Accounting for Mondays…….
If you are running a business, you must know your numbers. Are you making money, losing money, what is your inventory, what is your available cash? Your options trading portfolio is a business, and you have got to know your numbers to have any chance of success.
At the end of every day you should note the price level of the Index that you use for Delta Weighting. This may be the SPY, or the DIA, or maybe the QQQQ – that depends on your portfolio and your particular system. You should also record your total weighted Delta (market risk), Theta (daily time decay) and your Profit/Loss Year to Date,
We use Mondays for analysis and we do it EVERY Monday, first thing after the market opens. It takes us a couple of hours, usually. We have a form that we created for this purpose. At the top we place the symbol name, or XYZ. Below that, our form has a place for today’s date on the left. The next box is called “action”. Here we record our opinion of the trend for that symbol – Is it in a bull market, bear market, in a channel, etc?. This point of view tells us what action we should be taking. If it’s a bull market for XYZ then we should be a buyer. If it’s a bear market for XYZ, then we should be a seller, If it’s in a channel, then maybe we want to try and get our Theta as high as possible. Knowing the trend will focus your thinking,.This is just scratching the surface, analysis has many, many subtleties to it. We use our own proprietary indicators and subscribers get the detail that is needed to make this work, along with the form, properly constructed and filled in.
Our Monday sheet then has a place for “Profit Year to Date”. Once a week we record our performance for XYZ since January 1. Then, we record our Profit Realized (for that week) and the weekly Cash Flow (Theta) for that position. Each separate symbol is inventory for the business, and you must determine which inventory is making you money and which is losing. This analysis give you the guidelines for the upcoming week. Looking at a symbol we have been discussing in the blog – WMT (WalMart) – here are last Monday’s numbers:
WalMart is in a Bull market, we have lost $340 YTD, our profit realized for the week was +$55, and our weekly cash flow will be $155.
This is just an extremely simplified overview of our Monday accounting. We’ll continue discussing all of this in the future.
Stay Optioned, My Friend!