From Options to Bitcoin

I drafted this post sometime around MAY 2017 and haven't returned. It has been quite some time.
Personal development and experimentation with my personal system for profitability continued in that time period.

LET US BEGIN AGAIN. Here are my seven crucial rules to the "game" when it comes to options.

1. Remember the market is irrational.

2. Leave some cash!!!

3. GET IN. GET OUT. Set the exit points right away.

4. Don't hope to recover. Get out NOW.

5. Keep some cash.

6. If the trade doesn't happen at your predetermined price, leave it. DON'T CHASE

7. Buy options with high volume and a longer term view!!!

Before following these, I lost $412.04 in my regular trading account. I then moved some small funds to my Roth IRA throughout the year as I followed these rules. I managed to achieve a 15% gain in my retirement account from a few stock positions and options trades. You might say but that's less than what the S&P gained in a year so you didn't really beat the market and you'd be correct.

However, it should be noted that I started the retirement account in the middle of March and lost only $33.04 with options after using my self imposed rules. Going into 2018 using these same rules, I will be able to do more than beat the market once I gain enough disposable income to trade options again.

For now, I reside in the world of bitcoin, cryptocurrencies and other blockchain assets where significantly more gains are possible. Take a look at the video below for a quick introduction to this revolutionary technology.

Now take a look below at what'shappened in just one week!

So if you haven't already, please enter the world of cryptocurrencies. The technology itself is revolutionary, and it is as if we are in once again in the early days of the internet.

Leave a comment if you'd like to know more.

HAPPY NEW YEAR!!!

Too Many Trades

I seem to keep falling into the trap of too many trades.

Though the positions I enter do appreciate in value, by the time I buy and sell the options and then buy and sell another one, commissions and fees have already eaten up the gains.

As a result, I'm going to restrict myself to entering no more than three positions at a time.

But when I do, I will risk more of the account value so as to benefit from the percent gains.

Since last week, the following trades have occurred.

Again here is the overall market gain for the account.

And the net gain for the account.

For those counting that's $70.80 in additional commissions and fees since last time.
This means I'm pretty much back at the beginning for the second time.

Maybe I should set up a brokerage firm.

Win Some, Lose Some

Since the market was closed today for Good Friday, here's an update. I'll simply screenshot my trading history instead of typing it out.

Here it is for the past 10 days:

Hopefully that's legible enough for you to read.
As you can see, there's quite a bit of trading going on. Just how much?

First a look at the total account market gain since I started trading again:

Then a look at the total account gain with commissions and fees included:

As the difference shows, commissions ate up a whopping $166.78. The brokerage company has made almost 3 times what I have!

This kind of a thing is only a problem with a small account size. Remember we only started with $200.

And here's the current account value:

By the way, if you're astute you'll notice that an account that started with $200 and has a net gain of $61.22 doesn't add up to a value of $263.21. That's because I actually had $1.99 sitting in the account from my older days of attempting to trade options before depositing $200.

Hopefully successes continue to outnumber the failed trades and the account can move into the $300 range.

Back to Square One

The last post said the account value was $285.07.

Since then I've:

1. Bought an F May 17 $12 call @ 0.19 that was sold @ 0.16,
2. Gotten rid of the MU May 17 $28 call that was bought @1.97 for $1.73. 
3. Bought two MU May 17 $26 put @0.56 and 0.41, only to unintentionally sell them both @0.46 from the execution of an improperly set trailing stop. 
4. Sold the VALE Apr 17 $9 put that was originally bought @0.38 for 0.56 then bought a May 17 $9 put @0.52 only to sell at 0.56 two days later. I still thought VALE would head down based on support and resistance, but I wasn't able to look at the chart before determining a price point for entry. Because of this, I paid market price for that same put @0.49. It's currently sitting at a $22.14 net loss. 
5. Bought a GE May 17 $30 put @ 1.09 which sold later @0.89. I forgot set a trailing stop so the loss was greater than I'd like

So with all those trades, commissions and fees ate up $60.65. Add that to a market loss of $34 (which includes the current open VALE position) and the account now sits at $190.42

Got a few pending orders, but essentially, I'm back to the beginning.

