A little cleaning house

I reviewed my positions over the weekend and decided to start cleaning some of the trades out that are not in synch with my current plan.

I am targeting trades that are not in my TFSA primarily and trades that are not specifically recommendations.

I decided to play the trades as recommended by the services that I am trying and not to play trades that involve only placing half of the strategy they are using. A number of the trades involve selling naked options to fund the underlying long option purchase for the actual price move. Nice idea but naked options are very risky if not covered by a stock or long corresponding option. So buying just the regular option puts me at a disadvantage as I am not taking advantage of the credit from the premium sold to fund the purchase of the long option. If they have suggested a net debit trade combo then I will consider it as there is open risk at the outset...other than the naked option that is.

I also will stop buying longer term options to try to take advantage of cheap time premium in order to have less EV degradation as the expiry approaches...some trades are the inside month. While the time premium may be cheap, it drives the price of the trade up and therefore the risk is greater and it also reduces the position size that I can take which will drive total profits down. So I will stick with the recommendations.

I see that they have been closing trades and all are in profit, which is nice to note.

I did a check on one service, the active one that I may keep, that has a track record and find that, over all, they make a healthy profit. Picking trades here and there could reduce the profits should I pick the wrong trades, so I will try not to attempt cherry picking.

Today I closed a trade for a loss, about 13% and closed another for a 100% win. Both were outside of my parameters and the winner I should have closed yesterday when it was at 140%.

I adjusted my stats accordingly.

In order to save a little calculation time I setup a daily return formula on my spreadsheet that uses my dates to calculate the numbers. The average is a straight average of all the trades which does not reflect a return on capital, only a return on the capital used in the trade. I would like to see that number up to 100%, which I think is possible. I will put an average trade capital in some time and that number may mean more when relative to this average.

I did some more work on the Williams %R strategy, mostly thinking, and came up with a method that may work quite well. The trouble that I did notice is that it seems to not work well in a transitioning stock. It is great for established trends, up and down as well has horizontals, just not as the stock switches from one to the other. I think that tracking the performance regularly and placing trades frequently will give a good result overall. I am going to check this against a sector rotation scheme using sector ETFs and come up with a balancing plan to weight the trade sizes according to the performance results. I am going to guess that the horizontal pattern will be the best as it allows taking both side of the trade while up and down trends are best only trading with the trend.

Jeff.

Jeff.