Option articles newsflash

Well I have been thinking a lot about my option article series, one representing the actual positions and another one explaining my option strategy and learning curve. I have decided on stopping with the overview. It’s not really teaching anything and I was struggling on getting all the information in a readable format. As such it was just a spreadsheet with some of my gains and losses. While these can be interesting , my current way of thinking is I will post a blog as soon as I enter a position with and explaining why I think it’s a good idea.

Not as an advice that anyone should follow, just showing my thought process presented by a real life example. This combines the two article series in a more learning focused way. And it will save me a lot of hassle presenting large spreadsheets in a meaningful way.

Hopefully these adjustments will help the articles along.

March 2019 – Option positions

A short note on my options trading. This month I also took some option positions and this time a bit farther away into the future. Since I have time and no rush. In the meantime I am learning and reading up on options. This is a very slow process for me so no new part in the ‘what are options’ series. It’s a work in progress.

I also noticed my options table is a far cry from readable on smaller screens, and less bigger ones. So I am currently in the process of making this table more readable and understandable as well. Maybe it’s needs to be in a totally different format. I am aiming to get this in order with the next update.

Strategy wise nothing has really changed. I only incorporated a part of my savings as a buffer, which is more a state of mind really than anything else. I have not yet need to transfer any money from my savings into my investment account. I have added 1/3 of my savings towards my options portfolio , just in case.

I know this is more of an active approach towards portfolio management and something I don’t do with the vast majority of my portfolio. But this has turned out into a nice hobby and one I can do at my own pace , when I feel good and are up for it. All qualities in an activity which I need.

So for next time I hope having my new overview sorted. I a way people understand it and it’s readable. Until next time !

Februari 2019 – Option positions

Time for another update on the options trading part of my portfolio. On January the 18th all my options positions endend worthless. Which was fine by me because I wrote them, so all the premium was collected. The total for January is 19,14 , which is not a lot but it’s the first run of the experiment, so I am very cautious.

For the expiration on the 15th of March the following positions have been added. Writing 2 calls on parts of my positions in BAM and Aegon, which will bring in 20 euro’s and some sold puts on Philips. I was a little too late for Februari, so March it was.

I have adjusted the table accordingly for a complete overview of all my trades so far. Now it’s a matter of getting more knowledge about riks and modeling risk in order too get more out of it. For now I will remain at my 100% covered strategy. And as all learning and reading goes extremely slow in my case, this will probably stay that way for a while.

Total for January : 19,14

Date position openOption QuantityPriceTotal amountBuy / Sell End dateTransaction costs
Open/ClosedResult
03-01-2019Ahold Delhaize Put 19.00 18 January 201914,004,00Sell18-01-20190,85Closed3,15
18-12-2108Bam Put 2.20 18 January 201915,005,00Sell18-01-20190,85Closed4,15
5-12-2018Philips Put 29.00 18 January 2019 113,0013,00Sell18-01-20190,85Closed12,15
04-01-2019Aegon Call 4,50 15 March 2019210,0020,00Sell15-03-20191,7Open
07-01-2019BAM Call 3,00 15 March 2019210,0020,00Sell15-03-20191,7Open
22-01-2019Philips Put 24,00 15 March 201917,007,00Sell15-03-20190,85Open
30-01-2019Philips Put 30,00 15 March 2019120,0020,00Sell15-03-20190,85Open

Portfolio news – November and December 2017 changes

Another portfolio news update, another bimonthly report instead of the usual recipe. Again because of the addition of more ETF’s to balance the portfolio evenly between my own handpicked stocks and ETF’s. I also managed to get some additional result by writing put options on stocks I was planning to buy. Instead of simply buying the stock I wrote the underlying put option.

Effectively committing in buying the shares when the price falls below the strike price. For example, I want to buy 100 shares of company X , as it currently stands the share price of X is 50 Euro’s. When I simply buy the 100 shares it will cost me 100 * 50 = 5000. Let’s say I write an option at the beginning of the month with a strike price of 45 which will expire in the third week the same month. It’s mostly in the third week of each month when options for the current month expire.

Let’s say the price for the option at the beginning of the month is 1 euro , all random numbers btw , no correlation whatsoever with real world option pricing. When I sell this option I will receive 100 euro’s. Options always have 100 underlying shares as the number of shares the option contract consists of.

So the option price is 1 x 100 (number of underlying shares) = 100 as the total price of the option contract.

When I sell an option , I sell the right to another person to sell me 100 shares of company X. I am not going in to details on the difference between European option contracts and American. Maybe in a later post.

So what can happen to me when the option expires. The shares are higher than the strike , so above 45. I will not be held to my contract, the person who bought the put option can get a higher price on the market. So I get to keep my 100 euros. Easy money no ?

Not really, there is off course a risk. That’s why I got the 100 euros in the first place. I was willing at the beginning to take the risk of the obligation to buy 100 shares of company X at the end of the contract. Now lets say the price falls below the strike price of 45 euro’s. I will have to buy the 100 shares at 45 euro’s.

Is this bad ? Well if you are in it for the long turn like me this isn’t really bad. Normally I would have bought 100 shares at a market price of 50, now I bought 100 shares at 45 and got a 100 euro’s extra “discount”. It’s not fun if it drops a lot in a month but then are generally other issues.

The maximum risk is when company X goes bankrupt you will lose 4500 or sell the option at a loss in the market. But then again , under extreme circumstances the total portfolio you own will be under pressure. Or it’s just company X in which case you’ll probably have to review your stock picking criteria.

So it’s a bit of buying at a discount or receiving the premium (price you sold the option for). Always make sure you have the amount of money you need in case you need to buy the shares at the strike price, in my case 4500 in a savings or in you brokerage account. Never do any naked (uncovered) selling of options!

It’s a strategy which will get me a bit of extra cash flow each month , at least that’s the idea. I am also thinking om making a series about option trading and strategies. On the other hand there are loads of websites and books on the subject.