January Portfolio Income Report

The first month of 2011 is now in the books for options trading. Generally is was an “OK” month for our three portfolios. Typically most people think that volatile months are dangerous for our trading system. However it seems more often that when the market is marching higher – slowly day by day – it becomes just a little more challenging…still great strategies, but require more analysis.

Credit Spread Strategy: -5.79%

As always, we present our trading results completely open and honest. This month we did have to close out 1 of our spreads at a loss. While in hindsight we could have left it open and made money, we just didn’t want to take on that kind of risk into expiration. This is however, just the very 1st losing trade we have had for this strategy.

To re-cap this month’s income, let’s look at what we made in premium vs. our required investments (in margin). Here are the positions we had with corresponding PROFIT/INVESTMENT and RETURN:

RUT 830/835 CALL SPREAD – $40/$460 = 8.69% Return

SPX 1,300/1,310 CALL SPREAD – Loss $120/$920 = -13.04% Return

With regard to TOTAL INCOME and RETURN, the January portfolio produced a loss of $80 after investing just $1,380 in margin. That means we saw a total portfolio return of -5.79% this month. As we mentioned before, this of course is not a great way to start the year but every strategy will have losing months (we are not immune to losses). However, our strategies still force the market to make major, sustained moves – which it did this month.

Naked Puts/Calls Strategy: 1.90%

Our naked puts/calls strategy continued to do very well this month. We remain profitable with this “bread and butter” strategy for over a year now. Not always the flashy return, but it sure is consistent.

To re-cap this month’s income, let’s look at what we made in premium vs. our required investments (in margin). Here are the positions we had with corresponding PROFIT/INVESTMENT and RETURN:

IWM 85 PUT – $14/$580 = 2.41% Return

QQQQ 58 CALL – $14/$706 = 1.98% Return

DIA 102 PUT – $20/$1,020 = 1.96% Return

IWM 84 CALL – $16/$1,070 = 1.51% Return

With regard to TOTAL INCOME and RETURN, the January portfolio produced $64 of income after investing just $3,376 in margin. That means we saw a total portfolio return of 1.90% this month.

Iron Condors Strategy: 1.24%

As with our Credit Spread strategy we exited the upper half of the SPY Condor early at a small loss which really dropped our returns this month from the 5-6% range to below 2%. Again not always the flashy return, but it sure is consistent. Condors naturally require more adjusting each month.

To re-cap this month’s income, let’s look at what we made in premium vs. our required investments (in margin). Here are the positions we had with corresponding PROFIT/INVESTMENT and RETURN:

SPY 112/110-130/132 Condor – Loss $3/$375 = -0.08% Return

IWM 69/70-84/85 Condor – $10/$190 = 5.26% Return

With regard to TOTAL INCOME and RETURN, the January portfolio produced $7 of income after investing just $565 in margin. That means we saw a total portfolio return of 1.24% this month.

As we usually point out, our calculations assume that you enter just 1 (ONE) position for each trading alert. Those members with a higher capital base should be entering multiple contract positions each week to fill their respective portfolios.

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