I just cleared 120% ROI on my daytrading since April 1 and my trade size chart indicates that it is already time to go from 4 to 5 contracts per trade. I base this on an 85% participation assuming that there are a maximum of ten trades with an average per contract price of $2.50. Lately it has been a lower average and the trade count has been less than 10 concurrent trades as we are aiming to not have too many on the books at any given time... no more than 10 or 11.
So tomorrow I will add one more contract to the default setting on my platform so that I start the day with 5 contracts on the order windows. In all three of my forecasting models I had June as only a 1 contract increase month.
In the ultra conservative I had 1 per month for 12 months.
In the medium aggressive I had 1 in June, 1 in July and 2 each month thereafter.
In the way out there I have 1 in June, then the progression is 1, 2, 3, 4, 6, 9, 13, bringing me up to the 50 contract maximum.
The first two are just regular increases but the third is progressive based on profits and increasing trade size while keeping account participation above 60% up to the 50 contract sizing.
Then I figured I should use the actual daily averages for the current month in here as that is a more accurate representation of where this aggressive account should expect to be..instead of the arbitrary $250 per day average. I applied a restrictor to keep the increases down to 80% of maximum to avoid increasing too fast and to keep a bit more cash on hand while still planning on regular withdrawals in July.
The new contract count progression is 1 in June, then 2, 3, 5, 8, 12, 19 to the 50 contract maximum. This makes a difference of three months to maximum sizing and starts me off with almost a double withdrawal allowance... $4,400 instead of $2,500 per month.
I will maximize sizing increases and re-forecast the move to get to the largest account base quickly.
Rollin', Rollin' Rollin'....
Jeff.
Questrade, My direct access discount broker.
Monday, June 7, 2010
Saturday, June 5, 2010
Old goals, new timeline
I was scanning back over some of my older posts...May 2008. My very first goal set was to double my money each year.Now I realize that once a trading account gets large enough doubling the account is not necessarily feasible but it is a good start.
Seeing as that goal was set just over two years ago and now I haw doubled my money once in less than three months I feel that I will not only meet my goal, on average but that I can meet that goal in August, if not sooner.I need to double my money twice and change in order to just be on track.
I am not sure at what point I will stop trying to compound my returns by continually increasing position sizing. Some dollar amount per period, some position size per trade... I guess I'll find out once I get to a point that is comfortable for me... then go bit farther. Perhaps I will not stop as I find new ways to trade to continue to maximize my returns, I am sort of performance driven that way.
Jeff.
Seeing as that goal was set just over two years ago and now I haw doubled my money once in less than three months I feel that I will not only meet my goal, on average but that I can meet that goal in August, if not sooner.I need to double my money twice and change in order to just be on track.
I am not sure at what point I will stop trying to compound my returns by continually increasing position sizing. Some dollar amount per period, some position size per trade... I guess I'll find out once I get to a point that is comfortable for me... then go bit farther. Perhaps I will not stop as I find new ways to trade to continue to maximize my returns, I am sort of performance driven that way.
Jeff.
Friday, June 4, 2010
Friday Update
With the market gapping down and not filling the gap it proceeded to head South. This makes for a very nice day to be in puts.
I surpassed the 100% in my TFSA daytrading account after closing three trades, two mediocre ones and one decent one for a net 60% gain. The benefit of now trading 4 contracts is an increase in profitability as this month I am sitting on $1568.90 in profits with all 4 contracts whereas I would have been sitting on only $1131.90 with three contracts. That is an increase of 38.6% in profitability based on an increase of 33.3% in the trade size. The seeming disparity is due to the reduced relative commission costs of the slightly larger trades.
Ooops...I just closed another trade...but I won't change my above numbers. Call it one more small profit anyway, just closing one that was opened this morning.
Jeff.
