Prologue

In my last post, I railed against the high trading fees charged by Ameritrade. But I cannot rail against Ameritrade as a service. The cost of education is expensive, but not nearly as expensive as the cost of ignorance.

But as good intentions would have it, timing and fortune seem to be in the driver’s seat.

This week’s research was to review two or three online brokers that offer lower fees than Ameritrade (my broker). But on Monday, Charles Shwab announced the elimination of the Options Base Fee and a reduction in the per-contract price. Then on Wednesday, Ameritrade followed suit with the same “no-fees” changes to take effect 10/3/19. These changes were great news for me since these trading fees were literally eating my lunch.

Because of these developments, this week’s journal-blog will only record position changes for the record – no new insights.

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P&L and Performance Status

YTD (2019)

Realized Net Profit from Spreads: -$990.05
Spreads started: 62
Realized ROC (target = 72% for the year): -25%

A little caveat to the dismal P&L shown above. Earlier this year, I made a lot of rookie mistakes, and I’m still paying the price. It’s going to take a couple of months to recoup, and I do feel I have improved my trading understanding to fair better.

Last Month (Sept)

Realized Profit: $99.15
Spreads Started: 7 (4 Spreads closed)
Realized ROC (target = 6.0%): 8.4%

Spread Trades Won: 3
Spread Trades Lost: 1
Win Ratio: 75%

MTD (Oct)

Realized Profit: $0.00
Spreads Started: 0 (0 still open)
Current at risk $$$ for Spreads (Max: $3,960): 1,806.90 (46% of max risk)
Realized ROC (target = 6.0%): 0% (no closed spreads)

Spread Trades Won: 0
Spread Trades Lost: 0
Win/Loss Ratio: 0%

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Schedule for this Week

Monday:

  • Review and tweak the Trend-Channels for the general Market direction.
  • Determine if the IV is high or low so I can better choose Debit or Credit spreads.
  • Review and tweak Trend-Channels for all stocks in the watch list.
  • Confirm that the target expiration date for all options trades is set to Oct 25 (25 days).
  • By 10 AM, stage possible trades for all watch list stocks (but don’t trade anything).
  • Watch 1 Webcast or take one online mini-course to be completed by Friday.  

Tuesday:

  • Review how yesterday’s staged trades moved. Adjust premiums to take advantage of movement (these are “long-shots”). 
  • Submit a couple of Spreads, but keep a close watch. If one takes, cancel the others (we just want one new active trade). 

Wednesday:

  • If no “long-shot” spreads were accepted yesterday, then readjust premiums closer to ATM prices and resubmit. We want only 1 spread accepted so keep watch.
  • Recheck/tweak trend-channels. 

Thursday:

  • Reset target expiration date to Nov 8 (36 days out to the following Friday). 
  • By 10 AM, stage possible trades for all watch list stocks. 
  • Submit a couple of Spreads, but keep a close watch. If one takes, cancel all others. (Do not submit a trade with for the same ETF as Tuesday.)

Friday:

  • Same as Wednesday.
  • Update trading journal (this blog) and update it to the Internet by end of the day.
  • Make sure you watched a webcast.
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Trades Ended This Week

SPY: 282p/278p – 1 Contract – Open 9/5 – Expires 10/4 – Credit = $31.05
(Vertical Bull Put Credit Spread)
Open: Prob. OTM = 82.2%, ROC = 8.6%, Max Risk = $363
This position expired worthless. Net Profit = $31.05

QQQ: 179p/175p – 1 Contract – Open 9/5 – Expires 10/4 – Credit = $31.05
(Vertical Bull Put Credit Spread)
Open: Prob. OTM = 82.8%, ROC = 8.6%, Max Risk = $363
This position expired worthless. Net profit = $31.05

QQQ: 192.5c/192c – 2 Contract – Open 9/11 – Expires 10/4 – Debit= $64.95
(Vertical Bull Call Debit Spread)
Open: Prob. ITM = 52.3%, ROC = 54.0%, Max Risk = $64.95, Max Gain = $35.05
From the moment I submitted this trade, the S&P when on a near 5% slide without stop. To my chagrin both these positions expired worthless. Net loss = $64.95

Trades Still Cooking

SPY: 302c/301c – 1 Contract – Open 9/18 – Expires 10/11 – Debit= $54.00
(Vertical Bull Call Debit Spread)
Open: Prob. ITM = 48.9%, ROC = 56.9%, Max Risk = $59.95, Max Gain = $34.10
Now Probability ITM = 1.1%

DIA: 274c/273c – 1 Contract – Open 9/19 – Expires 10/18 – Debit= $50.00
(Vertical Bull Call Debit Spread)
Open: Prob. ITM = 41.2%, ROC = 68.1%, Max Risk = $55.95, Max Gain = $38.1
Now Probability ITM = 2.5%

DIA: 252.5p/247.5p – 1 Contract – Open 9/25 – Expires 11/01 – Credit = $44.05
(Vertical Bull Put Credit Spread)
Open: Prob. OTM = 83.6%, ROC = 9.6%, Max Risk = $444.05, Max Gain = $50.00
Now Probability OTM = 71.1%

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New Trades for This Week

SPY: 265p/260p – 1 Contract – Open 10/3 – Expires 11/8 – Credit = $42.00
(Vertical Bull Put Credit Spread)
Open: Prob. OTM = 86.3%, ROC = 9.2%, Max Risk = $456.00, Max Gain = $42.00

This one trade for the week is going against my instincts. The S&P has been declining for the past two weeks. The 9-day SMA is about to drop below the 50-day SMA. And the VIX breached 20, which is a signal to expect market turbulence soon.

So to help elevate my concerns, I went six weeks out for an expiration date hoping the long-term upward trend will easily carry this trade over the goal. The deep OTM short strike of 265 is nearly 10 points below the 1 Standard Deviation of SPY’s current IV. Its opening probability of being OTM is 86%.

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Epilogue

Cheers…

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