In this post, I will look at the 2022 end-of-year results. In another post I will write next week I will look back on what is my first year of options trading.
After the Christmas long weekend, everybody was still waiting for the traditional rally. It did not happen this year. Although on Thursday, all sectors and many stocks ended in the green, Santa Claus’ rally got canceled this year. On the last trading day of the year, Friday, everything turned red again.
History shows that the market typically (80% of the time) rallies in the week leading up to Christmas through to the New Year, with the S&P 500 facing 62% odds of an uptrend over the period, versus a 53% chance on any given day. In 13 of the past 20 Christmas holiday periods, markets staged a positive return, with the winning days averaging a +1.58% gain.
There really is no one-size-fits-all explanation for this calendar effect. Many have attributed the phenomenon to a wide array of potential reasons spanning market optimism on improved holiday spending, institutional portfolio rebalancing, and “tax-loss harvesting” to switch out of losing investments into potential gainers.
Source: Seeking-Alpha
I prefer short premium strategies so high volatility. But volatility is still relatively low. I need to be able to enter trades in all market conditions.
Historically, implied volatility has outperformed realized implied volatility in the markets. For this reason, we always sell implied volatility to give us a statistical edge in the markets. While I often search for a high IV rank at order entry, the market does not always accommodate me.
I, therefore, will start looking at adding these options strategies that benefit from increases in volatility, as well as more directional strategies to use during low-volatility markets to my playbook:
- Long bull call and bear put vertical spreads
- Ratio spreads
- Long put calendars and call calendars
- Long diagonal spreads
- Long volatility products
In bull(-ish) markets, as the VIX drops, implied volatility tends to be low in equities. Just like I take advantage of reversion to the mean when IV is high, I continue to stay engaged and do the same when it gets to an extreme on the low end. Therefore, in low IV, I will use strategies that benefit from this volatility extreme, expanding to a more normal value.
This doesn’t mean, however, that, in low IV markets, I stop looking for underlyings in the market that have high IV. Premium selling is where the majority of the statistical edge lies.
And as a last note: I am reading what is considered the bible for options traders: Options as Strategic Investment, 5th ed. by Lawrence G. McMillan.
The book is over 1000 pages, and I am now at page 505 readingabout index options.
Table of Contents
- Last Week’s Options Trading
- Opened POSITIONS
- Running and Closed Positions
- Running: Opened on 23 Dec 22: Feb 17 TLT Iron Condor 92/95/111/114 for $77 credit
- Running: Opened on 22 Dec 22: Feb 17 XLU Iron Condor for $76 credit
- Running: Opened on 22 Dec 22: Mar 17 EEM Bull Call 37/39 for $110 debit
- Closed: Opened on 21 Dec 22: QQQ Bull Put Jan 17 287/291 for $104 credit and closed on 27 Dec for $42 debit
- Running: Opened on 19 Dec: XLE Iron Condor Feb 17 73/75/96/98 for a $59 credit
- Closed: QQQ Opened on Dec 12 Iron Condor Jan 20 254/258/306/310 for $132 credit and closed on 29 Dec for $108 debit
- Running: SLV Bull Call Mar 17 20/22.5 for $123 debit
- Running: Opened on 7 November: EWZ Bull Put 16 Dec 26/30 for $102 Credit, Rolled to Mar 17 for Additional $22 Credit
- Closed: Opened 29 Nov: EWZ Iron Condor 20 Jan 25/27/36/38 for $59 credit and closed for $39 debit
- Running: RIOT Short Put Dec 16 5 rolled out to Jan 20 for extra $22 credit
- Running: RIOT Bull Put 20 Jan 2/4 Opened 29 November for $51 credit
- Rolled: AAPL Bull Put 20 Jan 120/125 Opened 23 Dec for $64 Credit, rolled to Feb 17 for additional $33 credit
- Rolled: AMZN Iron Condor 20 Jan 81/83/108/109.75 Opened 28 Nov for $37 Credit (after converting ‘wrong 108/109.75 wing), rolled the 108/109.75 wing to 100/102.5 for $83 and closed it for $13 and rolled out/down at wider spread the 81/83 wing to 75/80 Feb 17 for a $85 credit
- Closed: GDX Bull Put 20 Jan 25/27 Opened 30 Nov for $52 Credit and closed for $21 debit
- Closed 24 Dec: Rolled MRVL Iron Condor 20 Jan 30/33/42/45 Rolled 20 Dec for $81+$33 = $114 Credit and closed for a $81 debit
- Rolled: SHOP Opened on 8 Dec Jan 20 Bull Put 31/33 at a $50 credit and rolled out/down/wider to 30/35 Feb 17 for an extra $56 credit
- Rolled: SHOP Jan 20 Iron Condor 29.5/34/54/58 at a $166 Credit Opened on 20 Dec, rolled the 29.5/34 leg to Feb 17 30/35 for $56 credit and closed the 42/46/5 leg for $15
- Closed: QQQ Feb 17 Bear Call 280/284 on Nov 29 at a $2 credit and closed for $102 debit
- End-of-Week Active Positions Overview
- Financials
- Market Sentiment 31 December 2022
- 1. Geopolitical Events and Economic Trends
- 2. VIX Index
- 3. Oil and Gas
- 4. Gold, Silver, and Copper (Metals & Mining)
- 5. USD and Other Currencies
- 6. Bitcoin AND crypto
- 7. Yield Curves
- 8. Producer Price Index
- 9. Consumer Price Index (CPI)
- 10. Consumer Sentiment Index
- 11. Put/Call Ratio
- 12. DJI, SPX, Russel 2000 Indices, and Main Market Sectors
- Summary Market Sentiment
- This Week’s Economic Calendar
- Earnings and Dividend Calendar
- This Week’s Guidelines
- Conclusion
Last Week’s Options Trading
Last week, I started restructuring this part of my journal, because it has been taking too much work to update it each week. All the new, adjusted, and closed entries for each specific position are now added under each other in one chapter, including dates, adjustments, rolls, etc.
The last week of this year was a busy week which didn’t allow me to look every day at my positions. However, since we were getting close to 21 DTE for January 20 expiry, I took some time on the 28th and 29th to manage all my Jan 20 expiry positions. I also managed to slip in some new positions.
