August 5, 2020
I have updated my tutorial on how you start and build an ongoing option trading position. The trade started on May 8, the symbol is DBX. The profit is now about $1565 after 30 trades. I have been selling both calls and puts around a small position. My exposure has never been more than 600 shares. On May 8, DBX closed at $21.88. Let’s analyze it as if I would have bought 600 shares on that date for $13,128. Today, those 600 shares would have risen in value by $1.37, for a theoretical profit of $822. My profit is just about double the “buy and hold return” and I achieved that by selling options. Also, at times my exposure has been zero shares, while most of the time it’s 300 shares. This ongoing trade is a great example of how you create Option Trading Income. There is just no reason at all to constantly be looking around for a new symbol to trade. Just pick one – for the right reasons – and trade it well. Today, I own 300 shares at a cost of $6,900. My profit is $1565, or about 23% in 3 months. Is this a normal Option Trading return? No, it’s rather exceptional and there is always some luck involved with outsized trading returns. 1% a month a is reasonable goal and even that is difficult to achieve over the long term. DBX reports earnings tomorrow, Aug 6, so it could all change! I have a covered call at the 22 strike and the shares are trading over 23, so I am protected down to $20.53 because the calls were sold for $1.47. I should be Ok for the earnings report, but you never know. The only sure way to protect my profit would be to close the position and rebuild it after earnings. That’s never a bad choice when you are concerned about a big move at the report.