I’m thankful for the Easter Miracle, the beauty of God’s creation, and the blessing of having my family in my life. Here are my two Easter Week Vertical Spreads.

The angel said to the women,
“Do not be afraid,
for I know that you are looking for Jesus,
who was crucified. 
He is not here; he has risen,
just as he said.
Come and see the place where he lay.” 

-Bible: Mathew 28:5 – 6

Trade Trudging Easter Week

In Jesus’ name, I thank you Lord for giving me the convictions, strength, and guidance as I go through the trials of life. I thank you for keeping me resolute while those around me seem lost. And I thank you for the many pleasures I have and the promise of life hereafter.

To enter into new Vertical Spreads this Trade Trudging week, I need to complete my “Market Sentiment” section to guide me (see below).

Additionally, this week I am restructuring my Entry Rules. More to come next week.

Using Excel with ThinkorSwim
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Exit Rules: Vertical Credit Spreads – Pt 1
Having an Escape Plan (Exit Rules) for my open Vertical Bull Put Credit Spreads is just as critical as …
How To Make Loss Resistant Vertical Spreads – Strike Width
In this week's journal entry, I want to look at what makes a Loss-Resistant Vertical Spread. Starting with a …

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 04/11/2022)

This section reviews five indicators: Ecopolitical events, VIX, Put/Call Ratio, Consumer Sentiment Index, the S&P 500, and how these could affect the market’s direction. Then, I will use these indicators to help guide my trading decisions for this week.

Each of my five indicators will “vote” on a DEFCON (Damocles Options Trading Readiness Signal) level, exclusive to that indicator. Then, In the final sub-section, “My sentiment for this coming week,” below, I’ll compile the votes into a DEFCON level for the week.

Ecopolitical Tree Shakers (ETS):

Ecopolitical (Sociopolitical-Economics) Tree Shakers (ETS) can be breaking news, political machinations, Federal Reserve musings, or even Twitter Trends. They are events that can abruptly change the dynamics of the current markets. U.S. political polarization’s impact on Wall Street cannot be glossed over.

ETS 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 ETS can significantly disrupt all the other indicators at the drop of a hat.


Yikes – Yawns – Yays

  • Mid-Term rhetoric ramping – Yikes
  • PPI released 4/12 before opening – Yikes
  • Misery Index rises to 12.1% – Yikes
  • Russia likely to default 4/4 debt payment – Yikes
  • 10-Year Treasury yield hits 2.76% – Yikes
  • Bear market’s drumbeat – Yawn
  • Expecting a .5% interest rate boost in May – Yawn
  • April is historically the best month of the year – Yay
  • Cryptocurrency – Interesting

Geopolitical

  • The $2.2B debt payment due by Russia last Monday is still up in the air. Russia cut a deal last week to pay its April 4th debt in rubles (where dollars were required). They now have 30 days to convert those rubles into dollars. With the massive devaluing of the ruble and their debt rating downgraded to junk over the past month, it is not expected they will succeed. (Note, the last Russia default was after the Bolshevick Revolution (1917), which ushered in the Soviet Union.)
  • I am anticipating Euro-tensions to continue to stay raw for the foreseeable future. With the invasion of Ukraine, ex-Soviet countries bordering Russia have reason to be concerned for their geographical security. Both Finland and Sweden are holding votes this summer on whether to join NATO. I would suspect that Ukraine (if they are successful at keeping Russia’s forces at bay) will probably lean towards NATO as well. Thus, the Russian invasion of Ukraine will likely result in the NATO expansion that the invasion was supposed to prevent – the irony is not lost.
  • High inflation and Biden’s low approval have zapped the spirit of the democrats’ hopes to hang onto the House. The Senate is also prime for a change in leadership. So I expect the DNC to go nuclear – scare the hell out of their base to get them to the polls.

