I have two deep ITM QQQ Vertical Spreads that I have already rolled twice. And one of these expires this Friday. Should I roll a third time? If I do, I can’t help to feel it will be a hopeless attempt to stave off the irrational forces of fate – “cuz the future ain’t what it used to be.”
“You can observe a lot
by just watching.”“It’s like déjà vu
all over again.”“When you come to a fork in the road,
Various quips from Yogi Berra
take it.”
Rolling ITM QQQ Vertical Spread – Again?
Yogi Berra’s contributions to major league baseball are incalculable, but his legacy might be even better remembered for what he contributed to the American idioms. Sportswriters love Berra for his unforgettable Yogi-isms that add a literary flavor to any subject – mostly because they never made any sense.
For this week, I can find a lot of relevance in Yogi’s quips. Because none of my QQQ Vertical Spreads has made any sense over the last four months. And here again, I’m considering rolling one of my QQQ Vertical Spreads for the third time – it’s like déjà vu all over again.
COMMENTARY CONTENTS
- Troubled QQQ – Deja Vu
- The Original QQQ Vertical Spreads
- QQQ Vertical Spread Performance to Date
- Option 1: Let Expire/Assign and Take The Loss
- Option 2: Rolling QQQ One More Time
- Option 3: Close Early
- My Decision
We made too many wrong mistakes
Yogi Berra
This week, my Options Trading Readiness Signal is flashing a DEFCON level 2, and this trading guidance suggests I need to restrain from opening any new positions until market conditions improve. But I have two QQQ Vertical Spreads that are deep ITM and one of those expires this Friday. Should I roll again?
Troubled QQQ – Deja Vu
DOW drops 1,000 – Deja Vu
QQQ in Correction – Deja Vu
Put/Call Ratio above 0.9 – Deja Vu
VIX above 30 – Deja Vu
QQQ Spreads deep ITM – Deja Vu
Rolling QQQ? – Deja Vu
A nickel ain’t worth a dime anymore
Yogi Berra
The Original QQQ Vertical Spreads
I can’t know where I am going unless I know where I’ve been.
On the happy day of Dec 27, 2021, I opened this Vertical Spread:
QQQ:365p/345p – Open 12/27/21 – Expires 02/04/22 – Max Gain = $127.00- Open Price = $401.79
This Spread started out safe, with an 84.1% Probability of OTM and a Short Strike of 9.1% below the current QQQ price. The 4-month trend channel was bullish, the 2-weeks trajectory was bullish, the 1-week trajectory was bullish and the 9-Day SMA was above the 50-Day. Omicron was on the decline and the deficit-busting spending bill, Build Back Better, was busted. From most practical observations, this Spread was relatively safe.
On Jan 25, the Short Strike’s Prob-OTM of my QQQ Spread fell to a dismal 14.6% and the underlying was now 6.3% below the Short Strike. Bond yields were turning bullish for the first time in years, Fed’s December meeting mentioned the “I” word (interest rates), inflation was going from bad to worse, and new war fears between Russia and Ukraine were pressuring the global slowdowns. Being 10 days before its expiration, it was obvious that my Feb. 4th QQQ Spread would not make it. So I rolled it to:
QQQ:350p/310p – Open 01/25/22 – Expires 03/18/22 – Max Gain = $1,309 – Open Price = $358.30
The construction of this rolled Spread had a much improved Short Strike of 350 and a new expiration date of 49 days away. I was confident that the market dip had mostly run its course and this new Spread was safe – HA!
On Mar 13, 2022, QQQ continued its decline to $319.40, an additional 10.8%. This drop brought a total decline of $84.59 (20% below QQQ’s price when I first open the Spread on 12/27/21). So 2 days before expiration, I rolled it again to:
QQQ:345p/305p – Open 03/15/22 – Expires 04/29/22 – Max Gain = $1,996.00 – Open Price = $319.40
This new construction was marginally better with the improved Short Strike of 345 and a new expiration date 45 days away. Now I was “really confident” that QQQ was ready for a rebound.
Today, April 26, 2022, it’s Deja Vu all over again.
QQQ did start a rebound shortly after this second roll and my rolled Spread was well on its way to a happy ending on expiration. Then, last week when the Federal Reserve Chairman gave a very hawkish speech about needing to be very aggressive in quickly raising interest rates. After Powell spoke, the markets tanked. So, QQQ fell from its rebound high and is now down to $317.14. So now I now have to decide if I want to cut bait or roll all over again.
