My Options Trading Unlocked – Newsletter 30 Sep 23

Newsletter – My Options Trading Unlocked : Insights for Tomorrow’s Profits

30 Sep 2023

Is there a social dimension to your options trading ?

Read on, maybe I can inspire you to be a profitable & social option trader…

My goal is to share my journey and help you make a profit from options trading. I also write about my thoughts related to options trading and finance in general. And everything I think you may be useful to share about the stock market for the week ahead as an option trader. Every week I report about the status of my portfolio.

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1. Overall Market Overview

When I prepare for trading or following the market and my positions, I focus on two aspects : the general trend of the market with the indexes, mainly the SPX and the volatility of the stocks with the VIX. The reason why is clear in my mind : the general trend of the market and stock volatility are essential for options traders because they directly impact options pricing, influence trading strategies, and offer opportunities for risk management and profit generation in the dynamic world of options trading.

And then again, I don’t want to over-analyse too: so SPX trend and VIX levels are not far away.

The SPX index dropped down 32 points (0,7%) this week from 4320 to 4288. Some may argue there was a resistance line now around 4320. The RSI also shows that the market is a bit oversold, so I could have expected a bounce…which seemed to be the case this week, with a low on Wednesday. The market opened strong on Friday, but gave all its gain back at the close.

SPX Chart – SPX 4288 $

Market outlook for next week : Nobody knows anything so I am not trading direction. One could expect the market to follow through a bit more downwards and bounce from the mentioned resistance levels or maybe hoover a bit around this spot. For my positions, I hope to see a bounce in the market next week, and especially in some specific stocks.

VIX Chart – VIX USD 17.52

The VIX spiked on Wednesday (around 19.70), came back below 16 on Friday, but finally ended 0.32 higher than last week’s close (17.20). A rising VIX inflates the options prices and results in a negative P/L for open positions for options sellers. Every beginning option seller will experience that this inflation happens now and then and, most importantly, must understand it raises the extrinsic value alone, that will be recaptured as time will pass. As long as your positions intrinsically remain in tact, you will have to remain calm and see through this temporary loss in Net Liq. Understanding why things happen is in my opinion the basis of success.

A higher VIX also means higher options prices and gives us option sellers the possibility to have a bigger returns, except of course for the positions already open. The 21- and 50-day trend lines start moving up, maybe an indication that the downtrend, or the period with extreme low vix may be ending? Who knows?

2. TOCF Portfolio Weekly Recap & Trading Plan

a. My actions last week (24 Sep – 29 Sep 23):

Closing Positions :

None of my positions were closed in the last week of September. Although we are, on Friday, at 21 DTE (days till expiration) for all the 20 Oct 23 expiration options, I have decided to keep a few positions on till after the weekend, to catch the weekend theta as well. I felt like I good squeeze a bit more, or a couple of days more theta out of these positions.

Opening & Adjusting Positions :

• Opening $GOOGL – 29 Sep 23
  • STO 1 Short Strangle 120P/150C, ExpDate 17/11/23, BP $1400, IVR 33,7, SpyB_Delta 0,48 with PoP 74% for a net credit of $2,39
  • With this descent IVR in GOOGL and with most some of my positions at 21 DTE, I was looking to add a new position to add the extra theta ($7) to compensate for the positions I will close soon.

• Opening $MSFT – 29 Sep 23
  • STO 1 Short Strangle 280P/355C, ExpDate 17/11/23, BP $3200, IVR 39.2, SpyB_Delta 0.74 with PoP 79% for a net credit of $4,04
  • Same reasoning as for opening $GOOGL
• Opening $LYFT – 29 Sep 23
  • STO 1 Covered Call 14, ExpDate 17/11/23, BP (covered), IVR 8,8, SpyB_Delta -0,75 with PoP 86% for a net credit of $0,24.
  • I own 100 shares of $LYFT already and this CC lowers my cost basis a bit to a break even at $14.75
  • I have been hoping on a bounce for too long now. So I will keep covered calls on as from now till recovered for a scratch.

