Is it really possible to make money in this trading lark?

This is a discussion on Is it really possible to make money in this trading lark? within the First Steps forums, part of the Reception category; Originally Posted by teleph1 Being a regular reader, but rarely a contributor, I thought today I'd change the habit and ...

Reply
 
LinkBack Thread Tools Search this Thread
Old Nov 5, 2004, 5:42pm   #231
Joined Jan 2004
Quote:
Originally Posted by teleph1
Being a regular reader, but rarely a contributor, I thought today I'd change the habit and put my views forward and invite comments from you all.
I don't day trade, but I am an 'active' trader, doing very nicely to top up my income, with a view at some stage to move away from the 9-5 - but with a different psychology, possibly from the rest of you.
I started last year with £2000 to test my theory,and, trading the US markets, started buying shares and selling calls against them (covered calls). My target was, and still is, 5% per month growth. Bouyed by successful month after successful month, instead of day trading, I carried on using my covered call strategy (on a monthly cycle) by increasing my 'pot' to £25k. I've been doing this for months now, right through the Iraq crisis, the oil crisis, and I've only occasionally dropped to 2.5% return in the month.
Ok, so how do I move to raising my income from the markets? Well, instead of day trading, I will increase my 'pot' again to £100k, still with a 5% target. Occasionally I've started now selling naked puts, safer in my view than covered call strategies, but reflected in that they provide a lower return. So, there is my view, instead of trading more, just raise your capital to safer ground (where you can sleep at night) and still bring in the return you require.
Teleph1

I would be very careful selling options naked. The market will eventually catch up with you and take your money.I spent many years selling strangles and straddles with and without protection depending on the market. I would roll the position out (month or strike) if I came under pressure, it certainly was not good for sleeping at night. You alos need to be very well capilised and use a fraction of your account so that you can adjust if necessary.

A colleague of mine at the time was a covered call man, he used to wait until a stock had reached the top of its cycle and then sell the calls. I tried to explain to him that as he seemed to have a good method for predicting when individual stocks reached the top of their cycle he would make more buying the stock and then simply selling, instead of selling the calls against it.

Are you looking at cyclic stocks or what is your method for stock selection ?

Rgds

goshort
goshort is offline   Reply With Quote
Old Nov 5, 2004, 5:45pm   #232
Joined Jan 2004
derivatives are much more patient than stocks, and options are the most patient of derivatives - they like to reel out that trading line and for a while feed little tasty scraps from that hook to the cautious fish, - and then just as the fish gets the most confident and goes for its biggest bite ever - WHAM! - a one way trip to the freezer - and regardless- all the other fish queue up for the same fun - mmmm - guess they dont have memories
Strategic Trader is offline   Reply With Quote
Old Nov 15, 2004, 12:50pm   #233
 
8 Posts
Joined Jun 2004
Hi Goshort,
I actually subscribe to a website (www.poweropt.com), feed in the criteria I want (essentially I'm looking for good, large companies which are in the lower half of their yearly price range) and only ever look to the forthcoming month. I stick to a 5% max profit from selling a call, and the larger the downside protection the better - so if bad news hit's it gives me time to buy back the call and sell the stock.
I liked the naked puts, for this reason - if I sell a covered call and the stock drops, great I've got the option money and the stock's, but at a lower price than I bought them for. I have to be careful here, because if I sell another call at the same strike - I have to sell it for pennies. I'f I come nearer to at the money, the ask price of the call goes up, but so does my risk of being called out at a loss. Re: naked puts. If the stock drops to (hopefully just below) the stock price, I can have the stock put to me, but more likely at a fair price and I still keep the naked put option money. I can then sell a call against the stock, or maybe still sell it at a profit.
True, I think with a good bull market or more effort from myself I could make more with stocks alone, but 5% growth on average per month equates to 89% compound per year (if only it were that easy) and, most importantly, I'm very comfortable with the risk
teleph1 is offline   Reply With Quote
Old Nov 15, 2004, 4:42pm   #234
 
