You never let a serious crisis go to waste.
And what I mean by that it’s an opportunity to do things
you could not do before.

Rahm Emanuel (DNC Strategist)

 Commentary

This week began with excellent news on the COVID front. Reports from Pfizer-BioNTech and Moderna that their vaccines were over 95% effective in preventing COVID. Following this news was another major vaccine player, Oxford-AstraZeneca, making a similar claim. It now seems that we have a working resolution and a quick avenue to get beyond this crisis. This great news has pumped the markets and has helped my open Options Spreads.

But as I read the summary of Pfizer’s Phase 3 trials, I can’t help being reminded how much the COVID-crisis was a con. And because of this con, my Options Spreads suffered this year.

A Crisis the DNC Could Not Waste.

COVID-19 is not a phantom virus, and the pandemic had severe (and deadly) consequences for many. I believe it was rightly classified as a pandemic requiring federal and state resources to combat.

But I also believe that the magnitude of the hysteria generated was nothing but a desperate yet deliberate DNC strategy to out a sitting president.

Being an Election Year and President Trump was very much on his way to reelection, the DNC strategists needed to cause as much national unrest as possible, and they needed a crisis to save them. And since the pandemic was afoot…

Advertisements

I refer to Pfizer’s final report to provide some support for my theory of a deliberately overly blown COVID-crises.

From the Pfizer Final Phase 3 Trials

Out of 44,000 vaccine volunteers from several countries, half was given the vaccine and the other half a placebo. Then they kept a close eye on all 44,000 to see which ones developed COVID-19.

Of the 44,000 subjects, 170 people contracted COVID. Those who had the virus, had at least one symptom of the virus. Thus, 22,000 people who receive the vaccine, only eight got sick. And of the other 22,000 who just got a placebo, 162 got sick. Once I do the math, that is the 95.3% effective rate the vaccine provided. YEAH!

But Wait, it Gets Better

Focusing on the highly controlled study of the 22,000 volunteers that only receive the placebo, again note that 162 became sick from COVID. That makes an infection rate (compared to how we count the seasonal flu) of 0.7% within that population. That is remarkably lower than the 3.7% rate that is currently being nationally reported, and enormously lower than the +7% predicted back in March.

According to the CDC, between 3% and 11% of the US population gets infected by influenza (where there was at least one symptom) each year. 0.7% COVID under a controlled study vs. 3%+ influenza under general observations. 0.7% vs 3%… Hmmm.

Overstating the Death Count?

It stands out as odd to me that the US, which has the most sought-after medical infrastructure, resources/supplies, technologies, and professionals worldwide, also has the world’s highest reported death count (252,000) from COVID. John Hopkins reports the US has nearly a third more deaths than Brazil, the next highest country at 168,000.

Is the CDC tracking all deaths caused by COVID-19, or are they tracking all deaths where COVID-19 could have been a contributing factor?

On August 26, the CDC issued a report that 94% of the roughly 180,000 deaths contributed to COVID had other conditions that could have caused the death. They were also careful to state that only 6% have died, with COVID-19 being the only cause mentioned.

So, if an elderly individual was obese, diabetic, had cardiovascular disease, tested positive for COVID and died from congestive heart failure, they were included in the COVID deaths count.

Advertisements

The Sting

President Trump was politically outmaneuvered when he accepted the personal leadership of the COVID crisis (The Nightmare Before Election). After that, most political pundits acknowledged that Trump’s re-election bid would rest entirely on how he managed the pandemic. From that point on, all his detractors needed was to make the epidemic suck as much as possible – lockdowns, closures, and very scary stats.

He was also severely outmaneuvered over the Mail-In Ballots issue (Trudging Decision (Election) Week) and the national race riots to a smaller degree. 

When the dust clears from this election-charged pandemic, the postmortem review of the epidemic will show the virus’s purported death rate was overstated. The infection rate would be compared to the common cold virus, and President Biden would have magically beaten the virus.

The COVID-Crisis was more about unseating Trump than it was about national health.

Hell has no greater fury
than a Pelosi scorned.

Advertisements

This Week’s Market Sentiment

(As of 11/16/2020)

This Market Sentiment Section is typically completed by midday Monday morning. By the time this journal is published, it will be a week old.

In this section, I review five indicators: VIX, S&P 500 Put/Call Ratio, S&P Market movement, Consumer Sentiment Index, and Geopolitical events that could affect the market’s direction. I will use these indicators to help guide my trading decisions for this week.

VIX: Broad Market Volatility

VIX 9-Day SMA leveled off at 23.1 from 24.7 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 the election, it certaily appears the Marketeers gave a collective forehead-wipe as they now have an idea of economic policies.

Now that the general volatility of the markets is settling down, so will the premiums available for new Vertical Bull Put Credit Spreads.

Put/Call Ratio:

9-day SMA (all OCC options): remains low at .05 from 0.6 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 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. I believe we will see more of this as significant assets are moved from the COVID safe haven of Technology back to Consumer Discretionary and other starving sectors.

Advertisements

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 University of Michigan’s consumer sentiment for November fell to 77 – instead of the slight increase to the prediction of 82. Apparently showing a higher degree of fear. But I absolutely believe that this is more the result of the November Elections.

