No Lose Stocks 2013 Option Expiration Review

A while back, I wrote a post reviewing an NLS trade I made. In the comments on that post, a couple of the readers requested that I do a full review of the NLS trades I made that expired in 2013. Below is the data from the trades I made that expired in 2013.

(Note, there were trades suggested by NLS that I did not take due to either not having enough interest to buy them, or the trades had a Annualized Percent to Profit of more than 25%. NLS now only shows trades that are 25% or less.)

OPTIONS PURCHASED TO OPEN TRADE

G0598403: You bought 1 @ABT 130119C00060000 at 0.93 Feb 16th 2011, 09:30 0.93
G0598399: You bought 1 @T 130119C00035000 at 0.39 Feb 16th 2011, 09:30 0.39
G0598421: You bought 1 @XOM 130119C00110000 at 0.99 Feb 16th 2011, 09:30 0.99
G0598414: You bought 1 @JNJ 130119C00080000 at 0.5 Feb 16th 2011, 09:30 0.5
G0598419: You bought 1 @IBM 130119C00215000 at 2.44 Feb 16th 2011, 09:30 2.44
G0598428: You bought 1 @KO 130119C00085000 at 0.55 Feb 16th 2011, 09:30 0.55
G0598408: You bought 1 @LLY 130119C00045000 at 0.55 Feb 16th 2011, 09:30 0.55
G0598425: You bought 1 @CAG 130119C00030000 at 0.3 Feb 16th 2011, 09:31 0.3
G0598423: You bought 1 @PM 130119C00080000 at 0.89 Feb 16th 2011, 09:31 0.89
G0598396: You bought 1 @KMB 130119C00080000 at 0.65 Feb 16th 2011, 09:31 0.65
G0598394: You bought 1 @MO 130119C00030000 at 0.36 Feb 16th 2011, 09:40 0.36
G0598401: You bought 1 @MCD 130119C00095000 at 1.03 Feb 16th 2011, 09:50 1.03
G0639984: You bought 1 @AEP 130119C00045000 at 0.4 Mar 18th 2011, 09:30 0.4
G0639992: You bought 1 @MRK 130119C00045000 at 0.47 Mar 18th 2011, 09:30 0.47
G0639988: You bought 1 @WM 130119C00050000 at 0.55 Mar 18th 2011, 09:30 0.55
G0639973: You bought 1 @SYY 130119C00035000 at 0.7 Mar 18th 2011, 09:32 0.7
G0639982: You bought 1 @VZ 130119C00047000 at 0.77 Mar 18th 2011, 09:39 0.77
G0681012: You bought 1 @KFT 130119C00045000 at 0.4 Apr 15th 2011, 13:26 0.4
G0725504: You bought 1 @JNJ 130119C00085000 at 0.43 May 17th 2011, 09:30 0.43
G0725506: You bought 1 @MRK 130119C00050000 at 0.46 May 17th 2011, 09:30 0.46
G0725500: You bought 1 @PEP 130119C00090000 at 0.5 May 17th 2011, 09:31 0.5
G0725512: You bought 1 @SO 130119C00055000 at 0.1 May 17th 2011, 12:06 0.1
G1191914: You bought 1 @GIS 130119C00041000 at 0.27 Jun 28th 2012, 09:50 0.27
G0790034: You bought 1 @DUK 130119C00025000 at 0.1 Jul 11th 2011, 09:30 0.1
TOTAL 14.73

OPTIONS SOLD TO CLOSE TRADE

G0934282: You sold 1 @MCD 130119C00095000 at 7.05 Nov 8th 2011, 12:09 7.05
G0975169: You sold 1 @MO 130119C00030000 at 1.74 Dec 21st 2011, 10:01 1.74
G1027231: You sold 1 @PM 130119C00080000 at 4.15 Feb 9th 2012, 10:40 4.15
G1075107: You sold 1 @ABT 130119C00060000 at 3.25 Mar 19th 2012, 10:21 3.25
G1170993: You sold 1 @KMB 130119C00080000 at 3.4 Jun 6th 2012, 13:41 3.4
G1177573: You sold 1 @T 130119C00035000 at 1.38 Jun 13th 2012, 11:23 1.38
G1218752: You sold 1 @MRK 130119C00045000 at 1.9 Jul 27th 2012, 15:44 1.9
G1243612: You sold 1 @LLY 130119C00045000 at 1.43 Aug 24th 2012, 11:24 1.43
G1277172: You sold 1 @VZ 130119C00047000 at 1.17 Oct 4th 2012, 14:52 1.17
G1286436: You sold 1 @AEP 130119C00045000 at 0.85 Oct 17th 2012, 12:04 0.85
G1319424: You sold 1 @GIS 130119C00041000 at 0.41 Dec 3rd 2012, 14:25 0.41
G1327232: You sold 1 @CAG 130119C00030000 at 0.75 Dec 12th 2012, 11:36 0.75
TOTAL 27.48

So, I spent $14.73 * 100 = $1473 (not counting commissions), and I got back $27.48 * 100 = $2748 (not counting commissions).

That’s an 86.5% return over the course of February 2011- January 2013…or roughly 40% a year.

BUT I would never do this with money I didn’t expect to lose. In fact, I’m a little skeptical that these results are going to turn out to be an anomally, and that future years are not going to have so many winning trades.

The money I expected to lose was interest earned on my core capital. Over the time that these trades were placed, I’m guessing I was earning about 0.5% interest in CDs on my core capital (pitiful…).

Since I am only trading the interest amount, that means that the real return on the full amount of my core capital was only (2 years * 0.005 earned CD interest * 1.865 NLS return) .01865…or just less than 1% per year.

So for all the winning trades above, and the impressive 40% return, I ended up earning 1% per year on the money tied up by this strategy.

On the flipside, I did not risk any of my core capital, made about twice as much as I would have otherwise, did not spend a single day watching the market or worrying about my portfolio, and slept exceptionally well. That’s definitely a trade I’m willing to keep making.