Are you ready for 1Q earnings?
Each quarter publicly traded businesses post their earnings for the quarter. We are coming up on the end of first quarter of 2014. It has been a challenging quarter. The craziness in Ukraine caused some uncertainty. The colder than normal weather is being sighted as a reason some companies will not have earnings as good as expected 1Q14. There were some emerging markets concerns and a new leader at the Fed also.
In the end, there were no systemic problems that caused the market to turn long term bearish.
How is your trading business doing? As I and others have written, it is important to treat your trading as a business. Are you ready for YOUR 1Q14 earnings? If you had to produce an earnings report could you? If you had to have an earnings conference, call what would you say?
I work three jobs right now. Writing this blog is part of one of them. I have a day job that will end way sooner than my wife would like. The management of my portfolio is the only permanent job I have. My day job is based on a project that will end. Once that project ends, my day job ends. It has been nice that the day job went on much longer than expected since it has allowed me to grow my portfolio, which makes the job of managing my portfolio much easier. However, still the day job will end so I have to make “payroll” each month whether I need the money right now or not. That is a requirement that I have for me to be able to retire when my day job ends. If I cannot make “payroll” each month then I will need to find a new day job when this one ends.
My home, life expenses, and charitable contributions are the fixed overhead for my trading business. My variable expenses are things like entertainment and a luxury items. When I retire, I’d still like to have some luxury items and entertainment. So all those things go into my budget. With that budget, I determine what my returns need to be from my portfolio each month.
With my budget as the goal, I develop my trading plan. I go through all of the equites I trade and the trades that I use with them. I look at the returns and the probability for achieving those returns. I put them all together into a trading plan that beats my goals. That way if some of my trades do not meet their goals, my other trades have a chance to make the income I need for the month.
Earnings are every quarter. That means if I have a bad month, I can make it up before the quarterly earnings. I’ve been doing this for six years and each year I get better at this job. I keep looking for new ways to use options to maximize my returns. I use trades that I had not even considered three years ago. With each trade, I evaluate the market and how the trade is working. I look at how my entire group of trades is working. I typically have multiple trades on the same equity. Each trade works a little differently, but they all compliment each other. Each quarter I review how each trade is working. I also look at what I expect of my equities for the coming quarter. I use the best trades for the coming quarter. I also determine how I want to use the additional money I have earned that quarter.
I like the idea that business breaks down to people, process and product. Well, I am the only person, so that leaves process and product. My trading plan is my process, and the money I make is the product. That leaves my ability to develop a great trading plan. Each quarter I review my plan and make the adjustments that seem prudent. I look at other equities that might produce better than the ones on my present watch list. I have dropped equities based on my performance with them. If making money is not easy with a certain equity I drop it and find one that is.
I have a HUGE edge, make that two. I have a community with OptionsANIMAL that helps me. They give me trading ideas and keep me sharp. They make me test every belief I have. They gave me the idea for my favorite trade and led me to the trades I use the most. I also LOVE what I do. Fortunately, I love all three of my jobs. I am not crazy about the hours, but I do love what I do. The people are great and the jobs are challenging. Teaching with OA is very rewarding. The thing I like the most with each of my jobs is helping people. At the day job, I help people succeed with the process. At OA, I help people succeed with trading. With my portfolio managment job, I help people with the money I make. Never forget to give back. It is very rewarding.
So how is your 1Q14 earnings announcement coming? Review your quarter and see where you did well, where you could improve and where you should just stop. Work on your strengths and only work on your weaknesses if they are a requirement to make money.
Good trading,
Ken Bailey
OptionsANIMAL Instructor
