Posted in
Options Trading
By: Tom Gentile
on June 17th, 2022
At the end of June completes the second quarter of 2022.
How has your options trading gone?
We are not asking about your investments in stocks, bonds or crypto. We are not asking about your long-term holdings.
We are asking about your options trading.
How often to you Assess Performance?
It is up to you and your brokers when you assess performance and work on tweaking your existing process, but we are fans of doing it each quarter or at the very least bi annually.
If you aren’t seeing the percentage success rate in win vs. loss percentage or percentage gain for the account you would like start with an analysis of what you have done thus far and then see where you aren’t happy and work on improving in that area.
Is it the Trading Strategy or Money Management?
If you haven’t kept track of your options trades by strategy as you go now would be a good time to separate out the results for each.
Take you Long calls, take your long puts, take your call, and put credit spread and call and put debit spreads, take your butterfly trades, your Iron condors, etc. and put the results to paper or a spreadsheet and check your results.
This can be considered tedious work and compel folks to not want to do it, but PUSH through it as it may be just the things you need to enhance your performance.
Which strategy is working the best? Which one isn’t working or not that great? This helps you focus more going forward on what works and where you focus your time and which one you spend less time trading, or you cut that strategy out completely.
Then look at your stop loss management. Are you letting your losses run too long and to a loss percentage that if you cut your losses to say 50% stop would that have improved your performance.
If you are unaware of how big you let your losses run on average you can now make a change and be more disciplined in your approach and start setting GTC orders to stop out at that acceptable percentage loss point.
Are your Trades in Line with Market Direction?
Maybe you find yourself still trading to the long side in a market that is trending down. Bearish market conditions may be what you see happening overall in the market.
But if you say to yourself you are more comfortable trading a bullish style that may tell you to stall putting real money to work in a bullish manner and to go back to studying bearish strategies.
Paper trade those to a level of comfort and success and then discuss with your broker putting more of those options strategies to work.
Trust in the Process
We know this is tedious, but it is a good habit to get in to.
We can’t iterate enough we know this analysis takes time and it may be tough to see a reality you would hope was better than it is.
Trust in the process and know that if you do this analysis of yourself, it will help flush out what you need to do differently, what you need to do less of and what you have done well. Knowing what you are doing that is working while you work on other things that need help allows you to focus doing more of what’s working and growing your account.
App: Toms Option Tools
Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.
Other times I will have other charts may work to amplify my educational points.
Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.
Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.
Disclaimers
Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
This is neither an offer to buy/sell/ or recommend a particular stock or option.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
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