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Start Again.

Prologue

This past year has been one for the books! It will complete 18 months of trading trials, rookie mistakes, and strategic revelations as it comes to a close. So after a year of losses (which I will interpret as the cost of my education), I now look forward to zeroing out my account and starting again.

I also see this past year as just the first chapter of my effort to be a better and “aware” Options Marketeer. Although I now have some battle-scars and stories to tell, I still have a long way to read the market and manage my emotions. Education is a life-long pursuit.

The next several weeks will be a time to reorganize my journal, watch list, and log file in preparation for a new (from zero) start on Jan 1, 2020. The Options trades that I currently have cooking will need to close before Dec 31, so I can begin Jan fresh.

I do not anticipate submitting any new trades in December, primarily because I believe many Marketeers will close out a lot of winning positions as business cycles come to a close. Additionally, tax considerations are going to drive the market into higher volatility. I will continue to monitor and close exiting positions when the percent of max gain reaches 85% or when trying to minimize a loss.

If I submit new trades, it will be a last-ditch test on using Put/Call Ratios in the decision to open. But any new positions will be closed before the end of the year.

I also intend to reduce my journal activities in December since I won’t have too much new stuff to say.

Below I added two new sections for my journal:

• A Market Sentiment section. I want to articulate my personal interpretation of the current market sentiment for this week’s BEFORE I make any trades decisions.
• A revised Profit and Loss section that better matches my spreadsheet’s P&L statement.

This Week’s Market Sentiment

The primary purpose of this new section is to force me to first review the current market sentiment before I consider any new trades for this week. My adjusted schedule will now mandate updating this section along with adjusting Trend-Channels for my watch list, first thing Monday morning.

As of 11/25/2019

General Volatility: VIX = 12.11, up slightly from 12.05 last week
Put/Call Ratio 9-day SMA (all OCC options): .76, slightly up from .75 last week
Consumer Sentiment Index (CSI): 96.8, up from 95.7 last week, down 1.8% from 1-year
DOW 27,974, down slightly from 28,004 from last week
S&P 3,125, up slightly from 3,120.46 from last week

The 9-day SMA ratio for all the Puts and Calls managed by The Options Clearing Corporation (OCC) is just above .75. This ratio signals mainly a sideways moving market that is casually drifting up. Add, VIX is below 15, and neither indices are moving too fast. Without something shaking the tree, I would expect the market to drift in whatever trend-current it in.

For external tree-shakers, the impeachment effort is seeming to peter-out, and the US/China trade agreements are reportingly moving forward. This lack of significant national news is all keeping the CSI at its record high.

The only trimmers I can predict is going to be the usual end-of-year profit-taking sell-off.

My sentiment for this coming week is to not expect the needle to move too much. I would focus primarily on Deep-OTM Vertical Put Bull Credit Spreads but minimize the maximum dollar risk for the week and any trades.

Profit and Loss Statement

This section has been revised to show a simple snapshot table showing P&L for Year-to-Date, Month-to-Date and current week.

As of 11/29/2019

		Year	Month	Week #
		2020	Nov	48
Beginning Account Balance		$0,000.00	$0,000.00	$0,000,00
	Deposits	$0.00	$0.00	$0.00
	Widthdraws	$0.00	$0.00	$0.00
	Realized Profits (closed spreads)	-$471.00	$-19.00	$0.00
	Unrealized profits (open spreads)	$102.00	$102.00	$21.00
	Fees Paid (total)	-$692.40	-$17.00	-$1.00
Ending Account Balance		-$1,061.40	$66.00	$20.00
Total Gain/Loss		-$ 1,081.40	$ 46.00	$20.00

By far, the biggest loser for the year is the fees I paid to do trading business. To date I have paid over $690 is trading fees, representing 64% of all my losses. If it had not been for the trading fees changes in October, I may have summarily thrown in the towel.

Realized Profit by Strategy

	Year	Month	Week
	2019	Nov	48
Vertical Bull Put Credit Spread	-$170.00	$27.00	$0.00
Vertical Bear Call Credit Spread	-$372.00	-$29.00	$0.00
Vertical Bull Put Debit Spread	$0.00	$0.00	$0.00
Vertical Bull Call Debit Spread	$75.00	-$17.00	$0.00
Icon Condors	-$4.00	$0.00	$0.00
Cover Calls	–	–	–
Total	-$471.00	-$19.00	$0.00

Beyond the weighty fees, the worst strategy that I used this year was the Vertical Bear Call Credit Spread. This strategy cost me $372 over just eleven trades.

The only winning strategy was the Vertical Bull Call Debit Spread. I made $75 or eleven trades.

Schedule for this Week

Here are some possible guidelines when trading Options:

• A Put/Call Ratio that has oscillated for a time below .5 = sell a Vertical Bull Call Debit Spread
• A Put/Call Ratio between .5 and 1.0 = sell a Vertical Bull Put Credit Spread
• A Put/Call Ratio between 1.0 and 2.0 = Sell a Vertical Bear Call Credit Spread
• A Put/Call Ratio above 2.0 = Sell a Vertical Bear Put Debit Spread

Goals for Week: (11/25/19 – 11/29/19) (Week 48)

• Do not make any spread trades that will live past Dec 31.
• Max technical dollars at risk = $750, dn from $1,000 (see Market Sentiment section)
• Max dollar risk per trade = $350, dn from $500 (see Market Sentiment section)
• Place no more than one trade per day – except Friday (catch up day).

