SPY – Milking Our Cow Aug 17 – 25

August 17
After having sold our straddle on Aug 16 at 336, SPY gapped up on Monday to 338. We rolled to the same expiry for a strike of 338. This was profitable, losing $0.44/share on the call but gaining $1.08 /share on the puts.

We knew we'd have to close this before end of day, to avoid assignment. This was done at 3:18 pm, netting us an additional $0.05/share on the call and $0.05/share on the put. This may not sound like much, but remember those results are in one day! If we did nothing better than that in one year we'd make over a 100% return.

Normally, I try to sell a new straddle the minute I've closed one. However in this case, I did not do so. I think it was because I was very unsure of the direction of SPY, and feared a big gap up or down.

August 18
In any case, the next day, the 18th, SPY gapped up only slightly. I felt it would close the gap so I waited to sell a straddle when it reached 337 around 11:00 am. By 12:30 the ETF had recovered to 338. I rolled to that level. We lost $0.04 on the call but made $0.02 on the put. It makes sense to take such losses early, to prevent bigger givebacks of premium at expiration. In this instance that was worth about $1.00. We brought in an additional $2.16 in premium.

August 19
Surely enough, the next day, the stock had moved lower. We closed that 339 straddle for a gain of $0.09/share. I probably got a sense of market direction, and decided to only short the calls. This worked out, and I collected $0.56 / share closing the position before the end of the day.

At that point, I thought the market had dropped too much, and a reversal would be in the works. So I decided to short an AUG21 337 in-the-money put, collecting $1.68 in premiums.

August 20
This almost worked against me, as the market gapped down to $335.50 on August 20th. However, I sensed the market had dropped too much for this time frame and a closure of the gap was likely. Had SPY dropped more I would have rolled this position and sold a call at $335. But the gods favored me and SPY recovered. So I was able to buy back my call at a profit of $0.58 by mid-afternoon.

At that point, I though SPY would rally to 338 (it had just breached a wave high at 337.50), but then drop. I decided to sell 338 straddle, expiring AUG21, bringing in $2.28 in new premiums, on options expiring the next day. I texpected SPY to drop.

August 21
Yet SPY rallied. No problem, this strategy is very forgiving. I rolled the 338 calls to 339, at a gain of $1.08. I then sold a 339 straddle, advancing the date by 3 days to the 24th. At 3:40 in the afternoon, it no longer made sense to sell a straddle that would expire in 20 minutes and one side or the other would face exercise. This brought in $2.35 in new premiums.

It's important to put on your short straddles on a Friday, because you benefit by 2 days of free THETA decay. The only exception to this rule is if
you expect a huge economic event over the weekend which could propel markets to big moves. In that case any short positions would lose more in delta than they gained in theta decay.

August 24
On Monday, SPY gapped up by 2 points, not an overwhelming move for a weekend of events. My 339 short straddle was losing money, but I though the gap might close, and waited patiently. By 10:30 it was clear to me that SPY would not close the gap, so I took my lumps, losing $1.08 on the previous straddle. I chose to sell a 342 strike straddle but move date out to the 26th, as I did not want to have to necessarily roll again that same day to avoid exercise. This brought in $2.98 in new premiums.

August 25

SPY opened one point higher at 343.50, and my straddle was barely making any money. I decided to leg out of the 343 straddle to maximize income. I put on a series of about 4 trades, selling one side, then, when the market moved to the other directions - as I intended - selling the other side to maximize premiums. This can obviously also work against you if you read the tea leaves wrong. But I managed it well, adding about $0.20 cents of additional gains. By the end of the day I had rolled two more times, first to 343, than to 344.

So far so good. I've continued to add about $1000 of profits on my 16 contracts. Meanwhile, my long term contracts, are showing an extra $6000 or so of profits for the week.

size: 16 contracts
Launched April 4 2020
basis $48,535 or $28.56 / share
cash flow $17,895 or $11.18 / share
p&l $14,814 or $9.26 /share

GLD – Milking My Rented Cow Day 4

GLD dropped this morning from 188 to 186.50. I sold a 188/186.50 put spread to accommodate this. The 188 put I bought back resulted in an $0.84 loss and a debit of $2.42 to cash flow, while the 186.50 put sold brought in new cash flow of $1.51.

Somehow - by mistake it is embarassing to admit - I sold a 188 / 186.50 call spread at the same time. I only realized that later, when GLD hit another level that set off an alert for me. Noticing that this was not part of my strategy, I closed the position, even thought it was likely to continue to profit as GLD continues to move down (I think). Since I would have counted this error in trading had it gone against me, I will also count it when it goes in my favor. We made a $0.36 profit on that reversal today. It contributed $0.36 to cash flow as well.