Socioeconomics 

  • Is a Bear-Market on the horizon? There’s a lot of economist thinking so. But for my Vertical Bull Put Credit Spreads investment strategy, I would still be able to make money (as long as the decline is not too aggressive). But a Bear Market will not do my Buy-and-Hold portfolio any favors. I may need to increase my cash holdings to cover a downturn – if there is one.
  • The Federal Reserve’s efforts to combat inflation are specifically designed to slow economic growth. Raising interest rates and casting trillions of dollars of bonds back into circulation will put pressure on corporate growth and stock performances. But our current low unemployment and high energy business activity should keep the bulls running, but just not as fast. There is probably a recession on our horizon, but not for a year or two.
  • The Producer Price Index (PPI) released Tuesday reported a 1.2% jump over last month and an 8.5% jump from one year ago. The last time Inflation of this high was 1980, when it was at 8.9%.
  • The Misery Index also rose by 0.6% to 12.1% (8.5% inflation + 3.6% unemployment). Referencing the Misery Index Table from “Are We Miserable Yet?“, the last time it was this high was 1982. (Note, the variables of the Misery Index in 1982 were calculated from a 3.8% inflation and 8.3% unemployment. In today’s Misery Index, the terms are switched.)
  • The 1-Year U.S. Treasury rises to its 52-week high of 2.76%. And as a consequence of rising bond returns, so will home mortgages. As a result, the home building boom may not have the legs to last much longer. If home sales fall, so will the home commodities that support that industry.

The Yikes reported here lean more towards a slow down in general economic growth, from 8% down to maybe 2% growth. This adjustment will result in a corresponding adjustment to stock prices, and that adjustment will certainly bear pressure on the Vertical Spreads I have open now. And as the growth spindown continues, I need to be more cautious in opening new Spreads until the slowdown, slows down.

ETS votes cautious DEFCON 4

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 one-month forward-looking volatility, it is not designed to tell us which direction the market will move but rather how fast it can get there.

A VIX of 15% is assumed to be a market at rest. Since the intrinsic nature of the Stock Market is to move up, a VIX close to 15% or below will correspond with the market’s innate tendency to rise.

ThinkorSwim Chart: CBOE Market Volatility Index (VIX) - 04/10/2022
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ThinkorSwim Chart: CBOE Market Volatility Index (VIX) – 04/10/2022

The 4-week trajectory of the VIX Regression Channel continued a swing down as the Marketeers assessed the current market trajectory. But the past two weeks kept the VIX averaging above 20. This may suggest a deeper concern to the current market condition and will keep show-term volatility elevated.

  • Last week the VIX ended at 21.16%, returning to the long term value above 20%
  • The current VIX is above the 9-Day but below the 30-Day SMA
  • The 9-Day SMA remains below the 50-Day SMA

The trajectory of the VIX is decisively moving towards lower volatility, but a short-term leveling may suggest the Marketeers are not willing to go too much lower. With all three of the measuring values above 20, it is hard to be too optimistic.

Being blind to all other indicators, I will vote for an optimistic DEFCON level 3

VIX votes an optimistic DEFCON 3

Put/Call Ratio:

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

ThinkorSwim Chart: S&P 500 Put/Call Ratio - as of 04/10/2022
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ThinkorSwim Chart: S&P 500 Put/Call Ratio – as of 04/10/2022
  • The S&P 500’s Put/Call Ratio spent last week in the “Good Shape” region
  • The end of the week value of .6 is a tilt-down from .7 last week
  • The 9-Day SMA continues to drop to 0.59 – a little above last week’s 0.57

The S&P 500’s Put/Call Ratio continues to suggest that the Marketeers are not too concerned with a significant market change. Yet the values are not below .5, so they appear to be standing ready for one way or the other.

Being blind to all other indicators, I’ll vote for a cautious DEFCON 4

Put/Call Ratio votes a cautious DEFCON 4

Consumer Sentiment Index (CSI):

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. Surveys of Consumers (umich.edu)

Consumer Sentiment Index as of 03/27/2022
- OptionsTradesByDamocles.com
Consumer Sentiment Index as of 03/27/2022

March Finals was a disappointment as the indexes continued to inch downward.

March index of 59.4% is a disheartening 5.4% lower than just a month ago. And now, 59.4% is the lowest in 10-years.

Continued low CSI numbers confirms the general dissatisfaction with the government’s economic policies.

