I know it sounds like a gimmick, but it is true, I spend less than 5 hours a week on my trading and have been profitable for a long time through up markets (easy) and down markets (not as easy). I managed to launch Option Salary just a couple months before the pandemic* and this approach has still served me well, remaining profitable and ahead of the market. To be clear, it did not take me 5 hours a week early on. In fact, I’ve spent thousands of hours in study and practice to refine my methods. You will need to work hard as well, of course, but the intent is to save you a Lot of time.
This page is for Silver members only, where I walk through in (excruciating?) detail exactly how I run my trading business so you can set one up for yourself! If you have any questions or need more clarification, simply contact us and we’ll get you an answer and update this guide for everyone else.
Intro Footnotes:
*If you read my personal finance book**, you’ll see that I have a history of choosing the wrong time to enter certain activities (investing, home purchase, trading website, but the real lesson is that no one times the market perfectly and you can work through it).
**OK, the book hasn’t been written yet, but when I do write it, Silver members can have a free copy!
Hour 1 – Sunday – Planning Trades
It has been said that every minute of planning saves 10 minutes in execution (Brian Tracy). I’m not sure on the exact ratio, but planning your trades ahead of time will absolutely save you valuable time during the week. Further it can prevent you from taking emotional trades that often lead to poor results.
When the market is closed and stocks aren’t moving, it is much easier to plan your trade in a calm and rationale manner -making sure the trades you plan to take have an edge, that they are aligned with your trading goals. Saturdays, Sundays, and evenings are all fine times to do this. For me, Sunday works best.
It is Very important to write down your trades with clear guidelines on what you are or are not going to do. This will set you up for success for the rest of the week, as you simply need to execute your plan, not ‘guess’ what to do as the market moves around.
The first thing to do is decide how you will write down all of your trades. There are lots of options and I’ve tried many. I would recommend you try a few different ones and select one that works for you based on where you’ll be placing your trades and what feels natural. Here are a few ideas to get you started and then I’ll walk you through my setup:
- Paper – Good old fashioned paper and pen (or pencil). A big advantage of this approach is you can take it anywhere and easily take notes when you place the trades. You can use loose paper or a notebook of some sort. I used a moleskin notebook for quite some time and still use one to track some of my futures positions and other assorted market related notes.
- Excel/Google Sheets/Spreadsheet – A classic choice for anything involving numbers. With many people having Excel on their computers, this is a natural choice. Google Sheets is completely free and also works on mobile devices. Personally, I find spreadsheets a bit restrictive for tracking what trades I want to put on and use them more for analyzing my results. But, if it works for you, go for it!
- Electronic Notepad – Similar to the paper approach, the advantage is that you’ll have it on your mobile device, quite helpful if you’re trading during lunch at work or on the road.
- Software tool X – There are countless digital organizers, apps, planners, todo lists, etc. that you can select from. If you are already a heavy user of one (Evernote, Trello, Microsoft To-Do or OneNote, etc.) and you store Everything in one of those tools, go ahead and use it. Simply leveraging a tool that you already use will make it more likely that you’ll continue with the weekly planning sessions.
With my current workflow, I use Trello. It is a free tool at https://trello.com (paid options available, I simply leverage the free version). Trello has project “Boards” and lists of “cards” similar to a bulletin board. For those with an agile or Lean background, it is basically a digital Kanban-style application. I’m going to share my setup using this tool, but please remember almost any tool will work as long as you’re capturing enough information for you to make the trade.
Here is a snapshot of part of my Trello Board:
With Trello, you can easily move cards from one list to another, so on trade day after I place a trade in my next Actions list, I move it to “Done”.
Let’s dive deeper. Each Sunday I have a list of “Open Positions” that has all the positions I want to evaluate for the week. I go through them one by one and determine what I want to do. This could be placing a trade, putting a position on hold/watch (earnings week), or simply pushing it out to review in the future since I don’t have a setup I like. Let’s talk about each.
- Placing a trade – Let’s say I’ve decided to do a bullish put spread in Visa (Ticker: V), one of the names on my watch list. I will open my Visa card (I tend to simply use the ticker for the card name as you can see) and add a new checklist item with my trade idea:
In this case, the plan on 7/14 is to sell two put spreads expiring on August 14th, at the 180 and 175 strikes taking in a credit for 0.68. You can use whatever short-hand you prefer as long as you have the necessary information to make the trade. As you’re starting off, I’d suggest a bit more info vs. less. Why are you putting the trade on? What is an acceptable minimum credit or maximum debit for the trade?
