I will have order!!
I will have perfection!!
I will have…

– Lord Farquaad (Movie: Shrek)

 Commentary

Lord Farquaad

Lord Farquaad demanded order and perfection for his little lordship of Duloc. But the Reddit Revolt of last week has caused quite a mess, and now he is demanding answers.

The revolt was a “Short Squeeze” that an organized group unleashed from the Social Media site Reddit. The squeeze was meant to be an attack on a high-risk investment strategy popular by many Hedge Funds – shorting stocks. The attack was successful, and it forced the Hedge Funds to lose Billions over a couple of days.

This week’s commentary is going to look at the unintended consequence of that revolt.

The inexorable outcome from an unexpected and initially unexplainable massive price change of GameStop, AMC, Nokia, and a few others was to hurl the Marketeers into a tizzy. Just to stick a thumb in the eye of Hedge Funds, the revolutionaries wound up shaving over 1,000 points of the DOW and doing a lot of damage to private investors.

The broader markets had their worst week of the year, and it also threw three of my five existing position negative (not ITM) and convinced me to set this week’s DEFCON level to 3 (with a finger on the DEFCON 2 trigger).

Thus this week’s commentary is a reminder that Predator Investors are not only the well-funded Hedge Fund managers but also untrained militant-investors. And I need to be aware of how much collateral damage these baby-predators can cost me if I get caught in the crossfire.

Men of Farquaad’s stature are in…
short supply.

– Shrek (Movie: Shrek)

Hedge Funds

Hedge Funds are small and tightly controlled groups of wealthy investors that employ high-risk trading strategies to make oodles of money. Hedge Funds are mostly limited LLC that will only allow “qualified” investors to become members. What they do is not illegal nor immoral. New members enter into a Hedge Fund knowing the risks, and the risk is all theirs.

The most used investment strategy used by Hedge Funds is “Shorting Stocks.”

Why Are Hedge Funds So Reviled?

Hedge Funds are the apex-predators of the Stock-Market world. They prey almost solely on dying companies like GameStop. (Today, GameStop is the Blockbuster Video of the game console world.)

Like vultures along the highway, Hedge Funds are revolting to watch. But like the prehistoric raptors, they play an essential role as the trash-collectors of the Stock Trading jungle.

But what most annoys us little guys is that Hedge Funds are an exclusive club – and we don’t like exclusive clubs. They frequently outperform Mutual Funds and regular buy-and-hold accounts with a lot less money invested, and all of us small investors are not allowed to participate (for good reasons). So whenever we can stick-it-to-the-man, then we do.

I’d never join a club
that would allow a person like me to become a member.

Woody Allen
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Shorting Stocks

Shorting Stocks is easy. But it requires a special relationship with my broker and my willingness to suffer massive losses.

I can execute a “short” by simply selling a stock that I do not own (grossly oversimplified). Without having any money in my trading account, I can sell 100 shares of AAPL (that I do not own) for $135/shares (= $13,500). If my broker agrees, they will simply loan me 100 shares of AAPL then execute my sale. At that moment, I will have $13,500 in my account but will also have an IOU to my broker for 100 shares of AAPL. The IOU is called a “short” (I’m short the 100 shares of AAPL).

The desired outcome is that AAPL will have a bad couple of days, and HOPEFULLY, the price of AAPL will have fallen (to an imagined) $125/share. At that time, I can then buy 100 shares of AAPL at $125/share (using the money I received when I sold the original borrowed 100 shares) for $12,500, then give the 100 shares back to my broker. Everyone is happy, everyone is settled and I earned $13,500 – $12,500 = $1,000 from my efforts. I did it all without having any cash, to begin with… YEAH!

I’ll be glad to pay you Tuesday,
for a hamburger today.

– Wimpy Wellington (Popeye cartoons)
The ultimate Short-Seller
The ultimate Short Seller

The undesired outcome is that AAPL has a great couple of days, and now the price of AAPL has risen to $145/share. My Broker is now getting nervous that I may not have the $145/share * 100 = $14,500 to buy back and pay back the 100 shares of AAPL I borrowed. Now they are demanding that I deposit more money in my account, or they will unilaterally start selling any stocks that I may own.

The practice of “shorting” stocks is not bad, is not illegal, and is not immoral – but it is high risk. It is a practice typically reserved for well- funded Hedge Funds organization. It does not harm other investors unless it is part of a “Poop and Scoop” scheme meant to manipulate other stock owners out of their assets.

