End of the week Jan 8
Our WalMart (WMT) trade worked well this week. We sold cash secured naked puts at an average price of 45 cents and they expired. We kept the entire profit on our 3 contracts, or $131 after commissions/fees. This is the best possible result for a weekly trade. It does not often happen so don’t assume that you can do this week after week. Most trades need adjustments and rolling forward (more time) to work out profitably. Trading options is work that requires planning and patience. It is not gambling!
We will watch WMT for a day when it is down at least 1% and then sell naked cash secure puts again. Subscribers get those trade alerts before they are sent to the market by DPO.
The SPDR Consumer Staples EFT trade is ongoing. We sold one 50/48 Feb put vertical for 60 cents on Wednesday, another for 69 cents yesterday, and a third for 72 cents today. This vertical position is expected to take some time to become profitable. Verticals placed 6 or 7 weeks in the future will decay as desired over weeks, not days. The position is right at break-even for this week. Notice how we entered the position at one price and when prices got even better we repeated the trade twice. Pricing improved this week mostly due to the increased volatility caused by the violent market drop. Increased volatility raises option prices so for sellers like us, we take in more money for the same trade with higher vol. We will continue to follow, analyze & explain this position next week.
ALWAYS keep some cash available to open new positions during large market drops. The DPO portfolio ended 2015 at about 50% cash. We have invested some over the last few days, but there is plenty of cash still in the account. We trade options for cash flow – just like any business – cash flow is number one. In our system, we want to use options to earn cash flow of one-tenth of one percent (0.001) of our account value every trading day. For example – an account with $100,000 can safely create $100 a day in cash flow with a risk-managed options portfolio. We do it nearly every day in our accounts – and you can learn to do it, too!
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Stay Optioned, My Friend!