The downturn in the 2022 markets began on cue – the first week in January. And by the end of that first month, I was already falling down the “Correction” rabbit hole. I am ending this year with a frustrating loss of 41.3%. But I still have a couple of bucks left, so I’m still in business! This month’s journal entry is my 2022 year-end results for selling Vertical Bull Put Credit Spreads for income.
“I know what I’m gonna do tomorrow,
and the next day, and the next year,
and the year after that.
– George Bailey (Movie: It’s a Wonderful Life)
2022 Performance Review
I felt a bit cocky after 2021. It was a great year as I enjoyed an ego-stoking 52.1% return on my opening-year investment. My Vertical Spreads outperformed my buy/hold investments by nearly 20%. So I swaggered into 2022, thinking I had it figured out. (Selling Vertical Credit Spreads for Income – 2021’s Year-End Results). But painful losses in 2022 were a lesson in humility, as I can’t strut through a Correction.
By the end of the first month, I’ve already rolled two losing Spreads for a realized loss of ~ $2,000. By July, I was 33% in the hole. Then by year-end, more than half of my trading account vanished. What Happened!?
This month’s journal entry is my 2022 Performance Review for selling Vertical Bull Put Credit Spreads for income.
COMMENTARY CONTENTS
HOW DID I DO ON MY 2022 GOALS?
For 2022, I divided my Goals into “Primary” and “Secondary.” (Vertical Spreads Mission Statement – 2022)
Primary Goals
My primary goals focused on dollar performance.
Goal 1: Collect enough in monthly premiums to allow me to withdraw a salary on the last Friday of each month – Failed
The downturn in the 2022 markets began on cue – the first week in January. And by the end of January, I was already falling down the “Correction” rabbit hole. Four of my carry-over Vertical Bull Credit Spreads from 2021 were already deep ITM, and I was frantically researching how to manage losing Spreads.
But I made enough premiums to make my first $525 paycheck.
By the sixth week of the year, my trading account went negative. My continued withdrawal of a monthly paycheck only exacerbated the losses. Finally, my account got so depleted by August that I stopped withdrawing.
Goal 2: By the end of 2022, have more money in my Trading Account than when I started – Failed
I started 2022 with $28,000 in my Ameritrade Options Trading Account. By the end of 2022, I counted only $12,246.51 – a 56.3% loss. My 55 Spread transactions through the year earned me $13,568 in new premiums, losses from assignments, and early closes cost me $25,017.19. And I withdrew $4,200 as a quasi-paycheck.
Even if I had returned the $4,200 I withdrew, I would still end the year with a 41.3% loss.
Goal 3: By the end of 2022, be able to say that I did better selling Vertical Credit Spreads than I would have done if I had simply invested the same amount in an Index ETF as a buy-and-hold investment – Failed
Even though both strategies lost money, I can not say that I did better than a hypothetical investment in SPY:
COMPARING THE TWO STRATEGIES
| Strategy 1 Selling Vertical Spreads | Strategy 2 (hypothetical) ETF/SPY Investment | |
| Beginning Value | $28,000 | $28,000 (SPY 12/31/2021 = $474.96 share) |
| Ending Value | $16,448.70 | $22,723.73 (SPY 12/30/2022 = 379.77 share) |
| ROI | -41.3% | -18.8% |
| Results | LOSER | LOSER |
Secondary Goals
Ancillary to my primary goals, my secondary goals generally centered around Spread mechanics, market awareness, and personal aspirations.
Goal 1: Expand on my Options Trading knowledge with new strategies – Succeeded
Options trading strategies are more than spread techniques or clever construction. It is also effectuation. So, in 2022 I had a painful review of Market Psychology.
