I Set Aside $1000 to Learn Options Trading
This is Part 3 of a larger series.
This italicized text is copypasta and will be at the top of each of my posts for my self-learning options adventure where I outline how each option result review will be formatted.
Each trade review will have the following sections, always in this order:
- Overview of the Option(s) — full option name, security name, strategy, outlook, option type(s), expiration date(s),
- Due Diligence- the research I did in the underlying which led to the trade that I made
- Opening the Option(s) — when I opened the position, credit received/price paid
- Developments / Changes During Holding
- Closing the Option(s) — when I closed the position, credit received/price paid
- Review — did I win or lose? What was learned and what I could have done better. ***THE MOST IMPORTANT SECTION!*** (Best for last, ya know)
Also, a note on the arithmetic signs used throughout, I use the traditional options style, that is, a ‘+’ stands for any of the following: a buy of an option (ex. +1) and credit received from selling an option (ex. +$500), whereas a ‘ — ’ stands for the opposite in those cases: a sell of an option (ex. -1) and cash spent to purchase the option (ex. -$500). Market values of any held options are always positive (or $0).
1. Overview of the Option(s)
a. Option(s) technical name: BUY +1 ACN 20 APR 18 150 CALL
b. Security Ticker and Name: $ACN, Accenture PLC
c. Strategy: Long Call
d. Outlook: Bullish
e. Buy/Sell: Buy
f. Options: Call
g. Amount: +1
2. Due Diligence
I already own shares of Accenture. I think it is a great company that will only keep growing as technology becomes more and more prevalent at the industry level and older legacy companies want to upgrade their tech infrastructure. After Accenture’s had a large down day due to trade war fears like the rest of the market, I bought an in-the-money (ITM) call for Accenture at $150.
3. Opening of the Option(s)
a. Opening Date: March 22nd 2018
b. Market Value: $390.00
4. Developments / Changes During Holding
This call (like the rest of the market at this time) traded sideways until I sold only about a week and a half of holding it.
5. Closing of the Option(s)
a. Closing Date: April 4th 2018
b. Market Value: $130.00
LOSS: -$260 (NET: $620)
Running Score: Chris 0, Market 2
Welp, another loss.
Similar to Facebook, I was speculating that Accenture would go back up after it opened way down on March 22nd. I thought I was smarter this time, buying a bit further out expiration (nearly a month) of an April 20th expiration. However, trade war fears and some fears about inflation and fed rates were abundant at the end of March/early April, and Accenture traded sideways for about a week and a half (like the rest of the market). It seemed as though this pattern would continue, and before theta killed me like it did on my Facebook call, I sold my call in hopes to reduce loss.
What Was Learned / What I Could Have Been Done Better
- Patience. Because the market was trading sideways and my call wasn’t generating any money, I panic sold like a fool thinking this call was doomed. It turns out that last week when Accenture was trading at 155, these same calls were selling at $535 — I would have made a $145 profit — if I had had patience. However, at the same time, this could also be dangerous thinking, and I would end up in a place like I did with my Facebook call, which went 100% against me and retained nearly no value.
Any grammar errors, math errors, conceptual errors? Let me know!