‘Now, you’re not gonna have a country
if you haven’t got men that have learned to tell the difference between
human rights violations, from a punch in the nose.’

– Jefferson Smith (Movie: Mr. Smith Goes To Washington)

Commentary

I wouldn't give you two cents for all your fancy rules if, behind them, they didn't have a little bit of plain, ordinary, everyday kindness and a little looking out for the other fella, too.

My brows ache from all the eye-rolling I do. But with 100 days until the Presidential elections, I need to prepare myself for an on slot of sleazy reporting, and cynical political stunts – all of which will keep the market thrashing high for any new Vertical Bull Put Credit spreads I wish to open.

I should be used to flimflam journalism by now. But, it always appears to be getting far worse every year. In reality, the battle between journalistic civility, ethics, and political posturing are the main pillars of free speech. (And high market volatility is good for the premiums I can collect.)

Is Media Bluster Getting Worse?

For those of us who think that the savage nature of the news media is unique to our time, I suggest that we watch the movie “Mr. Smith Goes to Washington.” Besides being very entertaining, you would think that this movie was produced to expose just how much journalistic malfeasance there is in today’s news media industry. But when you consider that this movie was filmed in 1939, it’s a stunning confirmation that nothing has changed.

Donald Trump is not the first American President who has a unique relationship with the news media. One would think that respect for the highest office in the world would garner some restraint. The reality is that gossip reporting, and paparazzi-style intrusions have always plagued the officeholder.

“Nothing can now be believed which is seen in a newspaper. Truth itself becomes suspicious by being put into that polluted vehicle.” – Thomas Jefferson

“Presidents and the members of their Cabinets and their staff members have been slandered and misrepresented since George Washington…” – Harry S. Truman.

John Adams, who enjoyed nude bathing, would swim naked in the Potomac River every day at 5 AM to deal with the stress of being President. However, respect for the office has never prevented ridicule and caricatures of him running naked through the streets.

Advertisements

The Point Concerning Options Trading For Income

This commentary points out that political machinations and scandalmongering have been the common thread from the very first election until now. There has always been an organized, deliberate, and concerted effort to talk down the economy to gain a desired political end. There has also always been an intense effort to ballyhoo the economy for the same reason. There is no lack of political perspectives.

This style of communication has served the U.S. very well. We do not get sanitized propaganda from a State Media. But instead, we tend to get it through both barrels and from all sides of the spectrum.

My problem is information overload. It is up to me to filter and discern what I want to believe.

Those Who Live In Glass Houses Should Not Throw Stones

But the balderdash from our illustrious national news organization has no standing when it comes to destroying credibility. They do a pretty good job of destroying their own…

Annotation 2020-08-04 08175News2

Are these are the organizations we trust to tell us the truth? Not a chance!

It’s time to let the ballyhoo boys loose…

Advertisements

This Week’s Market Sentiment

(As of 08/03/2020)

This Market Sentiment is as of the start of my trading week. This analysis is typically completed by midday Monday morning, and I will use it to help guide my trading decisions for this week. By the time this journal is published, it will be a week old.

VIX – Broad Market Volatility:

9-Day SMA tipped down a little to 25.0 from 26.2 last week.

The VIX is an emotion-gauge for the general investing population. It is thought to be driven by the Marketeers’ current level of greed or fear. As a one-month forward-looking volatility matrix, it is not designed to tell us which direction the market will be going, but more of how fast it can get there.

A VIX of 15 is assumed to be a market at rest. But since the intrinsic nature of the Stock Market is to move up, a VIX closer to 15 will have an innate tendency to rise.

Annotation 2020-08-02 091937VIX
CBOE Market Volatility Index

The rate the VIX is dropping towards 15 has continued to slow. Over the past week, it inched down just a little but mainly moved sideways. The 9-Day SMA is still below the 50-Day SMA, and the current VIX is below the 9-Day SMA.

The sideways movement suggests that most Marketeers are waiting for an event to help them decide on a direction. This sideways movement is causing most of my watchlist ETF/Stocks to trend sideways also. This is not leaving me with too many Spread positions opportunities.

