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After starting The Trading Pro System home study course in mid March and going through all the video tutorials (there was quite a lot!) I started up an options paper trading account with Think or Swim early this month (April 2009).

It is now about 2 weeks since I put on my first paper trade in some index options.  I also put some positions on last week.  These particular options expire May 16th and every day I hold my options their profitability value increases.

I have gotten into the habit these last 2 weeks of checking my positions soon after I wake up.  Since I am in Pacific time, the markets have already been open for a few hours.  Although the type of trading I am engaging in is short-term (ie. holding positions and closing them out in less than a month), the time of day I enter my entrance or exit in a position doesn’t matter because I am trading via the Trading Pro System strategy, which bases decisions of trading on overall price fluctuations of the underlying stock or index you are trading over time.

I’ve already practiced adjusting one of my positions (EEM) because it had moved very close to my upper break even point.  I lost about $30 on that trade, but my new position via the adjustment if closed near the expiration date of that option will bring in a profit potential of up to ~ $250.

So the choice is:

1) potentially have a maximum loss of ~ $840 in the original position which would have brought in a potential profit around ~ $360 (43% gain) or

2) close the position out, lose only $30, readjust the position and potentially gain $250, which is a ~63% gain on a $380 investment?

I chose the latter and just recently reviewed where my previous position would have been had I kept it; it is currently at a loss of -$60.  My adjusted position is at a profit of $60…but since I lost $30 closing out the other position, I am really only up $30 in that position.

The longer I hold the option closer to expiration, the profit potential of this position will increase. If I hold this EEM position for another 2 weeks and the price of it generally stays where it currently is at around $27, give or take $1.50 up or down, my profit potential will be anywhere from $95 to $115 if I were to close it out in 2 weeks.  If I hold my position for 3 weeks  the profit potential increase to anywhere from $143-$175 within the same underlying $27 price range I mentioned above.

In total, I am holding 4 positions in my paper trading account and have invested about $1800 for a potential profit of around $1000(56% potential ROI) if my positions are held until the option’ expiration date.  I will most likely close them out just before they expire and hope to capture at least 75% of the potential maximum profit amount.

I’ll let you know my progress later.