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Short Squeeze

A “Short Squeeze” is a deliberate “Pump and Dump” retaliatory move against such “Poop and Scoop” tactics. But it takes a lot of effort to orchestrated a squeeze and is usually done by other well-funded organization

If my competitor enters into a major short move (say they borrowed then sold 100,000 shares of GameStop (GME) for $40/share), they just made 100,000 shares * $40/share = $4 Million from their short sell. Plus, they have an IOU for 100,000 shares to their broker.

If I can motivate 1,000 people to buy 1,000 shares of GameStop, then market forces (supply and demand) will drive the price up significantly (say to $100/share). Now my competitor who borrowed 100,000 shares now owes their brokers 100,000 * $100/share = $10 Million.

Panicked brokers are now seeing that this is a squeeze and will demand the holders of their IOUs to deposit $6 Million in their account (or else). They will also demand their 100,000 shares back before the squeeze gets worse. My competitors are now forced to bulk buying GME at the $100/share price that further drives up the share price to +$400/share. By the time the feedback loop petters out, my competitor may now have lost near half a billion dollars.

Winners of the GameStop Short Squeeze

Free Market Economy

One of the best examples of Free Market Economy was on display last week with the Short Squeeze of GameStop, AMC, and others. Last week’s Short Squeeze is a great example of how a band of like-minded investors can organize and make themselves known.

The Squeeze Organizers

The small group of organizers that started the squeeze. They started by buying large shares of GME at $40 – $50 – $60/shares, boosting the price as far as $450/shares after the me-too investors and the Hegde Fund’s forced buybacks joined the stampede. Once the price of GME was artificially pumped to $450/shares, they sold theirs and became millionaires overnight.

Crack-Pots of the World

Our current Social Media’s strength is the ability to get like-minded people together. And with a worldwide reach, you can get a lot of crack-pots to organize. This is one of the dangers of Twitter, Facebook, and Reddit. It is much easier to flex the strength of a minority of passionate people than is to get the vast majority of so-what-ers to get off their duffs.

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Losers of the GameStop Short Squeeze

Short Sellers

So far in 2021, GameStop short-sellers have lost at least $5 billion, according to S3 Research. Hedge Funds are the biggest users of short selling, but there are plenty of smaller individuals that partake. Most of those have lost years of portfolio building wealth.

There are good reasons why short selling is highly discouraged for the general investors – this is one.

Some of you may die,
but that is a sacrifice I am willing to make.

– Lord Farquaad (Movie: Shrek)

Me-To Investors

Predator Investor

The magnitude of last week’s Short Squeeze cannot happen with just a few hundred members from a Reddit group. Once the price of GME started to pop from the initial buys, many unaware private investors piled on, pumping the stock price even higher. Then the margin calls from the Hedge Funds’ brokers required them also to bulk buy GME to close out their shorts (their IOUs) also pumped the stock price. This prodded other me-to-ers, and the price of GME topped around $450/share.

Then the share price collapse started, and thousands of small-time investors were gobbled up.

Hedge Funds

Hedge Funds took the squeeze in the shorts. Billions was lost and some livelihoods were crushed. But Hedge Fund members are “qualified” for a reason. They have the funds, the means and ability to do it all again.

Broker’s Reputations

Brokers like Robinhood and IBKR saw billions of loaned stocks threating their solvency. Many halted trading, which was against the SEC rules and broker’s agreement with their members. There will be many law suits filed in the coming weeks.

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This Week’s Market Sentiment

(As of 02/01/2021)

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.

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

VIX: Broad Market Volatility

VIX 9-Day SMA Jumped last week to 27% from 22.8% last week. The one-week deviation is a whopping 5.8 from last week’s 1.4.

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
CBOE Market Volatility Index – 02/02/2021

The 4-month regression channel for the VIX continues its slow and steady decline from the uncertainty of the Nov ’20 elections. But from Election Day (about 80 days ago) it has been functional flat as the Marketeers try to assess the new Biden Administration.

The GameStop Short Squeeze from last week had pumped volatility across the board. Although I feel bad for those who got sucked in, the good news is that volatility is up (the VIX is now ~ 33%) and should produce a higher premium for any new positions I open.

