Do I need to be liked? Absolutely not.
I like to be liked. I enjoy being liked. I have to be liked, but it’s not like I have this compulsive need to be liked – like my need to be praised.

– Michael Scott (Sitcom: The Office)
(But sounds like Donald Trump)

 Commentary

The not so Options-Trading theme for this week’s brief commentary is to have a little fun comparing a President Donald Trump with a President Michael Scott by playing “who said it?”.

I am emphatically ideologically aligned with President Trump, Republicans, and Conservatives. Astronomically more so than I am to the AOC’s, Democrats, and hard-left liberals. And if the Presidential Election were today, I would vote for Trump over Biden.

But the election is over, and President-Elect Biden will now hold the reins of my Options Trading future – and so I say “it could have been worse.”

Guess what, I have flaws. What are they?
Oh, I don’t know. I sing in the shower. Sometimes I spend too much time volunteering. Occasionally I’ll hit somebody with my car.
So sue me.

Who said it: Trump or Scott?

It Could Be Worse

I was thinking back to the original Democratic contenders of Sanders, Warren, Buttigieg, Yang, Booker, Castro, O’Rourke, De Blasio, Harris, and others. They were the left of the left: defending Socialism and the merits of the Green New Deal. They eventually joined the Defund the Police movement and the Cancel-Culture. So when Joe Biden won the nomination, I seriously felt that we dodged a huge bullet.

Biden has been a pro-business moderate, which makes him less scary than the others. But he does come with a lot of insider baggage.

Sometimes I’ll start a sentence and I don’t even know where it’s going.
I just hope I find it along the way.

Who said it: Trump or Scott?

A significant part of that baggage is that he will be 78 years old when he takes office in January. This puts the nuclear football in the hands of someone who may not remember which button launches the missiles and which button gets him a latte. It also puts the possibility of a President Harris and Vice President Pelosi in play. (And if that doesn’t tighten your orthodoxy sphincter muscles, nothing will!)

Since the DNC campaign did not have anything they could run towards, all they could do was run a blistering negative campaign against Trump. And with three years of the never-Trumpers media to keep Trump’s favorables low, with his tweeter antics (the antics part never helped), and with his propensity for flamboyance, I believe that any of those other candidates could have won the general election as well.

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Donald Trump; the Michael Scott of the White House

“Would I rather be feared or loved?
Easy. Both.
I want people to be afraid of how much they love me.”

Who said it: Trump or Scott?

Can we compare President Trump’s personality to Steve Carell’s character Michael Scott from the sitcom “The Office?” Always crass, critical, and unintentionally rude in most things he does. But at the end of the evening he was the star of his administration, and his administration was successful.

President Trump was the “Turnaround CEO” that the country needed. He was tough, focused, and determined. He brushed aside those who got in his way and crushed those who thought they could take him down. President Trump was not evil, but bad-tempered, bureaucratic, officious, and callous. He is the Vogon a super-power country needs. I hope to see him in 2024.

“I don’t want somebody sucking up to me because they think I’m going to help their career. I want them sucking up to me because they genuinely love me.”

Who said it: Trump or Scott?
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This Week’s Market Sentiment

(As of 11/09/2020)

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

VIX 9-Day SMA dropped to 24.86 from 38.02 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% or below will have an innate tendency to rise.

CBOE Market Volatility Index

After a brief peak over 40% the week before last, Election Week saw the VIX diving down to below 25%. With the presidential election (mostly) decided, it is about time to see the VIX head down to below 15%.

Now that the general volatility of the markets starts to settle down, so will the premiums available.

Put/Call Ratio:

9-day SMA (all OCC options): ended lower at 0.6 from 0.7 last week.

Put Options are frequently used as protections against existing investments falling. When the ratio between Put Options bought versus 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.

Daily Put/Call Ratio for all S&P 500 Constituents Options

Over the course of last week, when it became increasingly evident that Biden will carry the election, the Put/Call Ratio for the S&P 500 bumped a little to above .7 before pulling back.

Over the past 3 or 4 months, the Marketeers did not see it necessary to protect their existing portfolio by bulk-buying Put Options. But with significant price thrashing of all the markets, I’m thinking that most Investors were realigning their portfolio balance.

