Jul 30 Options Writing Trades Update

The Nikkei average rose 1.6 percent on Wednesday, this after Wall Street rallied on Tuesday, lifted by a drop in oil prices, several better-than-expected quarterly earnings reports, an increase in consumer confidence, and speculation that the latest capital raise from a major financial firm is a sign that the worst is over.

Jul 29 Options Writing Trades Update

The Nikkei average fell 1.5 percent on Tuesday, led lower by financial shares after concerns about more credit and housing market turmoil battered their counterparts on Wall Street. I added the N225 Oct 9750 Put Options for 20 pts to the positions.

Jul 28 Options Writing Trades Update

The benchmark Nikkei ended up 19.02 points at 13,353.78, after rising as high as 13,468.94. The Nikkei gave up much of its earlier gains as investors remained cautious before more earnings reports due in both the United States and Japan and a raft of important economic data including the U.S. payrolls report. On days like this when the market is directionless, you can find that both the premiums on the calls & put options can decay concurrently...which works for options writing.

Options Writing Risk Management

1) Risk management begins not after you enter your positions but before you enter any positions
- Sell far out of the money options. Our objective is not to pick the winners but to avoid the loser. This fundamental difference in thinking is key to a successful trading "career" for the long haul.

2) Plan the trade & trade the plan
Set your mental stop loss limit at (example: 2X or 3X the premium value sold for) & execute it when reached. Period. This value is not fixed & can be adjusted depending on the individual market. This is speaking from experience. I have the battle wounds to show for. Instead of taking a small loss, I have had months of earnings wiped out for waiting too long to cut loss on not 1 but 2 occasions in 2006(N225) & 2007(ER2)....I am a slow learner.

3) Do a credit spread instead of naked options writing
For the more conservative trader, use certain percentage of your proceeds from the short option sales to buy a closer to the money option to offset the far out-of-the money short options which can partially offset your loses if the market goes against you.

The Week Ahead

The coming week is packed with earnings reports and several highly influential pieces of economic data, including the advance second quarter GDP report and the July employment report.

Jul 25 Options Writing Trades Update

Japan's Nikkei stock average slid 2.0 percent on Friday after Wall Street lost ground on poor housing data snaps rally on stocks. I picked up some N225 Oct 9750 Puts for 20 pts.

Jul 24 Options Writing Trades Update

The benchmark Nikkei average added 290.38 points to end at 13,603.31, above its 25-day moving average and its highest finish since June 26. The N225 Oct 15500 Call Options was last done at 40 pts & went as high as 50 pts. This is close to my stop loss point. I will have to make a few adjustments to the positions when it hits the trigger.

Jul 23 Options Writing Trades Update

The benchmark Nikkei ended up 127.97 points at 13,312.93 after rising as high as 13,388.63 at one point. I picked up additional N225 Oct 15500 Call options for 35 pts.

Jul 22 Options Writing Trades Update

Wall Street posted a slight loss near the unchanged mark on Monday. The Nikkei on the other hand climbed a whopping 3% percent on Tuesday, with Banking stocks up after a string of U.S. bank results that beat forecasts, providing some reassurance to the market. I got filled on additional N225 Oct 9500 Put options for 30 pts & the Oct 15500 Call Options for 25-30 pts.

Trading Income Meter

Today, a friend ask me if I am trading full time. I am not at the moment. I am still gainfully employed & enjoying every moment of it because I learn new things everyday by interacting with people. However, this got me to take stock of where I am now in terms of my trading income Vs my employment income. My monthly trading income now averages 60% of my employment income & the next intermediate goal is to achieve 100%. When I reach that stage, it will bring me another step closer to my financial objectives & I will have more options in terms of what I want to do. Author of the best selling book "Secrets of the Millionaire Mind", T Harv Eker said "Your income is directly proportional to the extend of your comfort zone". The bigger it is, the more wealth you can handle. I am building up my comfort zone to handle more. When you can handle more, life gives you more.

The Week Ahead

The peak of second quarter earnings reporting season hits in the week ahead, and with limited economic data to digest, market participants will be focused on the various earnings beats and misses.
A total of nine Dow components will report, including 3M (MMM), AT&T (T), Boeing (BA), Bank of America (BAC), Caterpillar (CAT), DuPont (DD), Pfizer (PFE), McDonald's (MCD) and Merck (MRK).

