2019 has truly emphasized in my mind the importance of implied volatility and trading naked options. Higher premium levels allow for much wider spreads, commissions are lower, profits come faster, defense is easier, and break-even frequency rises.
I've been saving my money this year to boost my account size and hopefully open up much more opportunities in 2020. This might be through trading products beyond ETFs, perhaps participating in such as or tackling slightly more expensive underlyings. Based on the numbers from the previous pages, I see a few generic ways I could potentially increase profitability:
Increase my average profit size
Reduce my average loss size
Increase my number trades
Next year, I'd like to bring my average profit and loss sizes a little closer together – ideally by bringing profit size up, and reducing the size of my average loss. I think this year, partially due to the nature of trading in low volatility, I risked a little too much for too little gain. While this may have boosted my probability of success, it also lowered my ROC. I think taking a bit more risk from a probabilistic standpoint could be a good next step for me. Additionally, increasing my number of occurrences might also help me boost profitability as long as my statistical odds prove reliable. Expanding my reach into other asset classes and a more volatile market would serve this goal well.
Looking Ahead
2019 was incredible for many reasons and I'm grateful to have earned a nice little profit! There's satisfaction in knowing I can rely on my own knowledge and decision-making ability to make money. My goals for next year are to improve my defensive increase my number of trades, branch out to new products, and push my risk tolerance a bit. I hope this little portfolio review has helped you put your own experiences into perspective and set some goals for yourself as well. Thank you for following along. Bring on those roaring 20s!