Sunday, January 3, 2010

Best and Worst Trades of 2009 Part II

While my first "Best and Worst Trades of 2009" post brought me back to some of the darker days of this year, today's post allows me the opportunity to focus on a few of my better trades of 09. Though I've made plenty of decisions that afterwards often cause me to question my sanity, I have been fortunate enough to get a few things right. While June was probably my best month from a P/L standpoint, I'd say December was my best month based on my market forecast and execution. I seemed to have had the Midas touch there for awhile. My success in December was probably due to the fact that a variety of factors combined to make last month a veritable boon for volatility sellers (which defines myself more times than not). What factors were those exactly? My top two would be seasonality and volume. Over the Christmas stretch we have more holidays usually resulting in a dip in implied volatility as options seek to price in less trading days than normal. Volume also dies down to pathetic levels increasing the odds the market remains in snooze mode. So as with any instance where options are ostensibly overpriced, I pick a few choice securities and start selling volatility. If I have a directional bias, I'll opt to sell either puts or calls (or spreads); if I don't have a directional bias, I may opt to sell both. Following is a list of some of my best positions last month.

USO Jan 37 puts
GLD Jan 102 puts
RUT Jan 550-540 put spread
SPY 117-122, 102-97 Jan Iron Condor

I've taken profits on all but the call spreads on the SPY.

Today's post wraps up my 2009 year end review. Let's all have a profitable 2010!

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