Based solely on the VIX, I would initially set this week’s DEFCON (Options Trading Readiness Signal) level to 3, with a finger on the DEFCON-2 trigger. But I do expect the drop in the markets will be just a knee-jerk reaction and will quickly return within the trend-channel by mid week.

DEFCON = 3 (almost 2)

Put/Call Ratio:

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
Daily Put/Call Ratio for all S&P 500 Constituents Options – 02/02/2021

The Put/Call Ration of 0.6 is a significant jump from the last two-month trend. This is enforcing the jitteriness the Marketeers felt from the “Short Squeeze” of last week. But the ratio is still under 1.0 so not too many Marketeers are seeing this volatility jump as long-term.

DEFCON = 3 (now leaning towards 4)

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Consumer Sentiment Index (CSI):

The CSI’s current level of 79.0, flat from 79.2 from last week.

The new chart below comes from ycharts.com.

This Consumer Sentiment Index (CSI), as provided by University of Michigan. This indicator tracks US consumer sentiment based on surveys on random samples of US households.

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.

US Consumer Confidence
Updated: Jan 20, 2020

The US Consumer Confidence continues to lay low for the past couple of months. This week’s value of 79 is only marginally better than the post-COVID-Crash of 72 at the end of April. But the rate of change does not affect the general sentiment that the economy remains stagnant as the pandemic rages on.

There is not a suggestion that the CSI should change the DEFCON rating.

DEFCON = 3

Market Indexes:

DOW (DJX) = 29,983 – Down 3.3% from 30,997 last week. (4 week deviation: 3.4, flat from 3.4 last week)
S&P 500 (SPX) = 3,714 – Down 3.3% from 3,841 last week. (4 week deviation: 39.8 – down from 47.5 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
Daily S&P 500 Index – Four-Months (Updated 01/31/2021)

Even after last week, the S&P 500 still continues a lazy bull run for over four months. But this last week did take a significant dive. The week ending value of 3,714 is a good 127 points down from the start of the week. Likewise, the DOW is over 1,000 points as well.

The current price has fallen sharply below the 9-Day SMA and briefly breached the 50-Day SMA.

For the S&P 500, measuring the price thrashing (deviation) for the past four weeks (currently 39.8) remains relatively flat. The steady deviation value suggests that the Marketeers are not in disagreement with the shenanigans of the

The DOW did fall more than 1,000 points but is nowhere near the correction level. And I still think the drop is more of a knee-jerk instead of some systemic economical problem. I may need to place a finger on the DEFCON 4 trigger but will hold off to and see how the week progresses.

DEFCON = 3

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Geopolitical Tree-Shakers (GTS):

One way to look at the GTSs is like a lit fuse to a bomb. The fuse can be fast or slow, and the bomb can easily be a dud. But I need to watch this closely as an indicator. The GTS can significantly disrupt all the other indicators at a drop of a hat.

  • The Short-Squeeze for GME, AMC, and others
  • Negotiations for the next Stimulus Bill
  • Trumps pending Senate trial
  • The COVID vaccine rollout is still fumbling

The “Short Squeeze” play last week shocked the Marketeers. The abnormal and unexpected behavior of GameStop, AMC, and others jolted the VIX to a whopping 37%. The corresponding market drop (predictable at such a big jump) was an example of a stampede to the door. The question at this point is “was the VIX jolt just a knee-jerk reaction? Or will this continue for a long time?”

The most significant Geopolitical hysteria last week was the Reddit-organized “Short-Squeeze” for various failing stocks last week. Although, this event is a significant wake-up call from the “little-guys” I do not see this crusade having too much legs.

This Squeeze stripped a lot of money from the big Hedge Fund guys and packed the pockets of the few early mutineers. But too many of the “me-to” late comers have lost their shirts.

Because I am believing that the Squeeze will be a yawner in no-time, I will keep the DEFCON at level 3.

