Comments on: This Is What I Own Right Now http://mytradersjournal.com/stock-options/2010/01/21/this-is-what-i-own-right-now/ Investing in Stocks Through Options Sun, 20 May 2012 05:09:47 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Alex Fotopoulos http://mytradersjournal.com/stock-options/2010/01/21/this-is-what-i-own-right-now/#comment-6521 Alex Fotopoulos Fri, 05 Feb 2010 14:29:49 +0000 http://mytradersjournal.com/stock-options/?p=3959#comment-6521 If you look under the Category heading at the Account Summary section on the upper left sidebar you can stroll through to see each month's update (and some other random account updates too). In February 2009 I was only about half invested and far ahead of the market, but stayed too underinvested for much of the recovery, so my year was more steady than the overall market. Since I had smaller losses up front I didn't have to make up as much through the rest of the year. They won't let you short the stock, so you can't do a covered put in a retirement account. Selling covered calls is the risk equivalent to selling naked puts, limited upside and full downside. I sell covered calls in my IRA instead of puts. You just can't go on margin like in a taxable account. If you look under the Category heading at the Account Summary section on the upper left sidebar you can stroll through to see each month’s update (and some other random account updates too). In February 2009 I was only about half invested and far ahead of the market, but stayed too underinvested for much of the recovery, so my year was more steady than the overall market. Since I had smaller losses up front I didn’t have to make up as much through the rest of the year.

They won’t let you short the stock, so you can’t do a covered put in a retirement account. Selling covered calls is the risk equivalent to selling naked puts, limited upside and full downside. I sell covered calls in my IRA instead of puts. You just can’t go on margin like in a taxable account.

]]> By: Alex http://mytradersjournal.com/stock-options/2010/01/21/this-is-what-i-own-right-now/#comment-6517 Alex Thu, 04 Feb 2010 22:12:05 +0000 http://mytradersjournal.com/stock-options/?p=3959#comment-6517 Alex, how did your strategy do last year during the crash to the March lows? How did you get through that? I assume that your 25% return includes a substantial loss into March and then you came back a lot to get to 25% overall? As soon as we get to a more stable (sideways to bullish)environment I'm going to get into this. I have a question for you. In my RRSP (retirment account)I can only buy calls and puts and do 'covered writing'. I cannot sell naked puts or calls. I know I can write covered calls but is there a way to sell 'covered puts'? (I cannot short in that account either). Thanks for your help. Regards, Alex Alex, how did your strategy do last year during the crash to the March lows? How did you get through that? I assume that your 25% return includes a substantial loss into March and then you came back a lot to get to 25% overall?
As soon as we get to a more stable (sideways to bullish)environment I’m going to get into this.
I have a question for you. In my RRSP (retirment account)I can only buy calls and puts and do ‘covered writing’. I cannot sell naked puts or calls. I know I can write covered calls but is there a way to sell ‘covered puts’? (I cannot short in that account either). Thanks for your help.

Regards, Alex

]]> By: Alex Fotopoulos http://mytradersjournal.com/stock-options/2010/01/21/this-is-what-i-own-right-now/#comment-6512 Alex Fotopoulos Wed, 03 Feb 2010 15:02:17 +0000 http://mytradersjournal.com/stock-options/?p=3959#comment-6512 It's been a couple of years since I've only kept enough cash to cover half of my naked puts. I only do that when I'm very bullish, although I wish I had done that in 2009. If everything was assigned I'd still have about $23k available in cash (after my trade yesterday (2/2/10). That's my plan B. Basically I look at my account as if I already owned these stocks, with the full downside risk accepted. I'm limiting my upside potential in dollars, but increasing my probability of making a profit each month by using options. Considering that I'm not quite 75% invested right now, it shows that I agree with you that there is some risk to the downside out there still. I had a 25+% gain last year while not being fully invested. That's a clear example of how taking small profits monthly can increase returns and reduce risk. I'll go update My Trading Model page to reflect this change since my first year of blogging. I had forgotten that I had not done so yet. Thanks for catching it. It’s been a couple of years since I’ve only kept enough cash to cover half of my naked puts. I only do that when I’m very bullish, although I wish I had done that in 2009. If everything was assigned I’d still have about $23k available in cash (after my trade yesterday (2/2/10). That’s my plan B. Basically I look at my account as if I already owned these stocks, with the full downside risk accepted. I’m limiting my upside potential in dollars, but increasing my probability of making a profit each month by using options. Considering that I’m not quite 75% invested right now, it shows that I agree with you that there is some risk to the downside out there still. I had a 25+% gain last year while not being fully invested. That’s a clear example of how taking small profits monthly can increase returns and reduce risk.
I’ll go update My Trading Model page to reflect this change since my first year of blogging. I had forgotten that I had not done so yet. Thanks for catching it.

