IN THE MONEY TRADES: April 2011 OPEX Results

Saturday, April 16, 2011

April 2011 Options Expiration Results

By one measure this was my best ever month financially, but just as I felt that last month's tally of $575 didn't paint the whole picture, I also feel this month wasn't as good as it looks. Though I've had bigger recorded gains in a month before, most of those gains were from long-term spreads that were building in value over time and finally got recorded in the month they were closed out; where as all of this month's gains were derived within the April options expiration cycle. So I am excited to book $11,357 in gains derived from the last few weeks of trading, but the instruments and leverage involved has to be kept in context. Up until about six months ago I was almost exclusively an equity options premium seller, now I'm also trading futures and these cut both ways. Last month I only had a few losing trades, but two futures trades in particular almost completely wiped out about 15 winning equity option trades. This month my futures trades went my direction so the gains look big in comparison.

The Nat Gas profit of $3,042 this month needs to be held in context with the ($2,306) loss I took on that trade last month. In my view this was a rolled contract with a net gain of about $700 over a two month period. And though I'm very happy that my short bond futures paid off over $8,000, that trade could have also moved against me and I'd be sitting on a large MTM loss right now. I color coded my trades again for me to analyze more than just the bottom line profit or loss. I'll go back at the end of the year and maybe create a pie chart or something to breakdown the performance. I had a few scratch trades this month where I either decided against them shortly after or tried to exit for a few pennies above trade price to cover commissions. Though the net result is near zero and I don't like to incorporate scratch trades in to my performance, I also don't want to omit them from the record.

I also fell in to an old bad habit this month and got away from my game plan a bit. Since I had a large position in bond futures I found myself watching the chart literally every 20 minutes or so whenever I was awake. Since futures trade almost 24 hours I find it hard to ever stop thinking about it. So we had a relative dead spot for a few days where ZB traded in a small range, when you're watching every few minutes two days of small movements feels like forever. So I entered a few trades that didn't make sense for me as I was just feeling the need to try and make something happen rather than just be patient. I did recognize this behavior shortly after as I try to objectively analyze my positions each night. So I admitted the errors to myself and exited the trades soon after. I won't go in to detail on each mistake but let's just say this was the only thing keeping me from a perfect performance and admitting this would have otherwise been a phenomenal month for me. So my record shows that quantitatively I am getting better, I'm more efficient with using my capital, better trade entries/exits, better risk/reward management, but I also still have a lot to work on and I'm mindful of that.

April 2011 Options Expiration Results