Jul 18 Options Writing Trades Update

Japan's Nikkei stock average slipped 0.7 percent on Friday, marking its sixth straight week of falls. In the small window of opportunity during the early part of the day session when the index was still up from previous close, I wrote additional N225 Oct 15500 call options for 25 pts. Subsequently, as the index trends south to show its true bearish nature, I added limited N225 Oct 9500 put options for 35 pts.

Jul 17 Options Writing Trades Update

The benchmark Nikkei gained 127.15 points to 12,887.95 for its biggest one-day percentage gain since 1 month ago, but trade was thin as the market waited for more U.S. bank results later this week, including Citigroup on Friday. I wrote the N225 Oct 15500 Call options for 20 pts. I am eyeing the N225 Oct 9500 & 9750 Puts to add to Oct's positions on volatility.

Definition of Financial Freedom

Everyone has the right to pursue his or her financial dreams. To turn those dreams into reality, we must identify precisely what they are. Following are five levels of financial well being that are possible to attain. Use this list to clarify which dreams are most important for you to achieve in your lifetime.

1) Financial Protection
This is the minimum and first financial goal for everyone. Its purposes is to be absolutely certain that you and your family are protected no matter what short or long term challenge may befall you or the economy. You have accomplished financial protection for yourself and your family when 3 goals have been met:

i) You have accumulated enough liquid assets to cover basic living expenses for 3-6 months
ii) You have begun a begun a private pension fund
iii) You have obtain insurance coverage for death, critical illness, permanent disability, hospitalisation or survivor needs to ensure that no matter what happen, you and your family would be taken care of.

2) Financial Security
You have achieved financial security when, through various investments, you 've accumulated a critical mass of capital that invested in a secure environment at an annual 8%* annual rate of return provides you with enough cash to meet the following six needs forever without having to work again unless you choose to:
i) Monthly mortgage payment
ii) Monthly food expenses for you & the family every month
iii) Pay for all the gas, electric and utilities
iv) Pay for your transportantion & communications needs
v) Pay for all your insurance premiums
vi) Pay for all applicable taxes, eg: property tax

3) Financial Vitality
You have achieved financial vitality when, through various investments, you 've accumulated a critical mass of capital that invested in a secure environment at an annual 8%* annual rate of return provides you with enough cash to meet the 6 goal of financial security, plus the following 4 goal, without having to work again unless you choose to.
i) The ability to provide, substantially or completely for your children's education
ii) The continued funding for your pension plan to enable you to build even greater financial strength for the future
iii) Providing for basic entertainment needs (at least 50% of what you enjoy now)
iv) The purchase of new clothing, or one or two reasonable "luxury" items

4) Financial Independence
You have achieved financial independence when through various investments, you 've accumulated a critical mass of capital that invested in a secure environment at an annual 8%* annual rate of return provides you with enough cash to live the exact same quantity of life you have today (accounting for inflation), without have to work again for the rest of your life. Financial independence is achieved when your investments income produce an income equal to your "work" income. If you earn $100,000 a year & invest $10,000, then the number you would actually need to be financially independent is $90,000.

5) Financial Freedom
You have achieved financial freedom when you have enough critical mass to provide sufficient income for you to live the lifestyle you desired (accounting for inflation) without ever having to work again for the rest of your life.

* One may substitue whatever rate of return one feels comfortable to obtain consistently

Jul 11 Options Writing Trades Update

The Nikkei share average edged down 0.2 percent on Friday. Before ending lower, the market had climbed in the afternoon on a New York Times report that the U.S. government may place Fannie Mae and/or Freddie Mac under conservatorship if problems at the government-sponsored entities worsen. But caution is in the air as U.S banks will be announcing earnings next week. As such, there may be more opportunity next week for options writing on volatility. I am looking at the N225 Sep 9500 Puts & the Oct 16000 Calls. Meanwhile, the N225 Jul options positions expires worthless today to close out another successful month.

Key To Financial Abundance

I came across this simple formula to achieve financial abundance. It may look simple but you would agree too that there is alot of truth in it. You cannot achieve financial abundance unless you learn and consistently apply this simple formula:

"Spend less than you earn, and invest the
difference. Then re-invest your returns for
compounded growth until you reach a
critical mass of investment capital that
creates the annual income you desire for life"

This formula will ensure that there will come a day when you never have to work another day of your life and that if you do work, it’s only because you want to!

Benefits of Financial Planning

At the heart of the financial planning process is the aim to achieve one's financial goals, needs & priorities. The contingencies we may encounter or need to overcome as we move through life can be summarised by the acronym LIBERTY.

