The Option Writer

99% boredom vs 1% mega stress

📅 June 16, 2023 edition

Mastering the Art of Losing: Insights from 'Best Loser Wins'

I thoroughly enjoyed reading Tom Hougaard's 📖book, "Best Loser Wins," which emphasizes the importance of understanding how to handle 📉losses for success in trading. I strive to apply this principle not only to my day trading activities, but also to my options writing business. As I have consistently mentioned in previous newsletters, uncontrolled losses can have 💥catastrophic consequences, making risk management crucial for maintaining long-term profitability.

During the past week, I engaged in selling $2000 and $2050 calls. To balance my position on Friday, when ETH was trading around $1850, I opted to include $1700 puts. Furthermore, I made the decision to enter with less collateral, slightly above 50%, in order to mitigate volatility during the CPI + FOMC week. As we all know, what followed was a sudden $100 drop in ETH, which then stabilized around the $1750 range. While I patiently awaited a recovery, but with news approaching I decided to close that position and initiate a new sell of $1550 puts.

This particular transaction resulted in a week with almost no net gain or loss, and that is perfectly 👍acceptable. We can endure weeks of small losses, minimal gains, or relatively flat performance intermittently. However, what we cannot afford is a substantial loss. Consequently, we go to great lengths to avoid such scenarios, implementing various strategies. We may progress at a 🐢slower pace, retrace our steps when deemed necessary, but in the long run, these efforts will yield positive outcomes.

This marked my first loss in 41 selling operations, and I am immensely pleased that I adhered to my plan without hesitation, willingly accepting a small loss when faced with the possibility of a significant one. This approach leverages the compounding effect of regular small gains, ensuring the maximum impact, while preventing the loss of four or five weeks' worth of profits in a single week. Now, let's strive for another flawless streak of 🥳40 successful trades.

📋June 16 Epoch review

This was a challenging epoch with a shaky position since day one! I talked about my management on the main topic of the day. My positions were:

• $2050 CALL

• $2000 CALL

• $1700 PUT (closed with a loss)

• $1550 PUT

  

📋June 23 Epoch plan

Let’s resume normal operations after news week. I still have a P2050 position opened from last week, and I am looking for opportunities at:

• $1800 CALL

• $1850 CALL

• $1550 PUT

• $1500 PUT

📈📉My results

Average Yield %: 1.7%

Projected APY %: 140%

Growth %: 23.2%

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Nothing in this newsletter is financial advice. I just share my thoughts and personal experiences on Options and the markets in general

Disclaimer: I utilize AI writing tools to assist me in refining the English language, as English is not my native tongue. While the content is entirely original, the form may contain some AI-driven enhancements.