Saturday, March 19, 2011

March 2011 Options Expiration

I look at this month as mixed results. At first glance the bottom line number doesn't look so hot, just $575. That doesn't pay the bills. However, I came in to the month with marked-to-market losses on some futures contracts and was forced to roll those early this cycle, and thus turn those MTM in to realized losses. So considering I started out the month with realized losses of about -$4700, I feel great that I ended up with positive realized gains. I actually had my best month ever selling equity option premium at $3863. This is kind of my bread and butter and what I've been doing for the last two years. Recently I've purposely tried to design my portfolio so that I've got offsetting types of strategies and asset classes, so I color coded my trades to get a better feel of the overall action. Historically I've just sold ITM calls or OTM puts and it's all time decay, it's all the same strategy, there really wasn't anything to track and compare other than total dollars.

But I started trading futures a few moths ago and this changes the risk/reward characteristics of the portfolio so I want to start tracking more than just percentage return or monthly realized dollar gains. I'm glad I did because without doing so I would have compared the $575 this month to the past few months and thought I didn't do so hot. But analyzing things further I learned that I had a break out month in one category. And the losses on futures this month are to be taken in stride considering I have allocated a certain percentage of my portfolio where I'm willing to take on increased leverage and risk that is not restricted to a 4-week options cycle. For instance, I've currently got MTM losses of -$4,000 on bonds and willing to add to that risk by continually rolling contracts, and I'm up $2,000 on nat gas but not looking to take the profit off the table yet. These numbers are much larger than any equity options related action I'm used to, but again they are also different risk/reward profiles and I'm ok with that. I am not in denial or trying to design a way to look past comparatively large futures losses. I would much rather have had no losses there but futures work differently than selling OTM equity options. When selling OTM options you've got time on your side and I can be wrong directionally and still capture 100% of the premium sold. But with futures it's a zero sum game and you have directional risk immediately after the first tick changes.

In trying to diversify, this month I sold some time premium via puts on names I wouldn't mind owning if put to me, I bought some ITM premium on a few names looking for a quick directional move, and searched for some high IV premium to sell OTM calls when the VIX spiked. Overall I'm actually really happy with the activity this month as I feel I'm growing as a trader and learning to allocate my capital more efficiently.

March 2011 Options Expiration Results

Current positions heading in to April Options Expiration

Some of the short puts that expired worthless for March expiration are still showing up for some reason. They are usually gone by Sunday night. I have no positions in KMP, MO, or X

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