Sep 23 was the third month this year as well as the whole of my 3 years of trading journey that I did not have any positive cash flow coming in. I also incurred the largest (5 digits) loss for this year (2023) after losing $5.2k and $4.8k earlier this year in Feb and March respectively. If you are keen to find out what happened, do read on for the rest of this article.
At the start of the year, I placed more than S$40k of bearish vertical spreads options contracts with an expiration date in mid-March 2023. The anticipated crash did not come, and I risked all contracts expiring worthless in March. So, as a desperate measure, I rolled the contracts to further expiration dates in June, July, September, and December. That also means that the strike prices have been reduced and only a bigger crash would save these positions from going worthless.
As it turned out, there was no crash in 2023 and the market either went higher or stayed sideways. Thus, all my positions in September expired worthless as Tesla was never close the spread’s strike prices of USD30 and US45, so was Nvidia which was not any close to USD50 and USD55. Thus, all these contracts expired worthless and I lost the capital that I put into these positions at the start of this year (2023).
The total losses for Sept 23 (3 positions in Tesla, SMH and Nvidia) added up to S$20.4k (USD14.9k).
I also decided to write off the losses (2 positions in Tesla & Apple) in Dec 23 as well as I see no way that they could crash by year end. Those positions added another S$7.3k loss to the total, which amounted to about S$27.7k.
I also had 2 singled-legged positions (PUT contracts) in both Tesla and Nvidia, which I invested using a small amount of capital and they both expired worthless.
Adding that few hundred dollars of losses, my total losses realised for Sept 2023 were S$28.16k, which was my largest monthly loss since Dec 2022 (-S$312k).
SOP Trading Strategy
On the other hand, my winning trading strategy (SOP) for this year, couldn’t yield good results in Sept as the share prices fell below my strike prices of my contracts.
My Tesla’s contract strike price was USD260 but on the last trading day of Sept, it closed at USD250.
My Nvidia’s contract strike price was USD475 but on the last trading day of Sept, it closed at USD437.
I had to roll them to lower strike prices in October to have a better chance of these contracts expiring worthless so I can get full premium (as options contract seller).
Concluding Thoughts
While the loss for this month (Sept 23) is huge, it is not totally shocking as I have carried these unrealised losses since the start of the year, where I made a big mistake and had a really bad start to the year. On contrary, it was liberating as I finally let go off the baggage that I carried since the start of the year.
It may seem like deja vu as I said that last year after realising major losses with my failed LEAPS positions and had thought that 2023 would be better, only to stumble again barely a few months into the new year. However, I believe all these lessons learnt (be it in 2022 or 2023), will help me better a better investor and trader in the years to come.
I want to also share this table that summarises my monthly gain and losses in options trading as well as the total loss/ gain since I started this journey in 2021.
Overall, I am still down -56k on capital invested but I believe I will breakeven one day as I continue to learn, refine my trades and improve on my risk management. As shown on the table, there is positive cash flows coming in for 29 out of 32 months of options trading. The reason of the net loss was the major mistakes that wiped out a huge chunk of the gains that come in almost every single month in the last 3 years.
Thus, I have faith that options trading is able to provide a good and secure avenue for sideline/ passive income if we know how to do it properly and manage our risks accordingly.
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