“The Progressibles” have a plan to get the Green New Deal across the finish line. And it’s GENIUS!

“People will trade quality for ease.”

–Evelyn Deavor (Movie: The Incredibles 2)

Commentary

I guffawed when I heard President Biden characterized the 2020 election as a “National Mandate” to “Go Big” on the progressive agenda. But this week, Biden is on a national campaign to push over $4 trillion in new spending and heavy-handed social engineering. I’m not sure who’s laughing now.

With the Democrat’s razor-thin majority within Congress, they do not have a prayer of passing these Rosseveltish mammoth bills and massive tax hikes with zero bipartisan support.

But “The Progressibles” have a plan!

Evelyn Deavor’s “Screenslaver”

In a stretched adaptation from the animated movie “The Incredibles 2”, The Progressibles will employ Evelyn Deavor’s mind-controlling technology – Screenslaver. Brainwashing every conservative/moderate Democrat in both houses to blindly support their left-wing ideologue.

The plan requires the Senate to abolish the Filibuster Rule, add two more liberal Senators via the DC statehood (the anti-Manchin measure), and pack the Supreme Court to fend off any challenges that will surely be made. – GENIUS!

Like master puppeteers, The Progressible will deploy Screenslaver’s technology (aka the Social Media Mobs) to relentlessly taunt everyone who disagrees, label all who objects a racist and slowly beat them into submission.

But Seriously

Even in jest, just throwing such extreme measures out to the Social Mob has caused the Marketeers to clinch their respective Marketing-Sphincters this week.

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Not to Knock Progressivism

Progressivism is good! It is required by all of us to keep moving our society to the next level of civilization. We cannot grow without progressive ideas and planning.

But the Progressive flank of the Democratic party has a problem. They are letting social extremists control their messaging. Forwarding progressive ideas cannot be a “because I said so!” deal. It needs to be advanced with the highest approval possible.

Most everyone wants progress, but most everyone will push back on any idea they feel is being forced on them. Positive messaging on direction, honest evaluation on cost, and respectful debate clarifying concerns and misinformation is best.

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This Week’s Market Sentiment

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

(As of 05/03/2021)

In this section, I review five indicators: VIX, Put/Call Ratio, S&P 500, 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.

Geopolitical Tree-Shakers (GTS):

GTS 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 the drop of a hat.

  • A $6T+ spending bills is being negotiated – expect lots of pork
  • Rising interest/inflation rates will be a continued background pressure for some time
  • Manchin machine-gunned DC Statehood
  • Federal Reserve big risk of a new recession by keeping key interest rates to near zero
  • Big Tech (MSFT, FB, GOOG, AAPL, and AMZN) on a rebound
  • GDP at 6.4% and retail sales surging

This week’s DEFCON (Damocles Options Trading Readiness Signal) will be initially set at 4. Let’s see if the other indicators will change this level.

VIX: Broad Market Volatility

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, the markets with a VIX closer to 15% or below will have an innate tendency to rise.

CBOE Market Volatility Index - 05/02/2021
CBOE Market Volatility Index – 05/02/2021

The 1-month Regression Channel for the VIX has gone entirely sideways while above the 15% line. This implies the range of thrashing has leveled as the Marketeers are beginning to disagree if the Bull Market will continue.

The VIX ended last week at 18.6%, higher than the week before at 17.3% which was higher than the previous week. These small bumps happened just as the Biden Administration floated multiple high-trillion dollar spending bills accompanied by massive tax increases.

Market jitters are becoming a bit more intense for the near term. The VIX (although not all that bad) is in sync with the GTS. If each DEFCON range had a scale in itself, I would think that we are approaching the next level up.

Maintaining DEFCON = 4

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.

S&P 500 Put/Call Ratio - as of 5/02/21
S&P 500 Put/Call Ratio – as of 5/02/21

The ratio jumping from . 55 the week before to .60 by the end of last week supports the jump in the VIX.

