Make Money Trading Monthly Options
This post is a continuation series about how I make money trading monthly options. I share here what my trades are for this and previous month’s. Also, I also discuss how much money I have made or loss for the month and how I am managing positions. Previous post haven’t really delved into my psychology behind trades and why which choices were made. If you are curious, I cover this more below. It may be helpful for you that are on the fence about can you do this yourself as well. Nonetheless, what has become apparent to me is that our economic survival may hinge on knowing other ways to generate income besides a traditional job. A working knowledge and experience of how to trade options can help you tremendously today and in future.
One Year Ago
A year ago in March, I looked at an opportunity to generate some more cash flow for my household. The opportunity manifested itself through options trading and that my knowledge to that point was sufficient to do well. Before that time, I really wasn’t that familiar with options trading at all. I learned the basics and understand better what I could do as I went along. I still don’t know and understand everything there is to know about options trading. However, I continue to educate myself as I go. Don’t close the door on this as an opportunity you could be taking too because you don’t think you can do. Below are last 2 month’s post and previous positions taken by date:
Previous Month’s Positions
- Gray – Highlighted gray implies a position in repair due to stock price being below original strike price I purchased the stock at. However, I am still able to collect premium from covered call position.
- Green – Highlighted green implies a position which I made some or all the money I intended to make.
- Red – Highlighted red implies a position which I loss money.
- Black – Highlighted black implies an open position which I cannot yet render a gain or loss assessment.
- 9/18 Bought 100 NTES @ $272.50
- 9/18 Sold 100 NTES @ $290.03
- 9/18 Bought 100 NTNX @ $22.50
- 9/18 Sold 2 ACIA Oct17 50 Call @ $0.75
- 9/18 Sold 1 AAOI Oct17 65 Call @ $2.30
- 9/18 Sold 5 TWLO Oct17 32.50 Call @ $0.75
- 9/18 Sold 1 NTNX Oct17 22.50 Call @ $0.97
- 9/18 Sold 2 AAOI Oct17 55 Put @ $3.80
- 9/18 Sold 1 NTES Oct17 272.5o Put @ $3.20
- 9/20 Sold 1 MU Oct17 34.50 Put @ $1.11
Previous Positions Analysis
Last month, NTES was a big stock appreciation gainer for me. The day I was assigned the stock at $272, it shot up to $290 where I sold out. I then got short again at the same strike as before of $272. I am still largely managing positions that are in repair for ACIA, AAOI, and TWLO. TWLO, ACIA, and AAOI have become largely underappreciated by the market after they briefly ran up in price, but loss steam when they reported weaker guidance and/or earnings than anticipated.
I try to collect the highest premiums I can on those positions in repair without having to roll them out because the stock price has appreciated too quickly. Despite being repaired, I still successfully collected premium on these positions from a covered call. Thus, a green on repaired position I still consider a success if I’m not forced out of the position and continue to decrease my cost basis in the stock while awaiting a turnaround.
This Month’s Positions
Here are the trades I entered for this month which are either a continuation of, a new, or a closed position. Options will expire on the 3rd Friday in November, unless I close early, roll up, roll out, or roll up and out of a position(s). I have some positions this month that I planned to close earlier then that as I wanted to see how earnings played out. Furthermore, I list the position taken in companies by their stock ticker symbol, i.e. ACIA. If you want to know who these companies are, here’s the part you need to do a little research:
- 10/23 Bought 200 AAOI @ $55
- 10/23 Sold 100 NTNX @ $22.50
- 10/30 Bought 100 AMGN* @ $180.00
- 500 TWLO with $40.23 cost basis
- 200 ACIA with $59.10 cost basis
- 100 AAOI with $59.66 cost basis
- 10/20 Bought to Cover 5 TWLO Oct17 32.50 Call @ $0.17
- 10/20 Sold 5 TWLO Nov 03 ’17 32.50 Call @ $1.03
- 10/25 Sold 2 ACIA Nov17 50 Call @ $0.65
- 10/25 Sold 3 AAOI Nov 03 ’17 42.50 Call @ $0.60
- 10/31 Sold 1 AMGN Nov17 180 Call @ $1.40
- 11/06 Bought to Cover 1 AMGN Nov17 180 Call @ $0.28
- 11/06 Sold AMGN Nov17 175 Call @ $0.98
- 11/06 Bought to Cover 2 ACIA Nov17 50 Call @ $0.03
- 11/07 Sold 2 ACIA Nov17 40 Call @ $0.20
- 11/09 Sold 5 TWLO Nov17 28 Call @ $0.25
- 11/09 Sold 3 AAOI Nov17 46.50 Call @ $0.50
- 10/23 Sold 1 AMGN Oct 27 ’17 180 Put @ $2.60
- 10/23 Sold 2 CRUS Nov 03 ’17 52.5o Put @ $1.90
- 10/26 Sold 1 AAOI Nov17 40 Put @ $3.80
- 11/07 Sold 1 AMAT Nov17 55.50 Put @ $1.05
- 11/07 Sold 2 GOOS Nov17 21 Put @ $0.75
- 10/11 Bought 1 GM Nov17 44 Put @ $0.82
- 10/11 Sold 1 GM Nov17 40 Put @ $0.11
*Dividend – The ex-dividend date for AMGN is 11/16, so I will earn a dividend as well during this time because I’m long the stock.
I was able to make money trading monthly options this month of $2594 with these positions excluding anticipated dividend.
My Trade Psychology
I added to the bullet list my cost basis for stocks I’m long that span more than one month that I am repairing. In order to not have loss any money, I need to sell my positions over and above this amount. I am fine with a paper loss being shown for now, but I intend not to loss money on trades over the long haul. This is earnings season during trading and a chance to make good money getting direction of move right.
On CRUS, AMGN, AAOI, GOOS, and AMAT, I did bet a bit on direction during these companies earnings. I thought they would go up in value, and I was right on 2 (CRUS and GOOS) of 5. The others didn’t behave quite like I expected.
The stock market can be a punishing place for those looking for quick buck. It can turn on a dime and a high flier can all a sudden be thrown out for trash. The bad thing is you can wind up owning that perceived trash if you’re doing secured puts for cash flow. If you can be patient during downturns because you think a companies solid fundamentals are being neglected by the market, you can be rewarded. My stomach has been tested, but I have a long term view and I have managed to wait out if stock moves against me temporarily.
Take for example AAOI, they reported before earnings weak guidance for the upcoming quarter and the stock sold off all the way down to $36 from mid $50’s. This news wasn’t received well by some investors in the stock. However, the stock trades at a cheap P/E multiple of 10.32. Then on 11/07, they reported earnings and it wasn’t as bad as anticipated. The stock has since appreciated to $45 as of writing this. This move in the other direction so quickly just shows how fickle some investors are and how wrong they can sometimes get it. For that reason, I put covered call on AAOI that expired before the earnings. So, then I could know better which way to play this. I think it moves back to mid $50s.
If you have weak hand, you might have gotten shaken out of this stock. The market does that sometimes and you have selling which could be due to earnings, an algorithm, profit taking, required distribution, re-balance, etc. Thus, you sometimes need time and patience for these things to sort out.
Finally, updates of trades I’m positioned in and how they have been working for me can be found here each month. Try not to play the market with a weak hand and sometimes things change and you don’t have all the information. Thus, continue to keep an eye on solid fundamentals and you are less likely to falter when market doesn’t share your sentiment for the moment.