Take it with a grin of salt
Yogi Berra
QQQ Vertical Spread Performance to Date
| Spread Count | Date | QQQ Spread | Action | Premium Collected | Premium Paid | Running Tally |
| 1 | 12/27/21 | 365p/345p | Open | $127.00 | $127.00 | |
| 2 | 1/25/22 | 365p/345p | Close to Roll | $1,270 | -$1,143 | |
| 3 | 1/25/22 | 350p/310p | Open Rolled | $1,309 | $166 | |
| 4 | 3/15/22 | 350p/310p | Close to Roll | $2,799 | -$2,633 | |
| 5 | 3/15/22 | 345p/305p | Open Rolled | $1,996 | -$637 | |
| 61 |
1 This Spread will not expire worthless because QQQ has continued its steep decline and is currently priced at $317.14 as of 4/26/22.
Now the question is, should I let this deep ITM QQQ Vertical Spread be assigned on 4/29/22 and take the loss, or should I roll my losing QQQ one more time?
It’s tough to make predictions,
Yogi Berra
especially about the future.
Option 1: Let Expire/Assign and Take The Loss
For this review, I will assume that QQQ (currently priced at $317.14) will hold its current value and will be assigned this Friday:
| Spread Count | Date | QQQ Spread | Action | Premium Collected | Premium Paid | Running Tally |
| 62 | 4/29/22 | 345p/305p | Closed / Assigned | $317.14 (cur price) – $345 (Short Strike) = -$27.86 * 100 shares = -$2,786 | -$637 – $2,786 = -$3,423 |
2 This row is an alternative ending to my current ITM QQQ Vertical Spread expiring worthlessly (which won’t happen).
If I let this Spread expire and be assigned, then the realized hit to my trading account will be -$3,423. This 11% loss will certainly be a big deficit to overcome.
It gets late early out there.
Yogi Berra
Option 2: Rolling QQQ One More Time
| Spread Count | Date | QQQ Spread | Action | Premium Collected | Premium Paid | Running Tally |
| 63 | 4/26/22 | 345p/305p | Close to Roll | -$2,406 | -$637 – $2,406 = -$3,043 | |
| 7 | 4/26/22 | 340p/300p | Open Rolled | $1,741 | -$1,302 | |
| 8 | 6/03/22 | 340p/300p | If Closed Worthlessly | -$1,302 |
3 This row is another alternative ending to my current ITM QQQ Vertical Spread expiring and being assigned.
At first glance, losing $1,301 is a lot better than $3,423. But here are some extenuating circumstances that will need to be considered.
- The newly rolled Spread will start its short life already deep ITM. If QQQ’s current price stays flat through Friday (very doubtful), then the current value of QQQ will be $22.86 below the Short Strike ($340 – $317.14 = $22.86) or 6.7% in the hole. Meaning that QQQ will have to rise over 6.7% in 36 days, to have this Spread expire worthlessly (current ETS and Trend Channels strongly suggest the opposite).
- The Mark-to-Market value of this rolled Spread will be ($317.14 – $340 * 100 shares) -$2,286 on day one. Add this to the existing -$1,301 then I am starting at -$3,302 in the hole. If QQQ does not rise over 6.7% within the next 36 days, then rolling a fourth time would be a bigger loser than taking the assignment this Friday.
- The Feds are working against me, inflation is working against me, and global turmoil (caused by Russia/Ukraine war and China’s COVID calamity) is working against me – I’m not feeling too warm and fuzzy about the short-term future. And at DEFCON 2 and with only 36 days to expiration, I don’t have too much confidence in a big market turnaround.
You’ve got to be very careful if you don’t know where you are going,
Yogi Berra
because you might not get there.
Option 3: Close Early
| Spread Count | Date | QQQ Spread | Action | Premium Collected | Premium Paid | Running Tally |
| 64 | 4/28/22 | 345p/305p | Close Early | -$2,600 | -$637 – $2,600 = -$3,237 |
My Decision
By midday Thursday, the probability of my current QQQ Vertical Spread expiring OTM was below 1%, and the small bump of the underlying yesterday was retreating. So I need to decide.
I rejected Options 2 (rolling). To roll this QQQ a third time, I would have to pay $900 (+/-) to open another Spread with a Short-Strike already deep ITM. And with markets currently bearish, I doubt QQQ would make a comeback within 36 days. Trends and sentiment suggest that in 36 days, QQQ could be even lower than now – meaning that rolling a fourth time could cost over $1,000 to dig an even deeper hole.