The 9-Day SMA is now above the 50-Day SMA and above the .5 line. So the short-term trend is moving more to the jitters side.

The amount of time the ratio remained above the .5 line during April is concerning.

Maintain DEFCON = 4

Consumer Sentiment Index (CSI):

I’m searching for a new Consumer Sentiment Index (CSI) chart as provided by the University of Michigan.

A low CSI index 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.

April’s final CSI update improved to 88.30 from 86.50 last month. But the snail’s pace at which the CSI is recovering from the COVID-Lockdown is a bit disheartening – but recovering it is.

It remains below 90, so I can’t say “things are peachy.” But the continued improvement in Consumer Sentiment is a good sign that the economy is ramping up.

Maintain DEFCON = 4

Market Indexes:

DOW (DJX) = 33,875 – Down 0.5% from 34,043 last week. (4 week deviation: 265 down from 376 last week)
S&P 500 (SPX) = 4,181- flat from 4,180 last week. (4 week deviation: 47.81 down from 74.3 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 Trend (Updated 05/02/2021)
Daily S&P 500 Index – Four Months Trend (Updated 05/02/2021)

Market Thrashing

4-Week Thrashing of DJX = +/- 265 points or 0.8% of the market’s volume is down from 1.1% last week.
4-Week Thrashing of SPX = +/- 47.81points or 1.1% of the market’s volume is down from 1.8% last week.

The Indexes thrashing in the 1.x% is indicating a steady-hand market. And since the S&P 500 and DOW’s trend trajectory is bullish, there is no reason to believe that will change. So with the VIX nearing 15%, the P/C Ratio above 0.5, and the calming market is bullish, I will not change the DEFCON.

Maintain DEFCON = 4

My sentiment for this coming week:

The four indicators (VIX, CSI, P/C Ratio, and Market Trends) suggests a collective hold of a the Market’s breath. There is a sense that we are waiting for an economic shoe to drop.

The GTS lists several geopolitical issues that I feel are very improbable to pass as advertised. With the razor thin margins in the House and Senate, the far-left liberal will have to coop all the moderate Democrats in both sides of the Capital building – which seems unlikely.

The indicators (VIX, CSI, P/C Ratio, and Market Trends) continue to show a happy group of Marketeers for this coming week. But geopolitical events will always be a significant influencer for my Vertical Bull Put Credit Spreads. Regardless of whether the events are real or fake, hyper-political news can send the markets into a tizzy at any time.

I feel that there will still be a couple of weeks aggressive growth.

VIX, GTS, P/C Ratio and current Markets are strong motivators to maintain DEFCON 4.

Trading Readiness Level

DEFCON = 4

This week, I will focus on:

  • Two spreads (both totaling < $2.5K risk) as the Markets see fit.
  • Spread term of 8-weeks or less.
  • Probability of OTM > 80%
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Profit and Loss Statement

(As of 05/07/2021)

Balance Sheet

Year
2021
Month
May
Week
#18
Beginning Account Balance$16,000.00$17,453.03$17,453.03
Deposits (Div. & Int.)$0.50$0.00$0.00
Withdraws (paycheck)-$1,200.00-$0.00-$0.00
Premiums on Open$3,140.01$212.00$212.00
Premiums on Close-$242.00-$9.00-$9.00
Fees Paid (total)-$45.54-$3.06-$3.06
Ending Account Balance$17,652.97$17,652.97$17,652.97
Total Gain/Loss$1,652.97$199.94$199.94
ROR1.1%1.1%
ROC10.3%

Progress Graph

Running P&L – As of 5/07/21

(Note: the negative weekly results for weeks 4, 8, 12 and 17 are when I withdrew $300 from the Trading Account for my paycheck.)

My Performance vs. SPY

Hypothetically, instead of depositing $16,000 in my Options Trading Account, could I have done better if I bought $16,000 of the ETF/SPY instead?

