Options Trader: October Wrapup

by: Philip Davis

Well we pulled that month out at the end! It was a bumpy ride into options expiration with a 24% loss for the week (damn oil puts!) eating into the 53% we had made in the first half of the month, but the last 10 days were decidedly kinder to us and we close out October in pretty good shape.

While still a far cry from September's 92% average, I must again point out that I did say at the time we should just quit there because it would be very hard to top!

October's final tally was 141 closed positions held an average of 9 days for a 41% average gain -- more in line with a usual month.

Our remaining 36 positions have been open an average of 15 days with a 7% gain. Of course, like some of our closed positions, they include the wrong ends of spreads and several hopeless oil positions that drag down an otherwise decent group.

The closed positions still include the total losses of 4 Morgan Stanley (NYSE:MS) and Goldman Sachs Group Inc. (NYSE:GS) positions that have tormented me since September as well as 10 oil positions that were rolled into December but are recorded here as a loss.

There were 24 doubles including, surprisingly, 5 ExxonMobil Corp. (NYSE:XOM) puts and 3 Valero Energy Corp. (NYSE:VLO) puts -- all from earlier in the month when things still made sense in the oil patch.

All but 8 of our doubles were puts, so I suppose my early month pessimism wasn't entirely unfounded...

Our best non-oil plays were a Phelps Dodge Corp. (PD) put, Molson Coors Brewing Co. (NYSE:TAP) put, General Motors Corp. (NYSE:GM) put, Toyota Motor Corp. (NYSE:TM) call, Gannett Co. Inc. (NYSE:GCI) call, LG Phillips LCD Company Ltd. (NYSE:LPL) call and the last of our Google Inc. (NASDAQ:GOOG) calls.

Our worst plays were oil -- we should have quit while we were so far ahead! Not following the Valero Rule led to virtually every one of these losses and I will try really hard not to try to outsmart it in the future.

I have very few regrets. Unlike September -- where we would have done well to hold on to many of our plays -- October was a choppier month that took profits away as fast as it gave them.

Our 32 regular stock positions returned 12% on an average hold of 26 days with just 13 positions remaining open -- not bad for "an options guy..."

The full spreadsheet will be posted tomorrow at:


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