Why Trade ETF Options?

Why mess around with options trading?

Last year I posted a blog on the “Our Blog” Page on my website titled “The Smallest Hedge Fund in the World.” (https://etfswingtrader.net/blog/smallest-hedge-fund-world/) It showed the transactions page from an account where I had $30,000 at my disposal for about six weeks. I decided to trade all my ETF setups with options trades, to see how far I could get with Uncle Sam’s money before I had to return it. (This was some kind of IRA rollover event.) Bottom line I made money at the rate of 15% per month for this short period. The power of option leverage. (See the blog for the actual list of transactions, one by one.)

It has been my plan to set up a couple of small options accounts, and use my ETF setups to generate some “spending money” for myself. (Most of my ETF trades are in a retirement account, so I don’t get to play with the money I make.) So I funded two options accounts about a month ago with $5000 each. My plan was to add money to them so I would have 2 parallel $10,000 accounts to generate spending cash.

Where do I stand a month later? The very first trade in one of the accounts was a losing options trade. Just my luck. But as of today it is sitting at over $5800 — or +16% in a month. The other account has fared better. After a month it is sitting at $7000 — or +40% for the month. 

I wasn’t trying to do a demonstration, so I wasn’t matching precisely the ETF setups in my subscription service. But all the option trades were based on the same kind of ETF setups.

So I am certainly not an option expert, and I never want to be in the position of trying to “seduce” people into trading options for “extraordinary profits”. Everybody and his brother has an options service out there that is going to make you rich — until you realize you have lost all the money in your account. But if you had to have a basis for trading options, wouldn’t a strategy that generates 9 out of 10 winners in the underlying ETF be a good place to start?

I have always said that if I could demonstrate a strategy that can win 9 out of 10 times, any good trader should be able to find a way to leverage it for outrageous profits. I always said that options were one way to do this. But this year I have been more committed to posting actual options trades to see how the numbers work in real trading. The numbers have been reassuring enough that I am now following my own advice aggressively. And taking a couple of thousand dollars a month out of my two small options accounts will buy a lot of restaurant dinners for my wife.

I have been committing about $1000 to each options trade in these accounts, buying half a position at a time. I am going to follow through with my plan to add another $5000 to each of these accounts by the end of this week, so I can double the size of my options trades. If these accounts keep performing as they are now, I will be covering my mortgage payment with two of the smallest accounts in the world.

Good trading. 

P.S. Shoot me an email if I haven’t sent you my 3-page comparison of the two options and strategies I am using — [email protected]

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