Haven’t been posting often because I have so much going on around this time. I’m still going to post a 2015 review but in the meantime, I executed the very first trade of my 2016 trading experiment and like I promised, I’ve decided to share.
It’s very simple: I originally wanted to initiate the experiment with $500.00. However, after I learned a bit more about options trades, I decided that I’d bring it down to $180.00 instead since that was a good enough amount to buy 2 options contracts. While I’d traded stocks actively before, I had never traded an option (Leave me a comment if you want a post on options). I learned about them in class and understood the theory well enough but in real trading, I’d never touched them. So to me, the $200 was tuition since I can lose it without blinking, or even shrugging. So I opened a new options trading account with $40.00 at Scottrade, and then transferred another $150.00 for a total account balance of $190.00. And then I spent three weeks watching the options markets trying to get a feel for them.
Since I had been studying the consulting company Accenture in December, I decided to make it my first trade. On December 30th, Accenture was trading at around $106.00. I bought one contract betting that it would climb to $108.00 for $0.68 per share for a total of $68.00 (every options contract covers 100 shares). After the $8.25 commission, the total came up to $76.25. The order summary is in the grey box near the bottom of the below screenshot.
At the same time, I bought a put option betting that the same stock was going to fall to $104.00 at $1.01 per stock, for a total of $101.00. Another trade commission of $8.25 brought the total to $109.25.
Between those two trades, I now had a double bet, which meant I would make (and lose) money whether the stock went up or down between now and Jan 15th which is the expiry dates of both options. Together, both trades totalled $185.50. I was now fully invested.
The next day, being 31st, the stock didn’t move much and I ended the day with a small net loss position of about -2.65%. The markets were closed on Friday, being New Year’s.
Today, Accenture (ACN), on the back of a general market sell off, plus their disappointing December earnings, started trending down sharply even by the time I checked their pre-market trading. They opened at $102.00, at which point I sold off the $108 trade at a steep loss of $0.11 per share for a total of $11.00, which after the $8.25 commission was about $2.75 net (a -96.4% return).
I then rode the $105.00 contract for a little longer until $ACN hit the mid $101s. I wanted to wait to see if it would test support at under $100 but I noticed a double bounce at the low $101s that suggested a lot of buy orders at that price (I learned how to read this from my earlier trading years). And since my options would lose value if the stock went back up to $103-104, I decided to go ahead and close out the position and take my profits.
I sold the 105s at $4.27 each for a total of $427.00 which came down to $418.75 after subtracting commissions.
So in total, I invested: Options: $169.00 + Commissions: $16.50 For a total of $185.50 then sold out for $438.00 less commissions of $16.50 for a total of $421.50 bringing my current account balance to $422.93 (near the top of the screenshot). You can see the $150.00 I added at the bottom of my transactions list, but you can’t see the account opening balance of $40.00.
So in summary:
Opening balance: $190.00
First week closing balance: $422.93
My initial goal was to start with $500.00 so I’m probably going to add $80 to this account and before making my next trade. Or maybe just roll with it as is.
Guess we’ll know in a few weeks.
My 2015 review will come in the next post. Happy new year, and a cracking 2016 to you all!