I surpassed the 100% in my TFSA daytrading account after closing three trades, two mediocre ones and one decent one for a net 60% gain. The benefit of now trading 4 contracts is an increase in profitability as this month I am sitting on $1568.90 in profits with all 4 contracts whereas I would have been sitting on only $1131.90 with three contracts. That is an increase of 38.6% in profitability based on an increase of 33.3% in the trade size. The seeming disparity is due to the reduced relative commission costs of the slightly larger trades.
Ooops...I just closed another trade...but I won't change my above numbers. Call it one more small profit anyway, just closing one that was opened this morning.
Jeff.
Thursday, June 3, 2010
A small reminder abuot "other people's plans"
From a blog entry that I started on June 3rd:
"One thing that I have always said is that if I plan to trade someone else's plan that I must plan to trade the plan exactly as it is laid out...otherwise I run the very real risk of spoiling the results or even posting losses when the plan is profitable.
Today was a small reminder about that idea as I decided to close a trade for a small profit. It was the only call option trade of 15 and the trade has been at the 80% loss level at one point, over 100% gain at another point and I closed it for about a 15% gain. Given the market I thought it prudent. Of course it went down to a loss position and headed back up for a higher price than I closed it for. I don't mind as I was fretting over it just a bit... even though it was a 2 contract trade... funny that."
Well, that trade was a June call...the only call on the list and I didn't really feel like letting it close for a loss. So it is fine that I decided to do what I did but today I would have been able to close the $1.95 contract for up to $3.70... trade the plan. Now, on the other side I have made a few deviations that were more profitable than the plan, but I expect that those are harder to get right if not by accident.
Jeff.
"One thing that I have always said is that if I plan to trade someone else's plan that I must plan to trade the plan exactly as it is laid out...otherwise I run the very real risk of spoiling the results or even posting losses when the plan is profitable.
Today was a small reminder about that idea as I decided to close a trade for a small profit. It was the only call option trade of 15 and the trade has been at the 80% loss level at one point, over 100% gain at another point and I closed it for about a 15% gain. Given the market I thought it prudent. Of course it went down to a loss position and headed back up for a higher price than I closed it for. I don't mind as I was fretting over it just a bit... even though it was a 2 contract trade... funny that."
Well, that trade was a June call...the only call on the list and I didn't really feel like letting it close for a loss. So it is fine that I decided to do what I did but today I would have been able to close the $1.95 contract for up to $3.70... trade the plan. Now, on the other side I have made a few deviations that were more profitable than the plan, but I expect that those are harder to get right if not by accident.
Jeff.
Stocks vs Options
I started running the numbers for stock trades along side of the option trade for the month of June with respect tot he day trading only. I fully expect that playing the stocks can be more lucrative on a straight cashflow basis as opposed to a ROI basis... back to ROR or Return On Risk I suppose.
Three days in and the numbers surprised me a little. While we have only had a few trades this week this is more for a comparison.
Options:
6 trades closed, 4 contracts per trade
$708 profits
Average trade size $2.66
Maximum capital in use at any given time $5,000
ROI and ROR are 14%
Stocks
trades closed, 100 shares per trade (200 shares per trade)
$688 profits ($1436 profits)
Average trade size $126.30 ($252.60)
Maximum capital in use at any given time $47390 ($94,780)
ROI = 1.45%, ROR uncalculated yet but assume 10% at risk it would be 14.5%...same for 200 shares)
Now, that is considering that the capital used is all cash. Seeing as there is 3 x margin the numbers change a bit as I only put up 1/3 of the totals but keep (or lose) the full P/L
ROI with margin used = 4.4%, ROR with 10% of the trade at risk is still 14.5% BUT if I lost 10% of the trades I would lose close to 30% of my cash thus reducing by 30% my buying power for the next day.
This one factor makes using margin not work it but does point out that trading stocks is better for the bottom line than trading options once the cash levels are high enough that the trades can be considered as a cash deal rather than a margin deal.
