High Expectancy Trading

This is a wild month.  You will notice from my past posts that at this point in the month I am usually closed out and moved on to the next month.  We had major moves in equities and oil in the past month so volatility is high, keeping option prices up.  This is not all bad because this system thrives on volatility.  The downside is I still have considerable capital tied up in trades for July that I need to free for August.  I will likely close the July trades Monday or Tuesday.  I do not like holding positions the last week before expiration. 

So far for the month I am down 4.65%.   After I close all open July positions I predict Iwill be down 3.5% for the month.

This is not too bad considering I had to defend 3 positions.  In all 3 I implemented a first line and second line of defense.  At the second line I closed each credit spread for a loss and opened other positions with the resulting capital.

So far this year I have gained between 3% and 4.5% each month until July.  Early in the year I was trading naked Puts without the extra gain potential I now get with credit spreads.  So, I expect future positive months to average at least 4%.  I can likely keep the impact in July to under a 4% loss.  Who knows how many negative months I’ll see in a year but let’s say this happens twice a year.   That means I can expect to gain 4% for 10 months and lose 4% for 2 months.  That a total yearly gain of 32%.  not too shabby.  I think I can improve this with some technical analysis tweaks.  I’ll post on this soon.

I’ll post again with an overview of my July positions once I close the month.

It is a rough month so far.  I had to defend 3 different trades.  This will likely occur 1-2 times a year.  The key is to stick to the plan I explained in the previous post.