Option Trading Tutorial Summary 2010

Here are the trades that I put on and closed in 2010. I closed a total of 33 trades of which 14 were profitable and 19 lost money. In all of these trades, the portfolio only lost 12%, which is 1% per month. I say 'only' because many traders that lose as many trades as I did in these tutorials would have completely drained their account. The secret is good money management, one of three critical aspects to successful trading.


Entry Date
Trade
Target profit
Actual profit/loss
Notes
12/21/2009 Short Put Credit Spread $288 + $288 Textbook trade
1/4/2010 Put Credit Spread (EWZ) $312 - $136 Got caught in the market turn
1/8/2010 Put Credit Spread (SPY) $297 - $369 Stopped out as the market turned bearish
1/12/2010 Put Credit Spread (DIA) $296 - $328 Stopped out in the market turned bearish
1/25/2010 Put Credit Spread (SPY) $288 - $81 Exited early using a technical exit
2/1/2010 Iron Condor (SPY) $180 + $192 Almost a textbook trade
2/3/2010 Put Calendar Spread (DIA) $220 - $44 Exited early when the market changed directions
2/9/2010 Put Credit Spread (SPY) $296 + $192 Added a call spread to the trade. Probably should have left it alone.
2/24/2010 Put Credit Spread (EWZ) $288 + $288 Textbook trade
3/2/2010 Call Diagonal Spread (IWM) $124 + $253 This turned into an ideal trade that I almost screwed up!
3/9/2010 Iron Condor (SPY) $174 - $172 Loss was minimized by some major trade management.
3/17/2010 Put Credit Spread (DIA) $288 + $288 Another textbook trade
3/29/2010 Iron Condor (SPY) $192 - $130 Could have been a winner if I'd not adjusted but then adjusting helped the EWZ trade below.
4/6/2010 Iron Condor (EWZ) $256 - $360 Got caught in market turn. Trade helped somewhat by adjustment.
4/15/2010 Call Calendar Spread (SPY) $99 - $330 I should have put a stop on the lower side of this position. Not following my own rules cost me.
4/22/2010 Long Call Vertical (SPY) $300 - $420 Got caught in another market turn. Should have executed my technical exit.
5/5/2010 Put Credit Spread (IWM) $280 - $352 Got caught in the market turn. Stopped out.
5/7/2010 Put Credit Spread (IWM) $266 - $329 Shouldn't have lost money on this trade with better trade management. See the key lessons learned.
5/25/2010 Pairs Trade (EWZ/SPY) $296 - $84 Trade adjustments and early close on EWZ helped minimize the loss on this trade.
6/11/2010 Iron Condor (DIA) $198 + $198 Finally! A successful trade.IT's been a while since I've had a winning trade. Who'd have thought it would be this one
6/15/2010 Put Credit Spread (EWZ) $273 - $220 Another loss. Just when things were looking good. Have I mentioned this is a tough market to trade in?
7/8/2010 Iron Condor (SPY) $208 $124 This one was a tough battle. Another that would have been fine if I'd not done any adjustments on it but turned out OK (more or less)
7/13/2010 Call Credit Spread (DIA) $255  $4 This trade made money but not nearly as much as it could have if it wasn't over traded.
7/29/2010 Diagonal Spread (IWM) $226 - $387 This trade got crushed in the recent sell-off but it could have been managed using technical exit rules
8/9/2010 Put Credit Spread (EWZ) $259 - $326 Another failed trade. I mentioned at the conclusion of this trade the importance of trading psychology
9/3/2010 Iron Condor (DIA) $162 - $375 I did not adjust this trade at all and so it suffered in the face of Sept/Oct bullishness.
9/14/2010 Call Credit Spread (SPY) $258 - $179 I followed my rules and closed the trade early on a technical break. This helped limit my loss further than my simple stop loss.
9/24/2010 Put Credit Spread (SPY) $245 $245 Textbook trade in response to the shift in trend. This trade helps offset some of the loss from the call spread above.
10/5/2010 Put Credit Spread (IWM) $266 $266 Another textbook trade. This recent market bullishness has really been beneficial to these put spreads.
10/19/2010 Put Credit Spread (SPY) $266 $266 Nice! Another successful trade. The bullishness lately has really helped these trades. Are there lessons? Of course!
10/20/2010 Call Diagonal Spread (EWZ) $324 -$334 The stop loss kicked me out of this trade prematurely. I believe there still potential for this trade but I have to count this one as a loss even though I will also be keeping it going.
11/18/2010 Put Credit Spread (SPY) $222 $222 Textbook trade - again. It would be nice to have a lot more of them but not all trades work out as well as this one.
12/3/2010 Put Vertcial Spread (DIA) $231 $231 Closed the last day of the year for the target price. Another textbook trade to finish the year.

For trades entered and closed in 2009, check here.

While the point of these trade tutorials isn't necessarily to have each one turn into a winner, it's still nice to be able to track the result over time. While I've summarized the trades above, I want to provide a portfolio summary much like we would if we had a trade log. After all, it isn't really about how many winners or losers there are but what the equity curve looks like. The table below will show the cumulative result of closed trades. Note: This includes open debit orders so the balance may seem off sometimes.

Starting Date Starting Balance Current Balance Cumulative Gain/Loss % Portfolio Gain % Gain/Month
12/21/2009 $19,365 $17,008 -$2357 -12.17% - 1%

As I continue to put on trades, how do I choose new strategies to trade? One way is through taking more of a portfolio management view. Check out this video to see an example of portfolio management in action.

Note: This trade discussion is for educational purposes only. I am NOT making any recommendations on the trade or the underlying stock or ETF. If you decide to follow this trade, please do so in a paper trading account. Trading options involves risk and some options strategies can result in losing more than the original amount invested.

thinkorswim, Division of TD Ameritrade, Inc. and Success With Options are separate, unaffiliated companies and are not responsible for each other's services and products.




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