December Portfolio Return – 5.19%!

Posted on 19. Dec, 2009 by Founder in Blog

The December portfolio return Extremely Profitable and marks the 11th consecutive month without ANY losing trades! Again that’s 11 months without any losing trades people! If you want to start seeing these returns in your own account, you only have UNTIL JANUARY 1st to SIGN UP FOR OUR FREE 30 DAY TRIAL. After that it’s gone FOREVER – WE PROMISE YOU THAT!

Watch this video to recap the December Income Portfolio:

Compared to the November portfolio, we had a return that was much higher comparatively from 4.38% to 5.19%. Clearly we don’t really care if we increase or decrease our monthly returns as long as we hit our 3% profit goal – which we are beating nearly each month. In addition, we showed once again that even in the face of a major market moves and extreme volatility, selling options with out P.O.T.S system still produced great profits.

To re-cap this month’s income, let’s look at what we made vs. our required investments (in margin). Here are the positions we had with corresponding PROFIT/INVESTMENT and RETURN:

QQQQ 30  PUT – $8/$192 = 4.16% Return

IWM 69 CALL – $20/$369 = 5.42% Return

SPY 85 PUT - $27/$499 = 5.41% Return

QQQQ 47 CALL – $22/$425 = 5.17% Return

As we said earlier, we did not have to close out any positions this month at a loss. This just goes to show everyone that by writing options, you are basically forcing the indexes to make dramatic moves in a very short time frame. And since we have positions on BOTH sides of the market (Puts and Calls), you are guaranteed to make money on at least one side of the trade every time – or both sides like we do every month.

With regard to TOTAL INCOME and RETURN, the December portfolio produced $77 of total income after investing just $1,485 in margin. That means we saw a total portfolio return of 5.19% this month. As we usually point out, our calculations assume that you enter just 1 (ONE) contract for each trading alert – i.e. a total of 4 contracts for the month. Those members with a higher capital base should be entering multiple contract positions each week.

***Even if you factor in a 1% comission for the month our return would still produce annualized returns of over 50% per year***

Currently we have a fully invested 2010 January income portfolio and are in the middle of building the 2010 February portfolio. The outlook for both of these portfolios is extremely positive right now as we are still writing options far away from the market’s current price.

New Trading Alert is AVAILABLE NOW for our Members! If you would like to start seeing these same return in your portfolio, SIGN UP FOR A FREE 30 DAY TRAIL here. Remember that this will end January 1st!

Enjoy your profits!

Expiration Week & Option Open Interest Signals

Posted on 17. Aug, 2009 by Founder in Blog

Another option expiration week is upon us – which only means one thing usually…more volatility! While I’m hoping for another down week, we must prepare for everything in between. Right now the futures are pointing much lower.

Last night I took a look the the Open Interest for the SPY, DIA, and QQQQ August Options. I’ve never really talked about this on the blog that much, but these are important things to take a look at as they can give clues to where the money is (or isn’t).

Open interest is the number of contracts which remain open in for the certain strike price and month. These are generally people who still think they can make money in the next 5 days with there options. Having said that, we all know that 85% of all options expire worthless and that you should generally trade OPPOSITE of the crowd or herd.

So, the QQQQ has A LOT of open interest near the 37 & 38 Put and Call range. Therefore, the worst case scenario (i.e. the one that would expire most of these options worthless) would be for the QQQQ to pull back from 39-ish down to around 37 or 38. This would clearly be the worst case scenario and therefore the MOVE we should be expecting by the end of the week. For the DIA the range is around 92 and for the SPY it’s around 98.

Our Investment Strategy

Posted on 01. Aug, 2007 by Founder in Blog

The Option Writer focuses on a  market-neutral investment strategy that profits from the time decay of index options.  We collect up front premiums from selling deep OTM options with low probabilities of expiring ITM.  Since we are able to write/sell options on both sides of the market (Puts and Calls), we believe that any major market movement will still produce substantial returns with minimal risk. Moreover, our risk managment strategy related to spread trading reduces capital exposure in extremely volatile market conditions.

Cold, Hard Facts – Right From The Source

According to a breakdown by the Chicago Mercantile Exchange Clearing House, more than 85% of all S&P options sold during the last six years expired out of the money and worthless. *Source: Chicago Mercantile Exchange Clearing House; Analysis of S&P options sold during the period 2002 through 2008. Given the facts, it is easy to understand why, in the long run, the seller of options should have a higher return than the buyer of options every time. Now isn’t that a beautiful statistic working in your favor?

Here’s How We Profit Month After Month

Our strategy is designed so that the individual investors/traders can substantially benefit from the time decay aspect of option premiums. The strategy is framed around the exact same trading strategies used by many of the world’s top money managers and hedge funds. In addition, thousands of other professional option traders have used this strategy to create portfolio income for decades.

Writing options provides the opportunity to receive the premium that the option buyer pays. Option writers benefit when the option expires worthless – which they do 85% of the time according to the COBE - allowing the option writer to retain the entire amount of premium that was received for writing the option, minus any fees or commissions from their broker.

Real Market Neutral Investing

The primary advantage of selling options is that the investor has the ability to profit from the decay of the option’s time value. Selling out of the money options and spreads allows the investor to potentially profit from sideways markets, trending markets, and even markets which move against the seller’s position. Truly a market neutral investment strategy.

Risk Management Is Our Top Priority

To be successful in any investment strategy you must first start with a clear understanding of your risk. At the Option Writer we always perform extensive risk analysis before recommending any trade to our members. In addition, we have several different “exit strategies” for each position should something unexpected come along.

We Do Not Attempt To Forecast Prices

The majority of popular option techniques are based on forecasting the future price of an issue. But determining market direction requires expertise in a number of skills – charting with technical trends and momentum indicators, the use of contrarian systems including sentiment indexes and put/call ratios, and valuation systems such as fundamental analysis. The truth is that most investors are knocked out by hopeful gambling in options rather than using simple strategies. It’s sad but true.

Background On Option Time Decay

Most options decay to the point of no value at expiration – as we know from the statistics above. If these options lose value at expiration, it stands to reason that those who sold them made money – similar to taking a short position in a stock that goes all the way to zero. Make no mistake, this is absolutely correct! Option sellers/writers make money when the options they sold are not exercised by the option buyer on or before the expiration date.

The Option Writer makes money by patiently waiting for the option to lose its value due to time decay. As an trader employing the technique of selling options you will place yourself in the shoes of the option writer and take advantage of this statistical fact. Based on this you may therefore conclude that most of the options you sell will decay and be winners at expiration – allowing the premiums you collected to accrue into profits.