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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Q1 2014 Results

The results for my first quarter option trading strategy results are in – positive return of 2.98%.  This is right in line with trying to achieve double-digit annualized returns.  There were a total of 32 trades made during the quarter or about 10 per month.

Right now, there are more interesting stocks than there were at the beginning of the year. I am holding positions in six different equities.  If you want to keep up with my trades you can find more detail here.

2013 Options Trading Review

Wow did 2013 go by fast!  The year started similar to the last couple with a number of good, quality companies trading at very attractive prices.  By the end of the year, the bull market had limited the number of system stocks to trade.  There’s a time to be greedy and a time to be patient, for me this is a time to be patient.  There are 4 stocks I like at these levels, I am nibbling around small positions using options to keep some money coming in while I wait for stock specific sell-offs or a general market decline to bring some stocks back into the green-zone.

My weighted return on the year was 15.83%, certainly well below the 30% return of the S&P 500 this year.  I kept pace through the middle of the year but as my cash position grew, my returns fell behind the market.  This is to be expected as selling puts in a raging bull market isn’t going to capture all the upside of just owning the market.  I will continue to underperform the market as long as the bull market continues.  The bull market might be done today, it may last through 2020…who knows? I do know that I will humbly take my double digit gain and thank the trading deities for the wonderful year. If you offered me a guaranteed return of 15.83% in my trading account for 2014 I would take it in a heartbeat. Pigs get fat and hogs get slaughtered!

July Trading Results

While June was showed how this system can minimize damage and actually show a profit in a down market, July was an example of the scenario when this system is expected to underperform the market. When a market is fully valued and good stocks are harder to come by, this system will naturally underperform in this condition on a large market up month as we will be holding a decent amount of cash. While our strategy still returned .36%, we underperformed a raging bull market.

June Trading Results

June was a great example of how this system can help lower return volatility. While the market as measured by the S&P 500 was down -1.5%, our system actually had a positive return of .36%. This is largely due to the fact that when the market starts becoming fully or overvalued, we increase our cash position to find better deals at a later time. Of course the market can keep rallying and we will underperform if the market continues to rally higher. However, we’ll take a slight underperformance during high flying markets to minimize the damage that occurs during bear markets.

May Trading Results

Market continues to run higher and we will continue to ride along with it…just not as much!  We are holding a relatively large cash position as there aren’t as many appealing stocks to invest in.  When there is the inevitable correction, we’ll be ready to put our cash to work.  In the mean time, we will be thankful for our profit…even if it doesn’t match the market return!

In May, the option trading strategies returned .5% while the market returned 2%.  At the half-way point of the year, we are up over 8.5%!