Option Recap - February 2018

Option Strategy | Active Income | Financial Independence
Option Activity Recap - February 2018
Whenever I was laid off back in April 2016 I had a fairly sizable amount of cash in my 401k that I was set to rollover into an IRA.  With a large amount of cash on hand I wanted to explore a more active approach to generating income from my portfolio as opposed to the rather mundane dividend growth investing.  Don't get me wrong I love dividend growth investing, but I also want to look for ways to get to financial independence sooner rather than later.  

So I embarked on a strategy to trade options in order to generate a higher income from the same capital base.  There's more risk involved, especially if you venture into underlyings that you aren't willing to own, but the income generation can be quite substantial.  

For the bulk of my option trading capital I stick with fairly simple things such as selling puts or calls and don't venture into the more complicated strategies that are out there.  

The results for 2017 were fairly solid and encouraging, although the one way move higher in the markets meant that I missed out on potential gains as opposed to just buying the market.

This year started off well with January producing my largest monthly profit ever of $3,183.30.  

Despite the craziness of the markets in February that saw the S&P 500 and DJIA down over 10% at the worst, I'm pretty happy to see that I booked gains of $2,103.92.  That brings the YTD total to $5,287.22 of booked profits.  

That doesn't include any unrealized gains or losses from positions that are currently open.  It also doesn't include any realized losses on positions that were rolled out in time.  I only book the gain or loss once the position is fully closed out, i.e. if I sell a put option and then roll it out to the next month the position is still considered open even though they are technically 2 separate trades.  I've found that to be the easiest way to handle things from a P/L standpoint as well as keeping track of the net credits on positions.

While the $2k of profits looks really nice when I take a closer look at the results nearly 80% of the profits were booked from 1 position entirely.  It's better to be lucky than good right.

If you're interested in using options, TastyWorks is one of the cheapest brokerage firms out there with just $1 per contract commissions to open and $0 to close.  Commissions on stock purchases are $5.  If you sign up for an account through this link and deposit at least $2,000 I will receive a referral credit that can be redeemed through TastyWorks' referral program.
Trade Recap

That position was my Nvidia (NVDA) super bull, or at least my version of the super bull.  My version is selling an OTM naked put and using the proceeds to purchase an OTM call.  The trade could also be classified as a combo.

The trade started off back on 12/19/2017 when I initiated the position by selling a $185 put, buying a $215 call and also buying a $110 put to release capital since this was in my IRA account.  All of the original positions were for the 2/16/18 expiration.  On order entry the position had $103.26 of option premium with the risk being purchasing 100 shares of NVDA at $185 with the potential for unlimited rewards due to the long $215 call option.  At the time the position was opened NVDA's share price was trading around $196.

My reasoning behind the trade was that (1) I felt NVDA still had room to run, (2) NVDA seemed to have pretty solid support (TA alert) around the $185-190 level and (3) NVDA was likely to report earnings the week prior to expiration which would keep theta, time decay, at least some at bay via the vega expansion.  

As luck would have it my assumptions played out nicely.  Not long after I initiated the position NVDA's share price went on a nice bull run.  By 1/19/18 NVDA's share price had climbed all the way up to around $230.  

The position was working out beautifully for me as it was a bullish position.  So I decided to buy back the $185 put option to take all the risk off the table and also sell a $245 call option against.  That left in a pretty solid spot where I had the long $215/245 call spread on for a $577.91 credit.  At that point the worst I could do was make that $577.91 on the position with no potential for realized losses.

The share price continued to run higher leading up to and after earnings; however, then the market kerfluffle that started in late January commenced.  I put in an order to sell my long $215 call back out and buy to close the short $245 call for an additional $1,743.62.

All combined this trade netted me $2,321.53 of profits.  Considering there was just $7,396.74 of capital at risk that's a smooth 31% return on capital.  

This position was by far my most profitable option position that I've made and far surpassed even my optimistic scenario for how it would/could play out.  


Options trading has been a fun undertaking and something I will continue to explore going forward.  My desire/attention for it might wane since it does require a lot more activity than just passive dividend growth investing, but the results so far are promising as a way to generate more return via option premium than from the dividends alone.

Going forward I plan to do a quick recap of each months option activity and also highlight one trade, winner or loser, that was closed in that month.  If you'd like to check out my option trades in between updates feel free to check out my Option Summary page that I update usually on a daily basis.

Also if you're interested in options trading or have any questions feel free to leave a comment or shoot me an email.

Do you utilize an option strategy on top of your core dividend growth investing?  


  1. Nice work on the options trading JC. I dabbled in this some years ago, but didn't like the amount of attention it required to monitor. Also didn't really enjoy it as much as researching stocks and building an investment portfolio. Always great to try new things and broaden your knowledge though!

  2. Frankie,

    It definitely requires more attention than just buy & hold dividend growth investing. But it's fun and interesting so I keep at it. Although what I'm really wanting to experiment with is whether it can be a realistic and most of all consistent form of income for my wife and I to allow us to reach FI a bit quicker. So far so good, but the results will really be telling whenever the markets make a turn. Although I've been liking the return of volatility over the last month or so.

    All the best.


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