Put/Call Ratio:

9-day SMA (all OCC options): rose to 0.64 from 0.61 last week.

Put Options are frequently used as protections against existing investments falling. When the ratio between Put Options bought vs. Call Options bought is above 1, then this is an indicator that the Marketeers are buying insurance to what they may see as declining Markets. Conversely, when the Put/Call Ratio falls below 1, then there is a general sense that the broader Markets will increase, and more investors are buying more than selling.

Annotation 2020-08-02 091937PCR
Daily Put/Call Ratio for all OCC Options

The 9-Day SMA inched up from 0.61 to 0.64. The week before last, the 9-Day was 0.59. Even though the 9-Day averages are moving up, the Put/Call Ratio is still signaling little concern over the Markets’ general direction. More investors are buying Calls over Puts.

This chart is suggesting a continuation of a Bull direction in the markets.

Consumer Sentiment Index (CSI):

Annotation 2020-08-02 091937CSI

The U.M. Consumer Sentiment Index revised July’s numbers slightly lower from 73.2 to 72.5. This slim change confirms the general “Mel-uncl-lee” that the general consumer feels about the current pace of economic recovery. The current unemployment rate of 11.1% (July 2020) out of a possible employment base of 60% (percent of our population who work) takes a pretty good chuck out of our economic energy. Additionally, we are still coerced and mob-shamed into staying home, lie low, and keep your knees close to your chest.

The CSI information is primarily historical, but a good indicator of trends. It can abruptly change on good or bad news, but we won’t see that in this chart until next month.

The CSI trend suggests a lethargic consumer base until either a vaccine is thoroughly dispersed throughout the world, or until after the November elections.

Market Indexes:

DOW = 26,428 – Down 0.1% from 26,470 last week.
S&P 500 = 3,271 – Up 1.7% from 3,216 last week.

The S&P 500 is a stock market index that tracks the 500 largest companies in the U.S. This index represents about 80% of all the capitalization for the country. The S&P is widely considered the best indicator of how all the U.S. markets are performing.

Annotation 2020-08-02 091937SPX
Daily S&P 500 Index – Four-Months

The S&P 500 was arguably flat last week until last Friday. Apple had a blow-out earnings report on Thursday, and the 10% jump helped all markets. As Ronald Regan said, “a rising tide raises all ship.”

This week will start with the current S&P 500 value slightly above the 9-Day SMA. The trend for this market remains bullish. Employment numbers will come out at the end of this week, and the national Jobs Report shortly after.

Geopolitical tree-shakers are:

  • Election year politics continue to exacerbate economy fears
  • Ongoing negotiations over a Stimulus Package
  • U.S. and China poking at each other, stoking a new cold-war
  • The “Defund the Police” movement is causing some angst

Sounding like a broken record, the largest tree-shaker is the heading up to the November Presidential election. Agenda-driven journalists are exacerbating the current issues into crises and creating sensations out of nothing. I expect the fever-level rhetoric to stay negative over the next three months.

My sentiment for this coming week:

Of my four indicators above, the P/C Ratio and the S&P 500 are reinforcing each other in confirming a continued Bull market. But the CSI is vociferously signaling for caution.

An agreement on the Stimulus will certainly pump some fuel in the markets. I do believe I will see movement on this effort. I do believe that this week should end in a hefty percent higher than last week.

But with the VIX still hovering above 25 I’m going to broaden my breathing room for new positions this week to at most 4%.

This week, I will focus on:

  1. Limit the max risk per trade to < $1,000.00
  2. Short Stike Price to be 4.0% below the current underlining’s price
  3. Keep the week’s total dollar risk < $1,500.00
  4. Keep the overall dollar risk to be below $3,000
  5. Will focus on mid-term trades: 4-5 weeks
  6. Credit spreads only (need positive cash flow for psychological reasons)
  7. Will consider only Bull Spreads
  8. Set Conditional-Trailing-Stop-Limits
Advertisements

Profit and Loss Statement

(As of 08/07/2020)

