I decided to start trading, if you can call it that, credit spreads as well as covered calls a few months ago and thought I would post my progress. To give you some background I paper traded this strategy for 3 months and just finished up my 2nd month of live trading.
Credit Spreads Strategy
I write OTM credit spreads with less than 4 or 5 weeks until expiration to keep things on the more conservative side and to keep time decay in my favor. I only enter trades where there is approximately a 75%+ change of obtaining the maximum profit (usually look for 80%+). I incorporate technical analysis as well as steer clear or any company announcements. I look for a return of about 8% a month but am completely happy with 5%. My risk/reward ratio isnât probably what most would get excited about but since my position are so far OTM I feel that I can close out a trade before I get anywhere near my max loss and thus upping my expected return. My goal is to let the options expire worthless but I am toying with the idea of locking in a lesser profit during the week of expiration.
Note: Trading is done in a margin account so returns may vary, however, calculations assume cash only.
Just to forewarn readers, I tend to only make a few trades a month and usually within a day or two so there will not be a ton of posting here. I will try to answer any questions and all suggestions are welcome.
I have included a few of my past trades
(Please note commissions are ignored)
(Will add Covered Call Strategy at a later date)
9/03/09
Long - PALM @ 13.92
Short - Sept â09 13 Call @ 1.46
9/21/09
Called @ 13 = 0.54 (4.33%)
9/04/09
Long â DTG @ 21.30
Short â Sept â09 20 Call @ 1.96
9/21/09
Called @ 20 = 0.66 (3.41%)
9/17/09
Long â RMBS @ 18.05
Short â Oct â09 17 Call @ 1.93
10/19/09
Called @ 17 = 0.88 (5.46%)
9/28/09
POT
Long â Oct â09 105 Call @ 0.40
Short â Oct â09 100 Call @ 0.80
10/16/09 Both Expired = 0.40 (8.70%)
9/29/09
POT
Long â Oct â09 105 Call @ 0.35
Short â Oct â09 100 Call @ 0.75
10/16/09 Both Expired = 0.40 (8.70%)
Credit Spreads Strategy
I write OTM credit spreads with less than 4 or 5 weeks until expiration to keep things on the more conservative side and to keep time decay in my favor. I only enter trades where there is approximately a 75%+ change of obtaining the maximum profit (usually look for 80%+). I incorporate technical analysis as well as steer clear or any company announcements. I look for a return of about 8% a month but am completely happy with 5%. My risk/reward ratio isnât probably what most would get excited about but since my position are so far OTM I feel that I can close out a trade before I get anywhere near my max loss and thus upping my expected return. My goal is to let the options expire worthless but I am toying with the idea of locking in a lesser profit during the week of expiration.
Note: Trading is done in a margin account so returns may vary, however, calculations assume cash only.
Just to forewarn readers, I tend to only make a few trades a month and usually within a day or two so there will not be a ton of posting here. I will try to answer any questions and all suggestions are welcome.
I have included a few of my past trades
(Please note commissions are ignored)
(Will add Covered Call Strategy at a later date)
9/03/09
Long - PALM @ 13.92
Short - Sept â09 13 Call @ 1.46
9/21/09
Called @ 13 = 0.54 (4.33%)
9/04/09
Long â DTG @ 21.30
Short â Sept â09 20 Call @ 1.96
9/21/09
Called @ 20 = 0.66 (3.41%)
9/17/09
Long â RMBS @ 18.05
Short â Oct â09 17 Call @ 1.93
10/19/09
Called @ 17 = 0.88 (5.46%)
9/28/09
POT
Long â Oct â09 105 Call @ 0.40
Short â Oct â09 100 Call @ 0.80
10/16/09 Both Expired = 0.40 (8.70%)
9/29/09
POT
Long â Oct â09 105 Call @ 0.35
Short â Oct â09 100 Call @ 0.75
10/16/09 Both Expired = 0.40 (8.70%)