Option Trading Series #3 – Stalflare

For today’s interview we have Stalflare from Italy. At the time the interview, Stalflare had just decided to trade options and was in the process of setting up a new brokerage account.

Tell us something about yourself.
Hi there everyone! I am a relatively “new” DGI investor from Florence (Italy) having started my journey in December 2014. I have always had passion for investments and the stock market, I guess that thanks to the very difficult situation in finding easy and good places to put one’s money I started reading and studying different forms of investment, and in the end took the plunge and dived in the DGI world.
As double taxation is a major pest for us Europeans, I have started to look into Options for cost basis reduction and opportunities to enter a certain stock at a lower price. To make things easier for me I trade in 3 different currencies on several stock markets.
How did you get an interest in option trading?
Option trading was something that I always looked at with “fear”, after all they are derivates and mainstream news tend to discourage normal investors from using them. As I read a lot of blogs some of the fellow DGIers invest in options too and that was the spark that ignited my curiosity.
What actions did you take to learn on option trading?
I asked fellow bloggers, and some online search. I also started reading those “unread/impossible” chapters of all my finance books from Uni… πŸ™‚
What is your goal/ambition?
Be efficient: tax, cost and commission efficiency are all targets that I am pursuing
How do you describe your style? Did this evolve over time?
Very hard to say… At first I was concentrating on “names”, now I have a more analytical approach to DGI, I am much more cold that I used to be before. With Options I haven’t started yet to trade (I am only paper-trading for now).
How much time do you spend on trading options?
Not a lot, 10 minutes per day to check things, 10 to trade. Mind you, right now the experiments that I am doing are all on the sell side (naked puts and covered calls) all of which I want to expire, regardless of the outcome. I underline “regardless of the outcome” because I am happy to sell a covered call at the strike price even if underlying is higher as I am happy to buy a stock at a price with a naked put even if current price is lower. I only target companies where I am happy to be long so either one way or another I am fine with the results. (this approach might change as I am in process of studying the rolling of Options and so on)
How do you deal with the risk that comes with option trading?
As I am pretty much risk averse the paper trading that I have done has been quite “safe”, which also means really low returns, but I am not fussed about it.
What tools/sites/blogs/podcasts do you read on option trading?
Tastytrade and Optionalpha, plus some blogs of FI (yours in one of those for example!)
What is the size of your option trading account?
Right now zero, the paper trade account is stupidly high but it’s fake money after allo.. .:)
Where do you get inspiration for trades?
From my portfolio. If I own it “long” then it’s something I can trade, or if it’s in my shortlist then I can short the puts as I’d like to own the stock.
Why am I ok to sell? Well, let’s say that the covered call is a strategy to decrease cost basis, so technically I am aiming at letting the option expire OTM and keep the premium. I have of course considered the fact that I might not always be able to do that, but if that is the case I hope I was clever enough to set a decent price that would allow me to reap at least some good gain (15%+ on the average cost). I haven’t thought the numbers yet on that strategy because I need to see what premiums can be reaped and what expiries I can get, but I plan to start trading covered calls on “less core” stocks, so that if I have to sell them I am not ripping my heart out as if I sold a stake in KO or Diageo. I cannot make any real life examples now because I am waiting for my positions to be transferred and see what I can actually sell as a covered call, but as soon as I get around it it will be easy to see if the plan can be put in practice. But please remember here to me it’s not so much on how much money I can make with the option, is about eroding cost little by little and optimising my cost basis. Even a few cents is fine, as long as risks are minimal.
Naked puts are easier under that point of view, mostly because I do not care if the stock “goes under” the strike, the important point for me is to enter at a predetermined price to have a good yield. Clearly if a company is falling apart and stock price goes to zero I am not happy, but in case I’d be long on the stock and not trading options I would have the stock already and the loss priced in, while with options I can always decide NOT TO buy the stock closing the position (and loosing something of course, but not keeping a company that is going pear shaped).
Watchlist usage is a great advantage. They are all companies that I’d like to own but for price reasons I cannot buy. Fine, I sell naked at the strike I desire and wait. Unless the company goes bust I have good outcomes “whatever the weather”, and this is good enough for me. Of course this blocks liquidity so that management has to be though very well…
How do you track your trades and P&L? Where can we follow your results?
Didn’t set up the page yet, it will be on my blog soon, although before that I will publish my Index Fund page a project on which I have been working on for the last 3 months…
What is the worst trade ever you did?Β What is the best trade ever you did?
Unfortunately no answers here for Options, for stocks the worst trade is BBEP (will document soon), the best is the decision to start investing in this way! πŸ™‚
Where/how can we follow your progress?
You can follow me on my site. Any suggestions/ideas are really welcome!
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10 thoughts on “Option Trading Series #3 – Stalflare

  1. Ciao ATL,
    Thanks for having me in the interviews, at the time of writing I still had to make the first trade (which I managed to pass eventually), so I hope that what I wrote is not entirely boring… πŸ˜› Anyways I love the initiative so it was great to be part of it!
    ciaociao
    Stal

    Like

  2. Hey ATL, Hey Stal,

    Nice interview! I really like it, that there are some interesting people starting out at trading options.
    We can learn from each other. Step by step. Together we will reach that Financial indepence goal faster than everybody alone.

    thanks for sharing!

    Like

    1. Ciao Chris,
      Thanks for the comment, really appreciate it. ;P I do agree completely with you, it’s like learning all together in a way, I have grown up so much (financially speaking) thanks to the community… πŸ˜›
      ciao ciao
      Stal

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    1. Ciao IH,
      Yes Paper trading was an highlight of the supercomplicated platform that Interactive Brokers offers. I am lucky to have started there also because judging from what is happening because of Brexit I might have lost myself even more capital if I went into the “real” trades straight away!
      ciao ciao

      Stal

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    1. Ciao Trsitan,
      Thanks for coming by, I love these series that ATL came up with, I hope that in some time I can give more technical details about trades and strategies, but so far that’s as much as I can share with the community… Still it’s a good exercise for me too! πŸ™‚
      Easy for me to say “come to Florence”, but if you guys have the chance do give me a shout, did you know that 40% of the entire world’s artistic patrimony is in this town? πŸ™‚
      Must see once in a lifetime!
      ciao ciao
      Stal

      Liked by 1 person

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