 YearMonthWeek #
 2020Aug32
Beginning Account Balance$9,000.$4,047.79$4,136.93
Deposits (Div. & Int.)$38.44$0.00$0.00
Withdraws (paycheck)-$1,875.24-$0.00-$0.00
Premiums on Open$4,569.00$245.00$245.00
Premiums on Close-$8,024.00-$0.00-$0.00
    
Fees Paid (total)-$148.69-$2.10-$2.10
Ending Account Balance $3,559.57$3,559.57$3,559.57
Total Gain/Loss-$5,440.43$242.90$242.90
ROR 7,3%7.3%
ROC-40.0%  

 

Realized Profit by Strategy

  Year Month Week #
  2020 Aug 32
Vertical Bull Put Credit Spread -$3,596.97 $65.89 $65.89
Vertical Bear Call Credit Spread -$182.79 $0. $0.
Vertical Bull Put Debit Spread $0. $0. $0.
Vertical Bull Call Debit Spread -$66.83 $0. $0.
Icon Condors $0. $0. $0.
Cover Calls
Total -$3,846.59 $65.89 $65.89
Advertisements

Schedule for this Week

Goals for this week: (08/03/20 – 08/07/20) (Week 32)

  • Max dollars at risk (for the week) < $1,500.00
  • Max dollar risk per trade (new trades) = $1,000.00
  • Update Trading Log as trades occurs

Entry Rules for Vertical Bull Put Credit Spreads:

  • Expiration date set at <= 4 weeks?:
  • Probability of OTM > 50%?:
  • Short-Strike price (Head Room) >= 4.0% below the current price?:
  • Dollar risk set at or below $1,000.00?:
  • Put/Call ratio below 1.5, or flat, or falling over that last 2-3 weeks?:
  • The Trend-Channel is Bullish?:
  • Short-Strike price below the trend channel at expiration?:
  • The current price within the bottom 1/2 of Bull Trend Channel?:
  • The current 1-week or 2-week trajectory bullish?:
  • 9-Day SMA above 50-Day SMA?:
  • ROR >= 50%?:
  • Set a GTC Conditional Trailing Stop Limit (CTSL): (see screenshot below)

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
  • Set target expiration dates for all options as follows:
    • Bull Credit Spreads: Aug 28 (<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 movements.
  • Submit a couple of Spreads, but keep a close watch. If one is accepted, cancel the others (we want only one new active trade per day).
  • Be mindful of Entry Rules.

Friday:

  • Review the total technical dollars at risk for this week. If significantly below $500, then submit additional spreads if prudent.
  • Update and post weekly journal (this blog) with any lessons learned or strategy changes.
Advertisements

This Week’s Trade Activity

(As of 08/07/2020)

Spread Count Summary:

  Year Month Week #
  2020 Aug 32
Vertical Bull Put Credit Spread 59 2 2
Vertical Bear Call Credit Spread 12 0 0
Vertical Bull Put Debit Spread 0 0 0
Vertical Bull Call Debit Spread 7 0 0
Iron Condor 0 0 0
 
Total 78 2 2

Current Dollars at Risk:

  Year Month Week #
  2020 Aug 32
Vertical Bull Put Credit Spread $1,455.00 $1,455.00 $1,455.00
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 $1,455.00 $1,455.00 $1,455.00
Max Risk Allowed $3.000.00   $1,500.00

 

New Trades Opened This Week

(08/03/2020 – 08/07/2020)

QQQ: 258p/250pp  – Open 08/05/20 – Expires 08/28/20 – Max Gain = $124.00
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=72.9%, ROR=18.2%, Head Room=-4.7%, Max Loss=$675.00, IV%=23%

Annotation 2020-08-05 104945

Entry Rules for Vertical Bull Put Credit Spreads:

  • Expiration date set at <= 4 weeks?: Yes (23 days)
  • Probability of OTM > 50%?: No (18.2%)
  • Short-Strike price (Head Room) >= 4.0% below the current price?: Yes (-4.7%)
  • Dollar risk set at or below $1,000.00?: Yes ($675.00)
  • Put/Call ratio below 1.5, or flat, or falling over that last 2-3 weeks?: No (>3.8)
  • The Trend-Channel is Bullish?: Yes (See Chart)
  • Short-Strike price below the trend channel at expiration?: Yes (See Chart)
  • The current price within the bottom 1/2 of Bull Trend Channel?: No (See Chart)
  • The current 1-week or 2-week trajectory bullish?: Yes (See Chart)
  • 9-Day SMA above 50-Day SMA?: Yes (See Chart)
  • ROR >= 50%?:
  • Set a GTC Conditional Trailing Stop Limit (CTSL): (see screenshot below)
Annotation 2020-08-05 104945CTSL

