High Probability Options Trading Journal

Discussion in 'Journals' started by guru, Oct 12, 2021.

  1. guru


    High Probability Options Trading Journal

    Just moving this strategy out of my previous & more generic journal at https://www.elitetrader.com/et/threads/gurus-pursuit-of-the-holy-grail.349297/page-13#post-5462838 , and after setting up a new portfolio-margin trading account at TDA a month ago just for this purpose: trading highest probability options strategies and tracking/posting weekly P&L here.
    I won't be revealing strategy details unless/maybe when everyone else starts posting details of their own successful strategies.
    Though generally I'm trading various temporary option skews that open up as the supply & demand shifts between different parts of the options chain.
    All of my trades are hedged, at least partially, though they do have pockets of very large risk. Some of my trades may be considered free hedges, thus profiting from the market pullbacks, though there is a large risk in miscalculating something.
    I am also making small bullish bets including holding small number of shares.

    Most of my trades have multiple legs and averaging 4-7 options (not legs) per trade, therefore my commissions will also be high, up to $4.50 per trade, at least until I negotiate lower commissions with TDA.
    I may be in a trade from a day to several months, though usually aiming at 1-2 weeks on average.

    The goal is to make minimum 10%/year ($100/day on $200K account) with max drawdown of about 2%, thus basically keeping the account steadily growing. Unless more opportunities present themselves, and they often do.
    Currently this account is up approx 7% since starting trading a month ago, so over 80%/year is possible, or much more if I'd made larger bets. For now I'm trying to play it safe while working towards improving my approach. On another hand, I'm trading in this account part-time, so not sure how far I will be pushing it without spending more time on this.
    Most of my trades come from my internal options analysis system that suggests highest probability trades, statistically and/or historically, which I then review and manually plug into ToS. Though some of my trades come from Excel spreadsheet where I track past performance of selected strategies.

    And unfortunately for now the profit and then the drawdown sometimes shows as swinging a lot due to some illiquid LEAP options that TDA is unable to price, and simply pricing them at the mid. My account is usually quite stable during the day, only occasionally showing large swings due to market makers widening their bids. But the swings are showing up much larger after market closes when some bids may be completely withdrawn and TDA may be pricing a $30 option at $10, or a $10 option at $30. This throws my small drawdown goal out of whack, so I may try to stabilize it by holding less LEAP and illiquid options.
    I may also need to account for the account balance being off by +/- 1% (+/-$2K) at any time.

    Again, the goal of this journal is simple: post weekly account balance / P&L.



    (NOTE: this account was sitting empty until recently, and I started trading after getting approved for portfolio margin on September 13)
    Last edited: Oct 12, 2021
    emulimu and qlai like this.
  2. Is this sort of your alternative to holding a bunch of cash? Or are you keeping the cash stash in a different account?
  3. guru


    I have my main account at Interactive Brokers but they require too much margin for some strategies, or actually my margin swings unpredictably when various options expire. I also hold various long-term conviction trades in there, so it can swing much more.
    This one is meant to be more stable, so indeed I'm thinking of it as an alternative to keeping money at a bank and getting practically no interest, just trying to get steady growth instead. But there are always risks of things going wrong, especially when trying to take on more trading opportunities, so not everyone may compare this to holding cash.
    morganpbrown likes this.
  4. guru


    Just a quick weekly update, though not much has happened recently. I'm making some profitable trades but the account is fluctuating due to trading illiquid options, and when those expire then I'm taking on new ones that also cause fluctuations. I've got out of most LEAPs but even shorter term I may, for example, buy/sell some $0.50 combos that can be valued by TDA anywhere from $0 to $3, depending on bid/ask spreads. This way my balance is usually off (mostly after hours), but on average the account shows steady growth.