TFSA day two.

This was a poor day, $7 in profits... better than a loss at least and all trades were closed, no hold overs.

I have been doing all the math showing some really nice numbers based on $10,000 trade sizes and what not. Today we had a talk, well, John did all the talking, in the direction of trade sizing. Apparently we are to keep out trades to a maximum of 5 contracts. I have no trouble with that initially as I am aiming for $1000 trades which makes most of the $2-$4 trades in the under 5 contract range. In a few weeks that will change. I had planned on at least hitting 10 contracts on larger options and up to 20 on smaller options.

The idea of limiting to this size is troublesome. I figure that I can trade the stocks and make use of larger trading capital by entering the stock at the same point as the options and exiting using trailing stops. The entries would be fine as the contract price entries are at or near low points, buy on weakness, and sold at high points, sell on strength. The thing about getting out of an option trade is that just placing a market order screws up the bid / ask for anyone else trying to get out at the same point. Market order exits in a liquid stock are just a matter of course and hardly have any real bearing on the price.

The trouble is I am using a TFSA and margin is not available and I cannot even just plunk a hoard of cash in there instead due to the $5,000 annual contribution limit.

So, back to options in the TFSA and stocks in the margin once I get things rolling along. I will aim for at least 100 share orders and will need to keep the price range under the $200 price range.

I worked out the trades for today based on time of entry in the options orders and the profits would have been in the $670 range if I had my $25,000 in the margin account. In the long run I will still be making the larger trades and may only use the options when they are being sold to open for some premium capture. I want to get my TFSA built up to be able to do the larger trades without going into margin use for these.

I am looking forward to a good day tomorrow and tuning my order entry to be sure to get into these options before the prices run up as they are lately... more people in the group will affect entries. 150 - 200 were about right. 300 is getting pretty full and we will have to be more selective on the stocks we are using. 500, the ultimate group size target seems like it may be too cumbersome, we will see.

Jeff.