I can lower the risk by keeping tighter stops than 10%, in fact, in daytrading that is a very loose stop as in the largest trade, AAPL above $260 per share, I would have been using $1 stops at the largest which is really only an overall loss of 0.3%, not 10%.
In that light let's assume that a 2% stop is used overall. This puts the loss allowance down to a much more manageable 6% of the account assuming that all trades move against me and stop out... which none did yet.
The other advantage is that often John will call out a trade and the price will run away so we may either not get in the option trade OR may pay a higher price to get in. In a stock that is as liquid as the ones that we trade options on market orders are the norm as the spreads are very tight, usually no more than 5 cents. This lets me get into trades that run away from the group and close for a profit as soon as John decides that we are no longer watching it... or just set a VTSO or stop at that level to take advantage of a run.
There were two such trades today. One that I missed and would have produced a small profit but had I been into the stock it was a $2.50 move... $250 on 100 shares.
The other was a second opportunity as the trade was followed even after most of got out. It was an AAPL trade. The first move I was in for but sold too low and only saw 30 cents per contract, but still a profit. Others stayed in as the price bumped up then turned south once again to gain an additional 15 cents per contract. Had I been playing the stock I still would have sold on the first signal but I would bought back in on the pullback as there was another move expected. I tried to re-enter the option but missed it.
Total stock profits would have been between $2 and $3 per share which is about double the option trade based on 100 shares vs 400 contracts.
I hope by the end of June to be able to have a good idea of where I need to be in order to be able to trade solely stocks.
Having said that, the AAPL trade was a put or short stock play, as most are right now. I will have to split things up depending upon the market as I can buy puts and calls in my TFSA and buy stocks. I would have to short sell in my margin account so I can just play the puts instead of shorting in the TFSA and buy stocks long instead of calls. Either that or figure that the profits are large enough compared to options in order to make it worth while doing all my daytrading in the margin and just switching to the momentum options in the TFSA as that will always be options.
Always more food for thought and always requiring more capital to be able to do exactly what I want...it will come though.
Jeff.
Three days in and the numbers surprised me a little. While we have only had a few trades this week this is more for a comparison.
Options:
6 trades closed, 4 contracts per trade
$708 profits
Average trade size $2.66
Maximum capital in use at any given time $5,000
ROI and ROR are 14%
Stocks
trades closed, 100 shares per trade (200 shares per trade)
$688 profits ($1436 profits)
Average trade size $126.30 ($252.60)
Maximum capital in use at any given time $47390 ($94,780)
ROI = 1.45%, ROR uncalculated yet but assume 10% at risk it would be 14.5%...same for 200 shares)
Now, that is considering that the capital used is all cash. Seeing as there is 3 x margin the numbers change a bit as I only put up 1/3 of the totals but keep (or lose) the full P/L
ROI with margin used = 4.4%, ROR with 10% of the trade at risk is still 14.5% BUT if I lost 10% of the trades I would lose close to 30% of my cash thus reducing by 30% my buying power for the next day.
This one factor makes using margin not work it but does point out that trading stocks is better for the bottom line than trading options once the cash levels are high enough that the trades can be considered as a cash deal rather than a margin deal.
I can lower the risk by keeping tighter stops than 10%, in fact, in daytrading that is a very loose stop as in the largest trade, AAPL above $260 per share, I would have been using $1 stops at the largest which is really only an overall loss of 0.3%, not 10%.
In that light let's assume that a 2% stop is used overall. This puts the loss allowance down to a much more manageable 6% of the account assuming that all trades move against me and stop out... which none did yet.
The other advantage is that often John will call out a trade and the price will run away so we may either not get in the option trade OR may pay a higher price to get in. In a stock that is as liquid as the ones that we trade options on market orders are the norm as the spreads are very tight, usually no more than 5 cents. This lets me get into trades that run away from the group and close for a profit as soon as John decides that we are no longer watching it... or just set a VTSO or stop at that level to take advantage of a run.