Opened POSITIONS
Opened on 30 Dec: SPY Iron Condor Feb 17 343/348/411/416 for $128 Credit
31 Dec 22: lost $7 euros on Friday when everything went red again. But PoP is still at 70%, and deltas are under 20.
Opened on 29 Dec: QQQ Iron Condor Feb 17 235/240/294/299 for $138 Credit
31 Dec 22: I added a Feb 17 iron condor and closed all my other positions (21 DTE rule). As with all my iron condors a high volatility play. My general rules for iron condors are that the deltas of the individual legs should be around 20, IVR above 30, and ideally IV (implied volatility) higher than average HV (historical volatility). I do look at some technical indicators mainly to determine where to position the short strikes. So if I see an upward trend, I will move the put legs up towards the price of the underlying, and I will do the same with the call legs at the same time giving them more ‘cushion.’
Overall condor delta today at 1. Deltas of the legs today are still at or around 16. PoP at 69%.
Note: the Nasdaq-100 is the worst hit U.S. stock index for 2022, down over 34% on the year.
QQQ also has the highest current implied volatility rank of the 4 index ETFs, around 35%.
The investment seeks investment results that generally correspond to the price and yield performance of the index. To maintain the correspondence between the composition and weights of the securities in the trust (the “securities”) and the stocks in the Nasdaq-100 Index ® or NDX, which is heavy with technology stocks (50%) and is also concentrated with the top 15 stocks making up 60% of the ETF, the adviser adjusts the securities from time to time to conform to periodic changes in the identity and/or relative weights of index securities. The composition and weighting of the securities portion of a portfolio deposit are also adjusted to conform to changes in the index.
QQQ has US$149bn in assets and managed by Invesco.
Opened on 29 Dec: SQ Iron Condor Feb 17 42.5/47.5/75/80 for $150 Credit
31 Dec 22: $1 in the red and PoP at 66% now and short call leg highest at 27 deltas.
Opened on 28 Dec: AAPL Iron Condor Feb 17 105/110/145/150 for $136 Credit
31 Dec 22: I added a Feb 17 iron condor to the bull put I already opened. As with all my iron condors a high volatility play. My general rules for iron condors are that the deltas of the individual legs should be around 20, IVR above 30, and ideally IV (implied volatility) higher than average HV (historical volatility). I do look at some technical indicators mainly to determine where to position the short strikes. So if I see an upward trend, I will move the put legs up towards the price of the underlying, and I will do the same with the call legs at the same time giving them more ‘cushion.’
Overall condor delta today at 4. Deltas of the legs today are still at or under 20. PoP at 66%.
Watch it! Earnings later in January! If I keep to my 21 DTE manage/exit rule, this should be no problem if by then I have reached my 60% profit goal.
Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. It also sells various related services. In addition, the company offers iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; AirPods Max, an over-ear wireless headphone; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, HomePod, and iPod touch. Further, it provides AppleCare support services; cloud services store services; and operates various platforms, including the App Store that allow customers to discover and download applications and digital content, such as books, music, video, games, and podcasts. Additionally, the company offers various services, such as Apple Arcade, a game subscription service; Apple Music, which offers users a curated listening experience with on-demand radio stations; Apple News+, a subscription news and magazine service; Apple TV+, which offers exclusive original content; Apple Card, a co-branded credit card; and Apple Pay, a cashless payment service, as well as licenses its intellectual property. The company serves consumers, and small and mid-sized businesses; and the education, enterprise, and government markets. It distributes third-party applications for its products through the App Store. The company also sells its products through its retail and online stores, and direct sales force; and third-party cellular network carriers, wholesalers, retailers, and resellers. Apple Inc. was incorporated in 1977 and is headquartered in Cupertino, California.
Running and Closed Positions
Running: Opened on 23 Dec 22: Feb 17 TLT Iron Condor 92/95/111/114 for $77 credit
31 Dec 22: $2 in the red and PoP at 65% now and short put leg highest at 27 delta
Bond prices fell last week as yields edged higher again. This pulled down the price of the
iShares 20+ Year Bond ETF (TLT). TLT now stands out as one of the higher implied volatility ETFs,
with an IV Rank over 55. Source: Cherry Picks by Tastylive.
24 Dec 22: a last-minute play on Friday evening. $2 in the red now.
Running: Opened on 22 Dec 22: Feb 17 XLU Iron Condor for $76 credit
31 Dec 22: $7 in the green and PoP at 70% now and short call leg highest at 21 delta
Note: the Utilities sector ends the year nearly unchanged, and may provide some diversification opportunity given it often shows a limited correlation to the overall market. Source: Cherry Picks by Tastylive.
24 Dec 22: in addition to XLE, now also the next sector ETF added to my portfolio. Rationale: higher volatility. Looks like a good decision because already $14 in the green (due to the underlying price being closer to the short call).
Running: Opened on 22 Dec 22: Mar 17 EEM Bull Call 37/39 for $110 debit
31 Dec 22: P/L Open is now at $58 which is above 50% profit and coming close to my 60% profit .target.
24 Dec 22: EEM looks bullish to me but has very low volatility, so I am trying out a bull call debit play. At entry, I looked at the intrinsic value of the long call at 60 delta (should be equal to or higher than the net debit you pay, which itself should be in the middle of the spread, 50% PoP, short call at 40 delta, etc.). $21 in the red now. I already see that bull calls are not as easy as a bull put or bear call spread.
The investment seeks to track the investment results of the MSCI Emerging Markets Index. The fund generally invests at least 80% of its assets in the securities of its underlying index and in depositary receipts representing securities in its underlying index. The index is designed to measure equity market performance in the global emerging markets. The underlying index will include large- and mid-capitalization companies and may change over time.
Closed: Opened on 21 Dec 22: QQQ Bull Put Jan 17 287/291 for $104 credit and closed on 27 Dec for $42 debit
28 Dec 22: closed at 60% profit target within 6 days(!).
24 Dec 22: QQQ is quickly becoming one of my favorite symbols. Looking at bullish charts, but first and foremost, acceptable high volatility. $8 in the green now.
Running: Opened on 19 Dec: XLE Iron Condor Feb 17 73/75/96/98 for a $59 credit
31 Dec 22: $1 in the green and PoP at 68% now and short call leg highest at 23 delta
24 Dec 22: XLE didn’t move much since opening and is now $1 in the red
19 Dec 22: XLE is seeing higher volatility and is slightly bullish, backtested positive.
Closed: QQQ Opened on Dec 12 Iron Condor Jan 20 254/258/306/310 for $132 credit and closed on 29 Dec for $108 debit
31 Dec 22: closed. Decided to completely close this position for a small credit and set up a new one for a much higher credit (see above), rather than roll the two wings for lower credits.