One nice thing about Trello is you can store your trades in checklists and also use the description field for any relevant comments. You could put your due diligence information there (bullish long term based on xyz fundamentals, great support at the 190 level, trying to get long more shares to collect a dividend at 50, the ABC indicator says the stock is going to zero, etc.). You can also add images if you prefer to have a snapshot of the stock chart, an article or something else.
2. Placing a trade on a hold list. If there are certain positions I want to monitor during the week, I use a “Hold/Watch” list. One reason would be I want to see how a position performs after earnings or after a major news event, before taking any action. Another is if I have a long gamma trade on (straddle, for example) and want to monitor it to take it off if it hits my profit target. A checklist item may say “Remove half of the straddles if up $250 on the position” or something similar.
3. Deferring a trade. Rather than force a trade in a given name, sometimes it is simply best to do nothing and wait. I then move the card to a future week when I want to revisit it. Another example is if my position expires a couple weeks out and I don’t need to act on it during the week, I can defer it.
That’s what I do each week. Let’s return to the Trello lists I use and talk a bit more about the management.
First, let’s look at a card:
The title of the card is “C” for Citibank. You then see a note icon, which means the description field we discussed has content. The next icon is a check box with two numbers after it. The check box simply means there is a checklist in the note. The first number is the number of completed actions, the second is the total actions. This means I’ve placed 87 Citibank trades and plan to place one more soon! In the overview screenshot above you’ll see some checklists are “green”, that just means all the actions are completed.
Next, let’s talk about the categories I use for lists. Feel free to use what works best for you!
- Next Actions – These are the trades/adjustments I’ll make during hour 2
- Done – After I’ve made the trades, I move them to the Done list
- On Hold/Watch – Positions I want to monitor during the week (earnings, straddles or other positions that may need adjusting). If I make a trade, it goes in the “Done” list.
- Expiring this Week – Very useful for the Friday session, I simply go through these and adjust/close any expiring positions. Once the trade is made, it goes on the “Done” list.
- No Action This Week – I don’t need to do anything with these for the whole week.
- 1 Week out, 2 weeks out, etc. – These tickers I’ve deferred until future weeks
- Old Positions – Names I’m not currently trading, but have in the past and may revisit
- Research – Names that I want to investigate in the future
- Open Positions – This is my “starting” list each week for positions I’ll evaluate.
Let’s talk about how I fill my Open Positions list. This is actually the First thing I do each Sunday, but I saved it for last as the above context is important to understand first. I start with the blank Open Positions list and then move all the cards from the “Done” list. The other source for cards would be from the Old Positions or Research, if I need more trades for the week.
Then I move anything remaining from “On Hold/Watch” or “Expiring this week”. Next, the “No Action This Week” cards are moved over. Then, all of the “1 Week Out” are moved to “No Action This Week”, the “2 Weeks out” cards are moved to “1 Week Out”, and so on. Neat, right? Then I begin processing the “Open Positions” list as described above. Trello has a built in feature to move all cards from one list to another, so this is really pretty quick!
This system has worked well for me and it is quite easy to update on one screen while I have my brokerage application on another. The most important thing to do is to find a system that works for you, that you’re comfortable with and that you will keep using!
Summary – For each trade, capture enough information so you can easily place the trade during hour 2. Symbol, expiration, strike(s), number of contracts, price (and price range if applicable)
Hour 2 – Monday – Placing Trades
If you have done a nice job planning your trades on Sunday, this should be pretty straightforward and often will take a lot less than 1 hour! Simply start at the top of your trade list and place orders based on your plan.
Timing – if you are working full time, I find lunch to be an easy time to work through your trade list. If you have more trades than your lunch break will allow, then you may need to use a morning or afternoon break (if your work schedule allows it). Another thing to consider is that if you have so many trades that you can’t complete them within a 30 (or 60) minute lunch, you may be placing too many trades.
Market Movement – The market will almost always have moved since you planned your trades over the weekend. This is ok. Some of your trades are now more appealing than before, others are less so. For example, if your plan is to sell a weekly put in XYZ and XYZ is down on the day, you may get more premium for that same put! Similarly, if XYZ has rallied, you may now get less.