Monday:

• Determine/update this week’s market sentiment section.
• Calculate Put/Call Ratios for all stocks on the watch list.
• Review and tweak Trend-Channels for all stocks in the watch list.
• Confirm that the target expiration date for all options trades is set as follows:
  (This week’s trade duration was shorted from 6-weeks to 5-weeks due to the EOY.
  • Bull Put Credit Spreads: Dec 27 (5-weeks).
  • Bull Call Debit Spreads: Dec 27 (5-weeks).
• Stage possible trades for all watch list stocks by 10:00 AM
• NO TRADING BEFORE 10 AM. (Let the market find its direction after the weekend.)
• Watch 1 Webcast or take one online mini-course to be completed by Friday.  

Tuesday – Thursday:

• Review how yesterday’s staged trades moved. Adjust premiums to take advantage of movement as “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). 
  • Be mindful of Entry Rules.
  • Balance the spread strategy (Call/Put) to minimize actual risk for that expiration date.
• Update trading log file and journal (this blog) with any accepted trades.

Friday:

• Review the total technical dollars at risk for this week. If significantly below $1,000 then submit additional spreads.
• Update and post weekly journal (this blog) with any lessons learned or strategy changes.

This Week’s Trade Activity

As of 11/22/2019:

Spread Count Summary:

	Year	Month	Week #
	2020	Nov	48
Vertical Bull Put Credit Spread	60	4	1
Vertical Bear Call Credit Spread	11	4	0
Vertical Bull Put Debit Spread	0	0	0
Vertical Bull Call Debit Spread	11	3	0
Iron Condor	2	0	0
Margin Interest Paid	1	0	0
Total Spreads	85	11	1

Current Dollars at Risk:

	Year	Month	Week #
	2020	Nov	48
Vertical Bull Put Credit Spread	-$448.00	-$448.00	-$179.00
Vertical Bear Call Credit Spread	$0.00	$0.00	$0.00
Vertical Bull Put Debit Spread	$0.00	$0.00	$0.00
Vertical Bull Call Debit Spread	-$51.00	-$51.00	$0.00
Iron Condor	$0.00	$0.00	$0.00
Total Dollar Risk	-$499.00	-$499.00	-$179.00
Max Risk Allowed	-$4,500.00		-$1,000.00

New Trades Opened

IWM: 213p/215p – 1 Contract – Open 11/29 – Expires 12/27 – Credit= $21.00
(Vertical Bull Put Credit Spread)
Open: Prob. OTM= 83.2%, ROR = 12.5%, PC/Ratio = 1.64 (Bearish), Max Loss= $176.00
Prob of OTM now = 80.8%

After I submitted this trade, the parameters became significantly more bearish.

The current price of IWM had just dropped below the 9-day SMA as it has bounced off the top edge of the Trend-Channel. But the 9-day SMA is well above the 5-day. The expiration date of 12/27 is just a couple of days prior to the end of the year, and I do anticipate prices dropping for profit-taking. So the big question is – “why did I take this trade?”

I took this trade because when I submitted it, the trend was signaling bullish – but just barely. As a policy, I should write these synopses before I submit any trades…

Trades Currently Cooking

IWM: 160c/161c – 1 Contract – Open 11/25 – Expires 12/20 – Debit = $50.00
(Vertical Bull Call Debit Spread)
Open: Prob. ITM = 44.5%, ROR = 94.1%, PC/Ratio = .77, Max Gain = $48.00
Prob of ITM now = 58%

SPY: 294p/289p – 1 Contract – Open 11/15 – Expires 12/20 – Credit = $31.00
(Vertical Bull Put Credit Spread)
Open: Prob. OTM = 86.1%, ROR = 6.4%, PC/Ratio = 1.41, Max Risk = $468.00
Prob of OTM now = 91%

Current Trades Closed

QQQ: 208c/212c – 1 Contract – Open 11/21 – Expires 12/13 – Credit = $34.00
(Vertical Bear Call Credit Spread)
Open: Prob. OTM = 86.7%, ROR = 9.0%, PC/Ratio = 5.41, Max Risk = $365.00
Prob of OTM at closed = 71.8%

I’m closing this position sixteen days early at a debit of $70 ($.70 per share * 100 shares). The net loss on this trade is: $32.00 premium already collected – $70.00 premium paid to close the trade – $2.00 trading fees = -$40.00. Even though the Prob-OTM is still above 70%, I’m exiting this position because it is not moving in the direction I thought, and there is too many days left for it to go ITM. I will continue to watch this trade as “paper-money” to see if my I made the right decision.

The current price and the 9-Day SMA for QQQ have broken through the top of the 4-month Trend Channel, and the trajectory of the Put/Call Ratio had quickly moved to the bullish side from 2.78 at open to 1.76 at closed. (The P/C Ratio start above 2.0 initially signaling a slow bearish turn, then it quickly fell, suggesting more Marketeers are beginning to feel that there is still upside.)

Epilogue

I suspect that I will post at least one more journal at the end of December. Although my financial performance this year came at a cost and is certainly nothing to boast about, it is not nearly as costly as what it could have been.

Just for the record, I would like to document what it cost to make this first step.

Cheers…