Hello all, I have been learning how to trade options for well over 15 yrs or so, but I also really stink at understanding numbers. That is to say, accounting is a complete mystery to me.
All the examples that show up on google are super simplistic and completely no help in my situation. So, I keep muddling through with my slight excel skills to try to see how my investments are faring.
This part I get, sold an option the premium is profit. I also understand if I sold an option, but had to buy back to avoid assignment, then I have profit minus the cost to buy back. (Could be profit, could be loss)
The issue gets really muddy when I also need to account for assignments in there. So I get assigned a PUT, now I have a cost adjusted share price (price - put premium). Easy. Then later I get assigned a CALL, so now I have cost adjusted share price + call premium +/- assigned price.
Then you track that for a year or so (yes, this spreadsheet is only about a year old) and you find out you are losing track of what the total gains are overall.
How do you all track these numbers? Google just tells me to subtract the premium from price, but that doesnât account for any assignments where the underlying stock price has changed. Then multiply that by a number of times over a year, I cannot work out the calculation here.
Anyone got simple English that could walk me through this? Did I explain the issue clearly?
Oh, and I am trying to do this in a spreadsheet so that I am not hand calculating all the time. That is probably important info, I can struggle through the math each time, but Iâm trying to do this with Excel calculations.
Need to account for all those moves over timeâŚand it may be impossible, but maybe the simple English words might help me figure out how to set up the calculation.
Why are you tracking? When you buy a stock, through put assigned, the cost basis already shows the strike price - put premium. So when you sell the stock through call, same, the cost basis shows strike price + call premium.
You can track for other purposes, but there is no need. Which broker you are using?
I understand what you are asking because I canât figure out what is going on with selling a put when I try to study it online. I have calls down however. Based on Kingran post above, I think I understand the best that I ever have. Thanks King. As far as excel spreadsheets, canât help you there - sorryâŚdoc
So, yes in that simple one to one then the brokerage will show me that I made/lost money on that. There are a number of ways this breaks downâŚ
I got shares through a put, then I had a number of calls expire worthless on those shares, then eventually a call is assignedâŚwhat is my gain/loss?
I have a number of put expire until one hits, now I have shares but the cost adjustment is only for the last put, not all the premiums I have earned before thatâŚwhat is my gain/loss?
I have a put assigned, then I have a number of calls and additional puts expire worthless. The adjusted price is only for the assigned put, not for the other trasactionsâŚBUTâŚeventually I get a call assigned that is actually a stock price âlossâ butâŚhow do I know how bad a loss based on the additional options?
There are other examples from the options I am running but that is the problem with simple answersâŚthey donât apply to real world, unless I am missing something super basic.
Every expired call is a separate transaction, and they are short-term gains. So when you sell a share that is âcalled awayâ that you have held for more than a year then it is long-term gain, otherwise it is short-term gain.
Now, you can do math on your excel sheet many different ways, but from tax purpose, you cannot combine all the expired calls into the final sale, and convert your short-term gains to long-term gains.
Yes I use excel sheet to track specific individual trades, that gets rotated over time, but that is different from your taxable gain/ loss.
OK here is an example of how I track⌠on the column where I highlighted in yellow, I add any gains, and losses. This is not very useful to track the âreal-timeâ profit and loss, because it shows the position is held to expiry and at that time what the profit and loss assuming current price.
Separately, I have mostly moved on from this. You should focus on your entire portfolio performance and not waste time on tracking individual stock/ trade profit and loss. Instead use that time for research. Also, you donât have to make money on every trade, or you have to make it back on the stock that you lost.
So, now, I focus mostly on portfolio performance, and overall performance (because I have multiple accounts), and overall short-term and long-term.
So, the issue for me is that I need to know if what I am doing is working. Is it worth the effort to be this focused on options. I have a number of retirement accounts; this is the one I actively manage. It is my hobby/obsession, not for everyone but figure Iâve been managing this bit of money for well over 20 yrs now, so not like itâs bothering me.
Just telling people not to study something does them a disservice and also can miss some of the background on why.
You are misreading what I said. Focus on the portfolio performance, rather than individual positions. Because that kind of myopic focus is actually sub-optimal. Again,
You have fixed capital, fixed amount of time, how you want to spend is up to you. You asked for opinions, and I shared my thoughts⌠thoughts/ opinions that were formed from years of trading. Whether you like it or not, or whether you follow it or not is up to you. It makes no difference to me.
The whole is the sum of the parts. What @Kingram is saying is donât sweat individual trades. That does not mean donât evaluate your process which, I think, is what you are after.
I spent a lot of time (years) developing better ways to pick covered calls to sell. It started out with a very simple Excel spreadsheet, it grew to more complex Excel spreadsheets which are great but tedious and error prone. To ditch the spreadsheets I created a Covered Call Selector web app. It wasnât about checking results (I still have problems with that) but about finding the best options to trade. With each iteration I amazed myself by how much good analysis improved yield but it did not help with picking the right stocks, that came later. Recently I added a Roll Selector that allows me to sell calls on LTBH stocks which are typically out of bounds for covered call selling.
