With August behind us, I can write up a new post on my option trading income. And what a month it was: A new record combined with a few bad market events that created the elephants in the room. Can you help me with my elephants?
Option Income – 805.95€
It is official: you can make money while being on Holiday. In August, we were off 2 Weeks to Croatia. And still, I had trading income of 805€. That amazes me.
My current annualised return is 13,66%. That is way above the return that I use to calculate my FIRE date.
As from now, that should be my benchmark: Do I beat the market returns in my FIRE calculator?
The income is from 14 different stock. The main contributor this month was RDS.A. After being called away and missing out on the dividend, I already compensated more than the yearly dividend.
After my post on greed, I decided to take more emotions out of the game and now take the habit to take my profits soon. Actually, this is nice. At random moments, I get a trade confirmation and that means a profit! How do I do this? I create a Buy-to-Close trade after opening the position. Especially for the more speculative trades or trades that I regret. And it works. Just this Friday, the mechanism closed a trade that was open 2 days. The trade was a “mistake” as I forgot to check the earnings . Either way, I have an annual return of 95pct (The annual returns on a single trade are just awesome. They are perfect to show off and be the king of the world. In reality, we talk 20USD…!)
Dividend Income – 106,92€
August saw a paid dividend income after tax and fees of 106,92€. The vast majority comes from 1 stock. It actually has a 50% gain in 14 months. Should I sell? Or just forget about it? It is reasonable to expect that this dividend will increase year after year.
The elephants in the option portfolio
This is a new section. It’s goal is to give you an i sight in the problems that come with options portfolios. I plan to expose to you my fears, doubts and bad trades and how I think this will affect my income.
Why would I want to do that? I think it is very important that I do not only share the great results. It is even more important to share failures so that we can all learn from these.
Elephant 1 – TEVA
This is a big one: rather a herd of elephants.
The stock had been range bound for about 4 months already. That looked like a good option trading opportunity. Sadly, the earning were no bad, they were over-the-top bad. Cutting the dividend, closing factories, negative outlook on sales price of the products,… The stock dropped hard right after. I defended the position by rolling and thought I would be fine. Sadly, the drop is not over yet.
I consider taking a partial loss by rolling down the strike and taking the debit I pay as a loss.
Would I take into account the loss from this trade, there would still be an annualised return of 9,9 pct.
This will be a few years of drag on my returns. This one makes me sleep less good. Time for action?
Elephant 2 – LB
Similar story, not so bad. The stock seems to have stabilised sooner. and by rolling it out to January, the position is actually ATM. It does not mean it is profitable. This cash used to secure this put will not produce returns the next 4 months.
Elephant 3 – (non disclosed)
I overplayed a little here, by opening a postion too soon and not closing for a profit the other one. My bad!
Elephant 4 – AMS:AD
Thank you Amazon. You have send this one down from 19 to 15 and I am rolling, rolling rolling. Trading fees here are high compared to the time value. This is no fun situation. Should I take assignment for the dividend?
Total Pct ITM 46,77pct.
Given the elephants and the ITM percentage the outlook for September is not good.It means rolling a lot of trades and not booking profits in September. On the other hand, it creates high income months like August: after rolling RDS.A, I was able to book a big nice profit in August.
As I plan to reduce the size of elephant 1 – TEVA, I will be happy to be break even in September.
How are your options doing?