The Lesson? When you are trading with your own money on small positions like this, you don't pay enough attention. Be aware of that. This goes along with my general belief that it's important to put on fewer trades and positions rather than more, and pay a lot more attention.

At midday, GLD had dropped another $2.00. I rolled again, from 186.50 to 184.50. This caused a $1.46 loss on the 186.50 trade. It added $1.74 of new cash flow.

Summing up these trades, my p&l is now

$194 - $84 + $36 -$1.46 - $2.00 (commissions) = ($2)
My cash flow is
$185 + $151 + $36 + $174 = $546

Note: my outer calendar leg expiring AUG 28 has gained in extrinsic value, lessening my losses. Closing everythying out right now would lead to
an overall loss of $79. Still 2 days to go. The tide may yet turn in my favor, especially if I pay attention and avoid fat-finger trading errors.

GLD – Milking My Rented Cow – Day 3

As the thumbnail image shows, yesterday afternoon GLD rose from 183 to 186. I had prophylactically sold a 186/185 bear put spread if GLD rose to 186, which brought in $0.50 of revenue per share. Now I was holding a -1 +1 -1 "ladder" spread. I did not have time to deal with this until midday, as I was heavily involved in some much larger positions that required my attention.

By the time I did address the GLD position, at around 1pm, GLD was trading around $188.47. Ideally, I would want to be short the 188 strike. So I closed the lower 2 rungs of the ladder, to simplify my positions. I bought back the 187 AUG 21 puts sold at $2.27 for $1.10, sold the 186 puts bought for $1.77 at $0.78. I bought back the 184 put sold at $1.11 for $0.46. Altogether I made $0.63 cents less fees on these rolls.

Finally, I established the new short position by selling the AUG 21 GLD put at 388 for $1.58.

To date I have brought in $194 in realized profits, and have a positive cash flow of $185 after all fees. My original hedge, the 182 AUG 27 put, has lost $187 of value. If I were to close all positions immediately, I would have a gain of around $5.00 after slippage and commissions (194-187 - 2) on an original outlay of $89.00 ($269 - $160). That's a 5% return in 3 days, not too shabby.

But of course I will not sell yet. I still have another 3 days of time to milk my rented cow...

SPY Milking Our Cow on August 13 and 14

On Thursday, SPY started out the day on a moderate drop, so we immediately rolled our 338 straddle into a 335 straddle, at a tiny gain of $28 per straddle, or $0.28 cents per share. During the same day we bought and sold only the threatened call side for a $0.48 gain.

On Friday, SPY did not move much, but we rolled twice during the day to accomodate each $1.00 move. The reason for this is that on the last day of expiration there is a large reduction of theta loss in any strike but the strikes right at the money. So to maximize our option income, it is worth rolling frequently.

As you see below, we've ended the week in great shape, with another day of gains. Our long term leaps could be sold at a $5886 profit, and we've
realized $13,963 of gains. We've had this position on for 17 weeks. This come to a 41% return. Annualized, if this continues at this pace, this would produce $125%. Of course, we'll have to see how things develop.

size: 16 contracts
Launched April 4 2020
basis $48,535 or $28.56 / share
cash flow $15,043 or $9.40 / share
p&l $13,963 or $8.72 /share

IWM rolls 13 and 14 August

As seen in the graph above, IWM remained range bound in the last 2 days, fluctuating around 157. We optimized our positions for maximum theta decay by rolling every time the stock moved by $1.00. This sacrificed a bit of cash flow, but were brought in profits and optimized future profits.

On the 13th we closed off the puts and calls as separate elements, when pivot points were crossed. This was profitable, but is not something I would recommend to my viewers. It can be confusing, and easily lead to errors.

The next three trades were standard rolls. This requires careful attention to the securities price movements, and almost by definition requires the investor or trader to "live" in front of their computer or cell phone. But it adds a lot of additional income over a less frequently traded strategy.

The final and last trade taken today closed out the imminently expiring straddle, and sold a new straddle for the next closest expiry.

Status on August 12
size: 35 contracts Original Launch June 8
Long Term Hedge: $93,159 or $26.61 per share
Cash Flow to Date: $23,018 or $6.57 per share
P&L to date : $53,935 or $15.41 per share

Our long term LEAPS are worth a positive $2750 if closed today. This is a 60% return in 9 weeks time, a phenomenal result. If this continues, we could see a 346% yearly return, which would be simply mind-boggling. Of course, our results may deteriorate, over time, though we are confident they will continue to be quite good.