There were two such trades today. One that I missed and would have produced a small profit but had I been into the stock it was a $2.50 move... $250 on 100 shares.
The other was a second opportunity as the trade was followed even after most of got out. It was an AAPL trade. The first move I was in for but sold too low and only saw 30 cents per contract, but still a profit. Others stayed in as the price bumped up then turned south once again to gain an additional 15 cents per contract. Had I been playing the stock I still would have sold on the first signal but I would bought back in on the pullback as there was another move expected. I tried to re-enter the option but missed it.
Total stock profits would have been between $2 and $3 per share which is about double the option trade based on 100 shares vs 400 contracts.
I hope by the end of June to be able to have a good idea of where I need to be in order to be able to trade solely stocks.
Having said that, the AAPL trade was a put or short stock play, as most are right now. I will have to split things up depending upon the market as I can buy puts and calls in my TFSA and buy stocks. I would have to short sell in my margin account so I can just play the puts instead of shorting in the TFSA and buy stocks long instead of calls. Either that or figure that the profits are large enough compared to options in order to make it worth while doing all my daytrading in the margin and just switching to the momentum options in the TFSA as that will always be options.
Always more food for thought and always requiring more capital to be able to do exactly what I want...it will come though.
Jeff.
Tuesday, June 1, 2010
Relative Risk and Account Growth...and Other Odds
Today was "Newbie Day" in the trading room as this month's batch of new sign ups joined... that typically makes it a slow day as we planned on only one trade. John called out the one main and added a quick put in the QQQQs. I already had that trade on the go so I doubled it and then went over to the momentum account and doubled that longer term put as well. The market is heading down so why not catch today's highs to lower my average costs and increase my position sizing on some small priced options... about $1.
I added a relative risk function to my current tracking spreadsheet that gives me the percentage account usage for ten trades at $2.50 contract price average for sizes from 3 to 10 contract trades. It runs off the current balance as I enter the day's trades so I get a sort of live indicator.
Anything under 80% usage is clear to trade and right now 4 contracts put me at 77%. I currently have 9 trades (6 and three are double sized which counts as two per) and the average price is $1.97. My account cash balance is actually near my initial start up so I am only using about half of my total account and I am already near my 10 trade maximum target... lots of rubber room.
I guess that, since I have almost doubled this account since April 1 putting only the profits at risk is a good thing. Soon I expect that I will be putting less and less of the profits at risk which effectively reduces my relative risk.
BTW, my doubling up on the QQQQ trades has me at paper gains of $300 after the afternoon sell off... I would have been at $28 otherwise. I like the "would have"s when they were avoided and the "did"s are better.
I am well set up with puts for the upcoming drop in the market and, should we all be wrong, not putting initial capital at risk in any account now. That and all my gold plays are doing reasonably well.
Jeff.
I added a relative risk function to my current tracking spreadsheet that gives me the percentage account usage for ten trades at $2.50 contract price average for sizes from 3 to 10 contract trades. It runs off the current balance as I enter the day's trades so I get a sort of live indicator.
Anything under 80% usage is clear to trade and right now 4 contracts put me at 77%. I currently have 9 trades (6 and three are double sized which counts as two per) and the average price is $1.97. My account cash balance is actually near my initial start up so I am only using about half of my total account and I am already near my 10 trade maximum target... lots of rubber room.
I guess that, since I have almost doubled this account since April 1 putting only the profits at risk is a good thing. Soon I expect that I will be putting less and less of the profits at risk which effectively reduces my relative risk.
BTW, my doubling up on the QQQQ trades has me at paper gains of $300 after the afternoon sell off... I would have been at $28 otherwise. I like the "would have"s when they were avoided and the "did"s are better.
I am well set up with puts for the upcoming drop in the market and, should we all be wrong, not putting initial capital at risk in any account now. That and all my gold plays are doing reasonably well.
Jeff.
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