24 Dec 22: $30 in the green with PoP of 68% and short put still around 20 delta.
17 Dec 22: $38 in the green at 57% PoP, and short put strike at 23 delta.
15 Dec 22: open at 65% PoP and 73% P50 (chance to reach 50% profit) with short deltas around 18.
According to Tastylive’s lookback backtesting, the winning rate is around 56% which is low.
Running: SLV Bull Call Mar 17 20/22.5 for $123 debit
31 Dec 22: PoP up to 59% and $26 in the green.
24 Dec 22: PoP 56% and $6 in the green.
15 Dec 22: opened this bull call based on the set-up described in my playbook. Strikes at 60% (long) and 40% (put). Intrinsic value long strike => net debit to be paid. Debit at around half of the spread width. ROI 1:1 etc.
The Trust seeks to reflect such performance before payment of the Trust’s expenses and liabilities. It is not actively managed. The Trust does not engage in any activities designed to obtain a profit from, or to ameliorate losses caused by, changes in the price of silver.
Running: Opened on 7 November: EWZ Bull Put 16 Dec 26/30 for $102 Credit, Rolled to Mar 17 for Additional $22 Credit
31 Dec 22: short put strike still ITM, and PoP is now down to 46% and $34 in the red. The Brazil ETF is still shaky but looking and overall trending down.
Over the past two weeks, EWZ has rallied over 7% off lows as the politics in Brazil have settled down a bit and commodity prices have strengthened. Despite the rally, EWZ’s OTM calls are trading over equidistant OTM puts, indicating that the market sees risk to the upside. EWZ has been underperforming the SPY, so it may have less downside than the US market does, and that might be enough for a trader to consider a bullish strategy in it. EWZ’s IV has stayed relatively strong as the stock bounced, and with a 38% overall IV and a 35% IV rank, EWZ’s options make attractive candidates for short premium trades. If you think EWZ might continue to rally or at least not make new lows in the next few weeks, the short 25.5 put in the Feb weekly expiration with 42 DTE is a bullish strategy that has an 88% prob of making 50% of its max potential profit before expiry, and that generates $1.30 of positive daily theta.
Cherry Bomb Newsletter 30 Dec 22 – Tom Preston – Chief Quantative Strategist TastyLive
24 Dec 22: short put strike still ITM, but PoP is now at 52% and $44 in the red.
17 Dec 22: the price is still in between the short (at 75 delta) and long )at 45 delta) strikes with a PoP at 34% (1% above my stop loss target), and I am slightly above my second (100% stop loss) exit strategy target. I have to keep on monitoring and make a decision before the end of the year if it goes under the 33% PoP.
10 Dec 22: Due to the market surge this week, the stock price went above the put short strike. My strategy to do nothing in the last weeks when it went ITM has until now proven to be the right decision. But it is getting closer to 16 December, and still is in the red ($15). I need to manage this position next week.
7 Dec 22: Getting closer to the expiry date, I had to take action, so I rolled the continuously challenged 26/30 put leg out to Mar 17 for an additional $22 credit. This is not best practice (the DTE 45 entry – 21 close/manage rule): I should have managed/closed the position sooner, and the spread is rolled too far out). I am taking a risk here, but it should give me enough time to close the position at a profit when the price goes up again.
10 Dec 22: Today, the stock price is at 29.94, slightly below the 30 short strike (44 delta), PoP at 59%, and loss is $72 euros. So I will do nothing for now but need to monitor EWZ if it goes further down.
EWZ seeks to track the investment results of the MSCI Brazil 25/50 Index. The fund generally invests at least 80% of its assets in the securities of its underlying index and depositary receipts representing securities in its underlying index. The index is a free float-adjusted market capitalization-weighted index with a capping methodology applied to issuer weights so that no single issuer exceeds 25% of the underlying index weight, and all issuers with a weight above 5% do not cumulatively exceed 50% of the underlying index weight. The fund is non-diversified.
Closed: Opened 29 Nov: EWZ Iron Condor 20 Jan 25/27/36/38 for $59 credit and closed for $39 debit
28 Dec 22: closed. EWZ is going down, threatening the 27 short put, and I am not confident this downtrend will change soon. So I decided to close this position for a small 34% profit.
24 Dec 22: 80% PoP $27 in the green
17 Dec 22: more in the red ($36) at 47% PoP and short strike ITM at 58 delta. So also here I have to keep a close watch.
10 Dec 22: $1 in the red, with the short put strike at 26 delta, PoP72%
3 Dec 22: another short premium volatility play.
EWZ seeks to track the investment results of the MSCI Brazil 25/50 Index. The fund generally invests at least 80% of its assets in the securities of its underlying index and depositary receipts representing securities in its underlying index. The index is a free float-adjusted market capitalization-weighted index with a capping methodology applied to issuer weights so that no single issuer exceeds 25% of the underlying index weight, and all issuers with a weight above 5% do not cumulatively exceed 50% of the underlying index weight. The fund is non-diversified.
Running: RIOT Short Put Dec 16 5 rolled out to Jan 20 for extra $22 credit
Once in a while, I place trades in one of my favorite companies: RIOT. I follow blockchain, crypto, and NFTs. RIOT is very much correlated to Bitcoin, so as soon as I see Bitcoin going up or down, I know that RIOT will react.
31 Dec 22: ITM, $52 in the red, 31% PoP (another rule I have is that PoP should not go under 33% so I actually should manage the position now) and leg at 90 delta. I want to wait for volatility going further up and then roll out and down again.
24 Dec 22: not much change to the positive. Also, due to bitcoin going nowhere.
17 Dec 22: I have been rolling this position several times now. This week was the third time:
- RIOT Short Put 28 Oct (W) 5 Opened on Oct 14 for a $21 credit
- Rolled up to 5.5 and out to Nov 18 for extra $30 credit
- Rolled out to Dec 16 and down to 5 extra $20 credit
- Rolled out to Jan 20 for an additional $22 credit
With the fall of crypto in general and bitcoin not being able to break through any resistance around 17.000, RIOT is now at a new low.
So the position is looking at a $23 loss, 46% PoP, and strike at 76 delta,
10 Dec 22: RIOT keeps on going up and down with Bitcoin and ended deeper below $5 at $4.19. So this position is deeper ITM at an 81 delta and 39% PoP. I need to make a decision this week to roll it out again since the Total P/L is now $24 negative.
