The Money Tree

Safely Generating Income in Retirement

Deep OTM NP Strategy – SEP Results

Posted by mounddweller on September 17, 2011

Fellow Traders,

Another month of trading the Deep OTM NP Strategy is closed and in the books.  This month was a very good month for executing this strategy.  Below are the Key Performance Indicators (KPIs) I track to measure the success or failure of the strategy:

  • Number of Potential Trades Presented: 479
  • Number of Potential Trades Finishing ITM: 10
  • Overall Success Rate: 97.9% (I find this to be extraordinary given the volatility we experienced this month)
  • Total Capital Required to Execute All of the Trades Presented: $3,854,550
  • Premiums Received (net of commissions): $73,173.60
  • ROIC (before capital losses): 1.90% Annualized 25.66%
  • Capital losses associated with the 10 trades which finished ITM*: ($3,121.90)
  • Total ROIC (net of capital losses): 1.82% Annualized 24.57%

*Note: For performance calculation purposes it is assumed all positions remain open through expiration.  However, in all 10 losing trades this month a real trader could have easily minimized the loss by buying back the put before expiration.

In closing I’d like to also make note of the fact that of the 9 trades I highlighted in my commentary each week this period ALL of them finished OTM.  My intent in pointing this out is not to ‘toot my own horn’ so to speak.  Rather, it is to show that any trader using this strategy who is willing to invest a little time in doing some rudimentary due diligence can easily avoid the riskier trades and generate consistent cash flow each month while sleeping well at night.

I’ll be back later with another post with potential trades for OCT – Week 5.

Best Regards,

Troy

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