Hey Guys,
Since the time I sent out yesterday's email, the market has come back down again. It turned out to be a rough day yesterday. This morning the S&P 500 is hovering around the 4400 level.
I took on a few new positions today. In the main account, I bought shares of MMC and PGR. In the low-priced account, I bought stock for BRO. I loaded up in the financial sector today.
There was a tough loss in my options account on V. Just yesterday that position was showing a profit at one point in the day, then it tumbled all the way down to its stoploss this morning. I also closed a few other positions in other accounts that reached their time limits, two of which incurred a loss (AMP and PTON) and one of which locked in a profit (L).
My main account and low-priced account both primarily feature stock trades, and both are down over the last couple weeks. They're not down a huge amount by historical standards though. My options account on the other hand has taken a big hit over the last couple weeks. The options trades involve more risk, particularly with the approach I use for spreads and naked puts. It means that during down weeks, the losses are more intense than they would be with stocks. Of course on the flip side, when there is a strong up week the gains can be more amplified than that of stocks too. It's a more wild ride with the options trades, and during a week like this it can be tough to stomach. I try to remember that this is what I signed up for (taking a risk to try to generate a reward), and that I'm still in lock step with a 20-year back test that suggests their might be solid long term potential with this approach regardless of short term periods of drawdown.
If you want to take on options trades, but want to dial down the risk, one possibility is you could limit yourself just to deep-in-the-money call options. They don't have much "extrinsic" value, which means that their value doesn't erode away as time elapses. So when I post options trades, you could choose to take on the deep-in-the-money call option version of the trade, which is something I teach in the second video on this page.
Today I have a bunch of options positions that reached their time limits. I'll be closing those today. I would normally close them at the end of the trading session, but I will be away from my desk at that time today, so I will close them about an hour earlier than that.
If you have any questions or feedback, I'd love to hear from you.