My November Performance Compared to Kim's

[Guest Corto]

Kim,

Spreadsheet clipped below of my Nov performance compared to yours. You will notice a few things

1) Looks like you base your numbers off ~2000/trade. I target $1k/trade. My bottom line # would be ~$309 profit if I doubled it, or about 14% of the results you achieve.

2) I have stopped taking the non-earning plays. Those are listed as "Did not take"

3) There are quite a few "Did not get" notes meaning I was never able to get a price near your entry point and never got into the trade.

There is too much time and management in the non-earning trades for me which is one of two reasons I am not taking them.

When factoring in commissions and slippage and not getting trades because of what I consider too much slippage, this really just isn't producing results for me, even in what you are considering a good month for the program. I can't see how to rectify the trading to improve it significantly either. I don't make trading mistakes, and the ones I do get in I feel I am managing pretty well.

Mike

Book1.pdf

Edited December 3, 2012 by Corto

[Marco 223]

seems all of the difference can be explained by 'did not take' trades - so maybe you should takem

Seems to confirm my thoughts I mentioned in another thread - where I said I consider the earnings trades almost a cheap hedge (well one that in fact earns me a bit of money) for the income trades that I can now make bigger and sleep better with.

I'm not sure why you see them more effoert than the earnings trades usually you roll them once a week if you have to adjust you can usually combine that with the roll. maybe with 5 weeks of weeklies now sell the weeklies that expire in 2 weeks time - makes the trade slightly more conservative and you only need to roll every 2 weeks. Should make it slightly less maintainance.

Edited December 3, 2012 by Marco

[Reyon33 0]

I am Kim is taking 10% of his total Which is current about 23k, so his trade would be around 2 k per trade. I am in the same boat with you about the time consuming to follow all the trade. I just study a few non directional trades over the weekend and executed over the week. It gives me pretty good result. Of course, I got no where near Kim's performance. However, consider Kim is full time on this and I am not, I'm pretty happy wih the result.

[Kim 7,943]

Mike, I'm not sure what do you expect me to say beyond what I already said.

You base my P/L numbers on the model portfolio which allocates 10% compounded - this is the reason that the allocation now is around 2.2k and not 1k. However, even if you double your numbers, there are still many earnings plays where you get about half return of mine. I don't know why your returns on ARO, GPS and GMCR for example are so much lower than mine.

The SPY butterfly btw was a 12 days trades which did not require any management of adjustments.

[Guest Corto]

Kim,

I don't expect you to say anything. I am just putting my thoughts and results out there. I did miss the compounding. Duh.

The sense I get from a lot of the responses I've seen is that my results are probably relatively typical for a new person. I have a need to put stuff out there to help bolster my confidence in the system. It helps when I see responses from old timers and yourself that things generally improve with experience and time.

No worries, it is only money and it is mine to profit or lose. And like I said, things have been improving.

Mike

[Kim 7,943]

If things are improving, this is what important. I think that over time, you will find what is working for you and how to make things better.

When comparing results, it is important to compare apples to apples. The model portfolio assumes 10% allocation - in reality, you won't be able to allocate exactly 10% (unless you trade much larger account) since you cannot trade partial contracts. So if you allocate 1k and trade a $4 spread, you will but 2 spreads while the model portfolio will "buy" 2.5. If the trade makes 10%, you will show $80 gain while model portfolio will show $100. Over time, the difference will add up. Comparing percentage P/L before commissions will give you a better picture. I suggest that you analyze the results you got and find out why some the trades that you did take produced much lower gains.

Like I mentioned, the important thing is how much you make, not how much SO makes, and if you are happy with the results. I realize that people want to make money and want to make it quickly, but trading requires a lot of patience and there are no shortcuts.

[tjlocke99 18]

Kim,

I don't expect you to say anything. I am just putting my thoughts and results out there. I did miss the compounding. Duh.

The sense I get from a lot of the responses I've seen is that my results are probably relatively typical for a new person. I have a need to put stuff out there to help bolster my confidence in the system. It helps when I see responses from old timers and yourself that things generally improve with experience and time.

No worries, it is only money and it is mine to profit or lose. And like I said, things have been improving.

Mike

Mike,

I personally work full time during the day (not that trading isn't work of course) and can't get to a terminal except maybe once a day during lunch, so the earnings trades have not worked for me. I stopped even trying them a long time ago. However I have done some of the calendars successfully, and only trade about 20% of my portfolio now and keep the rest in dividend stocks or covered calls. I was even considering writing covered calls using ITM leaps to ensure a relatively save few % rate of return.

Also, I think what Kim has noted, if we get some 2 SD price swing one day you could very large ROR. Those events are not as rare as they sound

Good luck.

[Guest listolyman]

I have been considering the opportunity cost for the SO style of investing. If you invest in the SO model portfolio of $10k and make 2-3%/month then you would make 200-300/month. If you divide that by 20 days of trading a month then a profit of $10-15/day for actively managing your account. The question for each of us is what is the minimum amount that you need to average a day to justify the investment of time. There is a value in the education but there is also a monthly cost for SO membership and comissions that reduce the 2-3 percent gain. I have been learning and following the SO process for six months and my portfolio is down double digits due to the complexity of the process and time management.