Anyway, I already have a stock position in another account, and I don’t also mind having 100 shares as a position in my Tastyworks.
Riot Blockchain, Inc. and its subsidiaries focus on bitcoin mining operations in North America. It operates through Bitcoin Mining, Data Center Hosting, and Electrical Products and Engineering segments. As of December 31, 2021, it operated approximately 30,907 miners. Riot Blockchain, Inc. was incorporated in 2000 and is headquartered in Castle Rock, Colorado.
Running: RIOT Bull Put 20 Jan 2/4 Opened 29 November for $51 credit
31 Dec 22: short put leg is ITM, overall $18 in the red, 44% PoP, and short leg at 90 delta. I want to wait for volatility going further up and then roll out or let the 100 shares be assigned to me.
24 Dec 22: also not much change here with short put strike in ITM.
17 Dec 22: $9 in the red at 62% PoP with short put strike at 37 delta.
10 Dec 22: $2 in the red at 62% PoP with short put strike at 37 delta.
3 Dec 22: Opened a RIOT bull, put in the belief that it can only go up from here, and (see above) I don’t mind getting assigned and would then get the shares at a discount.
Rolled: AAPL Bull Put 20 Jan 120/125 Opened 23 Dec for $64 Credit, rolled to Feb 17 for additional $33 credit
31 Dec 22: $2 in the green, 62% PoP and short leg at 37 delta.
24 Dec 22: closed the 160/165 call leg of the AAPL Iron Condor 20 Jan 120/125/160/165 Opened 29 Nov for $123 Credit for $4 a debit, making a $55 profit.
17 Dec 22: at $23 profit now, both short strikes are still around 15 delta, PoP at 70%.
10 Dec 22: at $24 profit now, both short strikes are still around 13-15 delta, PoP at 72%.
3 Dec 22: $1 in the green. Mainly a volatility play.
Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. It also sells various related services. In addition, the company offers iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; AirPods Max, an over-ear wireless headphone; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, HomePod, and iPod touch. Further, it provides AppleCare support services; cloud services store services; and operates various platforms, including the App Store that allow customers to discover and download applications and digital content, such as books, music, video, games, and podcasts. Additionally, the company offers various services, such as Apple Arcade, a game subscription service; Apple Music, which offers users a curated listening experience with on-demand radio stations; Apple News+, a subscription news and magazine service; Apple TV+, which offers exclusive original content; Apple Card, a co-branded credit card; and Apple Pay, a cashless payment service, as well as licenses its intellectual property. The company serves consumers, and small and mid-sized businesses; and the education, enterprise, and government markets. It distributes third-party applications for its products through the App Store. The company also sells its products through its retail and online stores, and direct sales force; and third-party cellular network carriers, wholesalers, retailers, and resellers. Apple Inc. was incorporated in 1977 and is headquartered in Cupertino, California.
Rolled: AMZN Iron Condor 20 Jan 81/83/108/109.75 Opened 28 Nov for $37 Credit (after converting ‘wrong 108/109.75 wing), rolled the 108/109.75 wing to 100/102.5 for $83 and closed it for $13 and rolled out/down at wider spread the 81/83 wing to 75/80 Feb 17 for a $85 credit
27 Dec 22: rolled the 81/83 put wing out, and down, with a wider spread, to 75/80 Feb 17. So at this stage this play has won me $11+$26+$83-$13+$85 = $192. However, $122 is still unrealized. The position is now $30 in the red.
24 Dec 22: this was a rolled AMZN Iron Condor 20 Jan 81/83/108/109.75 Opened 28 Nov for $37 Credit (after correction) and of which the 108/109.75 leg was first rolled to 100/102.5 Jan 20 for a $83 credit on 28 November and then closed on 22 Dec for 1 $13 debit. From the beginning, this has been a messy play, and I am now looking at $31 in the red, which is coming close to my 100% loss exit rule.
17 Dec 22: at $40 profit now, the short strikes are still around 15-30 delta, PoP at 57%
10 Dec 22: despite the messy set-up when I opened this position, I clearly recovered in the right way (closed the long call wing into a short 108/109.75 wing) and am now looking at a $31 profit, a PoP at 51%, and a short put strike not further out than 30 delta.
3 Dec 22: This went messy. Before sending the offer, I probably, and by accident, ‘thick-fingered’ the short call strike above the long call strike ending up with a broken iron condor (one side short, the other side long). I have to be more careful when reviewing and sending an order actually closely check.
So I made a beginner panic-football mistake and sold/bought back the long call leg strikes (I could have just rolled the short call strike down). I then sold a new 100/102.5 bear call to complete the iron condor again.
Until now, this has only cost me commissions and fees, and the position is in the green but far away from the profit target.
Amazon.com, Inc. engages in the retail sale of consumer products and subscriptions in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). It sells merchandise and content purchased for resale from third-party sellers through physical and online stores. The company also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Rings, and Echo and other devices; provides Kindle Direct Publishing, an online service that allows independent authors and publishers to make their books available in the Kindle Store; and develops and produces media content. In addition, it offers programs that enable sellers to sell their products on its websites, as well as its stores; and programs that allow authors, musicians, filmmakers, Twitch streamers, skill and app developers, and others to publish and sell content. Further, the company provides compute, storage, database, analytics, machine learning, and other services, as well as fulfillment, advertising, publishing, and digital content subscriptions. Additionally, it offers Amazon Prime, a membership program, which provides free shipping of various items; access to streaming of movies and series; and other services. The company serves consumers, sellers, developers, enterprises, and content creators. Amazon.com, Inc. was incorporated in 1994 and is headquartered in Seattle, Washington.
Closed: GDX Bull Put 20 Jan 25/27 Opened 30 Nov for $52 Credit and closed for $21 debit
27 Dec 22: closed at 60% profit target.
24 Dec 22: $25 in the green now, which is close to my 50% profit target.
17 Dec 22: not much changed here: $7 profit, a PoP at 74%, and a short put strike not further out than 30 delta.
10 Dec 22: $7 profit, a PoP at 74%, and a short put strike not further out than 28 delta.
3 Dec 22: already $16 in the green. Jumping on the bullish trend for this underlying.
Closed 24 Dec: Rolled MRVL Iron Condor 20 Jan 30/33/42/45 Rolled 20 Dec for $81+$33 = $114 Credit and closed for a $81 debit
27 Dec 22: closed at half of my profit target (around 30%). MRVL is not one of my best symbols.
24 Dec 22: with the put leg coming close to the underlying price (challenged), I rolled the 47/50 call leg of the MRVL Iron Condor 20 Jan 30/33/47/50 Opened 7 Dec for $81 Credit to 42/45 for an extra $33 credit.
