Friday, December 30, 2011

Last Trading Day-Lets Talk about Options

As many of you know by now, I am blogging (I like that word) about turning $10k into at least $20k in the market in less than one year. I have a specific plan on how to accomplish this and it doesn't entail trading everyday, although I need to watch my positions carefully for resistance and support levels. The thing that I have found to be most challenging is sticking to the plan. With that said, I am confident I will attain my goal of doubling my Stock Market account (if I remain disciplined)

So as I sit and wait for prices to approach resistance/support, I am educating myself. To be specific, I am educating myself about options. The approach for options thus far has been to select great companies who I believe will go at at least 25% higher with expiration dates 3-7 months out. In my simulated account I own;

YUM, July $60 calls, bought 10 contracts at $3.60 each (4% gain)
GEOY, March $20 calls, bought 10 contracts at $3.60 each (2% gain)
CHD, July $45 calls, bought 10 contracts at $3.80 each (3% gain)

The question now is, "what is my exit strategy"?
Well I have decided I am going to experiment with 4 different exit strategies and see which of the 4 lead to the best results. The 4 are the following:
1. sell option when the stock price (not the option price) hits my target of 25% higher than when I bought it.
2. sell option if the option price is 50% more than I bought it at.
3. sell option if the option price is 100% more than I bought it at.
4. sell option very close to or at the expiration date no matter what the price.

In addition, part of the strategy at this point, which is subject to change, is that I will hold them until they either reach one of the 4 price points above or they expire worthless.

Prediction Record 5-1
Winning Pct. 84%

Start Date: 12/12/2011
Starting balance: $10k
Current Balance (interday): $11,675
Gain: 17%

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