8 Posts
Joined Jun 2004
Quote:
Originally Posted by Strategic Trader
derivatives are much more patient than stocks, and options are the most patient of derivatives - they like to reel out that trading line and for a while feed little tasty scraps from that hook to the cautious fish, - and then just as the fish gets the most confident and goes for its biggest bite ever - WHAM! - a one way trip to the freezer - and regardless- all the other fish queue up for the same fun - mmmm - guess they dont have memories
Thanks for the modern day 'Confucious Say..." advice. Actually I keep myself in check from taking large risks by holding back to a maximum of 5% growth per month. There are plenty of opportunities out there which offer a bigger bite, like you say, but to enable me to have a good night's sleep (and away from the Gin), I hold off
teleph1 is offline   Reply With Quote
Old Nov 16, 2004, 2:26pm   #235
Joined Jan 2004
Quote:
Originally Posted by teleph1
Hi Goshort,
I actually subscribe to a website (www.poweropt.com), feed in the criteria I want (essentially I'm looking for good, large companies which are in the lower half of their yearly price range) and only ever look to the forthcoming month. I stick to a 5% max profit from selling a call, and the larger the downside protection the better - so if bad news hit's it gives me time to buy back the call and sell the stock.
I liked the naked puts, for this reason - if I sell a covered call and the stock drops, great I've got the option money and the stock's, but at a lower price than I bought them for. I have to be careful here, because if I sell another call at the same strike - I have to sell it for pennies. I'f I come nearer to at the money, the ask price of the call goes up, but so does my risk of being called out at a loss. Re: naked puts. If the stock drops to (hopefully just below) the stock price, I can have the stock put to me, but more likely at a fair price and I still keep the naked put option money. I can then sell a call against the stock, or maybe still sell it at a profit.
True, I think with a good bull market or more effort from myself I could make more with stocks alone, but 5% growth on average per month equates to 89% compound per year (if only it were that easy) and, most importantly, I'm very comfortable with the risk
Hello teleph1

Thanks for your reply. I took a look at the site you mentioned.

You seem to have a game plan which is better than many people. Maybe if you keep things very small it will work out, the tendancy is to up your size because things are going great and then the volatility starts coming in and so do the losses.

When you think about a covered call in fact this is the same thing as a naked put. The value of the stock can therorectically go to zero - of course you will keep the premium on the call which was sold, but otherwise if you are happy with risk factor then by selling a naked put instead of doing the covered call you'll pay only 1 lot of commissions instead of 2.

Best regards

Goshort
goshort is offline   Reply With Quote
Old Nov 16, 2004, 5:49pm   #236
 
8 Posts
Joined Jun 2004
Quote:
Originally Posted by goshort
Hello teleph1

Thanks for your reply. I took a look at the site you mentioned.

You seem to have a game plan which is better than many people. Maybe if you keep things very small it will work out, the tendancy is to up your size because things are going great and then the volatility starts coming in and so do the losses.

When you think about a covered call in fact this is the same thing as a naked put. The value of the stock can therorectically go to zero - of course you will keep the premium on the call which was sold, but otherwise if you are happy with risk factor then by selling a naked put instead of doing the covered call you'll pay only 1 lot of commissions instead of 2.

Best regards

Goshort
Hi Goshort,

well, it's working for me up to now, and that's the main thing I suppose. I use Interactive Brokers, and the commissions are very small, just a couple of dollars to do the whole covered call trade.

I use the site to get the shares which fit my criteria, then do a little research, just to make sure they are good/sound companies and have no announcements that month. I don't really look at the size of the trade, just the share price once I've 'pulled the trigger', keeping a note of my break even should things go bad. My £25k 'pot' is split into 5 different companies (and if I can manage it, 5 sectors), so even if something catastrophic were to happen to a share, it doesn't kill me off.

I've tried to keep things as simple as possible, because I really don't want to be pouring over charts and drawing lines everywhere - from my experience a share price can be disected a hundred ways, then the company or an analyst makes a statement and you can throw all your technical analysis out of the window.

I've been doing things this way for a year now, never been less than 2.5% per month, and mostly at 5% growth per month. The downside is that I can't take advantage of large upswings in a share price, but I'm happy with that, because it means I'll get the 5% I'm aiming for.
teleph1 is offline   Reply With Quote
Old Nov 16, 2004, 7:40pm   #237
Joined Jan 2004
Quote:
Originally Posted by teleph1
Hi Goshort,

well, it's working for me up to now, and that's the main thing I suppose. I use Interactive Brokers, and the commissions are very small, just a couple of dollars to do the whole covered call trade.

I use the site to get the shares which fit my criteria, then do a little research, just to make sure they are good/sound companies and have no announcements that month. I don't really look at the size of the trade, just the share price once I've 'pulled the trigger', keeping a note of my break even should things go bad. My £25k 'pot' is split into 5 different companies (and if I can manage it, 5 sectors), so even if something catastrophic were to happen to a share, it doesn't kill me off.

I've tried to keep things as simple as possible, because I really don't want to be pouring over charts and drawing lines everywhere - from my experience a share price can be disected a hundred ways, then the company or an analyst makes a statement and you can throw all your technical analysis out of the window.

I've been doing things this way for a year now, never been less than 2.5% per month, and mostly at 5% growth per month. The downside is that I can't take advantage of large upswings in a share price, but I'm happy with that, because it means I'll get the 5% I'm aiming for.

