With 2017 behind us, it is time to look back and review what trading option thought me. I now trade options for 2,5 years and really geared up early 2017. Let’s start!
First, let us look at the december results
Option Income – 551,09€
In December, I realised in total 551,09€ euro of profit. This income comes from 19 stock.
For the first time, I also sold a put on a stock with a price well above my “mental” limit. I did this by setting up a put spread: I sold a put and bought a put with a lower strike. This way, I did a defined risk trade. I knew that my max loss would be limited to the difference between the 2 strikes. All other trades I do are “naked” puts. The max loss is there the strike of the put. This trade brought in nice money, compared to the “risk” I took. I consider doing more of these trades.
2017 In review
For the whole of 2017, My option income total 7100€. 1K less than our travel budget. That is a nice context to know!
A pure numbers results is not a useful info. It needs to be put in context: how much risk did I take and how much capital did I reserve for that.
On the risk side
I use 1,5 leverage. That means that I have for every 100€ open put position around 66€ of collateral in my account. I could go way higher than this. Brokers allow you to go up to 3-4 time of leverage. I decide not to do that. Why? I want to sleep well at night.
On the capital side
My return on capital comes in at 13,27% (USD converted each month to EUR – virtually). Note that my capital was not stable throughout the year 2017. I added in different steps capital to my portfolio and plan to keep it at this level.
Is 13,27% a lot?
Risk and return go hand in hand. Trading options is equal risk to owning stock. So, only a comparison to stock is honest. Comparing to a savings account with a 0,11% yield is not fair!
Some ETF performances
SPY – 19,6% when measured in USD, 6,5 when measured in EUR
IWDA (EUR) – 5,9%
EMIM (EUR) – Emerging markets went well in 2017 : 22,4%
On a personal level, I am happy with this return. It beats the return that I use in my FIRE calculation. And the cash flow from this would allow us to pay for holidays when the kids no longer want to join us. That is a nice perspective.
Will it last?
Trading mostly short put options in a bull market is easy. Why: a short put – or selling a put – is a strategy that makes money when the market goes up. Question is: how high can it go, how much longer can it go up? Will I be happy to have all my cash trapped in stock when the market goes south and I need to buy all these stock? Let us see the next year