Today I’m writing to provide a progress report on the ETHS Investors Association and my experience trading options.
I am excited to announce that the ETHS Investors Association has reached 70 members. We began this year with only 8 members, so I am very thrilled that we have become one of the largest clubs at ETHS. We have had speakers such as Tom Sosnoff and Shari Reiches, and in the coming weeks we will be meeting Brad Keywell and visiting the Chicago Board of Trade.
Beginning next week, we will be splitting the club into two sections. We will have a less advanced section for new members to teach the basic stock and options investing as well as personal finance. This group will be headed by Henry Young (Vice President), Zane Kashner (Vice President), Ezra Garfield (Director of Operations). I am confident that they will do an excellent job educating our new members. We also will have a higher level section that will focus on advanced trading. That section will be headed by myself, Sam Robertson (Portfolio Manager) and Mr. Mersch (a former prop trader). All members are welcome to participate in the Capitol Hill Stock Market Game.
I am very optimistic about the future of the ETHS Investors Association. I am continually working to create opportunities for our members.
I started trading options with real money near the beginning of the year. In the past two months, I made a 10% overall portfolio gain trading, and I have paid $140 in commissions. Although I feel I have been quite successful, it has been quite a rocky ride.
On my first trade, I executed an Iron Condor on Facebook right before they had earnings. An Iron Condor is a bet that a stock will stay within a certain range, shown below on the profit vs stock price graph. Mathematically using Bjerksund-Stensland I found that I had a 99.5% probability of profit. I also had a moderately large profit so I executed the trade.
Unfortunately, I did not understand that the formula does not factor in events such as earnings that could create an extraneous movement in the stock. Facebook blew out their earnings and went up 22.5%, but only 10 cents above my upper profit threshold (the highest the stock can be for me to make money). Since I was so close to making a profit, I insisted on not closing the position. That Friday, (the day after earnings and expiration) the stock moved up and down toying with my $62.25 upper threshold. When I finally gave up and tried to take a $100 loss on the trade. Unfortunately, I was not able to close the trade because I was trading a weekly option which had very low liquidity. In the end, I had to go through a short options exercise (I ended up short 300 shares of Facebook which I had to buy back for $18,500 in cash they awarded me. My portfolio ended up getting margin called and I took a $500 loss from the trade.
Even though I did lose a lot of money off that trade, I learned a lot and I won’t be making those mistakes again.
Luckily, my next few trades all went very well, and I quickly paid back the $500 loss. I took multiple option positions in Twitter, Tesla and Apple that all were extremely profitable. You can follow all my trades on MyTrade: http://www.mytrade.com/noahsilv Every day I am learning something new about options, and I will continue to update The Haas Report.