I rejected Option 1 (letting it expire/assign) because QQQ restarted its decline midday Thursday. And if it resumes its rate of decline over the past few weeks, then the assignment could cost me a whole lot more.
I opted for Options 3 and closed early while the time value was negative.
Check the comments I made after I closed this losing Spread in the “Vertical Spreads Closed This Week” section below.
Always go to other people’s funerals,
Yogi Berra
otherwise they won’t come to yours.
Other Posts from Options Trades By Damocles
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 04/25/2022)
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
- Feds may raise interest rates higher than we think – Yikes
- 1st Quarter GDP estimate Thursday – Yikes
- Is a 2022 Recession becoming more likely – Yikes
- Federal Reserve meets next week – Yikes
- Russia playing the nuclear card – Yikes
- EU passes the DSA – Yikes
- Last week’s market collapse – Yikes
- Europe banning Russian oil – Yawn
- Setting up for a market boom – Yay
Geopolitical
- Russia’s military reset has cast its eye on the Donbas region and the southern parts of Ukraine. Once they control the political and economical activities in these areas, they can import new Russian settlers to rebuild and develop a large Russia-friendly geographical section of Ukraine. Then, expect a Crimea-style annexation territorial grab. (Note, the Supply Chain loss and the global cost to rebuild will continue to fuel inflation for the foreseeable future.)
- China is heavy-handedly dealing with a COVID outbreak. China’s “Zero COVID Policy” has fenced off apartment buildings, shut down massive sections of cities, created quarantine centers, and erected barriers to entire towns. As I feel bad for those caught in China’s harsh-isolation methods, these lock-downs will exacerbate an already strained product production and supply chain.
- I expect to see growing pressure on the Big-Tech cash cow over the next several years with the passing of the EU’s Digital Services Act (DSA).
- Both Sweden and Finland will be applying for NATO membership this May. This will keep war jitter high as Russia plays the nuclear cards. The insuring disruption to European economic growth will play handily in the threat of a US Recession.
- The talk of the Europeans banning Russian oil gets a “Yawn” because it won’t fully happen. Seen as the biggest stick to use against Russian aggression, too many countries need Russia’s oil to survive.
Socioeconomics
- Shades of start-of-year’s Market Correction, the DOW nosedived nearly 1,000 points Friday in apparent response to Federal Reserve President Jerome Powell’s Thursday Speech. At the same time, the S&P500 Put/Call Ratio spiked 30%, the VIX rose nearly 25% and the S&P’s thrashing jolted above 2%. The Marketeer’s needs to spend the weekend with a couple of margaritas and access longer-term effects of the upcoming rate hikes
- Strutting their hawkish stuff, the Federal Reserve rattled the markets last week by hinting we could see a 0.5% Interest Rate hike come June. Some economists are predicting that the rate might even go as high as 0.75%. (Plus, the Central Banks are starting the unwinding of their balance sheets to the tune of about $95B per month). Our risk-weary Marketeers are going to be a little gun-shy during the ramp-up to next week’s Feds meeting.
- I’m predicting that the consumer goods companies are going to take it on the chin when they report their guidance for the rest of the year. Bringing down inflation will bring down projected revenue, and sending up interest rates will slow down expansions/hiring. So the unintended (but maybe necessary) consequences of a hawkish Fed will be to usher in a 2022 Recession
- One good aspect of a declining market is that it sets up the opportunity to buy wrongfully depressed yet quality stocks. Using this time to build out my buy-and-hold portfolio may make all this worth it in a couple of years.
There are not many “Yays” to hang my hat on this week. An aggressive Federal Reserve and the probable inflation amplifying Build-Back-Better 2.0 Bill are not signaling to me that the broader markets will be healing anytime soon. And since it appears we are still in a four (maybe five) month correction, I need to be wary of entering into any new Spreads
ETS votes an optimistic DEFCON 2
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.
The 4-week trajectory of the VIX Regression Channel took an aggressive bump into higher volatility. The start of the VIX spike began at the same time the S&P Put/Call Ratios jump into the nervous region (see below).
- Last week the VIX leaped to 28.21 from 22.70% the week before, keeping to the long term value above 20%
- The current VIX is well above the 9-Day and 120-Day SMA
- The 9-Day SMA has crossed above below the 120-Day SMA
The trajectory of the VIX is shouting “Volatility!” This is good for collecting premiums or pushing the Short-Strike further out. But this is not good for opened Vertical Spreads getting close to ITM.
