Trading Spreads for Consistent Profit in Small Accounts

Week of 5/26

At one point thought I was going to turn in a negative week. This is why I love this strategy. You can save the panic for other areas of your life. The awful LOW earnings trade turned profitable after a rally the next day, and I don’t know what ULTA was doing before it’s earnings call, but it turned out great. You see the beauty in being a seller is that you are never out of it. The old SNAP earnings trade, that you may recall was a 25% disappointment, has leveled off and I am now bouncing around break even. Time and price action work in my favor if I can be patient. I don’t think I have to tout the success of the system anymore so…

How does one get started, or better yet how would I get started trading this system.

  • Watch all the videos and read all of the books. Educate yourself on as much of the terminology and sub strategy as you can
  • Paper trade to develop the rules and designed systems that will be the standard for a trading career. Keep a journal and really learn what is going on during this time.
  • Gather capitol in whatever amount I am willing to risk. Keep in mind that, because this is an investment, whatever I put in is at risk of disappearing. Really understand that fact. I would not put any money in that I could not afford to lose 100% of. It is possible and actually likely at some point. Ever heard of a hedge fund that went bust?
  • I would go to Tastyworks (best fees I have found) and open an account. In order to trade option spreads I have to open a margin account, which requires 2000 minimum funding.
    • A note on margin… Margin can be a great tool if you understand what it is and do not abuse it. I avoid margin whenever possible because it is essentially leverage. When you leverage your gains, you also leverage your losses. It is never a good idea to leverage losses against money you can’t cover. So while they will force you to have a margin account, you can keep track of your net risk in your own notes and avoid exceeding what you can cover with the cash you can afford to lose.
  • Follow the system that I have designed ahead of time. Have fun trading.

I have shared articles from people who have been unsuccessful at this and largely disappointed. I’ve been there. I had a baseball coach that once told me, the thing that makes a great athlete is the ability to adjust. This system is my present adjustment to adversity in trading option markets. It serves well for now, but I am certain there will come a time when it either no longer meets my needs or no longer works at all. But then I only need to adjust, learn, grow. To be cliche, success is what you make of it. That is as true for trading as it is for anything else. Enjoy this week’s journal. As always if you have questions or comments, please feel free to post to the comments section, or email me directly at deanjohnson202@gmail.com

5-26stat

New format here for Journal and Summary

Trade Journal – Summary

Trade Journal – Open Trades (2)5-26

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