This is the first of a series of reports that I will post each quarter summarizing my trades and performance. My aim is to give you an options trading tutorial by breaking down the sources of my portfolio results so that you can track how each strategy is doing. I'll also include anything that I've learned for the quarter and what I have planned for the near future. Also, I'd love to respond to any questions or comments that you may have. I hope you enjoy this Q1 report.
Important Events - 2011 Q1
The year began with some disappointment in that my account at TD Ameritrade was being closed due to my being located in a "high risk" country. It turned out to be a blessing and I have been really happy with Interactive Brokers since switching over.
Japan and Libya were the big stories this month, no point going over the details, I'm sure everyone is familiar. I actually thought the market would fall a bit lower than it did, and did not benefit from the recovery as much as I perhaps should have.
I achieved my goal of a 1-2% monthly return with no major drawdowns. This is my goal each month so that my yearly target is a return of somewhere between 12-24%. I am on track for roughly an 18% yearly return. Thankfully, I was able to avoid the 7% drawdown that the market experienced between February 18th and March 16th.
Below is my portfolio breakdown:
Portfolio Results
IRON CONDORS, CREDIT SPREADS AND NAKED TRADES
This was my best strategy for the month. I have a couple of open trades due to expire on April 16th but these are quite likely to expire worthless which is the best possible result for me. Highlights include:
Earned a total of $3,725 from a total of 17 trades.
88% success rate (15 out of 17)
SHORT TERM TRADING AND DAY TRADING
This was my worst strategy for the month, due to a single bad trade. On Jan 28th, it looked like the correction everyone had been expecting had finally arrived, I bought 2 SPY 132 Feb puts in and watched as the market dropped nearly 2% for the day. I had a roughly $500 gain on the first day, and expected the market to continue to fall. Unfortunately the market bounced back over the next couple of days and rallied right up to expiration leaving my position worthless. Ironically the day after the options expired worthless, the market started to correct for real this time falling 7% over the next couple of weeks. Looking back on this trade my main error was that I didn't have a clearly defined exit strategy for the trade. I could have done a number of things differently:
1) Closed the trade at the end of the first day for a nice short-term profit
2) Closed the trade at the end of the third day as the market had rallied hard and it was obvious my view was wrong. I would have broken even or had a small loss at this point
3) If I still believed the market would correct, I could have potentially rolled the position to the next expiry month which would have been a very profitable trade
One of the main things with trading is to learn from your mistakes. With this trade I learnt that I need to clearly think about my exit strategies from both a profit and a stop-loss perspective. I've also learnt that perhaps this strategy may not be suited to my trading style so I will need to look at my trading plan again and re-evaluate.
Below is a summary of this strategy:
Lost $416 for the quarter (lost $694 on one trade)
75% success rate (9 out of 12)
1 large loser, a lot of small winners. Not an great outcome......
COVERED CALLS AND CASH SECURED PUTS
I did not trade this strategy heavily this quarter as I was expecting the market to correct and these are bullish strategies. I did enter trades as the market was correcting and placed trades between late Feb and late March. This strategy did well for the quarter proving that sometimes patience is important. A few positions are still open and due to expire in April and May but are looking good so far. Some highlights include:
Made $1,656 from 5 trades
100% success rate (5 out of 5)
Summary
Overall I made $4,964.25 for the quarter or 4.51% on my starting capital of $110,106. This nicely met my goal of 1-2% per month and I am on target for an 18% yearly return. My winning trade ratio was 85% with 29 out of 34 trades making a profit.
During Q2 I hope to again achieve my goal of 1-2% per month. I will stick with what is working for me and reduce my short term trading and day trading. My Q2 target for the S&P 500 is 1375 and my year-end target is 1400.
Thank you all for your continued support and I hope you enjoyed thisoptions trading tutorial. Best of luck with your trading over the coming quarter. As always, I would love to hear from you with any comments or questions.
Happy Trading!
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