I continue to believe that the market regain its bull status soon.

Market Indexes:

DOW = 29,480 – Up 4.1% from 28,323 last week.
S&P 500 = 3,585 – Up 2.2% from 3,509 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

Continuing last week’s Biden Bump in the markets, the trend channel for the S&P 500 has perked up. The current market value is above the channel and above the 9-Day SMA. And the 9-Day SMA is well above the 50-Day SMA.

With a collective sigh of relieve that the brutality of this years election is over, I would consider that the bullish direction will contiue.

Advertisements

Geopolitical Tree-Shakers (GTS):

  • Elections are over (mostly), big sigh of relief
  • Great news in COVID vaccines – distributions could start soon
  • 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 has been positive
  • President Trump’s exit strategy in question
  • House Dems neutered by losing seats

My sentiment for this coming week:

Of my five indicators, the VIX, Put/Call Ratio, S&P 500, and GTS are signaling a happy group of Marketeers. I expect the general markets to continue a recovery over the next several months.

The Geopolitical Tree-Shakers will certainly continue to 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.

The CSI shows a very concerned consumer group, but that is only because of the brutal DNC campaign to dump Trump. The DNC despicably threw the country under the bus just to win the election. President Trump sees this as rigging the election – I see this as Trump being outmaneuvered.

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
Advertisements

Profit and Loss Statement

(As of 11/20/2020)

Year
2020
Month
Nov
Week
#47
Beginning Account Balance$9,000.00$2,439.89$2,590.84
Deposits (Div. & Int.)$38.54$0.00$0.00
Withdraws (paycheck)-$2,625.24$-0.00$-0.00
Premiums on Open$5,995.00$231.00$78.00
Premiums on Close-$9,572.00-$2.00-$2.00
Fees Paid (total)-$171.51-$4.09-$2.04
Ending Account Balance$2,664.80$2,664.80$2,664.80
Total Gain/Loss-$6,335.20$224.91$73.96
ROR9.2%2.9%
ROC-41.7%

Realized Profit by Strategy

Year
2020
Month
Nov
Week
#47
Vertical Bull Put Credit Spread-$3,665.85$265.90$57.95
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-$3,915.47$265.90$57.95
Advertisements

Schedule for this Week

Goals for this week: (11/016/20 – 11/20/20) (Week 47)

  • 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 11 (<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 11/20/2020)

Spread Count Summary:

Year
2020
Month
Nov
Week
#47
Vertical Bull Put Credit Spread7231
Vertical Bear Call Credit Spread1200
Vertical Bull Put Debit Spread000
Vertical Bull Call Debit Spread700
Iron Condor000
Total9131

Current Dollars at Risk:

Year
2020
Month
Nov
Week
#47
Vertical Bull Put Credit Spread$1,831.$1,831.$922.
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$1,831.$1,831.$922.
Max Risk Allowed$3.000.00$1,000.

New Trades Opened This Week

(11/16/2020 – 11/20/2020)

All of my underlings in my watchlist have benefitted from the post-election bump. All, with the exception of QQQ have shot above the top resistant line of the trend channel. Fearing that a post-exuberance jump will be more of a mini-correction, but that has not happen yet.

QQQ: 270p/260p  – Open 11/19/20 – Expires 12/11/20 – Max Gain = $78.00
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=83.3%, Head Room=-7.3%, Max Loss=$921.00, IV%=20%

Entry Rules for Vertical Bull Put Credit Spreads:

  • New maximum dollars at risk < $3,000? Yes ($1,829.00)
  • Max dollar at risk this position < $1,000? Yes ($921.00)
  • Max time to have any dollars at risk < 4 weeks? Yes (22 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)? No (1.8)
  • 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=271.86)
  • Is the short-strikes Prob-OTM > 70%? Yes (83.3%)
  • Short-Strike price below the trend channel at expiration?: Yes (see chart)
  • The current price within the bottom 1/2 of Trend Channel?: No (see chart)
  • Is the long-strike at maximum width? Yes (10 strike width)
  • Set a GTC Conditional Trailing Stop Limit (CTSL): (Not Set)

The elections are over and I’m expecting the general volatility to start falling, and in doing so give some legs to a bullish direction.

I also think that as new COVID vaccine news comes out and we are talking about distribution before the end of the year, then the markets will get a positive charge.

Finally, a Federal stimulus package should also be in the mix, which usually bumps the markets.

Advertisements

Trades Currently Cooking

(As of 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=91.3%, Head Room=-9.0%, IV%=21%

Trades Closed This Week

(As of 11/20/2020)

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%
At Close: Prob. OTM>98.8%, Head Room=-15.1%, IV%=20%, ROR= 13.7%

Cost to open: $0.62 premium collected * 100 shares = $62.00
Cost to close: $0.02 premium paid * 100 shares = $2.00
Net Profit= $62.00 to open – $2.00 to close = $60.00 – fees
Actual ROR = $60.00 / $437.00= 13.7%

I closed this position with 9 days left until expiration. The percent of premium achieve was above 95% so I closed early.

Advertisements

Conclusion

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

#OptionsTrades by Damocles
Options Trades by Damocles
0