What I've learned trading in 2014

I feel a sense of satisfaction with every year that goes by. Every year brings on a different set of challenges as it relates to trading and this year I feel like I’ve learned a lot. Like any professional trader, I will take this knowledge into the new year with one more year’s experience under my belt – continuing to grow and hopefully become better and better at my craft.

Here are a few things I struggled with this year, as well as some things I need to improve upon:

1. Taking profits too soon - This was a big one for me this year. There were things in my personal life which required my attention, therefore occupied my mind during the trading day. The one thing I’ve noticed is that if there is something lingering in your mind, it will come out in your trading performance – somehow, somewhere.

My goal next year is to separate myself from the things I can’t fix in my life when I’m at my desk. If there happens to be something I can fix, then I will attend to that first, before I sit down to trade. I noticed that my profit taking was directly related to me wanting to get up from my desk and take care of other business; which resulted in me cutting losers when I should (this is a good thing obviously), however taking profit too soon on my winner really affected my P/L over time – NOT GOOD!

2. Not prepping enough before the opening bell – I believe this is directly related to the above issue. I felt that I sometimes would rush my prep period in order just to get it over with. I would follow whatever was hot on Twitter and trade it – not sticking to my rules of finding my own voice and inspiration as I wrote about here.

3. Holding less than normal positions overnight – My days have been pretty hectic lately, so when I sleep I really didn’t want to think about positions I had overnight. Since my main strategy is premium selling, I was short-changing myself by not maximizing the amount of time decay I could have received by holding more positions overnight. Don’t get me wrong, it’s great to end the day in cash and have a clean slate each morning, but this should only be done when the MARKET allows for this, not for when I want to.

My goal next year is obvious – increase more overnight swing holds when appropriate.

4. Write more about my trading – There is something really gratifying about writing down my experiences – both good and bad. It’s almost therapeutic for me and I feel that it is a necessary outlet for my thoughts. Not only for the fact that it might help someone else, but also for the fact that I need to keep a mental journal somewhere so I can reference it in the future.

My goal is to write more, do more videos, expand my options trading course and be more vocal on my Twitter.

5. Remember why I am trading – Honestly, the reason why I work so hard at this game and why I keep at it year after year is because of the one thing it provides: Freedom.  I come from a humble background and need to remember sometimes where I came from, what I’ve been through and where I am in my life. Things could have been so much worse for me, but I will not let that happen. I will strive to reach new levels of success and never give up. Why am I doing this? Because life is more than just working a 9-5 job making someone else wealthy, at the expense of your own happiness.

Where you come from, or who you used to be, or how tired you get some days, or how many times people laugh at you, NEVER stop doing what you believe in, because the pain you feel now is temporary – but if you quit, it will last forever.

Happy New Year everyone. God bless you all.

 

What I've learned trading in 2014

Why should you trade options?

Here’s a question I get a lot, along with all its other permutations: “What’s so good about options?” , “Why not just trade stock?”, etc.

There are a myriad of reasons why I like to trade options, but let me tackle just a few of the main reasons for the purpose of this article.

1. Leverage - Most people have a good understanding of leverage when it applies to other disciplines. For example, if I qualify for a $500,000 mortgage loan with a 20% down-payment ($100,000), my initial investment is only $100,000 out-of-pocket to purchase a home worth 5 times that value. If I rent the property out to a tenant I will get substantially more rental income than I would if I bought a $100,000 house with all cash. Granted, I still have to make the loan payments, but I stand a better chance of getting qualified tenants in a more desirable location.

If I buy an in-the-money call option for $1000 and I think that that stock is going to rocket higher, I will reap the rewards of the call option gaining exponentially more profit than if I owned stock – plus my risk is capped at only the $1000 I paid for the option. Now just like the mortgage example above however, I still need to make “payments” to the seller of the option, in the form of time-decay, but that unfortunately is the price of doing business.

2. Being the House – Not only can I buy options, but I can also sell them, which gives me the ability to play the odds as if I were a casino owner and the market are the people sitting at the slot machines and roulette tables. What a great setup! Of course, like any casino owner will tell you, you will occasionally have someone who will be a larger-than-expected winner – but over time, you will eventually be the profitable one if you keep letting people play the game. Here are some articles on how to do this: http://optionboost.com/members/tag/selling-premium/

3. Protection – Who says that I have to pick only stock or options? I can combine these two investment vehicles to enjoy the advantages of both. Perhaps I want to buy puts on my existing long stock positions, or I want to sell calls on my long stock position to collect some premium (income) as every day passes, or maybe I want to sell some puts to have my stock positions grow when the stock pulls back and I get assigned more stock through the exercise of the puts.

There are many more reasons, but suffice it to say: Options give the investor flexibility to structure just about any scenario as well as the ability to flip any scenario the opposite way to bet against it.

Feel free to shoot me an email on the contact page if you have any questions.

Hope this helps.

http://optionboost.com

 

Why should you trade options?

3 ways to profit from selling puts

I often receive questions about how to properly sell puts, what the risks are, how much money can I make, etc. The truth of the matter is, selling puts is a very risky strategy if you don’t have a plan.

The idea of acquiring stock through selling puts is not new. Many traders have utilized this strategy for income as well as building into long stock positions. Here are a few ways you can become profitable and stay out of trouble.

1. Always have one goal in mind: Reduce cost basis.  If I went out and bought 100 shares of XYZ stock at $10.00 per share and then sold a 5.00 strike put for $1.00, I should be thrilled to own another 100 shares of XYZ stock at a cost basis of $4.00 per share (strike price of the put, minus the $1.00 of premium you collected for the sale of the put).

This is tricky though, because what happens if the stock falls too fast and I’m underwater too much on the put I’ve sold? Well, here’s where you need to know about adjustments.

2. Making adjustments to my short put position simply means “rolling” it down to a lower strike price, or out farther in time, or both. Example: If I sold a 5 strike put for $1.00 and it quickly went against me and went up to $2.00, I could simply close it out and re-sell another put which is lower in strike and further out in time for the $2.00 I need to make back. This is a simple way to make a rolling adjustment, but it does require some skill as when to know the time to roll (try look at support lines going back a few months for a guide).

3. What happens when you don’t get assigned the stock, or you don’t have to make adjustments to your position? YOU COLLECT THE PREMIUM OF COURSE! This is the bread-and-butter of the strategy – you collect a sweet income on all the puts you have sold and the premium (profit) goes straight into your account by expiration).

Hope this helps!

 

3 ways to profit from selling puts