Monthly Report for September +4.7% / +$7,990.50
Well I got caught in the huge reversal this month. At one point I was up +10%, then the massive volatility came in and I put on a short iron butterfly hoping to catch the volatility crush and got smashed in my iron condor. Guess what? The vol crush never happened and cut my returns in half for the month. Ouchy!!
Considering the market I was happy with my returns but frankly got lucky picking up several good reversals on assignments at expiration. For the third time in a year the Fed made a major move Thursday night of expiry royally screwing any trader foolish enough to hold RUT, SPX, etc. until settlement. One friend of mine was 45 points OTM on Thursday only to lose $45,000.00 after the settlement price pushed him 27 points ITM. The really crazy thing? Nothing even close to the settlement price was ever seen Friday morning.
Trade Record
12 trades, 8 wins, 4 losses = 2-to-1 win / loss ratio
avg $ per win: +5,552.63 avg $ per loss: -9,107.63
avg % per win: +40.3% avg % per loss: -43.7%
I moved some cash into safer positions and pulled it out of the market. I’m trading with $140K and feel pretty comfortable with that risk.
Update on Goals for 2008
Health - I haven’t made much progress here. Outside of my lack of personal discipline my radial tunnel syndrome has been killing me. Of course the doctors are still wanting to do surgery. Ummm…. Yeah…..
Give $25,000 to charity - We have given away $11,000 given so far this year.
Produce $250,000 in personal income (outside of my business and retirement) - $250K is still too much for a $175K account. I moved some additional money out of the market. I’m being very careful to focus on putting on great trades and not being concerned about how much money I make. As Dan Sheridan says “focus on the tradecraft”.
Pay off $125,000 of personal debt - So far we have paid down $42,000 in personal debt. I still have a second mortage that I would like to finish paying off but I’m putting this on hold for a bit to reduce any pressure I might feel to create excess income and mistakenly overtrade.
Study for and receive my Series 65 (Investment Advisor) license - Fail. I know, I know I have to stop trading long enough to get my license. Sheez!!
Insanemoney.com - Things are going well. I plan on updating the blog side to include a welcome video, a highlight tab showing some of the favorite posts, and will add some of the trade entries I’m doing without updates.
Raise $1,000,000 of investor funds - Haven’t started yet. I need to complete my license first.
Make 3% a month in options - Check. Made 4.7% for this month.
Teaching - One of the items I’ve identified in my life that I want to do more of is to teach. I really enjoy it and its very satisfying for me. I would like to focus on teaching investing so I’m going to investigate working for a couple of different options houses, the community college, and privately. I’ve been approach to teach one-on-one several times and I think the time for me is right. I’m very focused on teaching the practical versus the theoretic so I might prefer private teaching to institutional teaching.
Lessons learned:
1) I should have scaled out when I hit 10% for the month. That’s a fantastic return and should have been happier with it.
2) While everyone else is playing the “I need to make money game” I’m playing the “I need to protect my money game”. That and staying focused on putting on great trades is serving me well.
3) Although volatility will reverse at some point, in truly crazy markets (like this one) volatility can stay high and go higher for longer than you can stay in the market. Beware!
Plans for October
Keep lots of cash on hand, trade well, and document the hell out of everything. Also, I need to increase the frequency of my posts to keep the emails and forum post coming and my mind constantly evaluating my positions and thinking.
All the best,
Mojo
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All the best,
Mojo
Excellent returns for the month considering what the market has done. What do you think of putting on a calendar spread on QQQQ, DIA or SPY. Buying the at least six months and selling the oct or nov (ATMs)? Similarly, with XLF or UYG.
Thanks.
Jawa
I'm not a big fan of putting on calendars in really high IV. Maybe look into some butterflies to capture the IV decline.
Do you live in MD?
Mojo
Calendars in High IV:
Here is why I think it makes sense. If you look at UYG (should be similar for all of them), the Mar 09 10 calls were going for around 3.70, and the Nov 08 10 calls were going for 2.70 (with UYG at 10.07 in the morning).
The idea being to use the Nov 08 calls to finance the Mar 09 calls. Due to the high volatility, the near term options are priced almost 70% of longer term options. In fact the Mar 09 calls have almost 5 times the time than the Nov 08 calls, but cost much less relatively speaking.
Jawa
I'm not a big fan of putting on calendars in really high IV. Maybe look into some butterflies to capture the IV decline.
Do you live in MD?
Mojo
If you placed the trade when the volatility is low, when volatility rises, you would have gained more on the back month and it will show a profit. So while the pay off graphs might look very pretty with high volatility calendars, they are very susceptible to losses, especially when vols are coming down like they did today.
UGO
Thanks.
Jawa
If you placed the trade when the volatility is low, when volatility rises, you would have gained more on the back month and it will show a profit. So while the pay off graphs might look very pretty with high volatility calendars, they are very susceptible to losses, especially when vols are coming down like they did today.
UGO
for an informative little discourse on calendar spreads, check out this blog:
http://blog.mdwoptions.com/options_f...oose-ends.html
Mark has just completed writing a 5 or 6 part discourse on calendar spreads from the ground up, the link above is to his latest posting, and I think it sums up the issues you are grappling with quite nicely...
Jawa
for an informative little discourse on calendar spreads, check out this blog:
http://blog.mdwoptions.com/options_f...oose-ends.html
Mark has just completed writing a 5 or 6 part discourse on calendar spreads from the ground up, the link above is to his latest posting, and I think it sums up the issues you are grappling with quite nicely...