August Ends – My Options Portfolio Continues to Push Higher – Patience Pays

August was another good month for My Options Portfolio. The portfolio gained 15.6% for the month and is now up 74.2%, or $20,392.50 since its inception back in early May 2010. You can see all the trades directly from my ThinkorSwim account on the  Options Portfolio page of the website.

If you look at the trades you will notice that I had a total of 9 trades in the month of August, three of which were closing trades from late July. Of the 9, only one, was an outright loser and one was break-even, but with commissions the latter trade was indeed was a loser. The loss was -64.3%, but as you can see my position-size was calculated (roughly 6%), so the loss was minimal to My Options Portfolio as I went on to gain over 15% for the month.

In my opinion, position-sizing is the most important aspect of trading. Remember, this is a marathon and not a sprint and by limiting your exposure to any given trade, you allow yourself to absorb a losing trade without devastating your portfolio. I cannot emphasize this enough and is why I always encourage a well-thought out position-size plan before you initiate your journey into trading. Of course, everyone will have different position-size plan because everyone has a different risk-tolerance. You need to figure out just how risk-averse you are as a trader/investor and, in my opinion, once you have figured that out, you should proceed to take another step that errs on the conservative side. Believe me, it pays in the long run to start out conservative and then increase your risk rather than the reverse.

As part of my newsletter I send out real-time trade alerts that include my position-size. Of course, this is not advice, it is just to show my subscribers how I use position-size in my own account. As I stated earlier, it is up to you, the individual investor to do your due diligence and figure out what is best for your given situation. You earned this money, treat it with respect.

Anyway, I once again wanted to thank all of you who have signed up for my newsletter service. I truly appreciate the loyalty and support. Hopefully, I can provide some insight through my newsletter that will help you prosper over the long-term using options. I still have a few spots remaining and will continue to take requests that will be added to a waiting list. I have decided to limit my service to 100 subscribers. Smaller is better.

Market Commentary

As for the current state of the market, well, you have to be encouraged by the gap today and the sharp push higher if you are a bear. Yes, I said it, a bear. The push moved the market closer to a short-term overbought state. Moreover, we officially closed the gap from 8/24. However, I think the 8/11 gap still might be a push to close ($11.37), at least during this latest mini-rally. I would love to see a gap tomorrow morning, because I will certainly take a position if indeed that occurs. I am not sure I would hold it into Friday as the much-anticipated August unemployment report will certainly move the market sharply and I typically do not like to get caught up in the game of guessing the report. It is typically a futile attempt, but if the technicals are already in an extreme when the market enters such a report I will sometimes take a smaller position. We shall see soon enough. The next few days should be quite interesting.

Kindest,

Andy