Being blind to all other indicators and just looking at this week’s CSI, I feel we should be extremely cautious.

Misery Index

With the copious amount of economic pressures throughout the nation this year (inflation, employment, interest rates, etc.), knowing what the Misery Index is and what direction the index is moving can cast a long shadow on Marketeer’s sentiment. Numbers are coming from the U.S. Bureau of Labor Statistics (bls.gov).

  • Inflation Rate: rose 1.2% in March 22. Now up to 8.5% from a year ago.
  • Unemployment Rate: March rate = 3.6%. Continue slight drop from 3.8% in Feburary.

Misery Index = 12.1% (8.5% + 3.6%). Up from 11.5% last month.

CSI votes a dismal DEFCON 3

Market Indexes:

DOW (DJX) = 34,721 – down 0.3% from 34,818 last week. (4 weeks deviation: 619 down from 848 last week)
S&P 500 (SPX) = 4,488 – down 1.3% from 4,546 last week. (4 weeks deviation: 121.28 down from 148.65 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.

ThinkorSwim Chart: Daily S&P 500 Index - Four Months Trend (Updated 04/10/2022)
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ThinkorSwim Chart: Daily S&P 500 Index – Four Months Trend (Updated 04/10/2022)

Market Thrashing

4 Weeks Thrashing of DJX = +/- 619 points or 1.9% of the market’s volume is down from 2.4% last week.
4 Weeks Thrashing of SPX = +/- 121.28 points or 2.7% of the market’s volume is up from 2.5% last week.
(Market Thrashing above 1.0% might indicate indecision from the Marketeers.)

The Markets ended last week, giving up some of their aggressive gains from the month prior – which was not unexpected. With the big news of the Fed’s hawkish minutes, the markets pulled back while the Marketeers assessed the meaning.

  • The 4-month trend continues decisively bearish
  • The 4-week trajectory continues bullish
  • Current SPX is below the 9-Day SMA
  • The 9-Day SMA is below the 50-Day SMA
  • High Thrashing suggests the aggressive rebound may not last long

The 4-Month Trend will continue Bearish for a while due to the Correction data on the back end. But the 50-Day SMA continues to move Bullish and the short-term trajectories suggest a possible return to a bullish direction.

Being blind to all other indicators, I’ll go with a cautious DEFCON 4.

Market Index votes a cautious DEFCON 4

My sentiment for this coming week:

Of the five indicators:

  • The ETS has few systemic issues – cautious DEFCON 4
  • The VIX is trending above 20% – optimistic DEFCON 3
  • The P/C Ratio is in good shape – cautious DEFCON 4
  • The CSI shows a consumer base not excited about our economic future – dismal DEFCON 3
  • The Market Indexes look to hold rebound – cautious DEFCON 4

Where it seems that I should see my Market sentiment as a cautious DEFCON 4, the PPI to be released on Wednesday (plus the drawdown of the markets as of Monday morning) may suggest a temporary short-term pullback for a week or two. Just out of caution, I’m going to declare an optimistic DEFCON 3

Trading Readiness Level for this week

DEFCON = 3

This week’s Rules:

Maintain vigilance.

The PPI is set to be released Wednesday before the market’s opening. Plus, this is a short trading week (Good Friday). I’m going to wait until Wednesday before making a Spread decision.

Entry Rules:
Exit Rules:
  • Early close following this schedule:
    • 85% of max-gain if 4 or more weeks out
    • 90% of max-gain if 3 or more weeks out
    • 95% of max-gain if 2 or more weeks out
    • Let expire if less than 2 weeks out
  • Roll Spreads within 1 week of expiration if:
    • Short Strike is ITM
    • Short Strike < 1.0% below the current price and 1-week trajectory is bearish
    • Short Strike < 55% POTM and 1-week trajectory is bearish







Profit and Loss Statements

(As of 04/14/2022)

Note: This month was my first for the year (and hopefully my last). This is solely from last week’s loss of $802 from a roll that, as it turned out, I did not need to roll.

