Let it go, let it go.
You’ll never see me cry.
The cold never bothered me anyway.

(Movie: Frozen)

Prologue

This post is my final 2019 entry as a trainee. And as the verse above states: I’m letting it go!

For a final tally on how well I did in 2019, look at the P&L section below. It’s not as bleak as I thought it would be when I started a year ago.

I’m using the month of December to unwind all working positions so I can have a fresh start on the first of January. So within this post, there are no new trading revelations that I needed to expound.

But December was not an idle month. I did make a few last-minute trades in hopes to slightly better my dismal performance year. I also continue to update the “This Week’s Market Sentiment” so I can practice articulating this essential weekly task.

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Let it Go!

From a view point, 2019 really was not so bad of an Options Trading year. I viewed hours of training videos, read hundreds of Internet postings, and tried 86 different spread strategies through various market conditions with various results. I started a weekly blog to document my efforts. I created a kick-ass, live-data, interactive watch list, and developed an intelligent log sheet that gives me my performance status at a glance. It was a great year of discovering, learning, and improving.

At the same time, I made some epic mistakes early that I could not recover. I purposely lose some trades just to see how my broker handles assignment fees. I allowed some trades to hit max loss, and unintentionally loss trades due to inexperienced and inattentiveness. Then towards the end, I burned myself experimenting with Bear Spread strategies.

But I also learn a lot. I learned:

  • several different Vertical Spread strategies
  • the importance of Trend-Channeling
  • how to construct loss-resistance trades
  • how to manage losing trades
  • the revelation of the Law of Large Numbers
  • how to shield my trading account from self-destruction
  • how to create a Trading Account budget
  • establish trading parameters, so I’m not hunting hamsters with a hand-grenade
  • how to pick higher-probability trades
  • the importance of reading (the) Greeks

Some personal disciplines I picked up:

  • the importance of establishing and following a trading schedule
  • analyze, record and document – keys to overcoming and concurring
  • be aware of the enemies within and without
  • rigidity is not a winning tactic
  • ignorance is NOT bliss

And some lessons I still need to learn:

  • expand my repertoire of spread strategies – Calendars and Diagonals
  • better insight in knowing when NOT to play
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This Week’s Market Sentiment

As of 12/23/2019

General Volatility: VIX = 12.8, basically a flat line from 12.1 last week.
Put/Call Ratio 9-day SMA (all OCC options): .66, slightly down from .76 last week
Consumer Sentiment Index (CSI): 99.3, basically flatlined from 99.2 last week
DOW 28,566, up 1.0% from 28,272 from last week
S&P 3,226, up 1% from last week’s 3,195

Think or Swim
5-month Put/Call Ratio Graph for All OCC Options as of 12/23/19

The most significant notable from the above Put/Call Ratio chart is the daily ratio is below the 9-day SMA, which is below the 50-day SMA, which is below the 200-day SMA. All indices are moving towards the bottom of the 2-month Trend-Channel, which itself is bullish. This lack of buying Puts for insurance implies that not too many Marketeers are fearful of what’s coming next.

The VIX below 15 (and falling), suggest that there is not too much indecision as to the market’s bullish direction.

Geopolitical tree-shakers are:

  • With Boris Johnson reelection as PM implies solid direction for Brexit
  • There appear to be buyers remorse on Trump’s Impeached
  • US/China Trade deal tension seems to be relaxing
  • North Korea is promising a Christmas present for the US (unknown as of today)
  • Surprising lack of the usual end-of-year profit-taking

Outside of NK becoming a new rattler, the old shakers seem to have gotten tired and quieted down. Beyond what NK means by a “Christmas Present“ and what the US does about it, it seems Christmas 2019 will show some Good-Will to all men this year.

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The Consumer Sentiment Index

The CSI remains above 99% continues to stand out the most. No one appears too worried about our economy. Even the eco-naysayers are backing off from the predicted 2020 recession mantras.

My sentiment for this coming week

There continues to be little conflict in the market direction as of late-Dec. If I were making trades this week, I would focus solely on Bull Strategies.

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Profit and Loss Statement

2019 was the year for me to make the rookie mistakes, and I made plenty. The final tally of a -$1,123.47 (loss) is what I am considering the cost of my education. And when I look at it this way, I feel I got off relatively cheap.

As of 12/23/2019

  Year MonthWeek #
  2019Dec52
Beginning Account Balance N/AN/AN/A
 Deposits$0.$0.$0.
 Withdraws$0.$0.$0.
     
