[cakndrew]

I’m happy to share what I did today. But some of it will contradict what I wrote earlier.

The first trade I did was ABT. $115/$110 strike price, 10 contracts, $307 premium earning about 6% for less than 2 weeks of risk (5/14) or 3% if closed early at half price. I liked that I could get such a good potential ROI for less than 2 weeks of risk. I did this right away, within a few minutes of the market opening. This was on Teddi’s watchlist for the day at this strike price so I went ahead with it. I wanted something in the Healthcare sector since none of the other options I have are in that sector/industry. I certainly didn’t expect the market to drop so much and in hindsight, I should have waited to see what the market was going to do or lowered the strike price to something with more protection. If I can make $50-$100 on it tomorrow, I will probably just sell it and move on to something else.

For quite a while, after that first trade, I spent a lot of time looking. Everything was down and so the premiums were fine but I had now had three options (MSFT, INTC and ABT) that were now within 2% or less of the strike price and so I was a little anxious about that. I looked into rolling them out/down but wasn’t real thrilled with what the numbers were showing me and since it wasn’t at or below the strike price yet I decided to let it go and see what happens.

Also, since I had about 25 credit spreads in play, most of my favorite big names I already had contracts and I didn’t want to double up on any of them with the market in a downward spin.

So next I started looking at the Best Bets list. Yesterday was the first time I had really given those stocks a chance because they are mostly smaller companies with low trading volume. But I was getting some amazing premiums yesterday with great protection so I spent a good chunk of the day today putting out offers. Many of them weren’t filled but a number of them were.

GKOS – $80/$75 strike, 5/21 expiry, $585 premium, 11.7% if held to expiry, 11% protection
LGIH – $160/$155 strike, 5/21 expiry, $587 premium, 11.74% if held to expiry, 8% protection (it was 10% when I put in the order)
YETI – $75/$70 strike, 5/21 expiry, $477 premium, 9.5% if held to expiry, 14% protection

And then towards the end of the day Teddi posted a couple of FB trades. And I did one of those too.
FB – $282.5/$275 strike, 5/21 expiry, $250 premium, 4.94% if held to expiry, 11% protection.

Overall, I’m happy with how today went. Even with the pretty big drop in the market, one of the Best Bets trades I made yesterday closed today for a $500 profit.

My MSFT contract that has only 2% of protection is set to expire at the end of this week so hopefully, it can make it to Friday without dropping more. This should be an easy one to roll out and still earn a premium on.

My INTC contract only has 2% of protection and doesn’t expire until next Friday. I’m kinda expecting that one to go in the money. I only received $237 for that premium so if I can close it tomorrow at a break-even or even at a little loss, I probably will do that just for peace of mind.

Over all, even with the down day, my entire portfolio has an average of 8% protection and my ROI average for the current contracts is sitting at 8% if all held to expiry (almost none of my spreads have made it to expiration though for the 2 months I’ve been doing this).

[cakndrew]

Thank you Aby. There were a couple of trades today that I thought might go below the strike price but none of them did, and then the market recovered a fair amount at the end of the day so I’m feeling ok about it.

My philosophy has basically been…be at least as conservative as Teddi and don’t be afraid to take profits early :)

[cakndrew]

Hi David.

When I am searching for trades I look for a strike-price 10% below the current price. However, some of the trades I do are less than that, particularly the ones that Teddi enters.

So the 8% I was referring to was the overall average protection that all my trades were currently at. As of today, with the big sell-off this morning. The average protection is down to 6%.

Hope that clarifies things?

Caleb

[cakndrew]

Thank you for your response Teddi.

Yes, I update my spreadsheet daily, sometimes more than once depending on the volatility of the market for the day and if I have some trades that are getting close to the strike price.

I do have extra capital that I can bring in if needed but the goal would certainly be that I never do that. I think I would rather take a loss on a trade which would reduce my overall ROI than to bring in extra capital. But I’d keep trying to roll it out and/or down until I was forced to take a loss. Right now, any premiums earned simply go back into the account to increase the capital available to trade with. And since my amount risked in each trade is on the smaller side that makes me feel more comfortable that I’d be able to recover from a loss on one if I had to.

It’s more the quick overall stock market drop that worries me. I think something I will focus on is to make sure the expiry dates on all my positions at any given time are more spread out over the following weeks rather than having the majority of them being like 4 weeks out. Then if the market does begin to drop, I will not have to worry about all of my positions being in the money.

As to the BA trade mentioned, I first entered that trade in the middle of April. It dropped again the next day and I got too nervous too quickly I think. I rolled it out, but not down, more than a month out. I got a very good premium for doing that, but if I were to do it again, I probably would have rolled it down as well, or at least waited another week to see where the stock price went. If I had waited the option would have just expired worthless on 4/30.

I’m thoroughly enjoying learning from you and watching all that you are doing. I am slowly learning the SPY hedge and just last week I started following and paper trading your trade ahead of earnings.

Caleb

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