Cash Balance Sheet

Year
2022
Month
Apr
Week
#15
Beginning Account Balance$28,000.00$27,645.97$27,864.93
Deposits (Div. & Int.)$0.67$0.00$0.00
Withdraws (paycheck1)-$1,575.00-$0.00-$0.00
Premiums on Open$9615.00$437.00$216.00
Premiums on Close-7,927.00-$0.00-$0.00
Fees Paid (total)-$34.78-$4.08-$2.04
Ending Account Balance$28,078.89$28,078.89$28,078.89
Total Gain/Loss$78.89$432.92$213.96
ROR1.6%0.8%
ROC0.3%
1 Paycheck = 22.5% of initial investment paid out monthly

Cash Flow Chart

Cash Flow Chart
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YOD Vertical Credit Spreads Cash-Flow Chart – As of 04/14/2022 (Excel Chart)

(Note: the negative weekly results for weeks 4, 8, and 12 were when I withdrew $525 from the Trading Account for my paycheck. Negative week 11 is from an unnecessarily bad roll.)

My Performance vs. SPY

Hypothetically, instead of depositing $28,000 in my Options Trading Account, could I have done better if I bought $28,000 of the ETF/SPY instead?

Options Trading
Account
SPY
(Fictional)
Initial Investment
(As of Jan 4, 2021)
$28,000.00
(Cash)
$28,000.00
(58.9523 shares @ $474.96)
Funds Added$9,615.67
(Premiums)
0.22 shares
(Dividends Reinvested)
Funds Removed-$7,961.78
(Early Close & Fees)
$0
(Fractional Shares Sold)
Market Changes-$1,695.00
(Open Spreads’ Fair Market Value )
-$1,868.49
(Gain/Loss)
Ending Balance$27,958.89
(Mark-To-Market)
$26,131.51
(59.1706 shares * $441.63 CV)
ROI-0.1%-6.7%
As of 04/14/2022 10:39 AM

Note: The markets started 2022 terribly. But I still believe that the year will end higher than it began. So if I can keep my at-risk Spreads safe until the markets start a slow trackback, then all this negative unrealized market value will reverse.







Schedule for this Week

Goals for this week: (04/11/2022 – 04/14/2022) (Week #15) (Markets closed 4/15 for Good Friday)

  • 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 on the watch list
  • Set target expiration dates for all Options as follows:
    • Bull Credit Spreads: Jun 3, 2022 (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 early trading.)
  • Watch one Webcast or take one online mini-course to be completed by Friday.

Tuesday – Thursday:

  • Review how yesterday’s staged trades moved. Then, 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 open on any one 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 a weekly journal (this blog) with any lessons learned or strategy changes.

This Week’s Trade Activity

(As of 04/14/2022)

Spread Count Summary:

Year
2022
Month
Apr
Week
#15
Vertical Bull Put Credit Spread2342
Vertical Bear Call Credit Spread000
Vertical Bull Put Debit Spread000
Vertical Bull Call Debit Spread000
Margin Interest000
Total2342

Current Dollars at Risk:

Year
2022
Month
Apr
Week
#15
Vertical Bull Put Credit Spread$17,039.$7,563.$3,784.
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$17,039.$7,563.$3,784.
Max Risk Allowed$28,000.N/A$4,000.

Options Buying Power:

Unallocated dollars available to open new Vertical Credit Spreads:

Current Cash Balance$28,078.89
Set-Aside Dollars for Existing Spreads-$20,000
Cash Available for New Spreads$8,078.89
(Options Buying Power)







Vertical Spreads Opened This Week

(04/1/2022 – 04/14/2022)

DIA:315p/295p  – Open 04/14/22 – Expires 05/27/22 – Max Gain = $101.00 – Open Price = $346.61
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 86.3%, Headroom= -9.2.0%, Max Loss= $1,899, AROR= 44.7%

ThinkorSwim Chart: Vertical Bull Put Credit Spread – DIA – Short: 315 Put – Long: 295 Put
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ThinkorSwim Chart: Vertical Bull Put Credit Spread – DIA – Short: 315 Put – Long: 295 Put

Entry Rules for this week. Always complete BEFORE submitting a trade order.