 Realized Profits
(closed spreads)
-$368.-$14.$0.
 Unrealized profits
(open spreads)
$0.$0$0.
 Fees Paid (total)-$755.47-$17.00$0.00
     
Ending Account Balance N/AN/AN/A
     
Total Gain/Loss -$1,123.47-$17.00$0.00
Return On Risk  <undetermined>N/A
Return On Capital <undetermined>  

By far, the biggest loser for the year is the fees I paid to do trading business. To date, I have spent over $755 is trading fees, representing 67% of all my losses. If it wasn’t for the fees I paid, my trading loss would only be -$368 instead of -$1,123.57. As a visual, that is a big deal!

If it had not been for the trading fees changes in October, I might have summarily thrown in the towel. 

Next year (2020), I expect a seismic change in the total fees I pay over the fees I paid in 2019. Gone are the $20 exercise/assignment fees. Gone are the $4.95 per trade fees. The only costs that remain is the $.50 per options leg fee.

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Realized Profit by Strategy

 YearMonthWeek
 2019Dec52
Vertical Bull Put Credit Spread-$69.00$49.00$0.00
Vertical Bear Call Credit Spread-$435.00-$63.00$0.00
Vertical Bull Put Debit Spread$0.00$0.00$0.00
Vertical Bull Call Debit Spread$140.00$0.00$0.00
Icon Condors-$4.00$0.00$0.00
Cover Calls
Total-$368.00-$14.00$0.00

Beyond the weighty fees, the worst strategy that I used this year was the Vertical Bear Call Credit Spread. This losing strategy represented all my losses (-$435 out of -$368) in just 14% of all my trades (12 out of 86). Obviously, employing a Bear trade strategy in a dominate Bull Market is not the best idea!

The only winning strategy was the Vertical Bull Call Debit Spread. I made $140 over eleven trades. But this is only true because 2019 had an extraordinary Bull run.

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Schedule for this Week

Goals for Week: (12/23/19 – 12/27/19) (Week 52)

  • Do not make any spread trades that will live past Dec 31.
  • Zero out the Options Trading account
  • 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/record Put/Call Ratios for all stocks on the watch list.
  • Review/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 (4-weeks).
    • Bull Call Debit Spreads: Dec 27 (4-weeks).
  • Look up Ex-Dividend dates for positions in/approaching ITM (MarketWatch/Calendar)
  • 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 one 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). 
    • 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.
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This Week’s Trade Activity

As of 12/27/2019:

The last of all my open positions have expired on 12/27/19. As of now, I have NO open positions open.

Spread Count Summary:

 YearMonthWeek #
 2019Dec52
Vertical Bull Put Credit Spread6110
Vertical Bear Call Credit Spread1210
Vertical Bull Put Debit Spread000
Vertical Bull Call Debit Spread1100
Iron Condor200
    
Total Spreads8620

Current Dollars at Risk:

With no positions open, I have nothing at risk.

 YearMonthWeek #
 2019Dec52
Vertical Bull Put Credit Spread$0$0$0
Vertical Bear Call Credit Spread$0$0$0
Vertical Bull Put Debit Spread$0$0$0
Vertical Bull Call Debit Spread$0$0$0
Iron Condor$0$0$0
    
    
Total Dollar Risk$0$0$0
Max Risk Allowed$4,500.00 $1,000.00
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New Trades Opened (all of Dec)

I have not open any new trades beyond 12/6/19. Will not open any additional trades until after 01/01/2020.

Trades Currently Cooking

No open trades.

Current Trades Closed

The last for 2019:

WM: 155p/153p – 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, Max Loss= $176.00, IV% = 4%
Prob of OTM now = 99.8%

Expired worthless 12/27/19.

SPY: 298p/293p – 1 Contract – Open 12/4/19 – Expires 12/27 – Credit = $49.00
(Vertical Bull Put Credit Spread)
Open: Prob. OTM = 82.3%, ROR = 10.7%, PC/Ratio = 1.8, Max Risk = $450.00, IV% = 10%
Prob of OTM now = 99.5%

Expired worthless 12/27/19

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Epilogue

Cheers…

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Disclaimer

Even though I have tried to make it clear that this blog is my personal journal of my individual trek into Options Trading, it has been suggested by others that I, nevertheless, include a general disclaimer. So here goes..

“This blog and the information contained herein is not intended to be a source of advice or analysis with respect to the material presented, and the information and/or documents contained in the blog do not constitute investment advice.”

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