If there isn’t significant news that changes your assumptions and the trade is better, take it and enjoy!
If the trade is worse, you can either take it, modify it, or simply move to the next trade. Have a plan for each. For example, let’s say our trading plan has us selling a 1 month, 50 strike put in XYZ for 1.00 and XYZ is trading at 55 on Friday’s close. By lunchtime Monday, XYZ is trading at 57.
- 50 strike put is still selling for 0.75 – we take the trade and decide we’ll take a fill anywhere above 0.50
- 50 strike put is selling at 0.25. We still want to get long the name and sell a 55 put for 1.25
- 50 strike put is selling at 0.25 and we don’t want to get long at a higher valuation, we pass on the trade.
As you can see, the more we’ve planned for up front, the easier this will be when we’re taking the trades. I try to have a few “too many” trades available for Monday, knowing that I simply won’t be able to take all of the trades.
Placing Orders – Use limit orders when opening new trades. Always. That way you won’t be unpleasantly surprised with your fill. I recommend placing a limit order near the mid point of the trade and then adjusting until you receive a fill.
For example, we want to sell a 45/50 call spread in XYZ that is trading at the mid point for 0.60. Place the order at 0.60. If it doesn’t fill, you can replace the order at 0.59 and continue to do so until you get your fill Or you are no longer happy with the price. At that point, you can adjust the strikes, or simply move on to the next trade.
Two methods for these adjustments. The first is to simply keep replacing the orders after waiting for a small amount of time. The other approach is to go through All of your trades and then go back and start adjusting. You’ll find that some of them may have already filled as the market continues to move.
Remember to write down your fills vs. your plan, this will make it easier to review your trades later in the week (spoiler alert for Hour 4!).
Closing orders – This one is optional, but if your trading plan has you Always closing certain positions for a certain profit target, you can set up a GTC (Good Till Canceled) order to automatically close your position. Examples would be once you’ve harvested 80% of the premium of a short option or short spread. Or, once a short position is less than a specific amount (0.10, 0.05, etc.).
Hour 3 – Friday – Adjusting Trades
Most options expire on Friday and we want to make sure that we’ve taken care of any trades expiring that day as well as any others that need adjustments. This will often take much less than an hour, so feel free to enjoy the extra time -or- spend a few minutes at lunch each day checking in on your portfolio.
I would recommend starting by looking at all trades that are going to expire. Unexpected or unwanted assignments can ruin a perfectly good week. If there is Anything near the money that expires later in the day, you really need to close it. Exceptions would be covered calls or cash secured puts that you are ok being assigned the shares.
If your trading plan has you regularly performing the same action on a symbol (writing a put weekly, selling a covered call, etc.), feel free to simply put the next trade on after you’ve closed the old one (rolling the trade).
Once you’ve gone through everything that is going to expire, take a look at your other positions and see if they need to be closed or adjusted based on your trading plan. Again, this will often take much less than an hour, so if you want to perform a quick check Tuesday through Thursday, feel free to do so.
Hour 4 – Saturday – Reviewing Trades
Each week, spend some time reviewing your trades and how they performed. If you followed the approach so far, all of the material you need is in your trade log and in your brokerage platform.
Take a look at all the trades you entered this week. Did you follow all of your rules? If not, why not? How were your entries compared to your plan? How did the trades perform in the first week? Any surprises?
Next look at any trades you adjusted. Did you adjust them within your rules? Did you Need to make the adjustments or were you just bored? Were you decreasing risk or increasing it?
Review any trades you closed or that simply expired. What went well? What didn’t? Was it due to the initial trade idea having a flaw? Did you forget about the impact of the greeks or volatility? Or was it simply that the trade entry was solid, but the outcome was not (which does happen!)?
Finally, look for trends in your trades over time. Do you always seem to lose on far OTM call purchases (you aren’t alone on that…)? Maybe stop doing that. Or spend some time digging into what is going wrong (a good use for Hour 5). What IS working well? How can you do more of that? Remember that we’re looking for trends over a significant sample size. Almost any trade can work one time – look for the ones that provide you a good return over time.
What I usually do is look at me “Done” column in Trello as well as any other trades that I closed that week that I wasn’t originally planning to close.