17 Dec 22: in the green now at 75% PoP and short call strikes around 15 delta.
10 Dec 22: slightly in the red at 67% PoP and short call strike at 27 delta.
7 Dec 22: another short premium – high volatility play.
Marvell Technology, Inc., together with its subsidiaries, designs, develops, and sells analog, mixed-signal, digital signal processing, and embedded and standalone integrated circuits. It offers a portfolio of Ethernet solutions, including controllers, network adapters, physical transceivers, and switches; single or multiple core processors; ASIC; and printer System-on-a-Chip products and application processors. The company also provides a range of storage products comprising storage controllers for hard disk drives (HDD) and solid-state drives that support various host system interfaces consisting of serial attached SCSI (SAS), serial advanced technology attachment (SATA), peripheral component interconnect express, non-volatile memory express (NVMe), and NVMe over fabrics; and fiber channel products, including host bus adapters, and controllers for server and storage system connectivity. It has operations in the United States, China, Malaysia, the Philippines, Thailand, Singapore, India, Israel, Japan, South Korea, Taiwan, and Vietnam. Marvell Technology, Inc. was incorporated in 1995 and is headquartered in Wilmington, Delaware.
Rolled: SHOP Opened on 8 Dec Jan 20 Bull Put 31/33 at a $50 credit and rolled out/down/wider to 30/35 Feb 17 for an extra $56 credit
27 Dec 22: rolled out and down to Feb 17 and changed/widened the spread to 30/35. Since I did the same with my other SHOP position, this is now one of two Feb 17 30/35 bull puts. Tastyworks still sees this as two positions, so I will track it separately.
Slightly in the green at 57% PoP and short call strike ITM (!) at 46 delta.
24 Dec 22: with the underlying price so close to the short strike, this one is also in the red at $69.
17 Dec 22: $8 in the red at 59% PoP and short call strike at 30 delta.
10 Dec 22: lightly in the green at 73% PoP and short put strike at 25 delta.
8 Dec 22: opened this one based on high IVR and Tom Preston’s Cherry Bomb Newsletter of 8 December (so I know who to blame if things go wrong! :).
Rolled: SHOP Jan 20 Iron Condor 29.5/34/54/58 at a $166 Credit Opened on 20 Dec, rolled the 29.5/34 leg to Feb 17 30/35 for $56 credit and closed the 42/46/5 leg for $15
31 Dec 22: see above: I now have two Feb 17 30/35 bull puts! Tastyworks still sees this as two positions, so I will track it separately.
P/L Open at 0, 57% PoP and short call strike ITM at 46 delta.
24 Dec 22: rolled the 42/46.5 put leg of the SHOP Jan 20 Iron Condor 29.5/34/54/58 at a $113 Credit Opened on 9 Dec up to 42/46.5 for an additional $53 credit.
17 Dec 22: $17 in the red at 64% PoP and short put strike at 34 delta.
10 Dec 22: $8 in the red at 65% PoP and short put strike at 29 delta.
9 Dec 22: since I didn’t use the full position allocation size for the 8 Dec SHOP position, and indicators like IVR were still positive, I decided to add this iron condor.
Shopify Inc., a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. The company’s platform enables merchants to displays, manages, markets, and sells its products through various sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces; and enables to manage products and inventory, process orders and payments, fulfill and ship orders, new buyers and build customer relationships, source products, leverage analytics and reporting, manage cash, payments and transactions, and access financing. It also sells custom themes and apps, and registration of domain names; and merchant solutions, which include accepting payments, shipping and fulfillment, and securing working capital. The company was formerly known as Jaded Pixel Technologies Inc. and changed its name to Shopify Inc. in November 2011. Shopify Inc. was incorporated in 2004 and is headquartered in Ottawa, Canada.
Closed: QQQ Feb 17 Bear Call 280/284 on Nov 29 at a $2 credit and closed for $102 debit
28 Dec 22: closed. This started as a condor in which the call wing was severely challenged. In December it went deep ITM, and I had to roll the wings out. I now made use of QQ going up and in the end recuperated my position. In the end, the play gave me a $52 profit.
24 Dec 22: this one turned green this week which is very good news after the adjustments I had to make on 3 Dec 2022! QQQ really recovered.
17 Dec 22: $25 in the red at 59 % PoP and short call strike at 45 delta.
10 Dec 22: QQQ went down to 282.04, so my P/L open is in the green at $4, PoP at 67%, the short strike is still ITM, but deltas respectively -54 and 50.
3 Dec 22: this was a weekly iron condor 2 Dec (W) 238/242/280/284 opened on November 4 for $133 credit and needed a complete rescue plan this week since it was getting deeper ITM.
So I rolled the put leg 238/242 to 269/273 for a $24 credit on Nov 18 and out to Dec 30 for a $62 Credit on Nov 29 and closed the 269/273 leg on Nov 30 for a $102 Debit;
I rolled the 280/284 to Feb 17 on the same day for a $2 Credit
So until now, I have a $133 + $24 + $2 – $102 = $57 profit on this play.
But I am still in the ITM danger zone with QQQ at 292.55. Closing it now would cost me $42.
The investment seeks investment results that generally correspond to the price and yield performance of the index. To maintain the correspondence between the composition and weights of the securities in the trust (the “securities”) and the stocks in the Nasdaq-100 Index ® or NDX, which is heavy with technology stocks (50%) and is also concentrated with the top 15 stocks making up 60% of the ETF, the adviser adjusts the securities from time to time to conform to periodic changes in the identity and/or relative weights of index securities. The composition and weighting of the securities portion of a portfolio deposit are also adjusted to conform to changes in the index.
QQQ has US$149bn in assets and managed by Invesco.
End-of-Week Active Positions Overview
Financials
Cash Balance 31 December 2022
I have progressively recovered the around $1,350 loss I made earlier this year (this excludes commission and fees) while learning how to options trade (yes, yes, first paper trade and then migrate to the real stuff, I know, but I learn more from being burnt).
And this week, I made some last bold (but calculated) moves to reduce the loss. I have not reached my year target, but since September I have shown to understand options trading much better and each month my cash position has improved. In a separate post, I will evaluate this past year and see where I should further improve and focus on in 2023.