Entry RulesComments
1Current maximum dollars at risk < $28,000?
Yes ($17,039)
Maximum Trading Account dollars I am willing to risk.
Do not open Spread if this rule fails
2Short-strike > 1 SD below the current price?
Yes (1SD=$324.49)
Short Strike should never be above the 1 Standard Deviation below the current underlying price.
Do not open Spread if this rule fails
3Is the Short-Strikes Prob-OTM >= 85.0%?
Yes (86.3%)
This is the guidance parameter set in the Market Sentiment Section (above).
Do not open Spread if this rule fails
4Is the Short-Strike price below the trend channel at expiration?
Yes (see chart)
Part of the Trade the Trend Strategy. Always make sure the Short-Stike is below the 2-month trend channel.
Do not open Spread if this rule fails
5Max dollar at risk this week < $4,000?
Yes ($3,784.00)
Maximum dollar risk set for this week. If I go over this amount for this week, then I may be short in later weeks
5Is the max time to have any dollars at risk is <= 8 weeks (<56 days)?
Yes (43 days)
Strive to open new spreads at 8 weeks expiration or less (the longer, the better). If 8 weeks is not available (or if there are already too many open Spreads with this expiration date), then seek shorter times.
7Is the long-term trend (two months) bullish?
Yes (see chart)
Trade the Two-Month Trend. A longer trend will not react fast enough for a 6-8 week Spread, and a shorter trend may be too capricious.
8Is the short-term trajectory of the underlying bullish?
Yes (see chart)
A 1-week trajectory may be a reasonable indicator if I should open a new Spread early in the week or should I wait. If the early trajectory is bearish, wait. If the early trajectory is bullish, don’t wait.
9Is the 2-week Thrashing < 1% & Bullish:
No (2-week Thrashing = 0.6% / Bearish)
If the 2-week trend is bullish and the 2-week thrashing is below 1.0%, then this is a good sign that the trajectory will continue. I might want to lower the Probability of Out-of-the-Money (POTM) to collect a little more premium.
10Is the Put/Call Ratio < 1, (or falling if it is > 1)?
Yes (1.1 down from 1.5)
If the Put/Call Ratio is < 1 (regardless of trajectory), this rule passes. If the ratio is >1 but <2 and is falling, this rule passes. But if the ratio is > 2 or took a significant jump, this rule fails.
11Is the current asset price above 9-Day SMA?:
Yes (see chart)
If the underlying price is greater than the 9-Day SMA then I should be reasonably confident that the underlying continues a bullish trend in the very short term. If so, I might want to lower the POTM to collect a little more premium.
12Is the 9-Day SMA above 50-Day SMA?:
No (see chart)
If the 9-Day SMA is greater than the 50-Day, then the bullish trend of the underlying has a degree of confirmation. I might want to lower the POTM to collect a little more premium.
13Is the Strike Width minimum (>= 20)?
Yes (20 strike width)
Mainly determined via market conditions. If the conditions are good, then open 2 Spreads at 20 Strike Width. If the conditions are not so good, then consider 1 Spread at 40 Strike Width. Strike Width. The Strike Width could be less if I’m trying to stay under the week’s max dollar risk.
If any of my Entry Rules fails, then I need to explain why I still opened this Vertical Bull Put Credit Spread below.

Of the 13 rules, 2 have failed.

  • Rule 9 may be a little concerning. The 2-week trajectory is Bearish and the Thrashing is low. This could mean that the Marketeers are expecting the bear direction to continue. Put the Put/Call Ratio has fallen to near 1.0, which should mean that the Marketeers are willing to buy.
  • Rule 12 will require more time as the tail end of the 50-Day is still reacting to the correction.

SPY:395p/375p  – Open 04/12/22 – Expires 05/27/22 – Max Gain = $113.00 – Open Price = $443.40
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 86.6%, Headroom= -11.0%, Max Loss= $1,885, AROR= 49.1%

ThinkorSwim Chart: Vertical Bull Put Credit Spread – SPY – Short: 395 Put – Long: 375 Put
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ThinkorSwim Chart: Vertical Bull Put Credit Spread – SPY – Short: 395 Put – Long: 375 Put

Entry Rules for this week. Always complete BEFORE submitting a trade order.

