Sunday, December 30, 2007

Double or triple your money in one year!

Assume you have had your own option investment strategy already. If not, please read this post and create one before you invest.

As you may have known already, the success of option investment depends on five parameters (If you do not know the five parameters, please read my post "Investment success, the ultimate formula" here). To double your money in one year, your quarterly return need to be at least 18%. To triple your money in one year, your quarterly return need to be 31%.

Based on the formula discussed in the post "Investment success, the ultimate formula", I have conducted a scenario analysis. Here is the result.

So you will more than double your money if

  • you stick to 5% investment rule,

  • have a winning percentage of 70%,

  • trade 20 times every quarter,

  • the average return of your winning trades is 60%,

  • and the return of your losing trades is -60%.

And you will almost triple your money if you increase the average return of your winning trades to 70%.

The annual return depends largely on your winning percentage, the average return of your winning and losing trades. Next, I will discuss the steps I use to identify winning trades.

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