The Money Tree

Safely Generating Income in Retirement

Deep OTM NP Strategy – OCT Results

Posted by mounddweller on October 21, 2011

Fellow Traders,

Another trading month has past and it was a successful one for our Deep OTM NP Strategy, albeit not as successful as in prior months.  This month we were presented with 500 trading oportunities.  Trading all 500 positions would have required $4,024,650 in capital.  Doing so would have generated $70,731.25 in premiums net of commissions.  However, volatility this month took its toll.  While the percentage of trades finishing OTM was high (473 of 500 for 94.6%) there were several of the 27 finishing ITM that had large losses.

Capital losses net of commissions totaled $25,909.85.  Thus, premiums net of capital losses came to $44,821.40.  This gives us a net ROIC of 1.11%, 11.61% annualized.  As I said, not great but still a solid profit.

This month I faired no better than the overall averages.  I selected 10 trades from the 500 presented that I thought had a high probability of finishing OTM.  9 finished OTM, with only AAWW finishing ITM.

Well, that’s it for this post.  I’ll be back later this weekend with a look at our NOV Week 4 selections.

Regards,

Troy

 

3 Responses to “Deep OTM NP Strategy – OCT Results”

  1. Vijay said

    Aloha Troy,

    I see AAWW is now close to $40. I was wondering how you played this puppy ?? did you roll or did you take the loss and move on ?? Thanks for your report(s) and sharing.. vijay

    • mounddweller said

      Vijay,

      I don’t trade all of the selections I feature in my Deep OTM NP Strategy or my Weekly NP Strategy. My pockets aren’t that deep. I did not trade AAWW. However, I will tell you that my experience has been that patience often pays off. The AAWW trade is a good example of that. When I selected AAWW as a possible trade back in mid-September it was at $47.09. After it announced it was altering its order for new jets the stock took a tumble, falling as low as $30.90. After the market digested the news it must have decided it wasn’t as bad as originally thought because the stock began to recover. The overall market rally last week didn’t hurt either. Thus, someone who hung on and had the stock put to them was able to sell it the same day for as much as $40.99.

      I realize this would have been a hard trade to sit still on. AAWW is not a blue-chip, household name kind of company. It would have been very hard to stay in the trade when it was down in the low $30s. However, it can payoff.

      Regards,
      Troy

      • Vijay said

        Thank you Troy for your response. I asked the question as a confirmation of my actions.
        I agree AAWW was (and is) a great company with good fundamentals and most of your reccos have always been ‘spot on’.
        FWIW, I rolled out of AAWW to November 30 strike for a net credit of +.10 (5 contracts) and I was curious if you (and others) in the room rolled out and down (like I did) or simply bite the bullet and take the loss. I am glad I rolled out and did not take the loss.

        Thanks again for your excellent picks and suggestions. I eagerly look forward to all your emails and reports. They give me a starting point for my due diligence. I must confess however, that I have not mustered the courage to take advantage of your weeklies plays at this time due to lack of self-confidence. I am glad you are having great success with that as well.

        vijay

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