INTRODUCTION AND STRATEGY:
This is the first posting for this trading journal so an introduction is in order.
The overall strategy is to trade specific markets to profit in a conservative and consistent way by using the best money management principles, while controlling Capacity Risk, Wiggle Risk, Information and Knowledge Risk, Governmental Risk and External Event Risk ( a thousand different ways for the Black Swan to say, “I love you”).
I expect to win. I expect to profit handsomely.
I trade and manage a number of portfolios for myself and others. Besides multiple portfolios, we use multiple brokers for different purposes. All that multiple stuff requires multiple monitors...I use eleven. We use a pilot portfolio to structure and execute trades. What we trade in the pilot portfolio we trade in most other portfolios in proportion to their funding. The pilot portfolio is representative of our trades so for purposes of this journal, I will report Pilot Portfolio trades only, otherwise it gets too complicated.
I trade Commodities, to collect the option premium and stocks to collect the option premium and dividends, and special stock situations to capitalize on various opportunities as they present themselves. Options are a good tool because they not only enhance returns but allow much greater flexibility in ways to profit and in risk management. I trade along well defined main lines to generate multiple “rivers” of cash flow.
Commodities
Dividend Machine
Special Stock Situations
Why Option Premium Collection?
It is said 70%, or more, of options expire worthless. In its most simple form, that means the option buyer pays a “premium” to the option seller, who keeps it, 70% of the time. An amazingly large numbers of people spend a great deal of time and capital BUYING options that are extremely unlikely to return a profit to them. Said another way, legions of people BUY options that have a very low mathematical probability of winning. I like to take the other side of the transaction and trade against those people by SELLING OTM options that have an exceptionally high mathematical probability …always on the order of 80% and 90%... of profiting. This implies that I win a very large percentage of the time.
So as not to make this first posting very, very long, I will explain more detail and the strategy behind trades as we go along.
Remember, this Journal is about how I trade…not necessarily how you should trade. These methods are what works for me, and have been honed over years and years of trading ( I started when Lincoln was President) and many painful and expensive lessons. Each and every day I am reminded about what I DON’T know about markets and human behavior.
This Journal is best used for educational purposes. I hope it triggers ideas for you, and ways to do things, and ways not to do things. The old saying, “If the shoe fits, wear it”, comes to mind. Trading is always more about the trader than it is about the market. I will be totally transparent and you will see both successes and failures; great logic and bonehead decisions. Runs of success and runs of failure. Any trader tells you he/she never has losses…run. Losses are a cost of doing business.
Keep your costs down.
I welcome your comments .
FROM THE LOG TODAY:
2:30PM. So far still hunting. Looking at Dividend Capture for SSL, ABT, FCX, HSC but cannot find a way in. All are Ex-Dividend on the 12th. May be too close to Ex date...options get a little testy then and a profitable entry seems more difficult.
Positions Already on the books:
Previously: Now SOLD DEC 102 CRUDE Calls with 38 days to go show some life in the wrong direction. 93% Probability of Profit. Tomorrow will sell some puts to offset price gain in calls and add Theta.
EURO NOV 140 Calls also showing some life with 26 days to go. Down to 73% probability of Profit. Our original assessment was that it would go down. Tomorrow we will sell OTM puts to offset and gather more Theta.
SUGAR DEC 29 Calls also misbehaving with 37 days to go. We will hedge some tomorrow.
CMI 65/70 and 105/110 Iron Condor on track for expiry in 12 days. 85% probability of profit now. If the underlying stock expires between those strikes we keep the premium, about $827 per 10 options. 603% return.
Closed Captured dividends:
10/6 SYY + 214.50 per 1000 shares. In one day, out the next.
10/10 DRI + 385.33 " " " In 10/7, out 10/10
10/10 BMY + 405.24 " " " In 10/5, out 10/10