Edited December 4, 2012 by listolyman

[Guest Corto]

That is a very interesting way to look at it. The only other method that I can think of that has the potential of continuous income on a weekly or monthly basis is covered calls. But I've already gone through that badly in 2008 when all my holdings went underwater and then I was terrified to write calls for fear of getting called out below my original buy price.

But there are some long term core holdings that I do hold regardless of the state of the market. And I could probably make similar level amounts/month by writing very OTM calls. But the underlying amount that is at risk is much larger, and the % return is much smaller, so I should take that into account when comparing the methods.

Keeps on coming back to the reason why I joined SO, limited risk, good return. But as listolyman' return proves, SO is not a foolproof method.

[Kim 7,943]

I have been considering the opportunity cost for the SO style of investing. If you invest in the SO model portfolio of $10k and make 2-3%/month then you would make 200-300/month. If you divide that by 20 days of trading a month then a profit of $10-15/day for actively managing your account. The question for each of us is what is the minimum amount that you need to average a day to justify the investment of time. There is a value in the education but there is also a monthly cost for SO membership and comissions that reduce the 2-3 percent gain. I have been learning and following the SO process for six months and my portfolio is down double digits due to the complexity of the process and time management.

Like I mentioned several times, looking at dollar amounts can be misleading. The only thing that matters is the percentage return. I can counter your argument by saying that if you can consistently make 2-3% per month, why not to invest 100k (even by taking a bank loan) and make $100-150 per day? Or 200k and make $200-300 per day?

I believe that over time as you gain skills and experience, you should be able to make 4-6% per month. But even with 2-3% - that's 24-36% per year (non-compounded). Do you know other strategies that can produce similar returns with similar levels of risk? Covered calls might work not bad in neutral or bull markets, but they are still directional strategies. In case of 2008 like crash, they will slightly reduce your losses, but not provide a significant protection. This is why I completely stopped trading stocks.

[Guest listolyman]

Good point. Unfortunately, i have not been able to make 2-3%/month(since i am in the negative) so investing 100k is probably not a wise choice at this time. I realize that the larger the investment then the more you make per day. Just curious how much time others are investing per week to manage trades and what their percent gains are averaging?

[Guest Corto]

Kim,

It would be interesting to see the current profit/loss of active subscribers for those who are willing to post it. Maybe a special forum could be started. I would like to see the following info: How long a sub, and current overall % gain/loss based off their trading portfolio size.

I'll start off.

2.5 months sub, I trade a 10k model portfolio and am currently down 7.4% overall.

[Guest listolyman]

Good idea mike. I would also like to see years of options experience and approximate hours invested a week in SO trades(researching, reading, placing trading, monitoring the screen, etc.).

6 months sub, 10 portfolio and down about 20% overall. This is my first six months of options investing and i spend about 15-20 hours a week learning, monitoring, etc.

Edited December 4, 2012 by listolyman

[Guest Corto]

I have 20 years of options experience, but none to the level of detail done here. Mainly buys, covered calls and vertical spreads.

I would estimate I am at about 1/2 to 1 hour/day tracking and such, maybe more on heavy weeks, and certainly some days where it is almost nothing. I really do rely on Kim and his expertise, and I do almost no checking of the trade's validity myself, for good or bad.

Mike

[tjlocke99 18]

But I've already gone through that badly in 2008 when all my holdings went underwater and then I was terrified to write calls for fear of getting called out below my original buy price.

Mike,

How could you get called out below your original buy price? Why would that happen?

[Guest Corto]

The goal was to make constant income.

So imagine, buy XYZ stock at $100/share. Write 105 strike call for $2. All is well in the world. Then XYZ drops to $80/share. Still want income? Need to write some call in the low 80s to get any kind of premium. If xyz then rallies above the strike, you need to roll the call for a loss usually, or go way out in time, or end up getting called way below the original $100 buy price.

Or, you let it sit, uncovered, not making income, because you are too scared to write a call way below your original buy in.

It is very easy to get screwed with covered calls in a bear market.

[EricSimpson1 5]

Kim,

Spreadsheet clipped below of my Nov performance compared to yours. You will notice a few things

1) Looks like you base your numbers off ~2000/trade. I target $1k/trade. My bottom line # would be ~$309 profit if I doubled it, or about 14% of the results you achieve.

2) I have stopped taking the non-earning plays. Those are listed as "Did not take"

3) There are quite a few "Did not get" notes meaning I was never able to get a price near your entry point and never got into the trade.

There is too much time and management in the non-earning trades for me which is one of two reasons I am not taking them.

When factoring in commissions and slippage and not getting trades because of what I consider too much slippage, this really just isn't producing results for me, even in what you are considering a good month for the program. I can't see how to rectify the trading to improve it significantly either. I don't make trading mistakes, and the ones I do get in I feel I am managing pretty well.

Mike

Most of your losses came from ADM, which I assume you were forced to hold through because of Hurricane Sandy. That type of event occurs once every several decades. If you throw that result out, you are doing a pretty good job with the pre-earnings IV strategy.

[Guest Corto]

Agreed.