02-20-2019, 10:32 AM
(02-20-2019, 10:08 AM)Kerim Wrote: Do you guys track your options performance in any formal way? If so, how? I figure it is easy enough to track the return on any individual trade, but across trades where a small percentage of the puts you sell are exercised, how do you determine overall return? Seems you can only measure against hypotheticals ("well, I would have bought it at X, so the fact that the shares were put to me at Y, and commissions were Z, so I gained / lost Q....").
Not formally, but I compute the ones that are exercised and I am almost always selling puts a few percent out of the money so that number will always be cheaper than if I just went long at time of put sale. Mostly I just look at i.e. "I just bought MO or KHC for $300 above current market price". I like to beat myself up and contemplate if I made a bad decision on the company overall, but it's short-term of course.
As far as the strategy the number I watch is the monthly income it generates. Lately I have about $100K committed to the strategy. Monthly income from option sales, after subtracting any I may have bought back for whatever reason is my return. Commissions subtracted of course. Goal is 2% monthly profit, or $2000 just from options. These are covered so the collateral is drawing about 2.4% annual while it's idle. I've been under the goal a few times. I've also had months that exceed $3500. Several times in the last 6 months which I am thrilled with that as it blows away my dividend income on a percentage basis. Even 1 1/2% would be acceptable accept during an extremely strong bull market year when just being long is better. This mostly ends during a prolonged down market as you now own the stocks long. A little cover call writing happens then if it makes sense.