Timelines and cashflow

I was putting in a bit of time while making sure that all was clear at work for the Holiday and I let my mind wander. The title does not tie two related topics together but addresses two important ones for me.... and neither should be long enough that I feel compelled to create two posts.

First, a comment by a professional trader who is starting to get in to the teaching side of the game. Fellow by the name of Ray Barros. Unlike a lot of the teachers he is looking at teaching his methods and providing insight into one of his chosen indicators as well as one that he had developed. He is successfully managing client's accounts as well as his own trading account and has been trading since 1990 or so.

The comment was that it took him 10 years to become consistently profitable.

Ouch!

I should ask him what that meant for him to quantify the idea of "consistently profitable".

Any of us that seek to become consistently profitable in any short order need to take pause and consider this. Now, I will admit that it may be easier now than it was then with the proliferation of online information, online brokerages and easier direct access to markets but still, 10 years. Don't be in a hurry to quit the day job.

My goal is to be able to rely solely upon trading and investment income as soon as possible... whether I do or not is beside the point. The "as soon as" is a fluid concept even though I have targets and goals. Some of those just have not worked out exactly as I would have liked for a number of reasons, and not all do to missed profitability. The need to continue to hold down a real job has shifted my idea of the timeline for both attaining my primary goal and shifted me into a less time consuming method of managing trades.

Basically I determined that I cannot day trade my way to wealth.

Now, the cashflow issue... I keep re-working my spreadsheets for call and put spreads to include certain target levels and I am finding that they shift easily depending upon the position size. Due to my small capital base the commission makes more of a difference on the bottom line that I would like. If I consider $10 per day based on a $5,000 trade size an acceptable Return On Risk then I can scale that accordingly as long as I leave in the commission factor as it varies with position sizing.

0.2% per day of the trade net commissions. Setting up a sheet to represent this over various timeframes and credit amounts was easy enough, if a bit tedious. I left out commissions but used the risk as if there were no credit applied due to the trade execution...it gets me very close. The rest I work out on the call / put check sheet where I put the bid asks over the OTM option chains.

Rather than get into the particulars, this means that no matter the size of the trade 0.2% ROR after commissions will always yield $10 for every $5000 of gross risk. A 6 contract trade on a $1 spread will need a slightly higher credit off the start than a 25 contract trade with a $2 spread but either will yield my target considering the combined concurrent trades.

Jeff.