, the August strikes were not available so they were opened with September or later as the back month), which is probably just going to delay the pain!!

 Anyway, I ended up putting 8 trades on, as follows:

 - Iron Condors, 5 trades (2 winners, 3 losers), average winner 7.25%, average loser 12.8%

 - Time Spreads, 3 trades (1 winner, 2 losers), average winner 18.5%, average loser 26.5%

Total loss for the month (including commissions) was $1,285 or a 7.6% negative return.

 As far as what did I learn?  I am still not very good at managing time spreads, and still don’t feel very comfortable with them!  My iron condors did not like this high volatility environment – it was a very relentless downward trend for most of the the month, and the biggest loser there came from the 15% loss on the LPIC (risked $3k), plus another 15% loss on the August LPIC which I was only in for 2 days right at the very end.  Those 2 LPIC trades lost me $919 just on their own.  The biggest timespread loss was $482 on the DIA trade – by trying to follow the trend I just kept digging myself into a deeper and deeper hole, and so by the time I got out, the loss was just too big for me to be happy at all!

 Anyway, time to move on and put that month behind me…