Options TradingSPY
(Fictional)
Initial Investment
(As of Jan 4, 2021)
$16,000
(Cash)
$16,000
(43.39 shares @ $368.55)
Funds Added$3,140.51
(Premiums)
0.31 shares
(Dividends Reinvested)
Funds Removed-$287.54
(Early Close & Fees)
$0
(Fractional Shares Sold)
Ending Balance$18,852.97
(Cash)
$18,441.97
(43.70 shares * $422.01 CV)
ROI+17.8%+15.3%
As of 5/07/2021

Schedule for this Week

Goals for this week: (05/3/2021 – 05/07/2021) (Week #18)

  • 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: Jun 25 (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 05/07/2021)

Spread Count Summary:

Year
2021
Month
May
Week
#18
Vertical Bull Put Credit Spread3022
Vertical Bear Call Credit Spread000
Vertical Bull Put Debit Spread000
Vertical Bull Call Debit Spread000
Margin Interest100
Total3122

Current Dollars at Risk:

Year
2021
Month
May
Week
#18
Vertical Bull Put Credit Spread$11,977.$2,288.$2,288.
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$11,977.$2,288.$2,288.
Max Risk Allowed$16,000.00$8,000$2,500.
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New Positions Opened This Week

(05/03/2021 – 05/07/2021)

DIA: 325p/315p  – Open 05/07/21 – Expires 06/18/21 – Max Gain = $81.00- Open Price = $347.06
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=83.3%, Head Room=-6.4%, Max Loss=$919.00, ROC 8.7%, 42d Dev = $4.23

Vertical Bull Put Credit Spread - DIA - Short: 325 Put - Long: 315 Put
Vertical Bull Put Credit Spread – DIA – Short: 325 Put – Long: 315 Put

Entry Rules for Vertical Bull Put Credit Spreads:

  • Current maximum dollars at risk < $16,000? Yes ($11,977)
  • Max dollar at risk this week < $2,500? Yes ($2,288)
  • Max time to have any dollars at risk < 8 weeks (<56 days)? Yes (42 days)
  • Long-term trend (four months) bullish? Yes (see chart)
  • Short-term trajectory of the underlying bullish? Yes (see chart)
  • Put/Call Ratio < 1, (or falling if it is > 1)? Yes (0.8 down from 1.5)
  • Current price above 9-Day SMA?: Yes (see chart)
  • 9-Day SMA above 50-Day SMA?: Yes (see chart)
  • Short-strike < 1 SD below the current price? Yes (1SD=327.97)
  • Short-strikes Prob-OTM > 80%? Yes (83.3%)
  • Short-Strike price below the trend channel at expiration?: Yes (see chart)
  • Current price within the bottom 1/2 of Trend Channel?: No (see chart)
  • Long-strike at maximum width (<= 15)? Yes (10 strike width)
  • Set a GTC Conditional Trailing Stop Limit (CTSL): (Not Set)

QQQ: 297p/282p  – Open 05/05/21 – Expires 06/18/21 – Max Gain = $131.00- Open Price = $329.06
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=82.7%, Head Room=-9.8%, Max Loss=$1,369.00, ROC 9.5%, 44d Dev = $9.88

Vertical Bull Put Credit Spread - QQQ - Short: 297 Put - Long: 282 Put
Vertical Bull Put Credit Spread – QQQ – Short: 297 Put – Long: 282 Put

Entry Rules for Vertical Bull Put Credit Spreads:

