What Does It Take to Make 10% Per Year? (Part 4)

Today the e-mail exchange continues between myself and another trader a few years ago on total annualized returns.

I wrote:

> If your example assumes the total net worth to be $100K such
> that $1500/month would indeed generate 18% per year then what
> happens in a losing month? You seem to gloss over by saying
> “not every trade will work,” but the losing months are a huge
> detail. If you can make 10% in some months then certainly you
> can lose 10-20% in others. Wouldn’t you also probably lose on
> higher capital requirements than you’d win because adjustments
> tend to increase margin requirements? If you adjust and don’t
> give the trade more leeway then it probably wasn’t worth
> adjusting in the first place (e.g. increased gamma risk).
> Those cards are stacked against you so making $1500/month in
> the winning months probably isn’t going to get your 18%.
> Hopefully the rest of the portfolio can help out.
>
> The other thing is that to risk $15K per month, you’re probably
> talking about 8-16 trades if you risk 1-2%/trade. Collar trades
> aren’t going to make you 10% per month so those would have to
> be included elsewhere in the portfolio. Even working full-time,
> it’s hard to manage eight (or 16!) trades per month (plus the
> rest of the portfolio) especially when the market moves fast
> and furious.

I will conclude this blog series in the next post.