• Adjustment $PYPL
  • I am now 59 days in this trade since I sold the $70 put, and the stock went against my position.
  • 25 Sep 23 : rolled my $PYPL Naked Put $70 position into a $70 Straddle with exp date 17 Nov 23 for $1.02 credit, total credit received now at $3.42
  • 29 Sep 23 :
    • Rolled the $70 call down to $65 call and into inverted strangle 65c/70p position, for $0,80 credit, total credit received now at $4,20.
    • Reasoning :
      • After analysis of my possibilities of my position $70 straddle in Nov, I’ve decide to take on the battle instead of just closing this gone bad position. With the $70 Put (delta 0,93 basically acting like 93 shares of stock and with extrinsic value in the $70 put of $0.16), I am considering this to be equal to owning 100 shares.
      • My plan : In case of assignment of the $70 dollar puts, my cost basis will be at $65,80 – so I will continue to sell “well chosen” covered calls against the shares and lowering the cost basis as much as possible, until break-even. How long this will take… who knows. I will take on the fight to learn and get the experience.

• Adjustment $AMD – 27 Sep 23 :
  • Rolled my $AMD Covered Call 106 position down to 102 and out to 27/10/23 for capturing more credit; extra credit received of $1.72, total credit received for CC now at $3.24

• Adjustment $MARA – 28 Sep 23 :
  • Rolled my $MARA Naked Short Put 9 position out to 17 Nov 23 for a $0.42 credit, total credit received now $1.12;
  • BE is now at $7.88; theta at $1.12 – I’ve preferred to roll out even after a nice move up, adding extra credit to this small position.

• Adjustment $SOFI – 28 Sep 23 :
  • Rolled my $SOFI Short Naked Put 9 position out to 17 Nov 23 for a $0.24 credit, total credit received now $1.22
  • Rolled my $SOFI Short 10 Put position out to 17 Nov 23 for a $0.11 credit, total credit received now $1.34
  • I have rolled out in time at the moment of an up move of the share price to receive more credit.

b. Results week (24 Sep – 29 Sep 23) & currently open positions:

Here is an overview for all accounts of the results of last week:

For this week: No positions closed, so nothing much to report besides that I have opened 3 new positions and rolled 6 times.

c. Results for September 23

Here is an overview for all accounts of the results of September :

The target of $800 for Sep 23 was breached with a net result of $1293. Closing six positions led to this result, you can see the distribution above. The profits (or losses) are always the sum of the results of the closed positions during that given month.

With the open unrealised P/L of ($2277.00), the Net Liq of my accounts is now $70,361.00 – an nice improvement of 2,35% compared to last week.

September 2023 :

• 📈 Set Goal $800 : 🟩 🟩 🟩 🟩 – finished above the monthly target $1293 / $800 (>100%) ✅
• Realised Net Profit/Loss : $1293 (1,80 % Net Liq) – close to the 2% I am aiming for as from October 23
• Portfolio Net Liq value : € 66,519 (Monthly change 📈 : € 181 or + 0,27 %) or in dollars (influence exchange rate!) $70361 (Monthly change 📉 : – $1124 or -1,5%)

Info – Interpretation of the exchange rate : I am from Europe and my base currency is euro. I am trading the US markets from a MEXEM account held in euros and from a Tastytrade account held in dollars. This means that I have and express my open positions and profits/losses of the US markets in dollars on both accounts. The Net Liq for me is only relevant in euros, taking into account the exchange rate (which sometimes is an advantage and sometimes not). This explains the difference in results between euros and dollars and for me the evolution of the Net Liq in euros is what matters ultimately.