I am more and more trading optimally, making full use of my cash, optimizing my positions etc .
The points I have to look at are:
- In general, my positions are placed on the safe side with low deltas, so less risk, and low profit
- I just started using max portfolio allocation (based on VIX) and need to add non-short premium and passive income strategies to optimize my portfolio.
- Except for a small short put undefined risk play in RIOT, I have been only doing a limited number of defined risk strategies which are lower risk but also less profitable: I may need to start looking at adding other defined risk strategies and once in a while short straddles and strangles based on low prices underlyings.
- I now select positions with higher premiums compared to the commissions and fees I have to pay and the target profit I have set as a rule (50%): I need to go for higher premiums/max loss by widening spreads, taking more risk, adding higher priced underlyings without overexposing myself to too much risk.
Find out more about the platform I love to use for my options trading:
If you like it as much as I do and want to open an account, click here:
Disclosure: for each referral I will get credits for items or cash to support this website! Thanks!
Market Sentiment 31 December 2022
Every week I start with a review of the market sentiment.
I mostly use eOption’s Closing Bell emails , StockTwits, BarChart and Seeking Alpha I receive daily as a source.
1. Geopolitical Events and Economic Trends
During the week, I capture the most important news. Every weekend before the new trading week, I review the current markets, the general geopolitical events, and economic trends determining the sentiment in the world of options trading.
- Wall Street closed out the year on Friday with its worst yearly performance since the financial crisis in 2008.
- The S&P 500 (market benchmark) fell nearly 20% in 2022
- The Nasdaq Composite (tech) lost a third of its value with a 33% drop for the year.
- The Dow (blue-chip) ended about 9% lower.
- Bitcoin dropped 64% in 2022.
- The war between Russia and Ukraine
- Surging inflation
- Federal Reserve hiking rates for the first time since 2018. With economic data through 2022 suggesting that the rising interest rates have yet to really cool the economy, worries have risen that the Fed will tighten policy too far which could tip the economy into a recession.
2. VIX Index
- The CBOE Volatility Index (^VIX) — Wall Street’s “fear gauge” — slightly up to around 21.67.
- A VIX below 15% is very low volatility. A 15% or below VIX is assumed to be a market at rest. Since the intrinsic nature of the Stock Market is to move up, a VIX close to 15% or lower will tell us that the broader market is likely to head higher.
- Up to 19% VIX means the market is in ‘lull’ mode. 19% is seen as the ‘steady state’ VIX. This arena is inadequate for short premium plays, which require high volatility. This is where long calls, puts, and debit spreads may be set up. Only when VIX gets closer to 30%, selling options become viable.
- At 20% or higher means medium volatility.
- A VIX of 30% or higher means high volatility. When selling options, you want to sell out of stocks when the VIX is near 30. This is where credit spreads, short strangles, straddles, short iron condors, etc., can be played.
- Above a VIX of 40%, this is still the case, but given the extreme volatility, you should be very careful.
VIX for position sizing
VIX moves around 21, so my maximum portfolio capital allocation for short premium strategies is still 35% of net liq.
See also on this subject this Tastytrade video.
VIX
< 15
15-19
20-29
30-40
>40
Volatility
Lowest volatility, all comfortable
Market in ‘lull’ mode
Volatility high
Volatility very high
Volatility and fear levels highest
Maximum portfolio capital allocation
25%
30%
35%
40%
50%
Volatility and the VIX are significant in how I size positions and portfolio allocation. Since my focus is on short premium trading, I must balance exposure to substantial losses and reaching sufficient occurrences.
In 2022 the VVIX Index (VIX Volatility Index) has also traded within a fairly reasonable range (roughly between 83 and 150). The long-term average is 86, and the VVIX is mean-reverting.
The VVIX is nicknamed the “VIX of VIX” because it is calculated using the implied volatility of ATM and OTM options in the VIX itself, using the same calculation method as VIX. The index measures the “volatility of volatility, or the “vol of vol.”
Today, the VVIX went considerably down this week from 78.84 to 77.05. So still moving away from the mean.
The VVIX/VIX Ratio
See more in this Tastyworks video.
3. Oil and Gas
The following sectors I look at – to understand the market sentiment – are, due to their massive impact on the global economy, metal & mining.
- WTI crude oil
- Oil prices finish higher as WTI crude rose +1.86 or 2.37% to settle at $80.26 per barrel and Brent crude futures settle at $85.91/bbl, up $2.45, 2.94%. Oil prices rise 6.7% for 2022 but end well below the highs after Russia invaded Ukraine earlier this year of $106.51.
- Natural gas prices rise for the 3rd straight year, gaining around 20% this year, but follow a sharp retrace in December.
4. Gold, Silver, and Copper (Metals & Mining)
To understand the market sentiment, I look at the following sectors: precious metals and mining due to their massive impact on the global economy.
- Gold prices end little changed, edging higher 20c to settle at $1,826.20 an ounce, managing a modest decline for the year, strong considering the sharp decline in many asset classes.
5. USD and Other Currencies
The DXY, the symbol for the US dollar index, tracks the price of the US dollar against a basket of six foreign currencies that have a significant trading relationship with the US and are also hard floating currencies. The index will rise if the dollar strengthens against these currencies and will fall if the dollar weakens against these currencies.
- The U.S. dollar is on track for its biggest annual gains since 2015 (+8.5%)
- The British Pound falls more than 10% since the start of the year
- The euro is down more than 5.5% to 1.07 (year low of 0.9537) after a 7% drop in 2021. Federal Reserve rate hikes and fears of a sharp slowdown in global growth boosted the greenback. The U.S. Federal Reserve has raised rates by a total of 425 basis points since March.
- The Bank of Japan’s ultra-dovish stance has seen the dollar gain 13.7% versus the yen so far this year.
- The dollar index (DXY) went slightly down this week to 103.494 (again slightly lower so nearly unchanged to last week and the week before that).
6. Bitcoin AND crypto
- Bad times for everything crypto (and therefore also everything blockchain) continue
- Bitcoin still struggling and down to 16591 from 16818 last week.
7. Yield Curves
- The year 2022 was not very gentle for Bonds, as Treasury yields post massive spikes given the aggressive rate hike cycle from the Federal Reserve.
- The 10-year yield rose 4.6 bps to 3.881%, off 33-bps from its 52-week high of 4.231% hit Oct. 24, 2022, and up 240 bps from its 52-week low of 1.496% hit a year ago.
