Recently I have become an avid reader over at Seeking Alpha. I find the analysis to be good, varied, and I like the more personal takes by the individual contributors than what you typically see on an investing website. It is my current go-to for analyzing stocks. My favorite types of posts at Seeking Alpha are the monthly or quarterly portfolio updates (Dividend Derek’s are one of my favorites). It’s great to see what actions people are taking with their investments and how they are performing. While I am not going to go over each and every options trade I made this month, I plan to go over some of my performance metrics and my strategies.
October was my first full month of options trading. Overall, I was able to net $723.57 across my various portfolios that I am now trading options in. The market was down over the month, with S&P 500 pulling back 2.5%, so to generate that kind of “revenue” in my first month highlights one of the key advantages to being an options trader – there is money to be made regardless of the direction of the market, even if it doesn’t move at all!
I am currently splitting my strategies in two. One is to trade mostly credit spreads in margin accounts and the other is to sell cash-secured puts & covered calls (i.e. “the wheel” strategy) in non-margin and IRA accounts. The margin accounts are focused on building cash to increase my trading capital and the other accounts are focused on investing profits into stocks for future growth or passive income via dividend stocks. Almost half (46%) of my profits came from the margin accounts despite only representing 11% of all my portfolios combined. The profits from options trading in my margin accounts generated a 3.5% total portfolio return (41.4% annualized) and the other accounts generated 0.5% total portfolio return (5.4% annualized). It’s worth noting that the non-margin accounts have the majority of their funds invested in stocks and much less in cash than the margin accounts, making total portfolio return potential from options trading limited.
Going forward I am looking forward to continuing to learn new strategies as well as perfect the ones I am using. I am very happy with my performance thus far, especially in the margin accounts. I anticipate better performance in November in my non-margin accounts as I have more contracts expiring this month than last, allowing me to realize those gains. In the past few days we have seen a huge move up by the market, which is generally good for those accounts currently since I have more short Put positions (bullish trades) than Call positions (bearish trades) currently.