Life with options #4

My current position...

Photo by AbsolutVision on Unsplash

I entered the options trading world earlier this year in January. Starting off the back of a long upward trumping trend in the market. We were continually seeing new highs for the indexes and some select stocks. Investments were truly paying their dividends in every sense of the phrase. It seemed like a good place to begin. But there was inescapably going to be a downfall. Everything is subject to change and if Newton taught us anything, what goes up must come down.

My first month in February I made a convincing profit of $2195.75 equating to around 8% of my account value. The average trade was probably around $150 so nothing of note on each trade — however, they collectively made up a healthy income for my first, cautious, month of trading. I thought it all seemed relatively easy, granting you access to my inexperienced naive thoughts. But in truth implementing selling vertical puts as a strategy when the market keeps rising consistently isn’t particularly difficult or extraordinary. So in my own defence maybe it was easy?

I was very pleased with myself and as I’ve said before you should bask yourself in self praise when things do go well. Not because you (or I) were necessarily the sole creator of the success, as it could have been blind luck, but my system worked and self confidence is an imperative quality to hold. It can be all too easy a world to dip into the doom and gloom of self doubt with options.

We use the phrase “life isn’t fair” only to recognise when bad things have happened. Why not reverse it and use it in a positive light, that there are always two sides to a coin and there can sometimes be a positive outcome to the unfairness. But to be completely honest I wasn’t too fussed about it being fair or not, I was winning.

Goose stepping into March, with high confidence and an increased account, I continued down a winning path. During February the Covid-19 virus had slowly been mobilising and incubating itself everywhere in our society and the stock market was obviously no exception. The initial havoc it rained on the markets weren’t actually that devastating for me, at first. The first couple of weeks the big crashes started happening I was able to switch my strategy to selling vertical calls (instead of puts) and I managed to net $2000 in one week! I was definitely hurtling into the adrenaline and heart pumping territory that feeds that hungry brain reward systems. It was most definitely a good feeling and one I found difficult to keep fully on the leash.

So I was on track for having a stellar two months of trading only 6 weeks in. Really I should have stopped there for March, taken the rest of the month off and enjoyed my win. I should have sought for some of my own advice of acknowledging the wins and not chasing the the surmounting piles of cash that felt like was being dumped trucked into my account. It might not be to everyone but to me it was a lot of money and I would have certainly been happier keeping it all.

However the choppy markets that dominated March and April coupled with my inflated ego fused a concoction of poor decision making that has left me in a somewhat disorientated position. My account now sits at just over $21,000 which is $4000 down from the initial investment of $25,000. Only a month ago that number read $31,000. I’m sure it doesn’t take a philosopher to work out that all the truths of how one would feel about trading can be found in those numbers.

As of writing it is the 14th of April 2020 and the last few weeks have been a struggle for me. Self doubt has crept out of its Pandora’s box and encouraged it’s close relatives anxiety and worry to do the same. I knew I might have to lose some money before I make some and valuable lessons are being learned. However, when actively not spending any money in my day to day life because I have very limited income right now, it’s hard to shake the gut wrenching feeling of not only not making money, but actively losing it! Nonetheless I have to accept that even if I learn my lessons a similar situation will happen again in the future — It’s the nature of the beast. It is a good test for me to see how I cope with this and how much it trickles into my daily life.

The full spectrum of feelings has appropriately been felt within the first three month. Truthfully I haven’t coped as well as I thought I would. I’ve found it hard to shrug the the constant ticking of thoughts on where stock prices are headed. When the markets open to when they close I find myself too often breaking out my phone to insistently check and double check current price quotes. I’ve found some reprieve in other hobbies like gardening, piano playing, cooking etc .. but until the markets close I’m not really switched off.

It’s an area that I will have to work on and hopefully be able to give you some insight into how one might be able to deal with it better in my posts. Or at least provide some comfort in sympathy of how you’re feeling. The whirlwind of frustrations and ecstasy will always be somewhat spinning.

I suppose this is what it means to be living with options…