There are software packages out there that will import your trade history and help you slice and dice the data. All of these packages cost money and I’m not ready to recommend one over another.
Note – I often combine this hour with my hour on Sunday. I find that in reviewing a trade, it can spark an idea for a new one. For example, if I am long 100 shares of XYZ and a covered call just expired, I may want to plan a trade for a follow-up covered call to expire next week/month. You can experiment with what works best for you and your schedule. For some, it is Much easier to carve out 1 hour on 2 separate days than have 2 hours of dedicated time. For others, finding a couple of late hours on a Saturday evening when the kids are asleep is optimal. Be flexible and look for a couple hours after the market closes on Friday and before it opens up Monday morning.
Hour 5 – Bonus
Congratulations, you finished a week of trading in less than 5 hours! Probably less than 4. Now what? It depends on where you are in your journey trading options. There is Always something else to do and I would recommend you set aside time each week to continue to learn, grow, and improve. Just putting in an extra hour a week will start to compound over time and contribute to your profitability. Here are some the things I have done and continue to do:
Podcasts. I love podcasts. I’ve been listening to them for years and they are a great way to learn more about finance, investing, options, self improvement, or really any topic you are interested in. As a bonus, you can listen while doing something else. Try putting on an educational podcast during your commute, while working out at the gym (or at home), while doing yard work or during a lunch break.
Books. There are numerous options and investing books – some are terrific, others not so much. For studying options, I recommend one that is very “textbook-like”. This will take some time to work through and study, but you’ll improve significantly by understanding the content:
- Option Volatility & Pricing by Sheldon Natenberg. I have the first edition and it stays on my shelf as a good reference. At least one Amazon review complained about some errors in the 2nd edition, which I can’t confirm nor deny. Reach out if you have questions on the book’s content!
For general investing books, find topics that interest you – personal finance, biographies of famous investors, technical analysis, value investing, etc. I have read books of all types over the years and at this point, I enjoy books around behavioral finance and biographies of investors/traders. Also, pretty much all of Michael Lewis’s books around the financial industry are fun reads. For behavioral finance (and really thinking in general), I strongly recommend:
- Thinking, Fast and Slow by Daniel Kahneman. This book is top notch. While not 100% related to finance, there are clear financial examples and it will help any one understand more about why they often make mistakes in trading and investing or in life!
Review more trades – Dig even deeper into your past trades. Are there patterns (good or bad)? What types of trades do you have the most success with? Why? Are your trade sizes appropriate? Are you risking too much – or too little? Doing deep analysis on your past results will often uncover opportunities for improvement.
Find more trades – I prefer to trade from a subset of symbols – ideally those with good liquidity and tight bid/ask spreads. I also get to know my companies (or ETFs/indices). How do they behave normally? Around earnings? What is their volatility profile? Are there current opportunities with this name that you can take advantage of? Spend some time learning more about a favorite stock or ETF or start scanning and looking for new ones.
Deeply study a topic – Confused on whether you are cheering for more volatility or less on a calendar spread? What is Rho, really, and do I care? Options on VXX are derivatives on the VXX ETN which provides exposure to VIX short term futures which really are calculated using S&P 500 …(ouch!). Pick a topic that confuses you or one that you’ve heard about, but know nothing about. Spend an hour and research as much as you can about it. Find a book or whitepaper. Run a simulation or paper trade. Dig out Excel or Google Sheets and crank through some analysis. You will feel great at the end with a much better appreciation of a topic that you didn’t understand juts 60 minutes prior. A couple of warnings – it may take more than an hour and be careful to use quality sources. When in doubt, reach out!
Explore your software – Most brokers have a wealth of features that you (and I) don’t know about. Spend an hour experimenting with the platform or reading/watching tutorials. You will often find features that will save you time in your future reviews, planning, or executing of trades.
Relax – Tough week in the markets? Take an hour and do something else – go for a walk, read some fiction, watch an episode on Netflix. Vacations, unexpected work emergencies, leaky roofs – there will be times when you can’t dedicate a 5th hour to the markets. That’s ok. Do keep learning, but don’t beat yourself up if you miss an occasional hour. The markets will be there the following week. Oh, and when you have an Amazing week in the markets? Go celebrate, you deserve it!
Help!
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