Friday, March 11, 2011


I´m one and a half years into gaining experience in trading options on indexes.
The first 8 months, was spent struggling with getting some kind of internet service in the boondocks. I was trying to do it, by driving daily into internet cafes. Hard way to learn.
Most of last year, ( 2010 ) after I finally got internet service, plus a backup battery operated inverter to give me electricity when our local area electric supplier went off, or had brownouts, was spent learning credit spreads and playing with diagonals, calender spreads, selling premium and other strategies that were touted by the experts on ELITE TRADER forums as being preferable. All the advice, more or less turned out to be not true. These long time experts were very cagey and got offended if you asked them what their annual Return on Investment was. Insulting defensive, was more like the reaction I got. I finally figured they were not doing that well, and more into bragging and comparing technical expertise of intricate strategies. Never could figure out for sure their ROI.
By December first, 2010, over a year into experimenting, using the monopoly money of TOS brokerage, eventually after paper and pencil trading for 8 months, I blew up the credit spread trading twice. Totally wiped out. Fortunately it was not REAL MONEY.
Since December 1st, 2010, I went into straight buying of PUTS and CALLS. This paid off almost immediately. Three months later the trial account of $5000 was up to $11,846, doing compounding in about 13 weeks. Around 137% ROI in 13 weeks. Still using TOS brokerage funny money, but now convinced I had a working methodology. The trick was in being extremely choosy about the trades and not to trade at all, unless I had one of my TWO SETUPS. Pretty much a 100% guaranteed profitable trade, every time, if I did that. The theory was to avoid any LOSING TRADES. My trading was about once, or perhaps twice per month. The profit was in COMPOUNDING. By not having a losing trade and compounding, or getting as close to maximum investment as the account grew ( pyramiding is another name ), things started to look up.
By March 1st I was ready to go into CASH REAL MONEY. Thats were we stand right now and as I have no fixed address, we travel in retirement a lot, ran into trouble with the PATRIOT ACT and I.D. verifications and all that jazz, them wanting utility bills ( have none), live on boats a lot, etc.´in order to open an account. Anyway, that is in the process, but takes TIME, as trying to work from my daughter´s house in Texas which is now our legal address, even though most of the year we can be in, any of five or more different countries. Do not like cold or snow and definitely not going to be any place cold. Thats were I stand now. Got my hot little cheque for $10,000 ready to go to the brokerage waiting on Account and I.D. verification to get started in real money. Brother in law put in $5000 and I put in $5000 and if we succeed, got more savings to increase should we be convinced to go that route.
What I learned in the past one and three quarter year, is that SPREADS in general and all the advice to sell premium and that kind of stuff, was pure hogwash. The people in trading on the internet can sell you all kinds of junk. Plain outright lies! Straight buying is the way to go. That became my only profitable way. I trade options on indexes. Thats my niche.
We shall see how it works out in real time, with real money, probably starting by April 1st 2011.
It is awfully hard not to OVERTRADE. The trading bug gets you, and you become addicted, to the adrenaline rush. Yet controlling that is the heart of the matter. What I finally did, was open more than one funny money trading account and just trade my working methodology in one account and that is the official record. In the other one or two accounts, I experiment with different methods, new ideas and stuff like that. Since it is not real money it doesn´t matter that much. Chalk it up to training and experience. The real methodology I have succeeded with in funny money, is the one I will use for real cash and I´m working on only trading when there is acceleration and buying pressure.

1 comment:

Gary Worden said...

Please update us on how you've done.