Option Trading Strategies Introduction

Welcome to Option Trading Strategies. The goal of my site is to show how anyone in the middle class can beat Wall Street using a simple, common sense option trading strategy I developed. I am not a professional writer and I do not work in the finance industry. However, I do have a burning passion for numbers, personal finance, the financial markets and options. This passion plus a ton of research and experience allowed me to finalize these option trading strategies several years ago.

I had three goals when I set out to create my option trading strategies. First, I wanted to achieve a double-digit annualized return. Second, I wanted minimal drawdowns while achieving double-digit returns in my option trading system. Third, I wanted to maximize my control and eliminate the variables and unknowns plaguing middle class financial plans. The typical middle class financial plan has an inherent reliance on external forces like employers, government, the economy and overall stock market performance. I wanted to minimize the effects those forces had in my family’s financial life.

I initially developed this trading system for my IRA because I wanted to take advantage of its tax benefits to help achieve my double digit returns. I knew buy-and-hold was certainly not going to accomplish my goals and I knew Wall Street was deceiving (friendly way of putting it) the middle class to make a buck. However, I couldn’t figure out what to do about it until my system finally came together. The control I felt over my IRA and financial destiny was incredible  I was not subject to whims of the economy or the stock market as a whole.  Up, down, sideways, quiet or volatile my system cranked out double digit returns with only small and infrequent drawdowns. I certainly wasn’t paying ridiculous fees to the uber-wealthy of Wall Street only to have them lose 40% of my money during the 2008 crash.

My taxable account was a different story. I floundered from one system to the next trading anything that moved like equities, commodities, futures and bonds. My systems would work until they didn’t and then I would craft a new system. Trading technicals or fundamentals, It always felt like I was guessing and hoping for the best.

In April 2011, the industry I worked in was shutdown very suddenly. Most of my coworkers took menial work to pay the bills or ran through their emergency fund looking for the perfect job. I went a different route.

Instead of messing around with different trading systems in my taxable account, I decided to use my IRA option trading strategy. Instead of reinvesting the profit like I did in my IRA, I would withdraw a fixed monthly percentage to replace my salary. I took the next year off and stayed home with my kids. I coached the local high school hockey team and read a lot of books. During this time, my family maintained the same lifestyle we were accustomed to and even managed to increase our net worth.

This was the financial freedom I never thought possible until I retired at 65+. It completely opened my eyes to the possibilities life has to offer when you’re not reliant on your employer, the government or Wall Street. The best part of this option trading system is there are only two, simple option trades you will make so I truly believe anybody can learn this trading system with a little study and effort. Learn all about my option trading strategies from my new options trading book now available at Amazon: “Beating Wall Street 1% at a Time”.

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April Results – The Option Trading Strategies

Hit my double-digit annualized return goal with an April return of 1.09%.  I underperformed the S&P 500 as to be expected with the market at all time highs and continuing to march higher.  We increase our cash position when stocks are elevated and great value is tougher to come by so we’ll usually underperform in a high flying market…the hope is that we will outperform whenever the market pullsback.

For the year, my strategy has returned 8.03% and hopefully we are well on our way to another double-digit return for the year (knock on wood).  My current portfolio and all trades in live-time are available to current members.  We are currently at 116 members and it is less than $1.00 to join.

march option trading strategy results

Very similar to January, when markets race to all-time highs my system will almost surely lag behind. The S&P 500 returned 3.6% while I only returned 1.44%. Protecting my capital is very important to me and while I certainly have no idea if the market will go up or down from here, I believe my system will offer more downside protection in the event of a sell-off than if I was fully invested. The flipside is that if we continue to make new highs, I will continue to lag. Pigs get fat and hogs get slaughtered so I will humble accept my return and attempt to prepare myself for whatever the market throws at me…good or bad.

February Option Trading Strategy Results

The market followed through on it’s big January with a solid 1.11% return in February. My strategy returned 1.73%, a slight outperformance of the market. These market conditions are my favorite where stocks quietly meander around flat and make great opportunities for sellers of options. There have been less stocks to trade under my system than in the past couple of years but this could be the new normal with the market trading close to all-time highs. We will continue to pick-and=choose our spots taking advantage of opportunities as they arise.

January Stock Option Trading Results

While every month there is a possibility of underperforming the market, I am almost certain to underperform a heated market close to all-time highs. By the definition of my system, I raise cash as stocks are soaring to new highs. It gives me a bit more downside protection in a crash but hurts my performance in big up months. This was one of those big up months as the S&P rose 5.04% and my system only gained 3.77%.

While I do enjoy beating the market, I will take an underperformance every month of the year if I am going to return 40% annually :) I compare my system to the S&P 500 every month because it is interesting, but beating the market is not my goal… returning double digits most years is my goal starting the year with a 3.77% return is a great way to start.

December and 2012 Stock Option Trading Results

Great December to finish out a fantastic year. The position that caused my November underperformance (HPQ – Hewlitt Packard) had a monster month and gave me a total return during December of 3.78%, an outperformance of the market by 3%. For the year, my system returned 18.23% well above my goal of 1% per month.

2013 should be an exciting year. With the fiscal cliff drama at least partially resolved, I hope individual stock pickers will be able to focus on company fundamentals more and government less. Despite the market run-up, members and I have several stocks we currently think are attractively valued and are placing our bets accordingly. Best of luck in 2013!