Saturday, January 4, 2014

2013 Year in Review

Time to review my 2013 trading results.  It was the best year in trading ever for me.  I made almost as much as I took in from my full time job.  I averaged $4,665/month in profits between my main brokerage account and IRA account.  I had a 82% win rate with 256 completed transactions.  

An 82% win rate is statistically about what you would expect from a strategy of only selling option premium. If you just buy a stock you can statistically expect to win 50% of the time.  Since you only win if the stock goes in your direction.  As an option seller, you generally have a 80% win rate, since the option buyer has to get 3 things right to make a profit.  The direction of the stock, the time frame for the move and an exact price to reach.  This is all statistically very hard to do!  

So I rather take the opposite side of that trade and win 80% of the time.  Of course for that high probability, win rate, the cost is higher risk of capital loss.  I have a higher probability of winning in most of my trades, but the amount of the win is small.  When I lose, I could lose allot more, since I'm taking on more capital risk.  

When reviewing my transactions I have many small wins and very few losers, but a few of the losers were huge!  $3K - $14K, luckily I had many more small winners to make up for the big losses.  My average win per trade was only $218.  But since I had 256 transaction that is still $55978 in total profits.  The moral to this story is to trade often, trade small and minimize your losses!

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