- The 2-year yield rose 6 bps today to 4.43%, rising 7 of the last 9 trading days and up 370 bps from its 2022 closing low of 0.764%. Yield is off 30-bps from its 52-week high of 4.726% hit Nov. 7, 2022.
Understanding yield curves also adds to better reading the market sentiment.
“A yield curve is a line that plots bonds’ yields (interest rates) having equal credit quality but differing maturity dates. The yield curve’s slope gives an idea of future interest rate changes and economic activity.
There are three main yield curve shapes: regular (upward-sloping curve), inverted (downward-sloping curve), and flat. Upward sloping (standard yield curves) is where longer-term bonds have higher yields than short-term ones.
Standard curves point to economic expansion, and downward-sloping (inverted) curves point to economic recession.
Yield curve rates are published on the Treasury’s website each trading day.”
Source: Investopedia
i. The 10-Year Treasury Constant Maturity minus 3-Month Treasury Constant Maturity Yield Curve
The yield curve (T10Y3M) compares the 10-year with the 3-month U.S. Treasury bond yield. It gives insight into bank profitability, which is correlated with economic activity. Historically, the yield curve has been a reliable predictor of economic recessions.
An inverted yield curve has been a good indicator of an economic slowdown ahead. A 10-year-3-month treasury spread approaching 0 signifies a “flattening” yield curve. Furthermore, a negative 10-year-3-month spread has historically been viewed as a precursor or predictor of a recessionary period.
- For some time now, the indicator has been predicting a recession.
ii. The 2-Year/10-Year Yield Curve
- The 2s10s curve is at its deepest level of inversion in forty years. For only the fourth time on record and for the first time since 2009, bearish sentiment has fallen double digits in back-to-back weeks
“An inverted yield curve can be an important economic indicator and a likely precursor to a recession.
When the curve inverts, the longer-dated bond (I am using the 10-year) will offer a lower annual yield than a short-dated bond (I am using the 2-year). This means that investors have bid up the prices on longer-dated bonds to the point where they yield less than short-dated bonds.
An inverted yield curve results from investor concerns about the economy and the stock market. History shows that investors tend to be right about economic weakness on the horizon when the yield curve is inverted. Since WWII, every recession has been preceded by a yield curve inversion.
Recessions don’t start immediately after the yield curve inverts, however. The inversion tends to precede the recession by 6 to 18 months.”
Source: SeekingAlpha
8. Producer Price Index
The Producer Price Index (PPI) program measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services.
Source: Bureau of Labor Statistics (BLS).
- November’s producer price index (PPI) came in higher than expected, rising by 0.3% MoM and 7.4% YoY.
9. Consumer Price Index (CPI)
The measure that is most often used to measure inflation in terms of consumers is the consumer price index (CPI). Tens of thousands of items in several categories are tracked. The basket of products or services is considered each month, and economists and statisticians look for trends. If the CPI rises, prices could trend higher, with inflation on the rise.
- The Core CPI , excluding volatile food and energy, increased 0.2 percent for November versus 0.3 percent expected and 6.0 percent annually, also 0.1 percent lower than forecast.
10. Consumer Sentiment Index
A low CSI index reflects the general (dis-)satisfaction with managing U.S. economic policies. A high satisfaction rating suggests approval of the current policy management and implies market stability.
Source: Surveys of Consumers (umich.edu).
- Consumer sentiment (as per the UoM data) going up again after hitting its lowest level.
11. Put/Call Ratio
- A Put/call Ratio of below .5 could mean the market is very bullish. Maybe too bullish. It could be an excellent time to sell stocks high.
- Between 1.0 and 2.0, the Put/call Ratio indicates a bearish market.
- A Put/call Ratio above 2.0 could mean it is very bearish. It could be an excellent time to consider buying low.
- Moving sideways if the Put/call Ratio oscillates between 0.5 and 1.0.
- The put/call ratio went down to 1.195, which indicates the same number of people are selling and buying and the market is moving towards being bullish (?).
Warning: previous research conducted by tastytrade revealed that the Put/Call Ratio is not a reliable trading indicator. Readers can check out this installment to review that research in greater detail this installment.
12. DJI, SPX, Russel 2000 Indices, and Main Market Sectors
In general, I look at the leading indices DJIA, SPX, and Russell 2000 (IWM) and the level of volatility or ‘market thrashing’ (excessive volatility with significant rising then near proportionate falling in markets’ values within a trading period): above 1% in any or all of them might indicate indecision in the market.
DJIA, SPX, IWM
- All in the red on the last day of 2022
- The S&P 500 (market benchmark) fell nearly 20% in 2022
- The Nasdaq Composite (tech) lost a third of its value with a 33% drop for the year.
- The Russell 2000 index of smaller companies fell 5 points or 0.3% in 2022
- The Dow (blue-chip) ended about 9% lower.
Major Stock Market Sectors
I also follow the major market sectors in Barchart.
- All sectors in the red! All except Energy (XLE)
- S&P 500: 0.25% down from 0.59% last week
And here the performance of all sectors for 2022:
For commodities it was a strong year, so energy gains most (64.40%). It’s followed by the defensive ‘risk-off’ sectors of utilities, consumer staples, and health care, which all finished marginally close to 0% for the year.
Real estate is traditionally also a defensive high-yield sector, but this year fell with other rate-sensitive sectors like communication services and consumer discretionary. The reason is the Fed aggressively hiking rates. Also changing work trends (remote) pressured the industry’s assets/valuation.
