The Secrets of my Success: 1. Set Goals

In this series of articles, I will explore the reasons I attribute to my success as an option's trader. Success means different things for different people, but I like Earl Nightingale's definition: "success is the progressive realization of a worthy goal or ideal". To me, happiness means to be engaged in a productive activity toward the realization of my goals. But I have to confess that there are always times when the doubts about my ability to reach my goals made me very concerned and insecure. It is ironic that instead of drawing from my previous accomplishments in life, I would instead find multiple reasons why I might fail. The truth is that if one stays motivated with the faith and believe that the things we routinely hold in our thoughts, our goals, will come to pass, then indeed they do and success cannot help but turn into reality.

You've heard me say that I used the Elliott wave analysis and buying option's calls in the 90's to create a good nest egg, but my believe that I could make money using puts during the early 2000's turned out more difficult than I thought. But I did believe that there was likely to be an option's strategy that I could use instead of stock positions which could provide me with both leverage and limited risk. In Sept 1999, One of my biggest stock positions, AAPL, fell from $63/share to $28/share overnight. This convinced me that holding stock was too risky, because I could not LIMIT my loss even to 5-10% of my stock position. Any stock can fall 30% or more overnight. With my previous experience using options, I knew that I could bet even on the riskiest of situations, but limit my risk to precisely the cost of my calls. Thus, I thought, there must be a strategy out there that I could use to use instead of stock, to safely use my capital while going about my business of enjoying life.

This was my ultimate goal for years: To put to use the money I had earned over a decade to good use limiting my risk but also exploiting the leverage of options both to the downside and to the upside. By 2000, I had closed most of my positions understanding that the Predictions of Robert Prechter in his book "at the crest of the tidal wave" were about to come true. I begun to trade puts and Elliott wave rapidly giving back 15% of my gains. I understood that I was going no where with that strategy. My understanding of options had to increase. It was only in Sept. 2002, that I gathered the courage to spend thousands of dollars in a series of option's seminars which brought me some basic knowledge I did not have, but my elusive, all inclusive, low risk, high leverage option's strategy was not clear to me. I think it was in late 2005, when I bought the book "Options as a strategic investment" that I found the basics for the strategy that I latter adapted to my own use: the PCCRC.

It should be sufficiently clear with this recollection, that a very specific goal is essential to success. I did not care how long it took, because this strategy should work in any market. I had many breaking even years, because I was not convinced that any of my strategies could work the way I wanted. I tested double butterflies, uneven butterflies, calendars, etc, etc. Although these were quite effective in limiting my risk, they did not serve my other goal: to give me the leverage to maximize my gains. I also tested CRC's (call ratio calendars) and PRC's (put ratio calendars), but even these trades did not properly protect me against those overnight reversals. Take for example AMZN in Oct 26, 2005. I had a very profitable CRC which turned into a loser at the stock fell 17% overnight. You can probably see that in the archives of this blog. That loss was particularly hard, not because of what its impact on my portfolio, but because of what it meant to my plan of finding a system that would be reliable in my hands. The CRC was not "IT".

By early 2006, I started to create PCCRC's and demonstrate them real time in this blog:

http://stockoftheday.blogspot.com/2006/01/real-time-tutorial-create-pccrc.html

I suspected then that my days of search where over. By the end of that year, I had increased my account, for the first time in years, by 30%. But my skills in selecting candidates and managing the traders are only getting better and so are my results. My preparation has finally paid off. And this brings me to the message by Earl Nightingale. Those that look at you with envy would say that you are lucky but says Earl: 'Luck' is preparation meeting opportunity. I also remember Renaissance artist Michelangelo's words: "if people knew how much work it took me to gain mastery, they would not think it was wonderful at all" Not that what I do is wonderful or masterful, but it was hard work, to be sure. Without a doubt if one endeavors to do one's work, success is likely to come unexpected in common hours.

Hold on to those goals, at first they may be nebulous. Make them vivid and specific. Endeavor to acquire the knowledge to bring them about and stay with them with faith.



http://stockoftheday.blogspot.com/2005/10/detailed-count-on-amzn.html