April 2017 Options Trading Update

Cheesy Finance Options Trading

After a weekend filled with exercise with some new skeelers, and a great frugal Saturday morning breakfast with blue (berry) pancakes (ok, it’s more purple…).

It’s time for the first official options trading update. After being motivated by Amber Tree Leaves, with his passionate presentation in Antwerp, I’ve started trading options as of late March (Mrs CF does not care about this at all). I also wrote up the basics of options trading in this post. But, without further ado, here is the April 2017 Options Trading Update.

April 2017 Options Trading Update

Without a good feel for how this work, no clear strategy and just wanting to have some fun. I’ve started full steam ahead (smart? probably not). However, we actually ended the month with a bit of money made! The options trading income for April was €130.

See below for an option trading overview for the  month of April.

April 2017 Options Trading Update

April 2017 Options Trading Update

Monthly Options Trading Income

Monthly Options Trading Income

The Options Trading Strategy

As noted earlier, there was no real strategy for options trading so far (other then a few high level ideas outlined in the initial post on options trading). Primarily as I was trying to find out what works for me and what I feel comfortable with. But I think I have found some rules that I should trade by:

  • Only trade options with stock you don’t mind owning, or better, actually want to own;
  • Use limit orders to write both puts and calls
  • Make sure the strike price is about 5-10% from trading value of that time
  • Trade with expiration dates of about 30-90 days in the future
  • Roll options within 10-30 days from the expiration date if you don’t want to be assigned the shares just yet
  • Accept an assignment of shares if the strike price is acceptable, and turn around to collect both dividend and write call options
  • Trade often and trade small
  • Develop a specific strategy for the stock/options and stick to it!

Oops….

Actually already ignored the above last week and bought/traded options on a share of a company I could normally not consider….. Boskalis (a maritime service provider). Their ex-dividend date was May and it pays a nice €1 per share (it’s a yearly dividend payer). They are not doing so peachy at the moment, and were punished in the stock market by dropping around 10%.

I thought to be smart and bought before the ex-dividend date at a relatively low price for that day. But then in the next week it plummets another 7%…ouch. I’m therefore now trading call options on this stock to recover from the loss in share value (even after the dividend payment is included!). It is going to take some time for this (paper) loss to be corrected with options trading. Dump move, as I don’t want to own this stock for the long term.

The moral of this story, stick to your own trading rules! A quick win can bite you in the a$$ and turn around into a loss really quickly.

Any trading mistakes on your end? How was your options trading for last month and this?

14 comments

  1. Always stick to your rules 😉
    Strikes can vary depending on market situations, and bigger risks yield bigger rewards.
    The mistake I made was writing too much put options on margin which didn’t make me feel that comfortable.
    I’m currently playing with options (amongst others) on Verizon, General Mills, Hormel Foods. These might seem pretty intresting.

    1. Still need to switch broker in order to expand my trading ability. Are using our bank to trade and to learn about the options world. Once I get more serious, we will switch to a broker. But thanks for the hints, need to keep my eyes open and learn.
      And yeah, stick to the rules……. best idea ever 🙂

  2. I don’t know. Investing to me is about actually owning part of a good business. This option trading sounds like gambling to me. But maybe this is my ignorance speaking.

    1. None at all, there is some “gambling” involved, but the idea is that you do this with shares you actually want to own. The options trading gives you the opportunity to either buy at a good price or get extra income on top of the dividend you already want to have. The only risk is that you get more shares than you perhaps want, or that they sell when you don’t. That being said, you can roll the options further in time to perhaps change your odds (and the extra income).

  3. I have some remarks on your rules

    •Only trade options with stock you don’t mind owning, or better, actually want to own;

    Absolutely agree, do not EVER deviate from this. If you follow this rule you cannot lose. You either collect the premium or you get a great stock at a good price.

    •Use limit orders to write both puts and calls

    Absolutely, always use limit orders. The market can fluctuate a lot in a few minutes with options.

    •Make sure the strike price is about 5-10% from trading value of that time

    O no. Your strike price can be very different depending on what you actually want to achieve. Look at AB inbev where I did a put at strike 100 because I didn’t want to be assigned and whendoyouretire did one at strike 110 because he wanted to be sure to be assigned. It worked out great for the both of us. And at the next meet-up I will bore you to death explaining all the fun things you can do by playing with the strike price

    •Trade with expiration dates of about 30-90 days in the future

    Again, this will depend on what you want to do actually. Just as with the strike price you can play with this and make the option fit your specific needs at that moment. That is actually where the fun starts!

    •Roll options within 10-30 days from the expiration date if you don’t want to be assigned the shares just yet

    It depends if there is a dividend date coming but usually you are good even 2 days before expiration date. Off course, you never know what the counterparty will do. Sometimes the counterparty is just plain stupid …

    •Accept an assignment of shares if the strike price is acceptable, and turn around to collect both dividend and write call options

    Yes absolutely!

    •Trade often and trade small

    O no, no, no, no. Remember rule one: only write options on stock you do not mind owning? Well, good stock at good prices are usually not in great supply. For options, you should walk slow and carry a big stick. And then, when there is a nice juicy target swing with all you’ve got. But you are learning at the moment, so small trades might be best now …

    •Develop a specific strategy for the stock/options and stick to it!

    Yes, absolutely. Stick to your strategy. Right up until the moment it is necessary to change strategy because the market has changed … This usually means walking away from righting options until the time is right once again to do it again.

    1. Thanks for that perspective. I’m still pretty new the whole options trading. So I’m trying to figure out what works for me. You got a couple of valid points, will try a few things in the coming weeks and months to get a better feel for it all.

  4. Nice, quite a successful first option month!

    I’ve tried the free version of BUX somewhere last year. It’s an app to easily bet on a higher or lower market price per stock/market/asset in the future. It’s very easy to use, but don’t know all of their options to trade. We didn’t do anything with it because their use is focused on short term gains.

    1. Thanks for the comment, actually had a look at the app this morning, not my think either. I’m still to switch brokers and will likely go for either Lynx or degiro based on what I’ve seen so far.

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