Technical Strategies:
- VERTICAL BEAR CALL CREDIT SPREADS – ENTRY RULES
- VERTICAL SPREAD ASSIGNMENTS – THE GOOD THE BAD AND THE UGLY
- WHY AVOID THINKORSWIM STOP-LOSS STRATEGIES FOR VERTICAL SPREADS
- MARK-TO-MARKET FOR VERTICAL SPREADS
Market Psychology:
- SELLING VERTICAL SPREADS – THE KENNY ROGERS STRATEGY
- BEWARE THE “BULL TRAP”
- CRYPTO TRUDGING – A BOURGEOIS LOOK AT CRYPTOCURRENCY
Goal 2: Stay aware of our sociopolitical-economics (ecopolitical) issues that affect my performance – Succeeded
- 5 THINGS TO HAPPEN BEFORE THE BULL MARKET CAN RETURN
- HUNT FOR RED NOVEMBER
- RAGNAROK – THE PROGRESSIVE ECONOMY
- UKRAINIAN EFFECT ON MY VERTICAL SPREADS
Goal 3: Maintain OptionsTradesByDamocles.com Trading Journal – Succeeded
After more than four years of weekly journal entries, my entries became a little repetitious. So I decided to change to a monthly journal to keep my commentary fresh. But I did continue to complete all the Market Sentiment sections and record all Options transactions each week.
Making this schedule change allows me to spend more time on other writing projects.
Goal 4: Be systematic – not emotional – Failed
The dramatic market decline at the beginning of 2022 was my weak performance of the year. I was expecting a 2020-like “V” shape recovery from the Russian/Ukraine run-up. And, even though I acknowledge worsening inflation, I did not anticipate the impact.
Via my lack of belief in my market matrix, I rolled and rerolled losing Vertical Bull Put Spreads, plus I entered new Bull Put positions when my matrixes suggested otherwise. By July, I was already over 40% of realized losses from my Trading Account.
Goal 5: Most importantly, love life! – Succeeded
A resounding success!
SOME STATISTICS
| 2021 | 2022 | |
| Initial investment | $16,000 | $28,000 |
| # of Vertical Credit Spreads sold | 85 | 55 |
| Win/Loss % | Win = 94% Loss = 6% Ratio =14.5 | Win = 63% Loss = 37% Ratio = 1.7 |
| Average Spread duration (days to expiration) | 34.1 days | 36.8 days |
| Average dollar risk per Spread | $2,214.50 | $1,596.45 |
| Average premium per Spread | $68.55 | -$164.44 |
| Premium collected | $9,581.00 | $13,568.00 |
| Premium paid | $1,118.00 | $25,017.00 |
| Fees paid | $121.04 | $116.03 |
| Realized return | $8,343.58 | -$11,551.30 |
| Year End ROI | +52.1% | -41.3% |
Will 2023 be as bad as 2022?
Starting in 2021, the U.S. economic policies took a hard left turn. The Progressive Movement was hell-bent on giving away as much as possible in the short time they had, canceling everyone who disagreed, and steering America closer to Wokalism.
On top of the nearly $3 trillion in stimulus spending in 2020 and an additional $2 trillion in 2021, 2022 started with yet another $2 trillion in giveaways. Then we spent most of 2022 in a forced Social Engineering campaign to persuade us sheeple that we all are racist, transgenders, and inequitable – the rise of Woke.
As a result – inflation exploded, and the post-COVID recovery crashed. “This is the Woke Economy – get used to it.” (paraphrasing Pres. Biden).
BUT – I believe most of the market damage has already been done in 2022. And, I am also convinced that bad-news fatigue has kicked in, and knee-jerk market reactions will be much less.
Remanence of the 2022 doldrums will continue, and 2023’s market growth will begin lethargically. But there was a lot of cash was taken out of the markets early in 2022 and is waiting to trickle back in late 2023, and having a divided Congress is going to put the kibosh on wild wokalistic spending. I believe that by the end of 2023, we will get back most of what was lost this year.
Attaboy Clarence!
George Bailey
Was This Post Helpful? Although blogging is great fun, any Donation/Tip will help keep my site active.