I will keep my the trading goal for October at $1350. Completely in accordance with my strategy. In case you missed it my strategy document or you hadn’t had the time yet, here is the link again to “Developing my strategy and profit goals guide”. Any thoughts or comments you may have on this trading strategy document, please don’t hesitate to email me or write them in the comments of the page.

d. My Trading Plan for upcoming week:

At portfolio level :

• The MX account is in euro en the TT accounts in USD. Sum of the values of the 3 accounts = $70361.00 USD (or 66,519.00 Euro)
• I have been working on reaching and keeping descent theta level, while keeping a descent delta/theta ratio. The sum of the SPY Beta Weighted Deltas of my three accounts is 54,93 (meaning if the SPY goes up $1, my portfolio value will go up $54 and vice versa)
• I am for a 1:2 ratio with long delta/theta. My positions have made a nice recovery and after adjusting some positions where required, the delta/theta ratio is at 0,54 at the moment. Exactly in the range I am looking for.

Most of my open positions are still in the red : the unrealised P/L is down to $(2277).

At individual stock level :

• I am looking for $PYPL to make a bounce so the recovery can start
• I will continue selling cc and lowering the cost basis on AMD, LYFT and PYPL (as good as covered).
• I am looking to close $IWM begin next week. It can remain and sit where it is right now or even slightly up.
• Although $FSR moved down quite a lot last week, I am quite confident in my opened $6 put position, is gonna be a winner I can close in October.
• The IC in $UNH and $SMCI will either be closed at 50% profit or I will keep them on and let them just run.

3. Weekly Watchlist

My special attention remains for the coming week to my 18 held positions in 13 different stock: AAPL, SOFI, AMD, MARA, LYFT, ORCL, UNH, SMCI, FSR, PYPL, IWM, MSFT, GOOGL

Currently no special attention for a specific stock that I want to take a position in.

4. Other stuff & info

I have been working on my a couple of projects this week:

• the Trade Results Page a historic graph of my trading results of the last 3 years, will get updated for Sep 23

• A permanent project is to improve the page My Approach to a methodic Options Trading Strategy and Profit Goals. I am really hoping to exchange some thoughts with you all on this topic, so leave me your thoughts in the comments of that page!

• I aim systematically reviewing and re-reading about options topics. To deepen my understanding of all the greeks I have decided to capture all relevant aspects of every greek in some sort of guide – page, that I can share. I have started with delta and you can read it here : Delta Explained – What is it and how can options traders use it

5. Some thoughts about the social aspect of trading

Options trading, at its core, seems like a solitary venture, where individuals meticulously analyse markets and execute trades based on their own understanding. However, I believe that beneath this façade lies a subtle yet vital aspect — the social dimension of options trading.

If you study & trade options and follow the market closely, you probably spend quite some time alone at your desk or mobile phone with little interaction with others and other traders.

The emergence of online trading communities, forums, and social media platforms has given rise to an interconnected network of traders. Here, traders share insights, strategies, mostly successes, and (sometimes) failures. This exchange can impact trading behavior, and in a few cases potentially altering market dynamics (remember the short squeezes).

But how does this connectivity affect my or your decision-making? Does the collective wisdom of a group influence individual choices? How significant is the psychological influence of a trading community? Can social interactions help become more profitable? These questions delve into the intriguing realm of the social dimension in options trading.

Considering the psychological factors in trading, understanding the collective market sentiment seems to be crucial. Social networks provide platforms for traders to express opinions, creating a ripple effect on trading patterns. The collective mood can either affirm or challenge an individual’s trading stance.

Moreover, collaboration within trading communities can lead to a diverse range of strategies. How does exposure to different strategies impact a trader’s approach? Is it possible to harness collective knowledge for improved decision-making? I believe it it can. Intrigued by this social undercurrent in options trading, I have embarked on a journey to unravel and report about my personal options trading adventures.

For this reason I am really attempting to create also a social aspect to my own options trading and of those who want to join in.

I aim to systematically engage interact and engage on Twitter (you can follow me @L2tradeoptions)and I have created a Discord for creating a social dimension of my trading. I shouldn’t explain the why of Twitter but this discord platform includes free access to different chatroom – chat channels where we can speak with other traders about trade recommendations and general strategies.