  • Current maximum dollars at risk < $16,000? Yes ($11,058)
  • Max dollar at risk this week < $2,500? Yes ($1,369)
  • Max time to have any dollars at risk < 8 weeks (<56 days)? Yes (44 days)
  • Long-term trend (four months) bullish? Yes (see chart)
  • Short-term trajectory of the underlying bullish? No (see chart)
  • Put/Call Ratio < 1, (or falling if it is > 1)? No (1.8 up from 1.0)
  • Current price above 9-Day SMA?: No (see chart)
  • 9-Day SMA above 50-Day SMA?: Yes (see chart)
  • Short-strike < 1 SD below the current price? Yes (1SD=300.03)
  • Short-strikes Prob-OTM > 80%? Yes (82.7%)
  • Short-Strike price below the trend channel at expiration?: Yes (see chart)
  • Current price within the bottom 1/2 of Trend Channel?: Yes (see chart)
  • Long-strike at maximum width (<= 15)? Yes (15 strike width)
  • Set a GTC Conditional Trailing Stop Limit (CTSL): (Not Set)

When this order was entered in the morning, I specifically picked a Short Strike that was just over 10% below the current. Prob OTM was above 80%.

QQQ (Tech Stocks in general) took a beating the beginning of this week, but was slightly rebounding this morning. I am expecting a bounce up over the next week or two. Need to check back on this to see if I was right.

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Trades Currently Cooking

(As of 05/07/2021)

IWM: 205p/195p  – Open 04/29/21 – Expires 06/04/21 – Max Gain = $70.00- Open Price = $227.79
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=84.8%, Head Room=-9.9%, Max Loss=$930.00, ROC 7.4%, 36d Dev = $4.11

IWM: 205p/190p  – Open 04/28/21 – Expires 06/18/21 – Max Gain = $134.00- Open Price = $228.03
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=80.9%, Head Room=-10.2%, Max Loss=$1,366.00, ROC 9.7%, 51d Dev = $5.12

DIA: 320p/310p  – Open 04/21/21 – Expires 05/28/21 – Max Gain = $75.00- Open Price = $340.69
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=84.1%, Head Room=-6.1%, Max Loss=$925.00, ROC 8.0%, 36d Dev = $5.40

SPY: 390p/375p  – Open 04/21/21 – Expires 05/28/21 – Max Gain = $107.00- Open Price = $415.85
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=82.3%, Head Room=-6.2%, Max Loss=$1,393.00, ROC 7.6%, 37d Dev = $9.65

IWM: 205p/195p  – Open 04/16/21 – Expires 05/28/21 – Max Gain = $100.00- Open Price = $244.17
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=80.3%, Head Room=-8.5%, Max Loss=$900.00, ROC 11.0%, 42d Dev = $5.42

QQQ: 310p/295p  – Open 04/14/21 – Expires 05/28/21 – Max Gain = $125.00- Open Price = $339.95
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=82.4%, Head Room=-8.8%, Max Loss=$1,374.00, ROC 9.0%, 44d Dev = $10.35

QQQ: 300p/280p  – Open 04/08/21 – Expires 05/21/21 – Max Gain = $119.00- Open Price = $333.83
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=85.4%, Head Room=-10.1%, Max Loss=$1,879.00, ROC 6.3%, 43d Dev = $7.80

IWM: 200p/190p  – Open 04/06/21 – Expires 05/21/21 – Max Gain = $80.00- Open Price = $225.02
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=83.8%, Head Room=-11.1%, Max Loss=$919.00, ROC 8.6%, 45d Dev = $5.80

Trades Closed This Week

(As of 05/07/2021)

No positions were closed this week.

DIA: 305p/295p  – Open 03/30/21 – Expires 05/21/21 – Max Gain = $91.00- Open Price = $330.31
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=81.0%, Head Room=-7.7%, Max Loss=$908.00, ROC 9.9%, 52d Dev = $6.9
At Close: Prob. OTM=96.9%, Head Room=-10.7%, IV%=9.3%, ROR= 9.0%

Cost to open: $0.91 premium collected * 100 shares = $91.00
Cost to close: $0.09 premium paid * 100 shares = $9.00
Net Profit= $91.00 to open – $9.00 to close = $82.00 – fees
Actual ROR = $82.00 / $908.00 = 9.0%

This position was closed 18 days early using a 90% of profit Trade Trigger.

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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

#OptionsTrades by Damocles
Options Trades by Damocles