This week I reviewed Cabot Options Trader’s performance in 2022, and I’m pleased to report that while not every trade was a winner, there were many bright spots in a terrible market. Let’s review my best and worst options trades of 2022.
First let’s start with the trades that worked well last year, as I’m generally a positive person:
My Best Options Trades of 2022
Most importantly, I did not push a ton of trades for Cabot Options Traders last year. While it is NOT sexy to sit on the sidelines, and I’m sure some subscribers wanted more action, there is no question that being patient, and waiting for the best set-ups, was the best trade in 2022.
However, when we did pull the trigger on a position, there were some nice wins. For example …
In late November, Cabot Options Traders bought Las Vegas Sands (LVS) calls following strong stock performance and a pick-up in bullish option positioning. This trade has worked well as we sold a piece of our calls for a 93% gain this week.
Another nice winner came in July, as my options scanner picked up on HUGE call buying in Starbucks (SBUX), which we added to the portfolio. I’m happy to report this position will be closed for a profit of more than 200% next week.
CF Industries (CF) is a stock I rarely paid attention to in the past, however, call buying activity went crazy, just before the start of the Russia/Ukraine war, and Cabot Options Traders jumped into a bullish position. While I didn’t feel good about profiting from others’ misery, a couple months later we closed our trade for a profit of 150%.
Fortunately, we owned S&P 500 (SPY) puts twice last year and reaped solid profits when the market fell. In hindsight, I should have owned more downside plays, but such is trading.
Finally, and though there were other wins I could write up, I was most happy getting involved with the commodity sector when call buying got hot earlier this year. We bought a Freeport McMoRan (FCX) position and closed the trade for a profit of 115%.
Ok, enough patting myself on the back … let’s learn from my mistakes:
Options Lessons Learned in 2022
I bought Google (GOOGL) calls in September as the stock had stabilized, and call buying activity was picking up steam. This trade was horribly timed as the market, led by mega-cap growth stocks, completely fell apart in the fourth quarter. My lesson learned from this trade is the market has to be in gear in order for a high-beta stock like GOOGL to work.
And taking that a step further, if the market then falls apart, I have to cut bait on the trade faster!
Like most traders, I didn’t see the big growth stock shakeout coming, which is fine … however, what I screwed up was not having the conviction to short those stocks even after they fell.
For example, my options scanner picked up on big Apple (AAPL) put buying in late 2022, I wrote it up for Cabot Options Traders, and then didn’t short the stock via a bearish position.
This was a mistake as AAPL finally succumbed to the selling pressure, and had I bought puts, the portfolio would have had another big win.
Stepping back, while there were many mistakes made in 2022, I am pleased that Cabot Options Traders had a decent year, and I am growing increasingly confident that 2023 could be a big year for options traders.
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