Summary Market Sentiment
Bull market
Bullish
Neutral/bearish
Bearish
Bear market/crash
1. Geopolitical events and economic trends
Positive trends, stable supply chains
Minor market issues, minor supply chain issues
National events, market issues, bad economic data, mini-corrections
Negative indicators, international events, serious market issues, broader market correction (-10%)
The total collapse of the global market, deep recession
2. VIX (VIX)
<15
Lowest volatility, all comfortable
15-19
Market in ‘lull’ mode
20-29
Volatility high (down from above 30)
30-39
Volatility very high
>40
Volatility and fear levels highest
3. Oil & Gas (XOP)
Oil & gas
Minor market issues, minor supply chain issues
National events, market issues
International supply chain interruptions, high oil & gas prices
International conflicts involving US, Russia or China, and other main producing countries
4. Gold, Silver & Copper (GLD & SLV & Copper)
Gold, silver, and Copper stable
Minor market issues, minor supply chain issues
National events, market issues
International supply chain interruptions
International conflicts involving US, Russia or China, and other main producing countries
5. US Dollar Currency Index (DXY)
Very weak dollar versus other currencies
Weak dollar
Neither weak/nor strong dollar
Strong dollar
Very strong dollar
6. Bitcoin (BTCUSD)
Bitcoin rising
Bitcoin rising slightly slower
Bitcoin “thrashing” at the same level
Crypto crashes, market corrections
Bitcoin or other cryptos or companies collapse
7. US Yield Curve (T10Y3M and US10Y vs US02Y)
Considerably steep curve
Steep curve
Average but still positive curve
Flattening, inverting, and approaching zero
Inverted curve and negative
8. Producer Price Index (PPI)
Lowest price level
Price level higher than normal
Price levels rising fast
The price level is very high
Highest price level
9. Consumer Price Index (CPI)
Lowest price level
Price level higher than normal
Price levels rising fast
The price level is very high
Highest price level
10. Consumer Sentiment Index (CSI)
High consumer confidence
Consumer confidence is less high
Consumer confidence going down from very high or up from very low
Low consumer confidence
No consumer confidence
11. S&P 500 Put/call ratio (PCR)
Well below 0.5 (very bullish)
Close to 0.5 (bullish)
Between 0.5 and 1.0 (neutral)
Between 1.0 and 2.0 (bearish)
Above 2.0 (severely bearish)
12. Dow Jones (DJI)
S&P 500 (SPX)
Russel 2000 (RUT)
Major Market Sectors (XLE, XLF, etc)
Strong bull market
No real changes in an upward trend
Bullish market
Minor changes in an upward trend
Neutral bullish/bearish market
Increased (negative) changes and “thrashing”
Bearish market (with bear rallies)
In general, going down, many negative changes
Bear market
A deep recession or the market is collapsing, or already did so
Trading style
No restrictions on trading (except for VIX rules)
Closer watch and reduce trades
More caution needed and reduce trades further
Extreme caution and reduce trades even further
Look to close any open positions and no new trades
This Week’s Economic Calendar
- Not much is happening in the first week of the year, except for PMIs and job numbers.
Earnings and Dividend Calendar
Earnings season is starting soon again. In addition, there are not many dividend payouts upcoming. I tend to avoid earnings or dividends (and other major events within 30 days of opening a position.
Also dividend dates for some of my ‘Faves’ are coming up in January and February: MRVL (1/5), FCX (1/12), AAL (1/19), SBUX (2/09), AMZN (2/14), DAL (2/19) .
Portfolio allocation
See above: I need to start working on a balance between defined and undefined risk strategies to be added to my playbook.
This Week’s Guidelines
Open Positions Status at Beginning Of the Coming Week
I now have 18 (!) positions: in AAPL, AMZN, EEM, EWZ (2x), GDX, MRVL, QQQ (3x), RIOT (2x), SHOP (2x), SLV, TLT, XLE and XLU.
15 positions is the average I need to have running to maximize my portfolio allocation,
I am now at 40% buying power usage, which is above the 35% I am ‘allowed’ to use under my portfolio allocation rules based on VIX for short premium strategies. However, 5% of my positions are debit spreads.
With a VIX of around 21, my maximum portfolio capital allocation for short premium strategies is 35% of net liq. Two of my strategies up to date are not short premium.
The remaining 20% must be filled with long options and passive income strategies. I want to have 40% in cash at all times. I may review this tomorrow when I look back at my performance in 2022.
Goals and Schedule for this week
Sunday: set up options strategy ideas and perform backtesting; select at least two options strategy ideas.
Until Tuesday: open one more vertical spread or iron condor and and a long position.
Rest of week: start looking at strategies involving buying bills or bonds for the remaining 25% of the 60% .
For short premium strategies, I need high IVR underlyings and underlyings trading in ranges with apparent resistance and support areas.
Underlyings Selected for Trading This Week
This is my selection for this week. I am still avoiding the earnings as much as possible, looking for high IVRs.
For this week, I will continue applying my underlying selection rules and focus on high volatility (IVR >40) and higher premium underlyings that have no significant events (like earnings < 30 days) coming up.
The expectation is that this week’s volatility will increase.
I added stocks with lower (<40) IVR/volatility since I want to true out some long positions and debit spreads.
Options Buying Power and Portfolio Allocation This Week
Based on my current buying power and portfolio allocation rules, I determine whether I can open new positions to maximize such portfolio allocation.
I use VIX to determine the allocation percentage for short premium strategies. Since I until now only opened short strategies, this is still applicable to my whole portfolio.
However, with VIX going down to 20, I should be looking at using 5% of my total NetLiq for other strategies.
Allocation based on VIX (for short premium strategies)
VIX
< 15
15-19
20-29
30-40
>40
Volatility
Lowest volatility, all comfortable
Market in ‘lull’ mode
Volatility high
Volatility very high
Volatility and fear levels highest
Maximum portfolio capital allocation
25%
30%
35%
40%
50%
In allocating portfolio capital, I need to use Buying Power (NetLiq)
Cash Balance
$12,279.46
Buying Power/Net Liq
$10,680.46
Max Portfolio Capital Allocation Short Premium (Cash Available for Trading)
35%
$3,738,16
Max Portfolio Capital Allocation Other (low risk, long positions)
25%
$2.670.12
Average Max Position Allocation (BP)
4%
$427,22
If I look at Buying Power usage, I have reached my max for short premium positions.
Portfolio allocation undefined vs defined risk
All my plays are ‘defined risk.’ I need to add undefined risk positions at a later stage. I will explain why in my blog post on constructing trades.
Since my average maximum position allocation is up to 4% and close to $448, I need to be looking for higher priced underlyings or increasing the number of contracts per position.
This Week’s Rules
This week I will start a post with my entry, adjustment, and exit rules per the options strategy. I will describe how I set up a playbook with all the strategies I want to deploy.
Conclusion
This should have been my first experience with the ‘Christmas rally’. Nothing really happened, except on Thursday. On Friday, all sectors went red, but most of my options ended up still green. Is this the beginning of a red beginning of the new year?
The focus will remain on the exit play, which is still very weak. I should not allow it to happen that I:
- don’t manage close to ITM short strikes of vertical credit spreads around 14-21 DTE
- allow a position to go below 33% PoP
- allow strikes legs to go down to (close to) zero extrinsic value.