L - Liquidity
Avoid the liquidity trap; lack of liquidity or the inability to convert assests into cash quickly and without losses often leads to financial losses. The extent of the loss is often directly related to the urgency of the sale. Hense a "fire" sale may burn up profits or even capital.

I - Inflation Protection
Like the magic of compound interest, inflation can also cause a dent in our plan and eat into our limited resources, if left unnoticed.

B - Bad Patch
Be prepared for rainy days by establishing a cash reserve that can last for three to six months, to be tapped in the event of unplanned unemployment, short-term illness or disability

E- Estate
Preserve the value of your assets and business interest. Also, make sure your wishes with regard to the transfer of your assets are carried out when you pass on. One should also avoid unnecessary delays and cost in estate settlement as this may cause undue distress to family and/or friends

R- Resources
While spending for today is important, saving for tommorrow is also essential, especially to cater to long term situations such as retirement, critical illness, permanent disability, or survivor needs. One should build up capital in order to be able to take advantage of the opportunities that could knock on one's door, such as setting up a business

T- Taxes
Inadequate tax planning, especially for high income or high net worth clients, often reduces the clients' savings for capital accumulation

Y - Yield
Everybody make money but fewer save it wisely. Even fewer know how to invest what they have saved and make the money work for them. At some level of personal security, your investments must generate enough growth to keep your after-tax assets at least on par with inflation. The financial planning process heightens the clients awareness to manage money wisely, making it work harder through sound financial strategies to achieve his goals.

Jul 10 Options Writing Trades Update

The benchmark Nikkei added 15.08 points Thursday to end at 13,067.21 despite the major sell off on Wall Street Wednesday. I added the N225 Sep 9500 Put options for 20 pts to the positions. The N225 Oct 16000 Call Option remains attractive & I am looking to add more to the positions on volatilty for Oct's income set up.

Jul 9 Options Writing Trades Update

Wall Street rebounded Tuesday following a late session rally as financial stocks soared and crude prices plummeted. The Nikkei stock average pared much of its earlier gains to end up 0.2 percent on Wednesday after a report that Iran had test-fired missiles, raising fears about a jump in oil prices on heightened tensions in the region. The volatility does provide some opportunity to write options here. The N225 Sep 9750 Puts & the Oct 16000 Calls are still attractive.

Jul 8 Options Writing Trades Update

The Nikkei stock average slid 2.4 percent on Tuesday to a two-month low just a day after the benchmark snapped a 12-day losing streak on Monday, in which it lost 8.4 percent and marked its longest losing run since a 15-day stretch in 1954. I wrote limited N225 Oct 16000 Call options for 20 pts.

Jul 7 Options Writing Trades Update

Alas, the Nikkei stock average climbed 0.9 percent on Monday on a softer yen and gains in other Asian markets, breaking its longest losing streak in more than half a century. I wrote the N225 Oct 16500 Calls for 15 pts. With this thin volume, the market can easily make a quick upward move with only some investors unwinding their short positions. According to some analysts, there is no compelling reason in terms of fundamentals to buy stocks now. The market bias is still one of sluggish/bearish to sideways movement, but this is just my view.

Jul 4 Options Writing Trades Update

The benchmark Nikkei finished down 27.5 points at 13,237.53, heading for its 12th straight day of losses, the longest since 1954. No end in sight still. One has to stay alert as Japanese stocks couldn't avoid being sharply hit if a spiral of interest rate hikes in Europe, the expansion of difference in interest rates, a weaker dollar, high oil prices and weak stock prices emerges.

Jul 3 Options Writing Trades Update

Japan's Nikkei stock index slipped 0.94 percent on Thursday with no end in sight, an 11th straight day of losses, the longest losing streak since 1954 on growing economic uncertainty after U.S. stocks tumbled and the Dow sank into a bear market. We are literally staring at history in the making now.....

Jul 2 Options Writing Trades Update

The Nikkei share average fell further by 1.3 percent on Wednesday to set its longest losing streak in more than 40 years. I wrote limited N225 Sep 9750 Put options for 35 pts.

Jul 1 Options Writing Trades Update

The benchmark Nikkei average fell 18.18 points to 13,463.20. It fell for a ninth straight day, its longest losing streak since September 2004. During extended trading, the N225 Sep futures fell further signalling more pressures ahead. The US futures are pointing to sharp drops on the open tonight as we speak. Meanwhile, the FTSE is trading in severe negative territory. With higher oil prices, & a firmer yen, its not unexpected that there will be difficult times ahead for the Japanese market.