This social aspect of trading doesn’t only add more interactivity — it can also help us all become better informed options investors and by talking with your peers. If you’re considering joining a discussion platform like our Discord, which I hope you will, I strongly encourage you to actively engage and participate rather than being a silent observer. Here are some reasons why I believe active engagement is valuable and some tips how to enhance your experience:

8 direct benefits of joining a discord trading community:

1. Collaboration is Key: Being part of a collaborative learning environment such as Discord group allows for interactive discussions, knowledge sharing, and learning from more experienced traders, accelerating your learning curve in options trading. In active discord groups, traders synergise knowledge, dissect market trends, and brainstorm strategies. It’s like having a trading brainstorming session 24/7!
2. Real-Time Insights: When the markets move, the community discusses, and allows you to stay ahead with real-time market insights. That’s gold in a dynamic options trading landscape!
3. Diverse Perspectives: Every trader has a unique approach but by engaging with diverse minds, you get exposed to strategy insights and ideas you might never have considered. It’s like trading in a think-tank!
4. Emotional Support: Trading can be emotionally taxing. In a discord community, you’re not alone. We share our wins, our losses, and concerns. The camaraderie helps maintain mental balance during market volatility.
5. Access to Tools and Resources: Many discord communities offer perks for exclusive tools, analysis, resources, and research materials that might not be easily accessible elsewhere, enhancing your trading capabilities. Imagine leveling up your arsenal with tools tailored by seasoned traders!
6. Enhanced Support and Motivation: Joining a trading community can combat the isolation that traders sometimes face. Sharing experiences and challenges with others can provide emotional support and motivation during both good and challenging trading times. Actively engaging in discussions allows you to exchange ideas, gain diverse perspectives, and enhance your understanding of the subject matter.
7. Networking and Mentorship Opportunities: Discord communities provide a platform to connect with like-minded traders and potential mentors who can guide you in your trading journey, potentially leading to valuable opportunities, improved strategies and profits.
8. Contributing to the Community: Your thoughts and insights matter. Sharing them contributes to a vibrant and enriching community experience.

4 Tips to engage actively:

• Initiate discussions: Don’t hesitate to start a conversation or ask a question. Your curiosity can spark engaging discussions.
• Respond and react: Respond to others’ queries and comments. Offer your perspective or appreciation for their input.
• Participate : be an active participant. It’s a great way to meet others and share your thoughts.
• Voice your opinions: If you have an opinion on a topic, share it respectfully. Your viewpoint might encourage a healthy debate.

Remember, your involvement amplifies the platform’s value for everyone. Unfortunately, often there are more silent watchers than active talkers. So I do encourage all who join our discord, to dive in, share your thoughts, and let’s make this community socially thrive!

Two quotes are very applicable here : “The more you share, the more you get” and “Your generosity today is the magnet for your prosperity tomorrow”.

There you have my 2 cents on the social aspect of trading. Social & Profitable ! (And don’t confuse Social with socialist)

Sometimes it only takes a few to lead the masses 🙂 We will enjoy it!

Whenever you’re ready, here are 3 ways I can help you to improve your option trading:

1. For the option traders still looking for a Trading Options Spreadsheet to track their results and improve their trading, check out the EASY “All In Trading Options Journal Spreadsheet”: the ONLY option trading journal designed to focus on parameter-based options trading and account management, as probabilistic-minded options traders like me like it. Checkout this article about the spreasdsheet, the multiple tutorials about the spreadsheet on my Youtube or read about the spreadsheet directly available in our webshop

2. If you are not a Free member of our discord yet : In our discord channels, we team-up with other like-minded option traders, with the aim to support each other and share valuable insights and ideas. I provide live comments, trade alerts, educational info and tools via our discord room. Join anytime ! here: http://discord.gg/cGW6xH4RNT
3. In case you haven’t found me on social media: I suggest to follow me on X @L2TradeOptions and on Youtube @TradingOptionsCashflow to pick up my latest content.

I hope that providing some insights in my trading and my thoughts, will trigger some thoughts and maybe ideas that will help you with your trading and helps to become an even more profitable options trader. Don’t hesitate to contact me to talk options.

Thanks for reading the TOCF Newsletter, a great weekend and happy trading!

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Let’s generate cash flow together !

P&K

Please do leave your thoughts below in the comments.