]]> By: Alex http://mytradersjournal.com/stock-options/2010/01/21/this-is-what-i-own-right-now/#comment-6511 Alex Wed, 03 Feb 2010 02:08:20 +0000 http://mytradersjournal.com/stock-options/?p=3959#comment-6511 Alex, yes I meant you are taking more risk for limited gains. I understand if your puts are assigned you will immediately sell calls to further lower your cost. But my point is that the market (Dow) may well correct a couple thousand points here or worse. So you may end up locked in to all or most of your assigned stocks as they are falling drastically. Especially bad since you sell puts that you can only cover half if all are assigned. Maybe you have a plan B in such cases I don't know, I would like to hear it. You're scaring me man! Regards, Alex Alex, yes I meant you are taking more risk for limited gains. I understand if your puts are assigned you will immediately sell calls to further lower your cost. But my point is that the market (Dow) may well correct a couple thousand points here or worse. So you may end up locked in to all or most of your assigned stocks as they are falling drastically. Especially bad since you sell puts that you can only cover half if all are assigned. Maybe you have a plan B in such cases I don’t know, I would like to hear it. You’re scaring me man!

Regards, Alex

]]> By: Alex Fotopoulos http://mytradersjournal.com/stock-options/2010/01/21/this-is-what-i-own-right-now/#comment-6510 Alex Fotopoulos Tue, 02 Feb 2010 15:24:22 +0000 http://mytradersjournal.com/stock-options/?p=3959#comment-6510 Alex, I'm not sure what you're asking. You said low risk, low gains. Did you mean to say I am taking on too much risk for the limited gains? If the former, I'd agree - Lower risk for small, steady gains. If the latter, I think by selling out of the money puts I'm reducing my risk. The upside is limited, but if the market goes up I can make 2% or more each month. Throw in a few losing months and I should have a balanced out yearly gain of 15-20% with less risk than if I was only invested in index funds/ETFs. - Alex Fotopoulos Alex, I’m not sure what you’re asking. You said low risk, low gains. Did you mean to say I am taking on too much risk for the limited gains?
If the former, I’d agree – Lower risk for small, steady gains. If the latter, I think by selling out of the money puts I’m reducing my risk. The upside is limited, but if the market goes up I can make 2% or more each month. Throw in a few losing months and I should have a balanced out yearly gain of 15-20% with less risk than if I was only invested in index funds/ETFs.
- Alex Fotopoulos

]]> By: Alex http://mytradersjournal.com/stock-options/2010/01/21/this-is-what-i-own-right-now/#comment-6508 Alex Tue, 02 Feb 2010 01:13:17 +0000 http://mytradersjournal.com/stock-options/?p=3959#comment-6508 Hi Alex, Using options to juice up returns is something I am looking to get into. However the market is overbought here even if sentiment is positive (a contrarian indicator), though that is changing also. Many indices are rolling over and the potential for a significant correction is real. So I am waiting with a lot of cash for a better environment. My point is are you not taking on too much risk here for such limited gains? This is not a normal market environment. Alex Hi Alex,

Using options to juice up returns is something I am looking to get into. However the market is overbought here even if sentiment is positive (a contrarian indicator), though that is changing also. Many indices are rolling over and the potential for a significant correction is real. So I am waiting with a lot of cash for a better environment.

My point is are you not taking on too much risk here for such limited gains? This is not a normal market environment.

Alex

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