Hi, I am starting this second Journal, the other one is Forex dedicated for active traders (here). This Journal is also published on my site and be understanding I will not answer questions here but feel free to send PM if you have questions. I also started on this forum a stock trading journal with a $50K account for a living but it was too time consuming and I stopped it. This one is way lighter and is about growing a small account ($3K) within 4 months in the safest possible way: This Experience is intended for beginners or people wanting to trade stocks without spending time following the financial markets. The Experience lasts 4 months, with an account of $3K as initial capital. The duration of 4 months is synchronized with the earnings seasons. I restart with new account on January, May and September so we include each earnings season . You can virtually simulate the Experience with a different initial capital provided you proportionally adjust your position sizes. I use exclusively options as a substitute for stocks (SPX components), this allows to control the risk exposure while benefiting of a high leverage. We don't trade volatility here. We trade with a directional bias and only the bullish side and we never sell (write) options. The current Experience started on September 22nd 2015, and will end on Dec 31st. You have the details below on each contract traded. When this one is over I will publish here the following Experience starting on January 1st. We don't trade much but believe me it worth it. Closed Positions and pocketed P&L Opened positions *The Max price is the maximum price at/below which the Trade is still valid for the Experience (in case you paper trade). Trades will be posted almost real time on Twitter @neoflytox. NVDA Underlying: NVIDIA Corp. Contract: NVDA, long JAN 15′ 2016 – 33 Call Qty: 3 Average Price: $1.60 Max Price : $1.72 Date:2015 Dec 8th 18:35 GMT +1 JD Underlying: JD.Com Symbol: JD Contract: JD, long JAN 15′ 2016 – 30 Call Qty: 3 Average Price: $2.37 Max Price: $2.50 Date:2015 Nov 30th 16:11MT +1 AAPL Underlying: Apple Symbol: AAPL Contract: AAPL, long Jan15′ 2016 – 117.14 Call Qty: 2 Average Price: $4.71 Max Price: $5 Date:2015 Nov 18th 16:50GMT +1
You lost me at "The duration of 4 months is synchronized with the earnings seasons. I restart with new account on January, May and September so we include each earnings season ."
Interesting. Last time I looked into doing that, I could never figure out how to enter such that the premium didn't make options less attractive than owning the stock position outright (cash permitting), even in a strong trend. How do you minimize that disadvantage?
Hi, The Experience has a duration of 4 months. At the end of the Exp we withdraw all the gains and restart with $3k for another 4 months. January, May and September as a starting date allow to include the beginning of each earnings seasons (individual stocks are mainly driven by earnings expectations, EPS and Growth). The reset after 4 months is part of the risk management but one can decide to accumulate or use a different capital, provided his exposure is proportionally adjusted.
Hi, The cost of the option is more related to its time value and its implied volatility, therefore we try to buy the cheapest one though with with significant volume. For the time value we use an expiry between 45 and 60 days and generally sell 3 weeks before expiry, the shorter we hold the better. For the IV we use the basic rule of IV below Historic volatility and preferably in the lower percentiles. The time value also attenuate the loss due to a falling stock. The other very big advantage, since we buy calls only, is that in whatever event (huge gap, black swan or crash included) our risk is limited to the premium we paid.
"4 months. January, May and September as a starting date allow to include the beginning of each earnings seasons" WTF? How many quarters are there in a year? How often do they come? What length of time does each quarter cover? I would suggest one understand the quarterly market report cycles before describing this system. Sure call it a 4 month period, but 4 months has nothing to do with earnings.
Hi; I never mentioned quarters here and again the 4 months period allow straddling 2 reports. On average, The first report is generally due on January for Q4 until mid Feb. The second is due On April until mid May for Q1, the third is due on July for Q2 and the fourth is due on October until mid November for Q3. Here an Investopedia saying this better than I do, I would just add that the reports spread over a 7 weeks period : The months of the year in which a majority of quarterly corporate earnings are released to the public. Earnings season is generally accepted as the months immediately following the quarter-ends of the year, which means that earnings seasons would fall in January, April, July and October. This is due to the lag between quarter-end periods and the time in which firms are able to release their earnings following their accounting periods. Read more: Earnings Season Definition | Investopedia http://www.investopedia.com/terms/e/earningsseason.asp#ixzz3tq4qjYHM Follow us: Investopedia on Facebook Edit: Probably synchronized is not the good term to explain the choice of the 4 months duration. But 4 months is better than 3 for us, because we can trade a stock after the report and before the report on each Experience (We never hold during the report).
TWTR Underlying: Twitter Symbol: TWTR Contract: TWTR, long Jan15′ 2016 – 25 Call Qty: 3 Average Price: $2.09 Max Price: $2.20 Date:2015 Dec 10th 16:12GMT +1 We are like jumping in the trade here that's why we bought small. We may see it around $30 quickly.