No Lose Stocks / Options Trading 2014 Option Expiration Review

A friend recently asked what returns my options trading system was generating, and I realized I hadn’t done a review of the trades that expired in January of this year (2014).

For some background, I don’t count a trade as a winner/loser until it’s sold, or expires. So I gauge the returns of my system based on all the trades that expire on the same expiration date. So my reporting lags about 2 years, meaning I currently have trades in my portfolio that will expire in 2016. I won’t know until then how well I’m doing now.

Here’s the review of the January 2013 expiration trades.

OPTIONS PURCHASED TO OPEN TRADE

@PG 140118C00080000 $0.4 Jan 22nd, 09:30
@ED 140118C00070000 $0.2 Dec 27th 2012, 09:30
@MCD 140118C00110000 $0.44 Nov 29th 2012, 09:32
@MO 140118C00040000 $0.24 Nov 7th 2012, 09:55
@DUK 140118C00075000 $0.65 Oct 25th 2012, 09:30
@JNJ 140118C00090000 $0.15 Sep 27th 2012, 09:30
@CL 140118C00140000 $0.58 Sep 27th 2012, 09:30
@MO 140118C00045000 $0.22 Sep 24th 2012, 09:31
@KO 140118C00052500 $0.12 Aug 21st 2012, 11:51
@BMY 140118C00042000 $0.28 Aug 10th 2012, 09:30
@PEP 140118C00095000 $0.19 Aug 7th 2012, 14:07
@PAYX 140118C00040000 $0.45 Jun 29th 2012, 09:30
@SLE 140118C00022000 $0.45 Jun 12th 2012, 09:31
@KFT 140118C00050000 $0.49 May 18th 2012, 09:30
@RAI 140118C00055000 $0.3 Mar 23rd 2012, 09:30
@CTL 140118C00050000 $0.4 Mar 19th 2012, 09:31
@VZ 140118C00050000 $0.45 Mar 7th 2012, 09:30
@T 140118C00040000 $0.3 Mar 7th 2012, 09:30
@PFE 140118C00030000 $0.24 Feb 28th 2012, 09:30

OPTIONS SOLD TO CLOSE TRADE

PAYX Jan 18 2014 40.00 Call $1.8 8/5/2013
@JNJ 140118C00090000 $3.5 Jul 15th, 12:38
@DUK 140118C00075000 $2.25 Apr 24th, 15:20
@BMY 140118C00042000 $2.67 Apr 23rd, 09:56
@MDLZ1 140118C00050000 $0.65 Apr 19th, 11:06
@HSH1 140118C00022000 $0.6 Apr 17th, 14:23
@PG 140118C00080000 $2.99 Apr 12th, 09:31
@PFE 140118C00030000 $1.58 Apr 11th, 10:53
@VZ 140118C00050000 $2.41 Apr 11th, 10:52

Summary

I purchased 19 options in the period from Feb 28, 2012 through January 22nd 2013.

I sold 9 options when the underlying stock reached its strike price before the January 2014 expiration date.

That leaves 10 trades that expired worthless.

Note how painful that sounds…I didn’t even win 50% of the time. I was wrong more than half the time. But I don’t watch my portfolio, so I had no idea. I only got the notifications of the wins. And those are quite fun to get.

I purchased to open $6.55 * 100 = $655 in trades, with $5 * 19 = $95 in commissions, (I’m estimating $5 per trade), for a total of $750 paid out.

I sold to close $18.45 * 100 = $1845, with $5 * 9 = $45 in commissions for a total of $1800 in deposits.

That means my return from February 28, 2012 through January 2014 was ($1800 – $750)/$750 = 140%…or roughly 70% per year.

I was wrong more than half the time, but I made more than 70% per year while doing it.

It’s okay to be wrong…what matters is the magnitude of the times you are right, and the minimizing of the pain from the times you are wrong.

Note the opposite could also happen…being right 99% of the time, but those 1% wrong times could wipe you out.

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