Options Trading Income Report – October 2015
Put a mark under “W” because we have a winner this month!
Only two trades this month were made, but both of them worked out for the best. Our friend CLF helped along this month, which I only think is right considering the hard time it’s given me the past couple of years.
Since CLF is at such a low point, usually between $2.50 – $3.25 it’s easy to trade more lots each trade. For example, if I sell five puts at $3 that requires me to have $1,500 to cover the trade. With USO moving between $13 – $16, I can only trade a single put.
What does this mean? It means more $$$ per trade.
Depending on volatility at the time for each of these underlying securities, I can usually receive ~3x more premium for the CLF trade because I’m trading more contracts. Additionally, with Optionshouse’s commission structure, one and five contracts trade for the same rate.
So, this month’s two great trades consisted of selling AND buying again.
On the sell side, I sold five contracts against CLF for $.32/ea ($1.60 total) and bought them back for $.14/ea ($.70 total) for a gross profit of $.18/ea or $.90 for the whole trade. I captured 56.25% of the possible premium in the trade($.18/.$.32) before commissions, and had a 6% return on the amount at risk ($1,500). The rest of the details are below in the chart.
As some of you may (or may not) know, I don’t buy a whole lot of options. However, I think CLF provides a unique opportunity given it’s popularity, volatility, history and current price. I’ll touch on all this in an upcoming article, but if we take a quick look at a CLF chart, you’ll be able to pull out some of my points.
What you see is since mid-July, CLF doesn’t stay below ~$2.50 very long, maybe a handful of days. When CLF starts heading into this range I take a look at buying a call with a strike of $1. There’s a few reasons for this and i’ll break them out in my upcoming article, but I consider it almost a given CLF will move up to somewhere above $3.00 within 10-14 trading days.
The trade image this time around entailed buying a call with a $1 strike with an expiration about six months out. I did this to give myself time to be wrong with my 10-14 day window and give CLF a chance to be profitable.
So, I bought this call for $1.71 and sold it back for $2.15, a gross profit of $.44. That’s a 25.73% return on the $1.71 before commissions. Not too shabby! I can’t think of the last time ANY mutual fund invested in returned this amount!
That’s the quick down and dirty for this month. Below are the details of the trades. I hope your October went as well, or better than, mine.
Until next month, happy trading!
October Net Income: $113.47
Total 2015 Net Income: -$153.71
|Strategy||Stock||Option||Entry Price||Exit Price||Commission||$ Gain/Loss||% Gain/Loss||# Lots|
|Cash Secured Put||CLF||Oct 15 $3 Put||$.32||$.14||-$10.44||$79.56||56.25%||5|
|Long Call||CLF||Apr 16 $1 Call||$1.71||$2.73||-$10.09||$33.91||25.73%||1|