your trading book

Discussion in 'Risk Management' started by econometrics, Feb 5, 2009.

  1. i am trying to make a trading book for my options trading. pls give some suggestions or examples?

  2. "Make a trading book"? Do you mean, you are writing a book?
  3. maybe he means he wants an example of how other traders write their books like maybe... record transactions... a book... i dunno guessing

    could you clear up what you mean?
  4. yes thatz what i meant. i am trying to use excel to record and analyze risks of my positions (making a trading book?)

    pls advise as to what items should i include as it is my first time doing it. thanks a lot.
  5. What is "thatz"?
  6. He meant an options trade log:)
  7. I think it's street for the contraction "that's".
  8. drcha


    Not sure if this is answering your question or not, but I'll tell you a rough outline of what I do.

    This is really more about the mechanics and decisions of trading, rather than the reasons behind the trade. I can remember the reasons pretty well, so I don't keep that kind of a log. If this is not what you want, just ignore the rest of this post.

    Try to set something up yourself rather than getting a ready-made template from someone--you will learn more by tweaking your own system.

    When entering an options position, I already have my "uncle point" in mind--so this is really my starting point for setting up my log. I might have a real stop or a mental stop, depending on the circumstances. In many cases the position might be hedged, but I trade it and enter it in my log as if it were not.

    I put each trade into a spreadsheet that calculates (daily) what I have made or lost, and where the exit point is today. If I have a profit I narrow the exit point or points to try to keep that profit.

    OK, so in the spreadsheet there is one row for each trade (well, there could be extra rows below if there have been any adjustments), and the columns are:

    --the type of position (I use a different worksheet for each position type actually, e.g. there is an iron fly sheet, etc.)

    --the date I put the position on

    --the number of days to expiration

    --the basic info on strikes, premiums, expiration, number of contracts, etc.

    --the total amount at risk

    --the point or points where I will exit for a loss (recalculated daily)

    --the point or points where I will exit for a gain (recalculated daily)

    --the current profit or loss (recalculated daily)

    --the last few columns show the exit date and percent return

    When calculating my return, I first subtract out the commission for both the entry and the exit. So as a simple example, if I put on a four-leg position, one contract of each, and the commission is $1 per option, I know I will ultimately trade 8 options (ignoring any possible adjustments). Therefore, the moment I put the trade on, my dollar return will show up in the spreadsheet as minus $8.

    I use midpoints in the spreadsheet, but of course don't always get those prices.

    Hope this helps you some. Needless to say the spreadsheet calculations have to be somewhat different for each type of position and each trader.

    Daily entries are basically what I have time for. I'm not willing to sit in front of a computer all day and I am willing to give up some profit in exchange for having a normal life in which I put on actual clothes and have friends and see them :) You may have completely different ideas about often to adjust your exit points, based on the time committment you make and the place where you like to sit on the inevitable see-saw of tighter stops versus greater risk.

    Oh, I keep a calendar in the Excel workbook, too, for time stops, so that I keep track of the last day to exit prior to expiration, which in most cases is one to three weeks before expiration.

    Once I have closed a position, I put a gray color in that row.

    I look at every position every day and quite often I double check my spreadsheet against my brokerage, and against the aforementioned calendar. We west coast people often have to trade prior to achieving adequate caffeine levels, and it's important not to forget about a trade or make a trading mistake and leave some undetected naked option lying around where someone can get hurt.