IWM rolls 05 AUG – 12 AUG

Here was the status at the end of August 5

I got a bit behind in my reporting, so I'm going to provide one graph and a brief recap for each day.

Aug 6
The price opened up $2 over our straddle centered on 152. So I rolled to 154.

bought to close AUG 07 152 call for $1.39 sold at $1.90 for loss of $0.51 per share
bought to close Aug 07 152 put for $0.40 sold at $1.16 for gain of $0.74 per share
overall gain of $0.17 per share

sold to open Aug 07 153 call for credit of $1.16
sold to open AUG 07 153 put for credit of $0.67

Status on Aug 6
size: 35 contracts
Long Term Hedge: $93,159 or $26.61 per share
Cash Flow to Date: $13,323 or $3.80 per share
P&L to date : $47,612 or $13.60 per share

August 7
bought to close AUG 07 153 call for $1.62 sold at $1.39 for loss of $0.23 per share
bought to close Aug 07 153 put for $0.12 sold at $0.67 for gain of $0.55 per share
overall gain of $0.32 per share

sold to open Aug 07 154 call for credit of $2.39
sold to open AUG 07 154 put for credit of $1.86

Status on Aug 7
size: 35 contracts
Long Term Hedge: $93,159 or $26.61 per share
Cash Flow to Date: $21,844 or $6.24 per share
P&L to date : $47,814 or $13.94 per share

August 10

gapped up to 156
bought to close AUG 07 154 call for $4.58 sold at $2.39 for loss of $2.19 per share
bought to close Aug 07 154 put for $0.92 sold at $1.86 for gain of $0.94 per share
overall loss of $1.25 per share

sold to open Aug 07 157 call for credit of $2.50
sold to open AUG 07 157 put for credit of $1.85

size: 35 contracts
Long Term Hedge: $93,159 or $26.61 per share
Cash Flow to Date: $22,195 or $6.34 per share
P&L to date : $43,374 or $12.39 per share

August 11

IWM opened at 157.50, close to where we anticipated it would finish the day, so we had no need to alter our positions.

Status on August 11
size: 35 contracts
Long Term Hedge: $93,159 or $26.61 per share
Cash Flow to Date: $22,195 or $6.34 per share
P&L to date : $43,374 or $12.39 per share

So we finished this period having sacrificed a bit of our rolling premium revenue. However, this has been more than offset by gains to our long term LEAPS which are unexpectedly showing a positive hoviering in the $3400 range. So we might even consider rolling those to lessen the cost of our long term insurance. But that is the subject matter of another post. Their are pros and cons to doing that and I want to address it with careful explanations.

SPY – 12 August Rolls

SPY continued to ride the Corona Express roller-coaster today, rising sharply after swooning 7 points in late trading yesterday. Looking
at the technicals, I was convinced SPY would rally to 334, but drop from there to around 332 by the end of the week, and possibly lower to $329.

Late on the 11th I believed the downturn was temporarily done and we were due for a dead-cat bounce up to 334. So I did not yet want to close my 337 deep-in-the-money put, hoping to buy it back cheaper as the price reached 334 again. But as the market was moving fast, I placed a buy order if SPY breached lower lows. That happened after hours, at a price of $4.12, resulting in a loss of $2.63 per share. I normally would have sold a 334 put at that time, to bring in additional premium. Oh well...

This morning, SPY had gapped up to 335, a little higher than I expected. Looking at the charts, I still expected it to hover around $334 for a day or so before dropping lower. So I collect my aug 12 337 calls to 334 bringing in $2.52 in premiums,

Of course, SPY did not care what I thought, and did its own thing. to my surprise, it reached all time highs at $337.47. So I had to roll with the punches, even though I'm still not convinced that we are not seeing a double top formation. I learned years ago to listen to what the market says, and not what I think it should do...

So I again rolled to the now higher centered point at $336. I could have centered at a strike of 337, but again, I felt that the runup was overdone, not being accompanied by any positive news on the political front regarding corona-support measures.

