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Real Live Trades

 
     
 

On this page I have listed 29 trades on five stocks that I carried out in June 2008. It was probably the most thrilling month in terms of extremes in trading, and most months are significantly more boring than this! The reason I chose these trades was to show some really good examples of how trades can go very well, moderately poorly and really badly - and that a good profit is still possible at the end of the month.

 
     
 
 
     
   
     
 
 
     
 


 
     
 


These are some real trades that I carried out in June 2008. This was one of my more profitable months in that year, despite one stock going quite badly against me because of an analyst upgrade. I include it because with these examples you can see exactly:

  • How I set up the trades
  • How I actively follow up those that go the right way
  • How I rescue myself from a bad trade


The trades on this page were carried out using my current favourite set of stocks, and I chose the particular spreads to sell using the options calculator method that I explain on the Credit Spreads page. From this, you will see some practical examples of the different scenarios that crop up in a given month. Not all are as exciting nor as close to line as this one was! Most months are a lot more boring but just as profitable.

Note: My aim is to achieve a minimum of 15% profit per month, after broker commissions.
Note: I include the stock prices, so that you can look back at the trading history and see that this is accurate, not some kind fake performance sell.
Note: For those who wonder why they are all Bear Call Spreads - the technical indicators showed at the time that the trend had just stalled, and was turning over into a downtrend. This is reasonably consistent with the 'Sell in May and Go Away' beginning of the summer doldrums.

Stock: BIDU
I got it just right on BIDU, and was able to sell three spreads, even though the stock price did not move very much. This set of trades shows just how powerful the effect of Time Decay is - almost no movement in stock price, but the value of the options melted away, allowing me to buy back the spread for a small debit and sell another spread for a bit of extra profit. The last spread expired worthless, so I did not need to buy it back.

Date
Price
Action
Spread
Call/Put
Cost
23 May
335.01
Sold
380/390
C
1.65
18 Jun
332.64
Bought
380/390
C
-0.00
18 Jun
332.64
Sold
350/360
C
0.72
20 Jun
334.81
Bought
350/360
C
-0.23
20 Jun
334.81
Sold
340/350
C
0.80
Total Credit
2.94

Total revenue for the month for BIDU was $294. There were five trades with a commission of $9.95 each, so the total clear profit was $244.25. On a margin of $1,000, the Return on Margin (ROM) was 24.4%. Not bad.
NOTE: to see exactly how to calculate ROM, go here.

Stock: ISRG
Again, there was not much price movement, and the power of time decay worked for me really nicely. I could have milked this stock a little closer, but the trend was not so strongly downsided, and it is always better to play within the safe boundaries.

Date
Price
Action
Spread
Call/Put
Cost
23 May
274.75
Sold
310/320
C
1.35
10 Jun
275.09
Bought
310/320
C
-0.18
10 Jun
275.09
Sold
290/300
C
0.90
Total Credit
2.07

Total revenue for the month for ISRG was $207. There were three steps with a commission of $9.95 each, so the total clear profit was $177.15. On a margin of $1,000, the Return on Margin (ROM) was 17.7%. Better than my planned 15%.

Stock: GOOG
This one got a little close, because there was short term trend reversal that brought the stock price up against my stop loss. I could have grit my teeth and trusted my reading of the trend, but the rules are the rules, so fairly early on I backed off and carried out a spread repair step (I was going away for a couple of days, and did not want to take a chance). I was $15 down after the repair, but was able buy back and sell two more times to come out with a nice 15% overall profit (before commissions, unfortunately). Whew!

Date
Price
Action
Spread
Call/Put
Cost
23 May
549.46
Sold
590/600
C
1.90
30 May
585.80
Bought
590/600
C
-4.45
30 May
585.80
Sold
610/620
C
2.70
18 Jun
562.38
Bought
610/620
C
-0.03
18 Jun
562.38
Sold
580/590
C
0.82
20 Jun
546.43
Bought
580/590
C
-0.08
20 Jun
546.43
Sold
570/580
C
0.62
Total Credit
1.48

Total revenue for the month for GOOG was $148. There were seven steps with a commission of $9.95 each, so the total clear profit was $78.35. On a margin of $1,000, the Return on Margin (ROM) was 7.8%. Not good!.

Stock: CME
This was one of those totally unexpected and un-plannable "Grrrrrr" moments. I had the trend just right, and was following it down just nicely step by step to a very clean 40% profit, when on 13 June some analyst stepped in (in expiration week, what's more!) and gave CME a superlative rating. My trend was blown out of the water even before my stop loss could kick in. The stock dipped briefly to $419.41 on 17 June, so I did a repair and moved on. Still, it could have been worse. I only lost $12, excluding commissions.

Date
Price
Action
Spread
Call/Put
Cost
23 May
464.20
Sold
510/520
C
1.42
30 May
430.30
Bought
510/520
C
-0.28
30 May
430.30
Sold
470/480
C
1.75
5 Jun
402.54
Bought
470/480
C
-0.15
5 Jun
402.54
Sold
420/430
C
1.32
17 Jun
419.41
Bought
420/430
C
-6.45
17 Jun
419.41
Sold
450/460
C
2.27
Total Credit
-0.12

Total loss for the month for CME was $12. There were seven steps with a commission of $9.95 each, so the total overall loss was $81.65. On a margin of $1,000, the Return on Margin (ROM) was -8.2%. Again, not good!.

Stock: RTP
This was a glorious run. The trend was very strong, and the stock did not look back as it plunged along with the gold price. In four steps I was able to rake in a very tidy profit. Even more amazing (the first time I have seen this), I was able to buy back the spread on 11 June for a CREDIT! That's how quickly it had dropped. RTP is definitely one of my favourite stocks for this type of strategy. It is very volatile, which is why the spreads sell at such good prices. You need to trade it a little far out, but it is a very strongly trending stock as a rule.

Date
Price
Action
Spread
Call/Put
Cost
23 May
524.46
Sold
570/580
C
2.10
30 May
483.25
Bought
570/580
C
-0.58
30 May
483.25
Sold
520/530
C
2.40
5 Jun
475.17
Bought
520/530
C
-0.43
5 Jun
475.17
Sold
500/510
C
1.87
11 Jun
441.95
Bought
500/510
C
0.27
11 Jun
441.95
Sold
490/500
C
1.65
Total Credit
7.28

Total revenue for the month for RTP was $728. There were seven steps with a commission of $9.95 each, so the total clear profit was $658.35. On a margin of $1,000, the Return on Margin (ROM) was 65.8%. WOW! It doesn't get much better than that.

Total Profit for the month on five stocks was $1076.45, or a ROM of 21.5%. This was a remarkable month, because there were two bad trades (one of which went really bad) and one exceptional trade. I chose this month to show what is possible. Normally, I out of these five stocks that I trade, in most months, one out of the five has a trade that needs a repair, usually for a very small net loss. If it is early enough in the month, it is easy to recoup the loss.
What is interesting is that I said in my page on credit spreads that on most trades there is a maximum chance of 20% of the trades going wrong, or a minimum of 80% chance of success. Here we have 29 trades, of which two went wrong. That is a 93% strike rate (or success), and that is not unusual. My overall profit record is still above 15% for each month.

 

 

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