No More Weeklies

So last time I mentioned that I "exchanged" an April $41 put of AT&T for a March 24 $43 call because I disagreed with the price direction. I only paid $9 for the position since the contract price was $0.09 and each contract is worth 100 shares. I did not place a stop loss because for this size account I chose to use $10 as the risk amount per trade (minus commissions and fees).

One cool thing I am able to do with my broker is simulate a position, so I did that for the April $41 put right after I sold it. Today, after market close, it is sitting at a $20.00 net gain while the March 24 $43 call will expire worthless.

The main difference between the two is this: one is a weekly option and the other is a monthly option. I have always preferred monthly options over weekly ones, but as a confirmation of what works best for me decided to try the weekly once again. Turns out I am better at seeing longer term trends than short ones, and I like it that way.

I bought an MU May $28 call yesterday at $0.97 per contract, so the total cost basis after commissions and fees is $112.04. The direction was originally determined from technical analysis of support and resistance, but after placing the trade I realized that MU actually releases earnings after the market closes. Even though the contract expires in May, I immediately placed a trailing stop order in case the market disagrees with the trend direction because of an earnings miss, lower guidance, or whatever else is on the market's mind.

Turns out they did well. So well the contract rose to a high of $2.83. The trailing stop executed at $2.63. I believe it will rise in the coming weeks as long as the market permits it to so I bought back in at $1.97. It's currently worth $1.87 at market close. I'll hold it till the price of MU comes close to $32 or the trailing stop activates.

The VALE put without a trailing stop or stop loss recovered but is not in-the-money. I'm glad I made that a monthly option and not a weekly one. Going forward, I'll post screenshots of my account and positions like I used to, so I don't have to explain so much.

And just to summarize. The account started with $100, and I added $100 more so we can say it started with $200. It now has a value of $285.07 after a combination of winning and losing trades and $45.42 in commissions and fees.

Cha-Ching?

Quick update.

My brokerage account is active again.
I deposited $100 for regular trading of options just to confirm some suspicions on a strategy going forward and $600 in my Roth IRA account.

On a good note, it's only been a week, but other than the money spent on commissions, the Roth account is doing excellent. Eight total positions open in carefully selected dividend stocks with a dividend reinvestment plan (DRIP) set up and the net gain (commissions included) is sitting at $31.41 as of this writing.

For the regular account, I've selected 7 high volume low priced stocks after considering the Barchart lists here and here for several days. For all seven of the chosen stocks, I'm keeping my trade decisions simple by identifying the support and resistance (S&R) lines. By choosing the monthly S&R as major decision points and weekly S&R as minor ones before drilling down to the daily chart, it makes it easier to identify ideal points of entry and exit for a particular trade.

I wasn't sure how much my commission on options were, so I made two bogus trades. I call them bogus because they were out-of-the-money weekly options trades lacking logic for their entry. A recent acquaintance had very passionately argued the probability of multiplying $100 into something around $10,000 within a few months using the same logic I used quite some time back, so I wanted to show just how often and how much you would have to be right on your trades in order to nullify the effect of commissions.

The first trade was placed for a T Mar $42 put on March 9. At the time the stock was trading around $41.8 and the option price as $0.33. There was no logic to this trade, so a trailing stop of $0.10 was set. This is because commissions are around $5.00 per trade (plus some change for fees as I found out). For a $100 account, this is already eating up 10% of the balance when considering both directions of the trade. I decided since 10% is already going to commissions, might as well just risk 10% of the account per position. The $0.10 trailing stop means a potential loss of $10, which is 10% of the account.

Because a trailing stop was set, there was no real need to monitor the position. Thankfully it executed as planned with a total loss of $20.10 on the account by the next day.