My sentiment for this coming week:

Trading Readiness

DEFCON 3

This week, I will focus on:

  • One late-week, 15-Strike-Width spread.
  • Spread term of 8-weeks or less.
  • Probability of OTM > 80%
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Cash Flow Statement

(As of 02/05/2021)

Year
2021
Month
Feb
Week
#5
Beginning Account Balance$16,000.00$16,222.98$16,222.98
Deposits (Div. & Int.)$0.12$0.00$0.00
Withdraws (paycheck)-$300.00-$0.00-$0.00
Premiums on Open$723.01$195.01$195.01
Premiums on Close-$61.00-$61.00-$61.00
Fees Paid (total)-$10.81-$5.67-$5.67
Ending Account Balance$16,351.31$$16,351.31$$16,351.31
Total Gain/Loss$351.32$128.34$128.34
ROR0.8%0.8%
ROC4.1%

Realized Profit by Strategy

Year
2021
Month
Feb
Week
#5
Vertical Bull Put Credit Spread$272.85$272.85$272.85
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
Icon Condors$0.00$0.00$0.00
Margin Interest-$0.53-$0.53-$0.53
Total$272.32$272.32$272.32

At the close of the first month of the year, none of my open positions had the opportunity to close. Although I do have a GTC trade trigger set on all open positions to buy-to-close if any of them hit 80% of max gain.

I’m investigating a new “Exit Rule”. I will set a GTC trade trigger to buy-to-close any open positions following this schedule:

  1. If expiration date is > 20 days, then close if doing so will generate 80% of max gain
  2. If expiration date is between 20-10 days, then close if doing so will generate 85% of max gain
  3. If expiration date is between 10-5 days, then close if doing so will generate 90% of max gain
  4. If expiration date is < 6 days then allow position to expire worthless
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Schedule for this Week

Goals for this week: (02/01/2021 – 02/05/2021) (Week #5)

  • Document lessons learned or new thoughts
  • Open one or two wide-strike spread
  • Update Trading Log as trades occurs

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: Mar 26 (6-8 weeks)
      Note: If there are no Options Chains published for the 8-week expiration, then use the next Options Chain down from 8-weeks (7-weeks, 6-weeks). Beyond 4-week expirations, only the monthly chains are available to trade.
  • 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 02/05/2021)

One notable event this week needs to be documented. On Monday I inadvertently purchased shares of stock in my dedicated Options Trading account that was intended to be in my other buy/hold account. I did not have the cash in my Trading account to cover the accidental transaction and as such triggered my margin to “loan” me the money needed to complete the total cost.

Upon realizing what I did I immediately sold the stock. The result of this error, I was charged .53 for the margin/fee and interest.

Spread Count Summary:

Year
2021
Month
Feb
Week
#5
Vertical Bull Put Credit Spread722
Vertical Bear Call Credit Spread000
Vertical Bull Put Debit Spread000
Vertical Bull Call Debit Spread000
Margin Interest101
Total833

Current Dollars at Risk:

Year
2021
Month
Feb
Week
#5
Vertical Bull Put Credit Spread$3,619.$1,805.$1,805.
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$3,619.$1,805.$1,805.
Max Risk Allowed$16,000.00$8,000$2,000.

New Trades Opened This Week

(02/01/2021 – 02/05/2021)

QQQ: 295p/285p  – Open 02/05/21 – Expires 03/19/21 – Max Gain = $88.00 – Open Price = $329.98
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=82,5%, Head Room=-10.6%, Max Loss=$911.00, ROC 9.5%, 42d Dev = 6.8

QQQ: 295p/285p  – Open 02/05/21 – Expires 03/19/21

Entry Rules for Vertical Bull Put Credit Spreads:

  • Current maximum dollars at risk < $8,000? Yes ($4,995)
  • Max dollar at risk this week < $2,000? Yes ($1,805)
  • Max time to have any dollars at risk < 8 weeks (<56 days)? Yes (42 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 (1.7 and slightly rising)
  • 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=299.23)
  • Is the short-strikes Prob-OTM > 80%? 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?: No (Short price above resistance line)
  • Is the long-strike at maximum width (>= 15)? Yes (10 strike width)
  • Set a GTC Conditional Trailing Stop Limit (CTSL): (Not Set)

I changed the DEFCON lever from 3 to 2 because the market seemed to immediately shrug off the Short Squeeze from last week.

IWM: 190p/180p  – Open 02/03/21 – Expires 03/19/21 – Max Gain = $107.00 – Open Price = $212.91
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=79.7%, Head Room=-10.8%, Max Loss=$892.00, ROC 11.9%, 44d Dev = 7.24

IWM: 190p/180p  – Open 02/03/21 – Expires 03/19/21

Entry Rules for Vertical Bull Put Credit Spreads:

  • New maximum dollars at risk < $8,000? Yes ($4,981)
  • Max dollar at risk this week < $2,000? Yes ($893.00)
  • Max time to have any dollars at risk < 8 weeks (<56 days)? Yes (44 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 (2.7 falling for 3.2)
  • 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? No (1SD=188.74)
  • Is the short-strikes Prob-OTM > 80%? No (79.7%)
  • 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 (>= 15)? Yes (10 strike width)
  • Set a GTC Conditional Trailing Stop Limit (CTSL): (Not Set)

As of this trade (mid-Wednesday), the week mostly recovered for the Short Squeeze of last week. So I opened this 10-strike width position with the assumption I will open another on Friday (if the market continues on its current recovery).

