October Results

When you are rigid and unchanging, you are lifeless. When you are flexible, you are alive.

Flexible is the theme word of this post. And flexibility is probably what helped me eke out a small gain in my portfolio since my last post on September 11th.

That's right, since September 11th (a period of 38 days) my account realized a 1% gain. But this 1% was anything but uneventful.

The iron condor, double diagonal, and butterfly positions entered into for this month quickly turned into losers as the markets continued their northward march. Each position contributed to nearly 5% unique losses to my portfolio.

Rather than adjusting these positions, I straight up closed them out, took the lumps, and focused on calendar spreads to ride the wave. It appeared to be the right decision, as my portfolio roared back to new highs with a 12% gain since exiting the offending positions.

My growing experience with calendar spreads is beginning to convince me to focus on them exclusively. Here's what I like about calendar spreads:

• Defined risk debit spread
• Relatively cheap to put on
• Are commission-advantaged (less options per trade equals less commission cost)
• Easier to manage
• The ability to roll positions offers multiple opportunities to lower risk and increase profitable outcomes.

I'm clearly tinkering with my plan. My goal is always to simplify everything. The simpler the better. In life and in trading.

While the steps to achieve my end results may be changing, the overall premise remains the same: attempt to achieve 5-10% monthly returns in risk-defined income trades with favorable odds that benefit from the passage of time. As long as the market doesn't move too far in any one direction too fast, these trades - as a whole - should profit.

The question I am wrestling with is the degree to which I should be aggressive. I'm tempted to go guns ablazing while my account is still small. This way, if I take a large percentage lump, it won't be a debilitating loss in real dollar terms.

Another thing I've realized, I need to focus on reporting returns in a consistent manner. I've begun to track my equity curve on a daily basis, as well as to maintain a rolling 20-day percentage return (roughly one-month of trading days). Currently, my 20-day rolling return is sitting at 10%. I'd like to keep this line as flat as possible. Stay tuned.