Greenbacks, bucks, clams, shekels, dinero, moolah. Whatever you call it, the overriding opinion in society is, “More is not enough.”
So how much CAN you make trading options? The one, real, true answer is…there is no definitive answer.
I know how much I can make trading a certain system but your results may be different. Regardless, take a good look at the question and ask yourself if it’s really the one you should be asking. Shouldn’t you actually be asking, “What trade meets my goals?”
Before I started mentoring with John, I was trading a successful RUT butterfly strategy. Although I was mostly happy with it, I wasn’t completely satisfied and didn’t feel comfortable scaling up. When I met with John for the first time, before we even went into any details about my current trade plan he asked me how much I WANTED to make.
How much I WANTED to make. This made sense to me because my goal isn’t to make as much money as possible in the shortest amount of time possible. (That’s fine if it’s your goal; it’s just not mine.) Instead, I have a fairly simple goal for my trading account – triple it every three years while not drawing down more than 50% in a given year.
So with that in mind, the next question became “Which trading strategy would meet my goal?”
Most likely my current butterfly could be based upon back-testing and my several years of live results, but it needed some tweaking. I started by analyzing and refining a myriad of my existing trading rules…then looked more deeply at the M3 for comparison. Know what I found? I found that I was gradually working my way toward the Exact. Same. Guidelines.
So, genius me, I reached a conclusion: Why reinvent the wheel?
A key advantage to the M3 is that it has MANY years of back-testing and live trading results, so I was more confident in the expected returns. Upon reviewing these past returns, I was actually rather astonished to find that trading the M3 would allow me to accomplish my goal. No need to try to fix my original butterfly trade or move on to more complicated or riskier trades; just manage my monthly M3 and meet my financial options trading goal. Yay!
Because of the availability of historical data on the M3, ROCK, and Bearish Butterfly, it’s easy enough to determine if they will meet YOUR goals. You can easily find the best and worst years, as well as the overall average. Of course, “past performance doesn’t guarantee future results” and your results may vary (quite) widely from the standard guideline trades based on your personal skill, discipline, and dedication.
Still, before you even start researching trades, start with your own goals. What do you WANT to make per year? How much drawdown are you willing to tolerate? By answering those two questions, you may find that some strategies don’t meet your goals so there’s no reason to pursue them. Hopefully, you’ll also find some that do.
And with that, you’ll have your very own answer to “How much money can YOU make trading options?”.
Written and contributed by Cynthia Sarver, Successful Options Trader of the Month