You’ll probably have noticed that one of the most important skills in managing an options strategy is knowing how to implement risk management techniques. There are several factors involved when looking at how you manage the risk involved in your options trading.
You may be aware of the fact that in many types of investments including options trading, when you raise your risk level you also in many cases raise your potential for greater returns. Managing these risks is a skill that is developed over time as you gain more knowledge about certain strategies. Experience also is a factor in developing the skill to know best how to manage your risks.
When we look at the returns that this account has generated over the last 27 weeks, we could compare it to something like the S&P 500 returns over the same period. Now of course the market has done overall very well over this time period and the S&P 500 has had a return very close to what I’ve achieved with this account during that time frame. The difference is that I’ve only actually used a small portion of my capital to achieve these results. What this means is that when the market does go into a downturn both the S&P 500 and this account that I’m trading options in will go down. Both investments will most likely recover sooner or later. The difference is that because I’m only using a relatively small percentage of my account at one time, during the downturn I will still have money to work with to generate premiums while waiting for the market to recover.
The goal is to continue to generate these same returns at least based on the premiums collected even during times where the market is declining. So over time this strategy typically will beat the overall market averages on a long term basis.
Week 27 Results
Here are the positions I started the week off with:
Of course I was still holding the 100 shares of BYND to cover the call position that I had.
I opened a new position on Monday by selling a put on QUBT with a strike price of $16 and an expiration of 11/7 (11 DTE). For this trade I collected a premium of $100.
By Friday the share price of BYND had come down some but was still above my call strike price so I was able to let my call get assigned and sold the shares for the price I paid for them which was $1.50 a share. The share prices of both of other puts were just slightly in the money so I rolled both of those out another week for the same strike prices. For my HIVE put I was able to collect an additional $25 in net premiums for the roll. I was able to collect an additional $13 for rolling the SPCE put out another week.
Here is a chart of all of my trades for the months of September & October:
Summary
So even though I had to roll a couple of positions this week I’m still using a relatively small amount of capital for my open positions. $2,550 of my cash is tied up as collateral for my open puts. This amount is only about 21% of my account value.
For week 27 I collected a total of $137.80 in net premiums. My target for week 27 is $83.92. My total premiums collected for the first 27 weeks is $2,320.84 and my target for the first 27 weeks is $2,072.46. Being ahead of my target does put me ahead so that in the future if I run into a situation where I have to take a loss or that I’m not able to quite make my target I can still stay on track overall.
Here are screenshots of my ending account positions and a chart of the weekly summary for the first 27 weeks:
