$200 to $2million Calendar Spread Challenge

monday, december 7, 2009

*Exited trades that were getting away*

Today, near the close, we closed out of our 2 $IWM Jan/Dec 58 Call Calendar spreads @ .70. With $IWM trading around $60.50, the position was getting a bit far from our sweet-spot and we were at risk of turning a nice winner into a loser.

This trade was originally entered on Nov 13 at .64 and .65 (two fills). At one point, this spread traded as high as .80 (a gain of 24%). However, despite a gross 8% gain in the spread - after commissions, this trade netted only 92 cents for a 24 day hold. So basically zero....Oh well. Swing and a miss, as they say.

We still have an open position that is performing well at the moment. We will look to put the proceeds from todays sales back to work tomorrow morning.

Portfolio Update:
Cash: $139.20
Open Position Value: $171.00
Total Portfolio Value: $310.20 (55% since inception September 24)
 
Quote from Sean McLaughlin:

Follow along (even copy the trades if you'd like) as we ride the inevitable topsy-turvy waves of an ultra-aggressive approach to building wealth.
More...

translation: Watch as someone defies all intelligence by completely misunderstanding "Risk-Adjusted Reward" - advocating something with less chance than buying lottery tickets...
 
tuesday, december 8, 2009

*New SPY Trade entered this morning*

This morning, we took the available cash in the account and put it to work in a $SPY Feb/Jan 110 Put Calendar Spread @ 1.34. The net cost of this trade was $136.52 after commissions, which leaves just $2.68 left over in cash.

The remaining open position in $IWM will probably be closed this week. And I'll update then.
 
wednesday, december 9, 2009

*Exited last December position*

This morning, we exited the $IWM Feb/Dec 59 call calendar spread at 1.80. This trade was originally entered on November 9 @ 1.29. After commissions, this trade netted us a 35% gain. Nice.

We will look to enter a new position with the freed-up cash tomorrow morning.

Portfolio:
Cash: $180.16
Value of Open Position: $140.00
Total Value of Account: $320.16 (60% gain since September 24 inception)

Now I just need to figure out a way to get some errands done without catching a cold in the wind/sleet/snow/freezing temps combo outside my window here in Chicago. Uggggg.
 
thursday, december 10, 2009

*Breaking out of the range, finally?*

I have no idea. I gave up on the prediction business a long time ago. It hasn't served me well.

However, with the $SPY trading north of 111.00 briefly this morning, I put our available cash into a Feb/Jan 111 Calendar Spread @ 1.47. Total cost of trade after commission was $149.52.

Now, completely out of spreads expiring in December and assuming the market doesn't do anything crazy, hopefully we'll settle into a boring couple of weeks to take us through the holidays. And boring is good for theta-positive income trades.

Portfolio:
Cash: $30.64
Open Positions: $291.00
Total Value of Account: $321.64

Stay warm, its cooooold out there.
 
Well, if the last quarter of 2009 is any indication...2010 should be a very good year.

The volatility suck that has been pulling premium out of my positions has made recent trades longer holds than usual. However, thanks to the sell-off going into the close today, I was able to exit the $SPY Feb/Jan 110 Put spread @ 1.53 for a 10% net gain in 23 days (entered on 12/8 @ 1.34)

Today's move catapulted this challenge account to a closing high, which is perfect for the last trading day of 2009.

As of today's close:

Cash: $181.12
Value of Open Position: $159.00
Total Value of Portfolio: $340.12
Gain since inception on Sept 24, 2009: 70.1% (annualized: 723%)

Hopefully, in the new year volatility will pick up without the market going all over the place.
 
Ha! I enjoyed your response. Even if you're mocking me...

I'm hoping to be able to achieve my goal inside a decade. With a little luck, and a lot of perseverance...I'll have a shot.

I certainly don't expect the pace of returns to maintain their current level. We've had some VERY accommodating markets for the particular strategy employed in this account. It'll be interesting to see how it holds up when we start having some real moves in the market again.
 
Yes, $2 million for 10 years of work in the markets does seem excessive (time-wise)...but consider, I'm starting this challenge with $200 and don't plan to add any cash.

My main trading account is better funded. And I employ similar strategies there. So hopefully, if all continues to go well...

Anyway, if you go back to the beginning posts in this thread, I started this challenge really on a lark to answer a question I had asked myself. This isn't so much about the money...it's about seeing if it can actually be done. The money will be a reward for successfully identifying and meeting a challenge. Also, lessons learned here translate well into my main trading account.

[when you trade from home, and don't have actual human contact for most of the day - until the wife comes home from work - I need to create interesting outlets to keep myself engaged and entertained. This is an exercise in that regard...]
 
Hi Sean,

Great journal! I think with your experience in trading, I believe you should be able to achieve your goal.

One question I have:

Why trade calendar spread?

Thanks!

PA
 
I like calendar spreads because I've learned through much trial-and-error that I'm no better than a coin flipper in deciding (predicting) which direction the market is headed next. With a calendar spread the market can go stay flat, go up a little, or go down a little, and I'm ok. If it goes up or down a lot, then I can get out with a manageable loss (in most cases). 3 of 5 possibilities, I make money (if held to expiration, which I never do). I like those chances.

I like that they are debit spreads with defined losses. I don't like Iron Condors. They tie up too much margin with too little reward (and the occasional and bad beat)

Calendar spreads are only two-legged animals, whereas butterflies, condors, and double diagonals are four-legged. With only two legs, the position costs less in commissions and slippage, and its easier to maneuver out of when its running against me. Plus, I feel more comfortable being long volatility.

I think I've covered most of the reasons for my preference.... ;)
 
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