Week three completed...almost

Well, week three comes to an end. I still have three trades open but made two separate day trades this morning in two of the currently open positions. Sort of cool to hold a core position to play off of it with a completely separate activity. The quick nickel vs the slow dime.

The morning netted $405. The week $1086 (largish loss and three trades not closed this week yet)

My wife is liking the trading now. Today I sent her shopping for a new leather coat...big sale on in Ottawa and I figured that I could cover that purchase as a "bonus" for hitting my overall $4,000 mark. Or I could count it as a +$250 per day average mark. Either way it is a good feeling to know that profits are in the books and I can transfer some of those nice gains to enjoy in a truly materialist manner.

There was a discussion about trade sizing for option trades as one individual was trading large volume, 50 contracts, when the expectation is 10 to 20 per trade for the value of option in play.

I had already come to the conclusion that a $2,000 option position was the best size for my account and produced the returns that I am looking for while still giving me smooth and quick order execution.

The scale then becomes option volume relative to the sizing and per contract cost. I round off, 0.5 goes to 1.

$1 x 20
$2 x 10
$3 x 7
$4 x 5
$5 x 4
$6 x 3
$7 x 3
$8 x 3
$9 x 2
$10 x 2

The daily target is still $500 per day based on those sizes so 3 - 5 trades are the expectation with trades in the $200 plus mark regularly. The moderator will work more trades in to increase returns if it is needed. I think the lowest weekly return was $500 for one individual. I cannot really see my weekly, even though I quoted a number a moment ago, as I track the trade in the week that the trade was opened rather than when it was closed. Perhaps I should change that next month as profits are only profits when the trade is closed. I expected to be closing all positions in the same day so that is how I set my spreadsheet up initially.

This is perfect for my smaller account as long as I trade options. Stocks are another matter as I need a much larger capital base to trade $100 stocks with any volume. Even a 100 share position is $10,000 in buying power.

Which leads me to my next part of my plan.

The TFSA.

If I transfer $8,000 (about the max as I lost some money last year in that account) I can manage up to 4 concurrent option trades at $2,000 (or 5 at $1500 or so) while keeping my margin account for stock trades. I plan on opening an account in my wife's name but I may just use it for the swing and momentum option trades as I may not be able to link her account with my platform to perform day trades.

Either way. My daily average right now is $251, just over my main target but shy of the group target. If I convert my daily target into a comparable tax free profit target it is $175. Switching to the TFSA should not stymie my profits in any way, except maybe due to the 6, 7 or 8th trades having to be in the margin account perhaps. This puts me well ahead on my initial goal.

Doing the math on $250 dollar tax free days...not even counting compounding or increasing my goal to match the group goal and trading only 40 weeks of the year ... puts the take home at $50,000 annually. Ramp it up to $500 (which I think is going to be low overall) and that puts a cool $100,000 in my pocket.

Take operating costs out of that, then add in profits from the other services that Ia m using and I expect that the number will still be higher yet.

These are not numbers that I am making up in some sort of forecasting model making any vague assumptions. These are hard goals set as a group that we are, mostly, currently achieving.

Let's play imagination for a moment.

Say I want to have the option of working or not, which this can easily provide. I run the trading through the TFSA for tax free and tax neutral profits (they do not affect any other taxation, even CPP). This provides the beef of my income. Then I put a good chunk of my other taxable income into an RRSP and get the tax money back from that to invest as well. In a year or so I stop collecting a regular taxable income and start drawing directly from my RRSP at substantially reduced, likely even minimum taxation...I have effectively given myself a largish bonus in year two of my plan while reducing my current taxation to near zero levels.

I have not thought this one through completely nor have I done any math on it but it sounds like a very good plan to me.

So...off to do some other "real" work for the rest of the day.

Jeff.