Earlier this month I wrote about experimenting with options trading. I just completed my first full month of options trading. It must confess it has been fun trading options. I’ve decided to continue options trading this month. I am selling covered calls and cash secured puts only. This may change in the future, but for now I am sticking to only those strategies I understand. In April, I executed 20 trades totaling $1,348.50. Less trading fees of $147.50, my profit was $1,201.00. All transactions occurred in tax sheltered accounts, which means this is free money!
April Options Trading
Of the 20 trades I made last month five were covered calls and fourteen were cash secured puts. The chart below shows every trade I made.
I sold seven contracts or 700 shares of PBR, at a profit of $135.72. I also sold one contract or 100 shares of JBLU, at a profit of $110.30 My total profit in April by selling covered calls was $246.02 I would like to sell more covered calls but I only own 100 or more shares of a handful of stocks. If I decide to continue options trading I will secure over 100 shares of more stocks in my portfolio. Today I own more than 100 shares of the following stocks: STWD, T, JBLU, GE, F, HOG, PBR and PM.
Cash Secured Puts
I made $1,039.52 selling puts. Of the fourteen puts I sold to open in April, I decided to buy to close three contracts. Two of the contracts I bought to close because they were inexpensive and I wanted to sell new contracts to make more money. One of the contracts I bought to close because the stock was under its strike price and I did not want to own the stock yet. This trade was for Visa. I want to own the stock, but I think its price will drop a few more dollars this quarter. The stock price dropped after earnings lower than I expected, so I decided to take a small loss rather than buy the stock. I earned $94.29 by selling the contract and bought it back May 1st for $152.71. I lost $-54.82 on this transaction. I did not account for this in the chart above because the transaction took place in May. Next month I will cover account for this transaction in my register.
Options Trading – Next Steps and Takeaways
For the month of May I plan on selling more cash secured puts, possibly on stocks I already own. By following this strategy, I can make money selling contracts and if one of my contracts falls below its strike price, I will own more than 100 shares of a stock I want. This will allow me to sell covered calls and make money on both sides of the transaction.
If after this month I decide to continue options trading I plan on investigating brokers offering lower transaction fees. Schwab charges me almost $10 per trade. I know there are better options out there. For now though, I am fine paying the fees. If I continue Options Trading I will likely open an account with Interactive Brokers with $10,000 of fresh capital and start making a few short time frame trades a month. Interactive Brokers charges a $10 a month account fee on accounts with a value under $100,000; but this is cheaper than paying $10 a trade.
What are your thoughts on options trading? Do you trade options?
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