Hello teleph1

As this seems to be your area, one other idea you could try is instead of buyiing the shares outright, buy a 2 year LEAP, this is less expensive than buying the shares outright and you can sell the LEAP back after a year and still get most of your premium back and of course get your premium income from the covered call. You will make more than the 2.5 - 5 % using this method. Again all the above assuming you are happy with the downside.

Good continued trading.

Goshort
goshort is offline   Reply With Quote
Old Dec 2, 2004, 4:12pm   #238
Joined Jul 2004
Quote:
Originally Posted by teleph1
I started last year with £2000 to test my theory,and, trading the US markets, started buying shares and selling calls against them (covered calls). My target was, and still is, 5% per month growth. Bouyed by successful month after successful month, instead of day trading, I carried on using my covered call strategy (on a monthly cycle) by increasing my 'pot' to £25k. I've been doing this for months now, right through the Iraq crisis, the oil crisis, and I've only occasionally dropped to 2.5% return in the month.
Ok, so how do I move to raising my income from the markets? Well, instead of day trading, I will increase my 'pot' again to £100k, still with a 5% target. Occasionally I've started now selling naked puts, safer in my view than covered call strategies, but reflected in that they provide a lower return. So, there is my view, instead of trading more, just raise your capital to safer ground (where you can sleep at night) and still bring in the return you require.

Your numbers are wrong . At 5% per month gain on a capital of 2000 , is only 100 a month , even if you compounded your gains to capital , it would still be under 7000 assuming you started in Jan 03 to now .

nowhere near 25k , and that's assuming you have no losses or go under 5% per month , which you admitted has happened.

Also the chap who said options were like the market hooking fishes when they least suspect is dead on . Options game is not as easy as some make it sound , sooner or later you get a big loss and that big one is usually much heavier than vanilla products due to the leverage factor.
wisestguy is offline   Reply With Quote
Old Dec 6, 2004, 6:04pm   #239
 
8 Posts
Joined Jun 2004
Quote:
Originally Posted by wisestguy
Your numbers are wrong . At 5% per month gain on a capital of 2000 , is only 100 a month , even if you compounded your gains to capital , it would still be under 7000 assuming you started in Jan 03 to now .

nowhere near 25k , and that's assuming you have no losses or go under 5% per month , which you admitted has happened.

Also the chap who said options were like the market hooking fishes when they least suspect is dead on . Options game is not as easy as some make it sound , sooner or later you get a big loss and that big one is usually much heavier than vanilla products due to the leverage factor.
No, I said my initial capital was £2000, but I have now increased that by adding a lump sum to make it £25k. It's 5% of that total sum I was referring to.

There are lots of comments on these boards which refer to what is risky and what is not, but everyone (I presume) has different levels of 'risk threshold'. What one person considers risky is not necessarily what another would.

I read the 'hooking fishes' comment, but I don't have all my eggs in one basket, have clear break even points where I would 'bail out' if the market turned against me and am comfortable with the possibilities.

As you're in agreement with the 'fishing' comment I presume you have experience in trading options and got 'burned'? What were you trading (and when), what went wrong and what would you do differently? If you have a clear answer to what you would do differently, I'd be keen to know why you didn't change your trading with your new knowledge.

Regards,
teleph1 is offline   Reply With Quote
Old May 27, 2007, 4:21pm   #240
Joined Mar 2005
Hi Kazza, I been looking at your messages. I am new to this game as well, I have bought and sold shares long term in the past, and have made money from it, I have never really lost, I suppose because it was long term and you can wait for the right time to sell.

But to do this for a living I would have to put alot more work into to make good money, I am sure you can make money from it. The question you must ask yourself -is what happens to the money that put in your bank? You dont see what the banks are doing with your money do you? Well let me tell you. The banks take you money and the play the markets with it, thats how the banks make massive profits. So you really loan the bank money when you bank with them and they take it and invest it in fx and on the stock markets.

If they were loosing all the time well.... think about it.

Regards

Richard
richardcartieruk is offline   Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Similar Threads
Thread Thread Starter Forum Replies Last Post
How to make money Trading Seasonal Patterns in Forex rav700 Forex 31 Jan 3, 2013 1:22pm
How much will make you happy and how long will it take you to make that much money? clylbw The Foyer 7 Feb 24, 2010 5:22pm
How to make money Trading Seasonal Patterns rav700 Forex 0 May 19, 2007 11:12am
Would this Make Money mark69 Trading Systems 11 Jun 20, 2003 10:16am
How to Make Money Trading Futures MarketMaster Futures & Options 6 Jan 21, 2002 10:10am

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)