SPY: 315p/306pp  – Open 08/03/20 – Expires 08/28/20 – Max Gain = $121.00
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=73.1%, ROR=15.4%, Head Room=-4.2%, Max Loss=$778.00, IV%=19%

Annotation 2020-08-04 081755

Entry Rules for Vertical Bull Put Credit Spreads:

  • Expiration date set at <= 4 weeks?: Yes (24 days)
  • Probability of OTM > 50%?: No (15.4%)
  • Short-Strike price (Head Room) >= 4.0% below the current price?: Yes (-4.2%)
  • Dollar risk set at or below $1,000.00?: Yes ($778.00)
  • Put/Call ratio below 1.5, or flat, or falling over that last 2-3 weeks?: Yes (<1.4)
  • The Trend-Channel is Bullish?: Yes (See Chart)
  • Short-Strike price below the trend channel at expiration?: Yes (See Chart)
  • The current price within the bottom 1/2 of Bull Trend Channel?: Yes (See Chart)
  • The current 1-week or 2-week trajectory bullish?: Yes (See Chart)
  • 9-Day SMA above 50-Day SMA?: Yes (See Chart)
  • ROR >= 50%?:
  • Set a GTC Conditional Trailing Stop Limit (CTSL): (see screenshot below)
Annotation 2020-08-04 08175CTSL

Trades Currently Cooking

(As of 08/07/2020)

 

Trades Closed This Week

(As of 08/07/2020)

SPY: 319p/318p  – Open 07/13/20 – Expires 08/07/20 – Max Gain = $34.00
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=51.4%, ROR=50.8%, PC/Ratio=1.3, Max Loss=$65.00, IV%=28%
At Close: Prob. OTM=>99%, PC/Ratio=1.3, Head Room=-4.6%, IV%=16%, ROR= 52.3%

Cost to open: $.34 premium collected * 100 shares * 1 contracts = $34.00
Cost to close: $0.00, expired worthless
Net Profit= $34.00 to open – $0.00 to close = $34.00 – fees
Actual ROR = $34.00 / $65.00= 52.3%%

IWM: 143.5p/142.5p – Open 07/17/20 – Expires 08/07/20 – Max Gain = $34.00
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=57.6%, ROR=50.8%, PC/Ratio=1.5, Max Loss=$65.00, IV%=33%
At Close: Prob. OTM=>99%, PC/Ratio=1.4, Head Room=-7.8%, IV%=24%, ROR= 52.3%

Cost to open: $.34 premium collected * 100 shares * 1 contracts = $34.00
Cost to close: $0.00, expired worthless
Net Profit= $34.00 to open – $0.00 to close = $34.00 – fees
Actual ROR = $34.00 / $65.00= 52.3%%

Advertisements

Conclusion

From the start of this week, it seems the Marketeers were laying low. Again, I believe they are waiting for a word about the next stimulus bill, which has not come as of Friday noon. The daily thrashing has been much lower than weeks before. But there was a steady growth in the DOW, and a late-week mini-rally helped the markets to end strong.

This week is also the first time, in a long while, where all my expiring position did so worthlessly. They were all low dollar risk positions, but each made max-profit. I’m hoping that this is the start of a steady march upward towards an end-of-year account recovery.

Advertisements

Disclaimer

Even though I have tried to make it clear that this blog is my journal, documenting my 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 concerning the material presented. The information and/or documents contained in the blog do not constitute investment advice.”

Advertisements

 

Contact Me

To contact me or ask me a non-post related question, please use this form. If you want to comment on this post’s topic, please use the “Leave a Reply” box below so it can be attached to the post for future reference. – Thanks

Options Trades by Damocles
Options Trades by Damocles
0