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.
- The S&P 500’s Put/Call Ratio got spooked and jumped into the “Feeling Nervous” region
- The end of the week value of 0.9 is a good jump from .6 last week
- The 9-Day SMA stayed is ended last week at 0.65 up from last week’s 0.60
Something (Jerome Powell) spooked the Marketeers last week causing most to run for Put-cover. This spike looks a little like the spike that happen the week of Jan 28. I will revisit my “Jabberwock” post for that week to see if there is any correlation and will report in the ETS section above.
Being blind to all other indicators, and just reacting to the end-of-week Put/Call spike, I’ll vote for an Optimistic DEFCON 3
Put/Call Ratio votes an optimistic DEFCON 3
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)
April’s preliminary had a welcome jump of > 10% over March’s finals. But it is still 20% down from a year ago and nearly 30% lower than the Trump era’s policies.
Continued low CSI numbers confirm the general dissatisfaction with the government’s economic policies.
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. 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) = 33,811 – down 1.9% from 34,451 last week. (4 weeks deviation: 320 up from 270 last week)
S&P 500 (SPX) = 4,272 – down 2.7% from 4,392 last week. (4 weeks deviation: 86.72 up from 64.81 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.
Market Thrashing
4 Weeks Thrashing of DJX = +/- 320 points or 0.9% of the market’s volume is up from 0.8% last week.
4 Weeks Thrashing of SPX = +/- 86.72 points or 2.0% of the market’s volume is up from 1.5% last week.
(Market Thrashing above 1.0% might indicate indecision from the Marketeers.)
For the fourth week in a row, the Markets continue to give up some of their aggressive gains from the month prior. This may be signaling that the pressures that caused the Correction are still lingering. Most of last week’s pressure was when Jerome Powell reminded the Marketeer’s that inflation is still massive, and massive interest rate increases are coming.
- The 4-month trend continues decisively bearish but the more relevant 2-month Trend remains a bull
- The 4-week trajectory is siding with the bears
- Current SPX is below the 9-Day SMA
- The 9-Day SMA is below the 50-Day SMA
- Falling Thrashing suggests the bears may be here for a while
Last week, the DOW saw a +1,000 point plunge in just two days. At the start of this week, it was another 900 drop.
With the rapid fall of Market Thrashing confirming the bear trajectory, I might expect the Bear Market sentiment might just be true, at least for the next several weeks. We might even return to the correction level lows. These matrices are NOT looking good for short-term Vertical Spreads
Being blind to all other indicators, I’ll go with a paralyzing DEFCON 2.
Market Index votes a DEFCON 2
My sentiment for this coming week:
Of the five indicators:
- The ETS has many systemic issues – DEFCON 2
- The VIX is trending above 25% – optimistic DEFCON 3
- The P/C Ratio is in good shape (but barely) – cautious DEFCON 3
- The CSI shows a consumer base not excited about our economic future – dismal DEFCON 3
- The Market Indexes look to slow the rebound – DEFCON 2
I’m not feeling too optimistic about markets’ growth for the next couple of weeks.
Trading Readiness Level for this week
This week’s Rules:
This week, my primary focus will be on the ITM QQQ Vertical Spread set to expire this Friday.
Entry Rules:
No new Vertical Spreads this week, except I may roll my deep ITM QQQ Vertical Spread expiring this Friday.
Probability of Out-of-the-Money (Prob-OTM) >= 85% (Entry Rule 3)(See this week’s Entry Rules Table in the Vertical Spreads Opened This Week section below)
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 04/29/2022)
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 #17 | |
| Beginning Account Balance | $28,000.00 | $27,645.97 | $28,264.85 |
| Deposits (Div. & Int.) | $0.67 | $0.00 | $0.00 |
| Withdraws (paycheck1) | -$2,100.00 | -$525.00 | -$525.00 |
| Premiums on Open | $9,803.00 | $625.00 | $0.00 |
| Premiums on Close | -10,527.00 | -$2600.00 | -$2,600 |
| Fees Paid (total) | -$37.84 | -$7.14 | -$1.04 |
| Ending Account Balance | $25,138.83 | $25,138.83 | $25,138.83 |
| Total Gain/Loss | -$2,861.14 | -$2,507.14 | -$3,126.02 |
| ROR | -9.1% | -11.1% | |
| ROC | -10.2% |
Cash Flow 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. Negative week 17 was from closing a deep ITM QQQ Vertical Spread that was too far ITM to roll a third time, plus my paycheck)
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 | $9,803.67 (Premiums) | 0.22 shares (Dividends Reinvested) |
| Funds Removed | -$10,564.84 (Early Close & Fees) | $0 (Fractional Shares Sold) |
| Market Changes | -$2,354.50 (Open Spreads’ Fair Market Value ) | -$2,686.22 (Gain/Loss) |
| Ending Balance | $24,884.33 (Mark-To-Market) | $25,313.78 (59.1706 shares * $427.81 CV) |
| ROI | -11.1% | -9.6% |
Note: It was bound to catch up with me someday, and this week was it. A recession starting at the nadir of a steep Correction makes those Spreads opened before the Correction high risk.
