OK, so let me back up a minute - when I first started learning about options I found people on the internet who were "selling" them. But I just couldn't wrap my mind around how you could sell something you didn't own in the first place. The bottom line is I didn't understand what it meant to go "short" - yes I was THAT green! Anyway, the gentleman who was teaching me about options said that's how most people traded them, through spreads and such. So naturally I asked why he didn't do it that way, and he replied that he liked the excitement and potential profits that came with directionally trading options. Fair enough, and for the time being I left it at that.
Well, I was always curious about this other way of trading options. So I started researching online what it meant to SELL or WRITE options, and as most of you know there are numerous ways to do this. Next thing you know I'm setting up Iron Condors, selling puts, trying my hand at credit spreads - even buying a 100 shares of T so I could turn right around and sell a covered call. Now, I didn't lose a lot of money, but I also didn't really make much either. Every now and then I'd pocket a little premium, but nothing major. What I found though is I just didn't have the buying power to play many naked puts. I mean, one position would damn near tie up my whole account, and that just wasn't worth it to me. So it was this realization that led me to zero in on credit spreads.
I loved them immediately!
Now, I had mentioned before that I had a knack for picking good support levels. Well, I took this knowledge and applied it using credit PUT spreads. I'd set up plays using just 1 to 3 contracts. After a few winners, I started playing 5 to 10 contracts... yes, probably a bit aggressive, but I felt comfortable doing it. Especially when I was playing stocks like T and KO! Anyway, I really started picking up the pace in the fall of 2013. In fact in the last quarter alone I booked $1,300 of profits - 10 times more than I had in the first three quarters of the year! And that $1,300 came with two MAX LOSSES totaling damn near TWO GRAND! I was shocked that spreads could generate such gains, but I was also learning you could get CRUSHED as well!
So look, I'm far from having everything figured out. I still make lots of mistakes - mainly cutting winners short and letting my losers run. Oh yeah, and I also have very little patience and I let fear and other people's opinions on Stocktwits sway me. So yes, I've got issues, but I'm happy to say that while the market was flat to down after Q1 of this year - I was up 12.5%!
I will continue to fine tune and perfect my strategy everyday. That's part of the reason for this blog! Lets put this plan of mine to the acid test, right?! The bottom line is I love what I do and I can't wait to see where this all leads.
I'm definitely enjoying life these days on the WRITE side of the trade!