Option Summary

Like I've done with most of my tables/spreadsheets I've been converting them to Google spreadsheets to make it easier to view/update.  Here's the results of all my option trades.

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I won't count the premium that I've received from selling any calls or puts in the total until the option expires or I close out the position.

Comments

  1. Hey PIP. I enjoy your blog. Since it's tax season, any chance you can detail how your put writing has impacted your taxes for 2013? I'd find that interesting and it's one of the reasons why I haven't turned to options as part of my acquisition strategy.

    Thanks!

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    1. Anonymous,

      I'll try and detail as much as possible but here's a quick rundown.

      Pretty much all gain/loss from closed/expired options are counted as short term gain/loss so it's taxed at the short term capital gains tax rates.

      It's my understanding that's how all options are handled even if the time the option was open was over 1 year.

      Thanks for stopping by!

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  2. Hi PIP,
    Thanks for sharing your journey to FI. I enjoy your blog and am amazed at your progress in such short time. I love your analysis and unbiased reporting. Your blog is one of the best for anyone pursuing FI. I have been investing for 4 years but I am 2 years behind compared to you in dividend stock investing. It good to see you post information on options as well.

    I have some capital sitting which I would like to invest but prefer to be in the side lines because I feel that the market is peaking. But I would love to use options as a strategy to buy stocks for long term investment. I feel selling puts to buy for long term may be a good strategy to buy in this market. Could you please write an article of how to use Put options to buy stocks?
    Thanks in advance.

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    1. Suresh,

      Your comment got thrown in with the spam comments and I just saw it.

      I'm working on an article covering puts right now.

      Delete
    2. Thank you JC. Just found your reply.
      You have done so well with options this year. Do you see yourself focusing more on Options for Passive income in the following years?
      Thanks

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    3. Suresh,

      It's something I'm definitely exploring and I have a post coming up, likely next week, detailing how 2017 went and what my plans are going forward. Long story short though, it's something I plan to continue to pursue over the next few years to see if I can consistently be profitable, especially during a bear market. If I can prove profitable then it'll be something I'll have to seriously consider to go to full time options trading while at the house in order to boost up the non 9-5 income and potentially let us move up our FI date by years which would be awesome. If you have any other questions feel free to ask away.

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  3. Hi there, I am little late to the party here but let me add my note to the options taxation issue. Since I trade options extensively, I had to deal with it to avoid short term capital gains taxes. If you want to trade options, you must do it as a trader and not as an investor. Yes, IRS separates these two in order to get better taxation. However, to get classified as a trader by IRS you must trade substantially and yet you may fail the IRS scrutiny. The best way to get trader classification is to start a new separate entity (the best way is an LLC with your wife as a partner to be treated as a separate entity with a separate federal tax ID and not a sole proprietor). That way your gains will be taxed under the 60/40 rule (60% as a long term gains, 40% as a short term gains) plus you get full loss deduction (investors can carry only $3000 - so if you lose 10k in one year, as a trader you can use it all to offset gains from previous year (yeap, I was surprised too), current year, or future year. As an investor you will be able to use only $3k the current year and move the rest into the next year, some of your losses won't be available for offset at all and you will deal with a wash sale problems. The problem is more complex, but the above mentioned items - 60/40 rule, full deductions, and wash sale were my reasons for converting my personal trading account into a business recently. My trading in last three years was too small for the hassle of starting a business,but this year I made 10k profit and the year is not over yet. And that is significant income to me to be taxed as a short capital gain.

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  4. I have been selling covered calls for about 15 years. Not many, but a few when things look beneficial. Mostly in IRAs, so it seems less complicated. Any thoughts? Keep up the good work.

    keep cranking,

    Robert the DividendDreamer

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    1. Robert,

      Selling covered calls has traditionally been a very conservative approach and works well in about all but a non-stop rising market. I'm not as big of a fan of selling calls though because I don't want to risk losing the positions that I built up. When I decide I want to exit a position though but it doesn't need to be all that quick then covered calls are the route I like to go. Writing/trading options in an IRA makes a whole lot of sense because it keeps the tax man at bay. I might have to set aside some capital from my 401k whenever I roll that over specifically for that purpose. Options are a bit confusing at first but they aren't that complicated once you work through some examples.

      Thanks for stopping by!

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  5. Hi PIP,

    How much capital is it taking you to generate the nice numbers you are putting up for options income (as in, what is the average amount that it's taken to generate the 7800 for the first five months of the year)? Is that what the RO and FI numbers are at the far right of the options summary tab? And what do these two abbreviations stand for? I am a long time investor but new to options so thanks for any info!

    Jon

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    1. Jon,

      Sorry your comment got kicked to the spam folder and I'm just now getting a chance to work through back comments from when I wasn't writing as often. The RO and FI are for my two portfolios where I will take naked risk and calculates my total notional exposure based on the option positions that are open in each of the accounts (RO = Rollover IRA / FI = FI Portfolio which is just a regular taxable account).

      Regarding the capital it's tough to say what the average amount is. In my TW account I do everything defined risk, but the other 2 accounts (FI and RO) I'll take naked/cash secured risk. The FI Portfolio is a margin account so a naked put will typically hold up around 25% of the strike price as collateral whereas the Rollover IRA has to be cash secured puts or what I've started doing is replicating margin by purchasing a further OTM put in order to define the risk but with the intention being if it doesn't go as planned I'll just take the shares.

      So in other words the average capital at risk per trade is kind of hard to quantify. I have a post coming out next week that will detail the starting capital for both the RO and TW portfolios and how they performed through the end of 2017.

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  6. Wow, your options income kicked up this year. Great job. What happened? Did you just decided to really focus on it more this year?

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    1. Travis,

      Yeah I was rolling my 401k over in November 2016 and decided to at least test the waters of using options more heavily than just buy and hold DGI. I have a post detailing 2017's results as well as my plan going forward but as of now I'm going to continue using options to see if I can consistently produce investment income in that route to seriously move up our FI date.

      Thanks for stopping by!

      Delete
  7. Hi Pip,

    Impressive work! Well done.
    What is PCS for "option type" in you spreadsheet?
    I am curious on how you select which stocks are worth developing a option strategy for? do you look at technicals metrics or else? for me this is the hard part... thanks

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    1. Hey John sorry for the extremely delayed reply. PCS is just put credit spread. I only use it for other calculations so I know how much total possible capital commitment that I have in that account. Many positions in my Rollover IRA are effectively naked put options but I open them as spreads to mimic margin. And since I don't want to blow up my account I need to keep track of the potential capital at risk.

      Regarding finding companies high IV is one of the biggest requirements for me to enter an option position. I've also started dabbling in technicals and hope to get to add that into my tool box as a way to help identify possible support/resistance lines to help improve my option trading. If you have any other questions feel free to ask or email.

      Thanks for stopping by!

      Delete

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