My "challenger" does not believe in setting automatic loss points and thinks you should just have a mental one and execute when it is needed. I disagree, so the next two trades had no stop losses or trailing stops. We used the same stock and an order for an Apr $41 put again at $0.33 on March 10. The order did not execute until March 15, but I disagreed with the trade direction so I sold at a price of $0.31 this morning and bought a Mar 24 $43 call at $0.09 instead. That's a $12.10 loss on that closed trade, but I will simulate and continue to watch the price action over the next month just to see how it would've turned out. Since the price of the new position is pretty much equal to the amount acceptable as a risk, there will be no automatic trailing stop set for it.

The other trade entered on the same day (March 9) was a VALE Apr $9 put at $0.39 limit. The order filled at $0.38 and one week later with no stop loss or trailing stop, is currently sitting at a price of $0.205. That's somewhere around a $27 loss after the commissions for exiting the trade is taken into account. Though a mental stop loss was set, I did not have time this week to continuously watch the price and place the sell order when appropriate. At the risk of even greater loss, I'll leave it for next week before getting rid of it

With 3 straight losses totaling $62.27 so far, hopefully my point has been proven. If you are trading with a small account, watch your commissions and trade with an automatic stop loss. I prefer trailing stops since it adjusts with any potential gains. I'll be putting another $100 into the account and placing careful, deliberate trades next week.

This update wasn't as quick as anticipated. Quicker ones will follow.

Hindsight is 20/20

I suddenly remembered I was blogging about my trading.
Reading some of these posts, it's amazing how stupid and ignorant I was.
20% gains every two weeks? Are you serious?

Actually. I was. Even in 2015 I was serious because that was when I tried binary options. Needless to say that was a failure too. And the reason is simple. Ignorance and Desperation.

Why in the world was I expecting my money to multiply by over 100 times in a year? What I was expecting to accomplish in two weeks took Warren Buffett the whole of 2016 to do. Am I mad?

I say ignorance is a reason because I chose to believe the exceptions could become the norm. In other words, I ignored what centuries of investing has thought the rest of the world. If it's too good to be true, it probably is. I hadn't read or studied enough about trading and investing to realize that my expectations were unreal.

I say desperation is a reason because I wanted to quickly gain back everything I had lost from my venture into real estate. I lightly mentioned it on one of my posts, but the truth of the matter is that I lost A LOT. I mean, sure it wasn't my own money since it was funded with credit cards, but I am obligated to pay it back. With interest. I also lost my source of income around that time, so monthly payments went down the toilet, which in turn affected my credit.

This also goes back to my ignorance. If I truly knew then how valuable my credit was, I wouldn't have taken on the debt. Even if I were to take on debt I would have ensured that I had enough spare funds to service the debt in the event there is no positive outcome from my venture. I had not studied enough about real estate investing to ensure that crucial step.

In 2016, I paper traded for a few months with success and believed I knew what I was doing. The account started with $100,000 and I was able to increase that by about 30% in a month. Seeing these results, a friend entrusted me with $1500. I truly believed I could achieve those same results. Here's an advice. Trading with $1500 does not work the same as trading with $100,000. You can't continue to "dollar cost average" till your trade idea works out. Oh and. Commissions will eat up your gains.

Three months later here's how I ended. $397.39 lost to commissions from trading so often and $743 in actual loss from the trade ideas. Total $1140.39 lost. Left shows loss from each trade and right shows loss including commissions. Click for a larger view if you can't see them.

So. What does this all mean?
I will be trading again come 2017. I will once again put my own money on the line keeping in mind all that I have learned. I will not expect unrealistic gains, but I will take them if they come.
I once read that Warren Buffet had two rules of investing. The first was not to lose money. The second was not to forget the first rule. Those will be my guiding words for 2017.

I look forward to sharing great news. I also look forward to hearing them from you.
Till then, may 2016 end well and have a prosperous and wealth building 2017!!!