Consumer Sentiment Index (CSI):

The Consumer Sentiment index hopes to take a broad snapshot of what we all feel to be the direction of the U.S. economy. It measures how consumers feel about their personal financial situation and compares that to what they believe is happening to others throughout the country. The survey contains 50 questions and is conducted to more than 500 people each month.

A low rating is a general dissatisfaction with our current management of U.S. economic policies. This dissatisfaction will imply that something has to change.

A high satisfaction rating suggests approval of the current policy management and implies market stability.

The U-M’s Consumer Sentiment Index (CSI) has not been revised since last week.

Now that the elections are over, and there is no more need for the faux-journalist to convince the general public just how things suck, we can hopefully restart believing in ourselves.

I would believe that the market rebound will continue.

Market Indexes:

DOW = 28,323 – Up 6.9% from 26,502 last week.
S&P 500 = 3,509 – Up 7.3 % from 3,270 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.

Daily S&P 500 Index – Four-Months

Last week, the DOW and S&P skyrocketed more than 7%. And when looking over the past four months, I can see massive price thrashing running up to and (now) just beyond the election.

The four-month trend channel is mostly flat as I incorporated all the thrashing. But now that the election is over, I would suspect these next two weeks will define a new trend corresponding to what the Marketeers believe how a new Biden economic policies will develop.

Geopolitical Tree-Shakers (GTS):

  • The stress of not having a finality in the election
  • The stimulus bill is still on the table and Trump has bowed out of the negotiations
  • The Senate Majority in question (not necessarily at risk)
  • International responses to President Biden
  • President Trumps exit strategy
  • House Dems neutered by losing seats

My sentiment for this coming week:

Market volatility is dropping and the Put/Call Ratio remains low. So whatever the current market trend is, I would expect it to continue. But since we just had a transformational election (significant change in regulation-governance), I am hard press to know what the market trend will be. I have to rethink what I think I know of the new economic policies. The next two weeks will be telling.

The Geopolitical Tree-Shakers will certainly change over the next several weeks – from “America Sucks” to “Kumbaya” as the national media’s efforts to scare the wits out of us moves from overdrive to a chagrined grin.

This week, I will focus on:

  1. Limit the max risk per trade to < $1,000.00
  2. Short-Stike price to be > 6% below the current underlining’s price
  3. Keep the week’s total dollar risk < $1,000.00
  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 alarms
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Profit and Loss Statement

(As of 11/13/2020)

Year
2020
Month
Nov
Week
#46
Beginning Account Balance$9,000.00$2,439.89$2,500.86
Deposits (Div. & Int.)$38.54$0.00$0.00
Withdraws (paycheck)-$2,625.24$-0.00$-0.00
Premiums on Open$5,917.00$153.00$91.00
Premiums on Close-$9,570.00-$0.00-$0.00
Fees Paid (total)-$169.48-$2.06-$1.03
Ending Account Balance$2,590.83$2,590.83$2,590.83
Total Gain/Loss-$6,409.17$150.94$89.97
ROR6.2%3.6%
ROC-42.5%

Realized Profit by Strategy

Year
2020
Month
Nov
Week
#46
Vertical Bull Put Credit Spread-$3,723.80$207.95$107.98
Vertical Bear Call Credit Spread-$182.79$0.00$0.00
Vertical Bull Put Debit Spread$0.$0.00$0.00
Vertical Bull Call Debit Spread-$66.83$0.00$0.00
Icon Condors$0.$0.00$0.00
Cover Calls
Total-$3,973.42$207.95$107.98
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Schedule for this Week

Goals for this week: (11/09/20 – 11/13/20) (Week 46)

  • Document lessons learned or new thoughts
  • Open new positions
  • Update Trading Log as trades occurs

Entry Rules for Vertical Bull Put Credit Spreads:

  • Current maximum dollars at risk < $3,000? Yes/No ( )
  • Max dollar at risk this position < $1,000? Yes/No ( )
  • Max time to have any dollars at risk < 4 weeks? Yes/No ( )
  • Is the long-term trend (four months) bullish? Yes/No (see chart)
  • Is the short-term trajectory of the underlying bullish? Yes/No (see chart)
  • Is the Put/Call Ratio < 1, (or falling if it is > 1)? Yes/No ( )
  • The current price above 9-Day SMA?: Yes/No (see chart)
  • 9-Day SMA above 50-Day SMA?: Yes/No (see chart)
  • Is the Short-strike > 1 SD below the current price? Yes/No ( )
  • Is the short-strikes Prob-OTM > 70%? Yes/No ( )
  • Short-Strike price below trend channel at expiration?: Yes/No (see chart)
  • Current price within bottom 1/2 of Trend Channel?: Yes/No (see chart)
  • Is the long-strike at maximum width? Yes/No (?? strike width)

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: Dec 4 (<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.
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This Week’s Trade Activity

(As of 11/06/2020)

Spread Count Summary:

Year
2020
Month
Nov
Week
#46
Vertical Bull Put Credit Spread7121
Vertical Bear Call Credit Spread1200
Vertical Bull Put Debit Spread000
Vertical Bull Call Debit Spread700
Iron Condor000
Total9021

Current Dollars at Risk:

Year
2020
Month
Nov
Week
#46
Vertical Bull Put Credit Spread$1,347.00$1,347.00$909.00
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$0.00$0.00$0.00
Iron Condor$0.00$0.00$0.00
Total Dollar Risk$1,347.00$1,347.00$909.00
Max Risk Allowed$3.000.00$1,000.00

New Trades Opened This Week

(11/09/2020 – 11/13/2020)

QQQ: 265p/255p  – Open 11/11/20 – Expires 12/04/20 – Max Gain = $91.00
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=82.2%, Head Room=-0.0%, Max Loss=$908.00, IV%=27%
Now: Prob. OTM=82.2%, Head Room=-7.9%, IV%=27%

Entry Rules for Vertical Bull Put Credit Spreads:

  • Current maximum dollars at risk < $3,000? Yes ($2,238.00)
  • Max dollar at risk this position < $1,000? Yes ($909.00)
  • Max time to have any dollars at risk < 4 weeks? Yes (23 days)
  • Is the long-term trend (four months) bullish? Yes (see chart)
  • Is the short-term trajectory of the underlying bullish? Yes (see chart)
  • Is the Put/Call Ratio < 1, (or falling if it is > 1)? Yes (0.8)
  • The current price above 9-Day SMA?: Yes (see chart)
  • 9-Day SMA above 50-Day SMA?: Yes (see chart)
  • Is the Short-strike > 1 SD below the current price? Yes (1SD=265.56)
  • Is the short-strikes Prob-OTM > 70%? Yes (82.5%)
  • Short-Strike price below the trend channel at expiration?: Yes (see chart)
  • The current price within the bottom 1/2 of Trend Channel?: Yes (see chart)
  • Is the long-strike at maximum width? Yes (10 strike width)
  • Set a GTC Conditional Trailing Stop Limit (CTSL): (Not Set)

For the first time in a while, all of the Entry Rules are correct.

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Trades Currently Cooking

(As of 11/13/2020)

QQQ: 247.5p/242.5p  – Open 11/02/20 – Expires 11/27/20 – Max Gain = $62.00
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=80.5%, Head Room=-9.7%, Max Loss=$437.00, IV%=29%
Now: Prob. OTM=95.4%, Head Room=-14.1%, IV%=27%

Trades Closed This Week

(As of 11/06/2020)

DIA: 262.5p/252.5p  – Open 10/21/20 – Expires 11/13/20 – Max Gain = $109.00
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=80.4%, Head Room=-7.1%, Max Loss=$890.00, IV%=22%
At Close: Prob. OTM>99.2%, Head Room=-10.7%, IV%=19%, ROR= 12.2%

Cost to open: $1.09 premium collected * 100 shares = $109.00
Cost to close: Worthless
Net Profit= $109.00 to open – $0.00 to close = $109.00 – fees
Actual ROR = $109.00 / $890.00= 12.2%

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Conclusion

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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.”

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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

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Options Trades by Damocles
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