Option Trade Results: April 2009

(Option Trade Results) Had a good month in April.

Total return was a gain of 11.87%. I put on four trades and all four were winners. We had an Iron Condor on the RUT, a Credit Spread on POT, a not so naked Put on C, and a butterfly on USO.

I expect May will also be a good month. I’ve got three trades on already for May and two are already near the point where I am going to take them off for double digit returns.

My goal is to have a 10% return every month. So far I have come very close. But in the stock market things don’t always go your way. We cannot control the market, we can only adjust to what it does. This month I was fortunate that the market calmed down a bit. The last few months have been insane. As things settle and the VIX (Volatility) continues to drop Option Income Selling Trades will do very well.

Trading options for income

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4 Comments

  1. DevonG on May 19, 2009 at 5:02 am

    Why don’t you factor commissions into your profit/loss? As you know, the cost can be quite significant especially on labor intensive trades.

    • Genius on May 19, 2009 at 10:24 am

      Good point. I am actually planning to write about how this is a misconception. Paying $5 or $10 on an option trade when you are making several hundred dollars does not effect the outcome very much. There are still plenty of people out there that are staying away from option selling because someone told them the commissions are too high. I hope to write about how this is not the case.

      Everyone has different commission rates. My rates are $1.25 per option and I try to keep the number of options in my trades as low as possible. For example, an iron condor on the RUT done 3 times, would be 12 options. But do the same trade on the IWM which is just a smaller version of the RUT and you are trading 120 options for the same trade.

      With increased competition amongst option brokers, commissions keep coming down which is great for us option traders. On the other hand, if you are using a broker that is not “option friendly” you can be paying $14.95 per option. At that rate, it’s not worth it.

  2. Aaron on May 22, 2009 at 6:33 pm

    What formula do you use to figure out your monthly returns? Do you take into account that each trade is weighted differently, or do you just add up the ROI’s and divide by the number of trades?

    • Genius on May 27, 2009 at 12:35 am

      The return is a weighted average of the returns for all the trades of the month. So if Trade A is 20% of the portfolio and Trade B is 10%, then Trade A counts twice as much as Trade B.

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