When this order was executed I was not at my workstation to record the Prob-OTM and Standard Deviation. It was about an hour later after IWM dropped a little when I captured the actual matrix.

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Trades Currently Cooking

(As of 02/05/2021)

SPY: 350p/340p  – Open 01/14/21 – Expires 02/26/21 – Max Gain = $86.00 – Open Price = $380.48
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=81.3%, Head Room=-8.0%, Max Loss=$912.00, ROC 9.4%, 43d Dev = 4.7
Now: Prob. OTM=54.4%, Head Room=-1.0%, IV%=36%

QQQ: 280p/270p  – Open 01/12/21 – Expires 02/26/21 – Max Gain = $102.00 – Open Price = $314.52
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=81.5%, Head Room=-11.0%, Max Loss=$897.00, ROC 11.3%, 44d Dev = 4.8
Now: Prob. OTM=54.4%, Head Room=-1.0%, IV%=36%

Trades Closed This Week

(As of 02/05/2021)

QQQ: 290p/275p  – Open 01/20/21 – Expires 02/26/21 – Max Gain = $122.00 – Open Price = $322.05
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=83.3%, Head Room=-10.1%, Max Loss=$1,377.00, ROC 8.8%, 37d Dev = 4.1
At Close: Prob. OTM=94.6%, Head Room=-12.5%, IV%=17%, ROR= 7.1%

Cost to open: $1.22 premium collected * 100 shares = $122.00
Cost to close: $0.24 premium paid * 100 shares = $24.00
Net Profit= $122.00 to open – $24.00 to close = $98.00 – fees
Actual ROR = $98.00 / $1,377.00= 7.1%

I closed this position with 21 days left until expiration. The percent of premium achieve was above 80% so I closed early.

Closing this position early returned $1,377.00 of allocated risk-capital back to the available funds. It also cemented my first realized win for the year.

IWM: 180p/165p  – Open 01/06/21 – Expires 02/019/21 – Max Gain = $116.00 – Open Price = $202.92
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=83.2%, Head Room=-11.7%, Max Loss=$1,383.00, ROC 8.3%, 44d Dev = 6.4
At Close: Prob. OTM=97.1%, Head Room=-15.8%, IV%=26%, ROR= 7.1%

Cost to open: $1.16 premium collected * 100 shares = $116.00
Cost to close: $0.17 premium paid * 100 shares = $17.00
Net Profit= $116.00 to open – $17.00 to close = $99.00 – fees
Actual ROR = $99.00 / $1,383.00= 9.0%

I closed this position with 16 days left until expiration. The percent of premium achieve was above 85% so I closed early.

Closing this position early returned $1,383.00 of allocated risk-capital back to the available funds. It also cemented my first realized win for the year.

QQQ: 290p/280p  – Open 01/26/21 – Expires 03/19/21 – Max Gain = $101.00 – Open Price = $329.04
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=81.3%, Head Room=-11.9%, Max Loss=$898.00, ROC 11.1%, 52d Dev = 7.0
At Close: Prob. OTM=94.5%, Head Room=-14.6%, IV%=20%, ROR= 7.1%

Cost to open: $1.02 premium collected * 100 shares = $102.00
Cost to close: $0.20 premium paid * 100 shares = $20.00
Net Profit= $102.00 to open – $20.00 to close = $82.00 – fees
Actual ROR = $82.00 / $898.00= 9.1%

This position was closed 22 days early when it reached 80% of Max-Gain. Exiting this position at this point frees up $898 of allocated risk-capital.

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Conclusion

By the time this week was over, the Marketeers had thrown off any concerns about the Short Squeeze of last week. All indexes roared back to their highs.

Even though the DEFCON was set at 3, I pushed back that level to 2 by Wednesday when it was apparent that a market reset would not happen.

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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

#OptionsTrades by Damocles
Options Trades by Damocles

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