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: (04/24/2022 – 04/29/2022) (Week #17)
- 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 17, 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.
- Bull Credit Spreads: Jun 17, 2022 (6-8 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 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 04/29/2022)
Spread Count Summary:
| Year 2022 | Month Apr | Week #17 | |
| Vertical Bull Put Credit Spread | 25 | 6 | 0 |
| Vertical Bear Call Credit Spread | 0 | 0 | 0 |
| Vertical Bull Put Debit Spread | 0 | 0 | 0 |
| Vertical Bull Call Debit Spread | 0 | 0 | 0 |
| Margin Interest | 0 | 0 | 0 |
| Total | 25 | 6 | 0 |
No Vertical Spreads were opened this week.
Current Dollars at Risk:
| Year 2022 | Month Apr | Week #17 | |
| Vertical Bull Put Credit Spread | $18,847. | $11,375. | $0. |
| 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 | $18,847. | $11,375. | $0. |
| Max Risk Allowed | $28,000. | N/A | $4,000. |
Options Buying Power:
Unallocated dollars available to open new Vertical Credit Spreads:
| Current Cash Balance | $25,138.81 |
| Set-Aside Dollars for Existing Spreads | -$20,000 |
| Cash Available for New Spreads | $5,138.81 (Options Buying Power) |
Vertical Spreads Opened This Week
(04/25/2022 – 04/29/2022)
No new Vertical Spreads were open this week.
Vertical Spreads Currently Cooking
(As of 04/29/2022)
Currently rolled Spreads: 1
Spreads currently ITM: 2
IWM:180p/160p – Open 04/20/22 – Expires 05/27/22 – Max Gain = $93.00 – Open Price = $202.33
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 85.9%, Headroom= -11.0%, Max Loss= $1907.00, AROR= 47.6%
Now: Prob. OTM= 61.1%, Headroom= -3.3%
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%
Now: Prob. OTM= 74.9%, Headroom= -5.7%
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%
Now: Prob. OTM= 73.8%, Headroom= -6.0%
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= 71.4%, Headroom= -4.2%
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= 61.4%, Headroom= -3.0%
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= 61.1%, Headroom= -2.3%
(ITM)DIA:335p/315p – Open 04/21/22 – Expires 05/13/22 – Max Gain = $95.00 – Open Price = $354.44
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 85.9%, Headroom= -5.5%, Max Loss= $1,905, AROR= 81.9%
Now: Prob. OTM= 46.3%, Headroom= +0.3%
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= 63.0%, Headroom= -3.1%
(ITM)(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= 28.6%, Headroom= +3.2%
Vertical Spreads Closed This Week
(As of 04/29/2022)
(ITM)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%
At Close: Prob. OTM= 0.9%, Headroom= +8.4%, AROR= -250.9%
Cost to open: $19.96 premium collected * 100 shares = $1,996.00
Net Loss = $1,996 to open – $2,600.00 to close – $2.00 fees = -$606.00
AROR = (-$606.00/ 44 days in play) *365 / $2,690 = -250.9%
Starting early Wednesday, QQQ was improving and I felt (hoped) that if it continued to improve and the ending premiums paid will be less than what I am projecting today. But as Thursday began, QQQ was tracking to give up its meager gain. I decided to close 1 day early before it gave up more.
By market close on Friday, QQQ ended the week at $313.25. If I would have just allowed it to expire and be assigned, I would have to pay -$3,175 (313.25 – 345 = -31.75 * 100 shares) from my Trading Account instead of the -$2,600 I did by closing early. So, even though it was a gut-punch paying out $2,600, I feel fortunate.
If the world were perfect,
Yodi Berra
it wouldn’t be.
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
– Damocles
I’m about to make the same mistake again.
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.”
