Sunday, November 2, 2014

Transparency - putting my money where my mouth is

This post will contain some super scary looking graphs. What are they?  They are the account reports of my new trading account with Interactive Brokers.  I'm hesitant to post them because while they do show the day-to-day ups and downs of my account, the huge v-shaped notch in the graph, while accurately representing the "panic-now-cash-value" of my holdings, however the panic now choice of exiting positions is just not something I do.

I'm also leery of posting them because I'm sure the bulk of my new readers do NOT understand what a "roll" is, nor how well it mitigates risk, and lets the market get over it self.  Heck: It's even a cash-positive move most of the time.

Additionally, the roll trade I did perform near the bottom of this ugly graph as it turns out was NOT necessary, and has stymied my account balance as the market and my account recover from last months' correction.  (More of a pot-hole really)

My trade didn't lose me any money, but it did slow down the exit of the position until this month.

So I suppose in the name of accountability, I'll cut to the chase and post them.

Graph 1: The last 30 days.  So the entire calendar month of October.  PURPLE line:

 Graph 2: My account since I started trading and live-tweeting every bull-put spread: GREEN line

Yes, I do realize that dip is a horrible horrible number and no doubt I've scared off many of you "can't-beat-the-index-naysayers" but as you can see from these charts, a AM still beating the various indexes. The hard part? The experience required to not panic and run for the hills arms flailing.

Even as my account liquidation value made this precipitous fall, the positions I held were mostly still all within reason.  (The market values for most of the underlying stocks had not crossed the upper strike price on my positions).  A couple had flirted with being completely in the wrong, but at the same time, most of them are not due to expire for 2-6 months, so as always there was time to wait and see.

Now that the markets have recovered, they are all mostly back where they should be.

You have to know when to hold 'em and know when to fold 'em.  Mostly with this strategy, you sometimes roll your way out of trouble, but if you've done your homework you almost never have to fold.

Stay hungry my friends!

P.S. Please don't let the scary charts scare you.  It's not nearly as bad as it looks.

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