2nd poll: annualized returns in speculative activity

[scriabinop23]

Including any wipeouts, surges, great profit years, etc, what have your annualized returns been trading options and other day trading 'speculative' activity (do not include typical mutual fund investing, long buy and hold style investing to offset your losses here) ?

Again, do not offset long gains here with your short term losses. Lets say long gains are buy and holds longer than 1 year.

For example (this is an example-not true), I just started trading options, and even though lets say I have a 5mil portfolio thats generally long, lets say I started speculative trading last year with $1mil, and I lost $800k. My annualized loss would be -80%, not -15% (total impact on entire porfolio).

I'll post another poll that deals with speculative investing's impact on long term choices.

 

[scriabinop23]

a large percentage who do 50% or above? i have a hard time believing this can be sustained. whoever's done this, feel free to post duration and share what you feel you would like.

 

[daddy'sboy]

That's only 9 traders out of 17. Still a bit early to extract any meaning since the sample is so small. All one can conclude so far, assuming the replies are honest, is that there are 9 speculative traders who make more than 50% annually from their speculative activity.
daddy's boy

 

[nytrader_1978]

My track record of 50%+ gains has been pretty short. I sustained hefty losses 2001-2004 as I was learning to trade options. I was down to less than 3k in August 2005. From there I traded up to 125k by December 05 in 37 trades. 327k as of June 30, 2006. That's around 11 months. As for how sustainable this is I'll have to find out.

 

[kalikahuna]

Greater than 50% annualized isnt hard....there are a few conservative techniques to get 3-6% a month (annualized to 69.5%)


What i wanna know is how to go from 3k to 100+k in 6 months!

 

[nytrader_1978]

Getting those kind of returns involved taking some serious risks that I would NOT recommend to anyone. I put all my capital in one contract and they were always front month positions. I think I was lucky nothing catastrophic happened.

To minimize risk I traded mainly NDX options, cut losses at no more than 30%, tried not to hold anything overnight unless I was up enough to survive an unfavorable gap at the next day's open, and mainly traded in the money strikes. I made enough on the winning trades that I was able to do well despite being right only 56% of the time.

I don't have a magic formula. I rely on resistance/support levels, VIX/VXO/VXN relative to their 10MA, % of stocks above their 40MA, II Bull/Bear numbers, moving averages, and Fibonaccis. I try to trade only when opportunities present themselves.

The main difference between what I did during my years of failure and the last 11 months was cut my losses. I was forced to because my credit cards were maxed out, I had 6 figure education debt, I had virtually nothing in the bank, and I thought I was about to lose my job. Only under those circumstances did I force myself to cut my losses. I wished I didn't have to learn the hard way.

 

[scriabinop23]

3k to 300k in a year? Are you serious?

What was your typical trade duration, and did you typically enter a certain time a day and exit another time? Also, besides your losses (was it a trailed stop?) being controlled, did you tend to set an upper limit you were happy with?

Lastly, what would you do with trades that were down slightly (10-20%) for the day? Would you wait them out and typically hold them overnight? Different policy towards holding over weekends ? (more theta decline)

Also, I assume you bought both sides (puts and calls) - did you do much of straddles this way? Any spread writing as well?

 

[nytrader_1978]

Normally I'll be in a trade for a week or 2. My goal is to get in when I think there's about to be a multiday run in either direction. I buy naked puts and calls. No spreads, straddles or anything else. I keep it simple.

As for losses, I don't have a stop. Instead I'm sitting in front of the computer the entire time with my finger on the sell button. I do this the moment I enter the position. I find that during my best trades, the position quickly goes in my favor and doesn't look back. When I'm up, I'll start raising my stops to the next resistance/support level. I'll usually have a target. In October's decline I used NDX 1540 as an exit target. When it dropped to that level I watched to see if it would break it. I gave it a few point of room to break it otherwise I was getting out. It broke 1540 and went even lower to 1515. When it dropped down there I was looking for 1500 to exit and if it didn't get there I'd get out at 1540. It never tagged 1500 so I exited at 1540. In some situations I'll use the breakeven level to exit. A lot of the time the market will start going to the direction I was hoping for the moment I exit. It's frustrating, but I tell myself there will be plenty of opportunities in the future.

Normally I'll enter the position in the morning so I'll have more time for the position to go in my favor. If I'm down 10-20% I'll get out of the position. I've been wiped out over a dozen times holding overnight when I've been in that situation. I also take into consideration imporant economic numbers or Fed meetings. If I'm not up substantially I will sell. Occasionally I'll be up and I'll still exit anyway. In May I was up substantially, but I still exited before the CPI came out. It cost me another 200k in profit, but I didn't want to risk giving back a chunk of my gains.

 

[scriabinop23]

Quote from nytrader_1978:

Normally I'll be in a trade for a week or 2. My goal is to get in when I think there's about to be a multiday run in either direction. I buy naked puts and calls. No spreads, straddles or anything else. I keep it simple.

I'm not understanding. How could you be in a trade for a week or two if you wouldn't let it gap or hold overnight? Would you sell at the end of day, and re-enter the same position in the morning?

 

[nytrader_1978]

Here's some examples of trades:

1. Nasdaq 100 Index NDX May 1700 Put
Entered 5/11/06 on the break of 1690 near the open @19.6
Exited 5/16/06 a little under 1635 @ various prices ranging from 67-69.

2. Nasdaq 100 Index NDX Feb 1700 Put
Entered 2/2/06 on break of 1700 @ 18.9
Exited 2/8/06 41.3 around 1660.

Sprinkled between these large gains are a lot of +/- 1-7% trades that even out.

The market will always gap. My goal is lower the risk of it putting me in the red by more than 20-30%. Generally I want to be up 10-15 NDX points before I hold overnight. Unfortunately this doesn't happen very often. I'll make trades where I quickly take profits and losses (intraday) and once a quarter I'll get that big trade where it goes in my favor and doesn't look back. I'm essentially fishing for the big fish by looking to get in at major turning points. If you are are up a lot by the close you know you probably caught one.