When the dust had settled at midday, I had a small loss overall of $511 or $3.19 per share, with a cash flow reduction of $2349 or $1.47 per share.

size: 16 contracts
basis $48,535 or $28.56 / share
cash flow $14,943 or $9.33 / share
p&l $12,318 or $7.69 /share

SPY – Summary of Rolls from 06 -11 August

The last few days have been a maelstrom of activity for me, recording new videos for the channel TradeJolt on Youtube, adding new credit card processing functionality to this website, and preparing the launch of a new blog dedicated to cryptocurrency finance, decryptofied.com.

We're also busy working away at an exciting new functionality to this site, which will add a marketplace for option deals between buyers and sellers of trade ideas. The idea is to allow publishers to post their best ideas, and to reveal enough about the idea for other viewers to wish to pay a small fee to reveal all the intricacies of the trade. We'll be adding rating functionality, and feedback. We think it will be a very powerful and popular feature.Expert option traders will have a new means of remunerating their research, while viewers of this site will have more of an opportunity to benefit from great trades.

So pardon the lack of detail as to the rationale for the following trades. Overall the strategy continues to increase in profits over time. Our earnings per share from selling options have grown this week from an accummulated total of $6.63 per share to $8.01 per share.

By the way, today on August 11, we were assigned on our 335 in the money calls. As my readers know, I like to try to avoid assignment,
as it can temporarily add to the overall margin requirement of a position, until the position can be closed out. Other than that impact,
it is not something to be concerned about, as we are covered by our outer LEAP options hedges.

A list of the trades made on each day follows beneath the graph of SPY's movements.

SPY has continued to march higher.
aug 6
bought back 332 call for $2.04 sold for $1.78 loss of $0.26
bought back 330 put for $0.41 sold for #1.09 gain of $0.68
net gain $0.42 /share

sold a 333 call for $1.41 exp aug 7
sold a 333 put for $1.13 exp aug 7
cash flow -$2.45 + $2.64 = $0.19

size: 16 contracts
basis $48,535 or $28.56 / share
cash flow $13,219 or $8.26 / share
p&l $10,613 or $6.63 /share

aug 7
bought back 333 put/calls expiring tomorrow
bought back 333 put for $0.64 cent sold at $1.14 for gain of $0.59
bought back 333 call for $0.41 sold at $1.09 gain $0.68
adjustment made
bought new 333 put expiring aug 7 for $0.66
sold same 333 put exp aug 7 for $1.13 gain of $0.47

sold 334 aug 10 put for $1.37
sold 334 aug 10 call for $1.44
cash flow -$0.64 - $0.41 - $0.66 + 1.13 + $1.37 + 1.44 = $2.23 / share

size: 16 contracts
basis $48,535 or $28.56 / share
cash flow $14,780 or $9.23 / share
p&l $13,397 or $8.37 /share

aug 10
bought back 334 aug 10 calls at $1.47 sold for $1.37 for $0.10 loss
bought back 334 aug 10 put at $0.23 sold for $1.44 for $1.20 gain
sold 335 call / put for 0.48 put 0.74 call

335 aug 10 calls sold for $0.73
335 aug 10 puts sold for $0.48
ttl $1.21
cash flow 1.70 - 1.21 = 0.49 cents x 16 contracts

size: 16 contracts
basis $48,535 or $28.56 / share
cash flow $15,564 or $9.72 / share
p&l $15,117 or $9.44 /share

aug 11

assigned at 335
bought back at $336.93 on 1000 shares and 336.50 on 600 shares
loss of $1.93 and 1.50 respectively
loss overall:
10 x 100 x 1.50 = ($1,500)
+ 4 x 100 x 1.93 = ($ 772)
+ commissions = ($ 10)
total =($2282) or $1.43 per share

sold new 337 aug 12 calls and puts for 1.55 put+ 0.96 call or credit of 2.51
cash flow gain of 1.08 /share

size: 16 contracts
basis $48,535 or $28.56 / share
cash flow $17,292 or $10.80 / share
p&l $12,829 or $8.01 /share

IWM – Aug 5 Rolls

Contrarily to SPY, IWM had not moved up quite as much, and looked like it might correct back towards our 152 straddle center. So I chose not to change the center point. However, the position was profitable. Upon examining the theta decays on the Aug 21 that I had been holding versus the new Aug 7 straddle and the condition of my cash flow - quite positive , it made sense to me to sacrifice cash flow and gain more time decay.

In the graph below, the red arrows show you the comparative Theta values. The shorter term options lose around 0.33 theta more each day or around $0.33 cents per share.

size: 35 contracts
Long Term Hedge: $93,159 or $26.61 per share
Cash Flow to Date: $13,675 or $3.90 per share
P&L to date : $46,812 or $13.37 per share