This is just a quick follow-up to my last post about making a 50% annual return. Remember, that number was assuming 80% of our trades are successful. Since the largest factor determining portfolio return is that percentage of successful trades, I thought it would be more interesting to see a graph showing this relationship, based on the same formulae from my previous post:
You can see we only need about 60% of our trades to be successful in order to break even, assuming we follow a strict exit strategy on bad trades. If 100% of our trades are successful (which is definitely attainable), we can make almost 120% in a year! And these numbers are actually a little conservative, since the formula assumes most of the trades are held to expiration (the scenario "c" example in the previous post), which in reality should almost never occur.
I'm coming up on the 4 month mark of my option selling adventure. In a couple of weeks I hope to post my 4-month portfolio return, reflect on the trades I've made, and talk about my future plans.
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