Entry RulesComments
1Current maximum dollars at risk < $28,000?
Yes ($15,140)
Maximum Trading Account dollars I am willing to risk.
Do not open Spread if this rule fails
2Short-strike > 1 SD below the current price?
Yes (1SD=$409.50)
Short Strike should never be above the 1 Standard Deviation below the current underlying price.
Do not open Spread if this rule fails
3Is the Short-Strikes Prob-OTM >= 85.0%?
Yes (86.6%)
This is the guidance parameter set in the Market Sentiment Section (above).
Do not open Spread if this rule fails
4Is the Short-Strike price below the trend channel at expiration?
Yes (see chart)
Part of the Trade the Trend Strategy. Always make sure the Short-Stike is below the 2-month trend channel.
Do not open Spread if this rule fails
5Max dollar at risk this week < $4,000?
Yes ($1,885.00)
Maximum dollar risk set for this week. If I go over this amount for this week, then I may be short in later weeks
5Is the max time to have any dollars at risk is <= 8 weeks (<56 days)?
Yes (45 days)
Strive to open new spreads at 8 weeks expiration or less (the longer the better). If 8 weeks is not available (or if there are already too many open Spreads with this expiration date) then seek shorter times.
7Is the long-term trend (two months) bullish?
Yes (see chart)
Trade the Two-Month Trend. A longer trend will not react fast enough for a 6-8 week Spread and a shorter trend may be too capricious.
8Is the short-term trajectory of the underlying bullish?
No (see chart)
A 1-week trajectory may be a reasonable indicator if I should open a new Spread early in the week or should I wait. If the early trajectory is bearish, wait. If the early trajectory is bullish, don’t wait.
9Is the 2-week Thrashing < 1% & Bullish:
No (2-week Thrashing = 1.5% / Bearish)
If the 2-week trend is bullish and the 2-week thrashing is below 1.0%, then this is a good sign that the trajectory will continue. I might want to lower the Probability of Out-of-the-Money (POTM) to collect a little more premium.
10Is the Put/Call Ratio < 1, (or falling if it is > 1)?
Yes (1.4 down from 1.8)
If the Put/Call Ratio is < 1 (regardless of trajectory), this rule passes. If the ratio is >1 but <2 and is falling, this rule passes. But if the ratio is > 2 or took a significant jump, this rule fails.
11Is the current asset price above 9-Day SMA?:
No (see chart)
If the underlying price is greater than the 9-Day SMA then I should be reasonably confident that the underlying continues a bullish trend in the very short term. If so, I might want to lower the POTM to collect a little more premium.
12Is the 9-Day SMA above 50-Day SMA?:
No (see chart)
If the 9-Day SMA is greater than the 50-Day, then the bullish trend of the underlying has a degree of confirmation. I might want to lower the POTM to collect a little more premium.
13Is the Strike Width minimum (>= 20)?
Yes (20 strike width)
Mainly determined via market conditions. If the conditions are good, then open 2 Spreads at 20 Strike Width. If the conditions are not so good, then consider 1 Spread at 40 Strike Width. Strike Width. The Strike Width could be less if I’m trying to stay under the week’s max dollar risk.
If any of my Entry Rules fails, then I need to explain why I still opened this Vertical Bull Put Credit Spread below.

Of the 13 Entry Rules, 4 failed. The 4 that fail are related to the current underlying’s trajectory. Since I believe we are bouncing from a Correction bottom (albeit slowly), I’m betting that the underlying will not fall more than 11%.

