WalMart – end of the week.

We ended the week at -$265 on our position, so up $75.

The Delta of our WalMart position, as weighted to the DIA, is almost zero, and Theta is now $20. We sold a new April 77.5 (basically ATM) on Friday. I’ll keep you posted on the progress of this trade.

I have been asked about a subject that we work on here, because there is little useful information out there to be found. No one really explains how you, as a small trader, manage your options portfolio. We try to teach it here. There are no bounds to the creative ways you can combine puts, calls, cash, and underlying stock to create a portfolio, so the suggestions that we present are just one path. You may find a different way that is just as valid.

We target 1.5% a month growth of our entire account value. This is 18% a year, – a very challenging number to achieve year after year. Berkshire Hathaway has averaged close to 20% a year over the life of the company. You and me – we are probably not going to do better than Warren Buffett. So let’s understand what is possible, what is probable, and what is a realistic goal. 20% a year (every year) IS possible and we are probably not going to do that because a realistic goal is not “I can do better than Mr Buffett”. You won’t.

Trading options is being in the options trading business – and they are two entirely different things. Anyone can open an account and trade some options, but until you realize that you are running a small business that trades options, you can’t succeed. You are in business to get paid for accepting a defined amount of risk for a defined amount of time. This is exactly what an insurance company does so – Are you actually in the business of running a tiny insurance company for stock owners? Yes, you are. You must learn THAT business to succeed. It’s not enough to know about puts and calls. You must know how to take your cash and invest it in a risk-managed portfolio that can hopefully throw off about 1.5% each month.

Portfolio management will be a subject that we continue in future articles

Stay Optioned, My Friend!


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