No Lose Stocks / Options Trading 2015 Option Expiration Review

January expiration just passed, so it’s time do a review of the returns for my options trading system.

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 2017. I won’t know until then how well I’m doing now.

Here’s the review of the January 2014 expiration trades.

OPTIONS PURCHASED TO OPEN TRADE

Contract $/Contract Buy Date
JNJ 150117C00095000 $0.4 9/26/2012
XOM 150117C00135000 $0.36 10/12/2012
PG 150117C00095000 $0.32 10/22/2012
AVP 150117C00025000 $0.55 10/23/2012
CSCO 150117C00025000 $0.74 10/25/2012
WMT 150117C00100000 $0.33 11/19/2012
WIN 150117C00012000 $0.25 12/20/2012
KO 150117C00050000 $0.31 12/31/2012
T 150117C00045000 $0.3 1/2/2013
GE 150117C00030000 $0.26 1/10/2013
DELL 150117C00017000 $0.11 1/17/2013
RTN 150117C00075000 $0.22 1/30/2013
CTL 150117C00060000 $0.05 1/31/2013
TGT 150117C00090000 $0.13 1/31/2013
MRK 150117C00055000 $0.51 2/4/2013
MO 150117C00045000 $0.21 2/5/2013
LMT 150117C00115000 $0.55 2/5/2013
SYY 150117C00040000 $0.3 2/6/2013
BP 150117C00060000 $0.31 2/13/2013
SO 150117C00055000 $0.21 2/14/2013
DD 150117C00065000 $0.33 2/19/2013
DD 150117C00065000 $0.33 2/19/2013
PFE 150117C00040000 $0.1 2/21/2013
MCD 150117C00140000 $0.22 3/8/2013
RAI 150117C00055000 $0.35 3/11/2013
PPL 150117C00037000 $0.4 3/15/2013
VZ 150117C00070000 $0.17 3/15/2013
LLY 150117C00075000 $0.43 3/27/2013
LO 150117C00058330 $0.29 4/1/2013
CAG 150117C00050000 $0.1 4/2/2013
GIS 150117C00065000 $0.23 4/10/2013
NEE 150117C00100000 $0.39 4/15/2013
WM 150117C00055000 $0.2 5/2/2013
POT 150117C00060000 $0.5 5/6/2013
DUK 150117C00090000 $0.6 5/14/2013
AEP 150117C00060000 $0.25 5/28/2013
TRV Jan 17 2015 110.00 Call $0.55 8/6/2013
WMT Jan 17 2015 95.00 Call $0.52 8/23/2013
K Jan 17 2015 80.00 Call $0.39 8/29/2013
MMM Jan 17 2015 155.00 Call $0.77 9/23/2013
PG Jan 17 2015 95.00 Call $0.71 10/4/2013
BBT Jan 17 2015 45.00 Call $0.18 10/29/2013
LLY Jan 17 2015 65.00 Call $0.36 11/4/2013
KRFT Jan 17 2015 70.00 Call $0.45 11/6/2013
SO Jan 17 2015 50.00 Call $0.32 11/6/2013
TGT Jan 17 2015 80.00 Call $0.82 11/6/2013
TWC Jan 17 2015 165.00 Call $0.50 12/23/2013
KMP Jan 17 2015 97.50 Call $0.29 12/24/2013

OPTIONS SOLD TO CLOSE TRADE

Contract $/Contract Sell Date
CSCO 150117C00025000 $2.88 7/9/2013
LMT 150117C00115000 $7.8 7/18/2013
RTN Jan 17 2015 75.00 Call $6.08 8/5/2013
JNJ Jan 17 2015 95.00 Call $5.13 11/20/2013
SYY Jan 17 2015 40.00 Call $2.10 12/9/2013
MRK Jan 17 2015 55.00 Call $3.33 2/5/2014
DD Jan 17 2015 65.00 Call $4.25 2/18/2014
RAI Jan 17 2015 55.00 Call $2.91 3/3/2014
LO Jan 17 2015 58.33 Call $2.91 3/4/2014
NEE Jan 17 2015 100.00 Call $2.70 3/17/2014
LLY Jan 17 2015 65.00 Call $2.12 7/24/2014
WIN Jan 17 2015 12.00 Call $1.16 7/29/2014
KMP Jan 17 2015 97.50 Call $1.74 8/11/2014
MO Jan 17 2015 45.00 Call $1.23 9/19/2014
MMM Jan 17 2015 155.00 Call $3.75 11/4/2014
LLY Jan 17 2015 75.00 Call $1.59 12/11/2014
AEP Jan 17 2015 60.00 Call $0.95 12/19/2014
PPL Jan 17 2015 37.00 Call $0.50 12/24/2014
SO Jan 17 2015 50.00 Call $0.49 12/24/2014

Summary

I purchased 48 options in the period from September 26, 2012 through December 24, 2013.

I sold 19 options when the underlying stock reached its strike price before the January 2015 expiration date.

That leaves 29 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 $1717/contract in trades, with $5 * 48 = $240 in commissions, (I’m estimating $5 per trade), for a total of $1957 paid out.

I sold to close $5362/contract, with $5 * 19 = $95 in commissions for a total of $5267 in deposits.

That means my return from September 26, 2012 through January 2015 was ($5267 – $1957)/$1957 = 169%…or roughly 75% per year.

I was wrong more than half the time, but I made more than 75% per year while doing it.

Also note that by 11/20/2013, the winning trades had already paid for all of the trades I would place in this group. Any trades that paid off in the year after that were pure profit.

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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