Vertical Spreads Currently Cooking

(As of 04/14/2022)

Currently rolled Spreads: 2
Spreads currently ITM: 1

DIA:320p/300p  – Open 04/05/22 – Expires 05/20/22 – Max Gain = $101.00 – Open Price = $350.13
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 85.7%, Headroom= -8.6%, Max Loss= $1,899, AROR= 42.7%
Now: Prob. OTM= 85.3%, Headroom= -7.8%

IWM:180p/160p  – Open 03/31/22 – Expires 05/20/22 – Max Gain = $94.00 – Open Price = $208.31
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 86.7%, Headroom= -13.6%, Max Loss= $1,906, AROR= 35.6%
Now: Prob. OTM= 85.4%, Headroom= -10.3%

SPY:410p/390p  – Open 03/29/22 – Expires 05/20/22 – Max Gain = $112.00 – Open Price = $459.50
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 86.4%, Headroom= -10.8%, Max Loss= $1,888, AROR= 41.3%
Now: Prob. OTM= 82.2%, Headroom= -7.2%

QQQ:310p/290p  – Open 04/07/22 – Expires 05/13/22 – Max Gain = $120.00 – Open Price = $353.44
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 86.5%, Headroom= -12.3%, Max Loss= $1,880, AROR= 64.2%
Now: Prob. OTM= 84.6%, Headroom= -9.4%

(Rolled) QQQ:330p/290p  – Open 03/25/22 – Expires 05/06/22 – Max Gain = $322 – Open Price = $359.08
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 77.5%, Headroom= -8.2%, Max Loss= $3,678.00, AROR= 75.8%
Now: Prob. OTM= 68.0%, Headroom= -3.6%

(ITM)(Rolled) QQQ:345p/305p  – Open 03/15/22 – Expires 04/29/22 – Max Gain = $1,996.00 – Open Price = $319.40
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 21.1%, Headroom= +7.2%, Max Loss= $2,004, AROR= 807%
Now: Prob. OTM= 42.8%, Headroom= +0.9%







Vertical Spreads Closed This Week

(As of 04/14/2022)

(Rolled) SPY:410p/380p  – Open 02/23/22 – Expires 04/14/22 – Max Gain = $509.00 – Open Price = $430.68
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 65.5%, Headroom= -4.8%, Max Loss=$2,491.00, AROR=148.9%
At Close: Prob. OTM = 98.8%, Head Room = -8.4%

Cost to open: $5.09 premium collected * 100 shares = $509.00
Cost to close: $0.00 premium paid * 100 shares = $0.00 (closed worthlessly)
Net Profit = $509.00 to open – $0.00 to close – $1.00 fees = $508.00
AROR = ($508.00 / 50 days in play) *365 / $2,491.00 = 148.9%

1. Spread opened (original) open 1/12/22, initial premium collected = $110.00
2. Spread closed (rolling) 02/24/22, premium paid = $383.00
3. Spread reopened (rolled) 02/24/22, premium collected = $509.00
4. Rolled Spread closed 04/08/22, premium paid = $0.00 (expired worthlessly)
Profit from this effort = ($110 – $383 + 509) $236.00 (less fees)

The original Spread’s construction was 430p/410p. When this Spread was closed (rolled on 2/24), SPY’s current price was $430.68 and closed that Friday at $428.30. If I would have let it expire, my Short would have been assigned and my Long would have expired worthlessly. The net loss would have been ($428.30 – $430 * 100 shares) = -$170.00.

By rolling the original Spread, instead of a -$170 loss, I realized a gain of $236.00. Rolling this Spread turned this loss into a profit during the time the markets were plummeting into a Correction.

Conclusion

Can selling options for income be considered a Home Business? Can I make money at home by selling Vertical Bull Put Credit Options Spreads? These are questions that I am trying to answer for myself.

Three years ago, I set out on a task to see if I could make a retirement income from home by trading Stock Options. I was an Options Trading Beginner, began with NO knowledge of Options mechanics and only $8,000 to risk. And because I learn best when I write things down, I have documented every step of the way (every bonehead mistake, process epiphanies, interconnecting events, externalities, and so on).

This blog is my Options Trading Journal for beginners (me). I will record my weekly Options contract buys and sells in hopes of gaining experience.

Experience is the ability to recognize that
I’m about to make the same mistake again.

– Damocles

Disclaimer

Even though I have tried to make it clear that this blog is my personal trading journal, it has been suggested by others that I, nevertheless, include a general disclaimer. So here goes…

“This blog and the information contained herein are 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.”







OptionTradesByDamocles.com
OptionsTradesByDamocles.com