(Consider it like the tip you would throw in the guitar case of a street performer as you walk by 😉)
Choose a tip:
Or enter a custom tip:
Your contribution is appreciated – Damocles
DonateOther 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 mostly old news.
(As of 11/25/2022)
This section reviews four indicators:
Then, I will use these indicators to help guide my trading decisions for this week.
Each of my four 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 Influencers
Ecopolitical (Sociopolitical-Economics) Influencers (EPIs) 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.
EPIs are 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 EPIs can significantly disrupt all the other indicators at the drop of a tweet.
Yikes – Yawns – Yays
- Beijing affirms Zero-COVID stance – Yikes
- 1% Interest Rate on the table? – Yikes
- PPI up 0.3% in Nov – Yikes
- Nov. Retail sales dropped 0.6% – Yikes
- FTX fallout has coattails – Yikes
- Federal 2023 omnibus bill – Yawn
- Is China relaxing Zero-COVID? – Yay
- Misery Index down to 10.9% – Yay
- WTI Oil dipped below $70.00/bbl – Yay
- Ukraine/Russia cooling – Yay
- Holiday Shopping – Yay
- Has inflation peak? – Yay
Geopolitical
- Apple is just one of the high-profile U.S. companies looking to shutter China as the nation’s Zero-COVID policies had significantly restricted freedoms and rights. The continued regional lockdowns have sent manufacturers packing. As a result, U.S. manufacturing orders in China are down 40%, as companies like Apple are looking to shut down their Zhengzhou factory. (Foxconn is looking to relocate its Zhengzhou factory iPhone production to India.)
- The 11-month low in WTI oil is good for my gas tank but will hit my energy stocks hard. But OPEC has decided to stick with their planned production cuts despite the upcoming Russian oil sanctions. So expect $100/bbl of oil again.
- Winter is not the only thing that is cooling Russia. The temperature with the Ukraine/Russian war is also lowering. The Russian forces pulling back and the perceived depletion of Russian munitions suggest that the conflict could be running out of gas. But this may just be the pause in front of a Spring offensive. Without a cease-fire and territorial agreement between Ukraine and Russia, this conflict will remain a thorn in the inflation side for a long while.
- FTX founder Sam Bankman-Fried sent ripples throughout all sectors of the markets when he was discovered to have bilked billions from his FTX cryptocurrency exchange. His deception sheds light on the sketchy execution of cryptocurrencies and may be the nail in the crypto coffin. As a result, there has been a mass exodus from cryptos, which has inflamed the markets as a whole. Fast money is a delusion.
- The 2023 omnibus bill on the Senate’s kitchen table looks to be served up to the American people for Christmas. But, even if this is a back-door extension to many of the Progressive’s Woke agenda and will blunt the incoming House Republican’s power, it will take the pressure off the table for an entire year. Moreover, having the Federal Government not be in chronic financial peril for the first three months of the year will help keep market volatility lower.
Socioeconomics
- The Christmas Season is over. With lots of cash left over from the COVID stimuli, a record 197 million Americans spent $9.5B between Thanksgiving and Cyber Monday, up 10% from last year. But even with a great end-of-the-month performance, November’s retail sales fell 0.6%, more than the 0.3% expected. Spending is good for the economy but can exacerbate inflation – which is bad for the economy. On a year-over-year basis, retail sales increased 6.5%,
- This month, we saw the Producer Price Index (PPI), Non-Farm Payroll Report, Consumer Price Index (CPI), and an interest hike rise more than expected. And yet, even with this particular set of bad juju, the Marketeers had no knee-jerk reaction. The S&P 500 ended mostly flat, and the Russell 2000 gained. There are now granularities in lousy economic news, and not every problem is causing a Correction Level response. It seems the Marketeers are starting to get a little thick skin.
- Taking the recent CPI and unemployment data, the Feds signal that the stubbornly high inflation rate is finally slowing. So, during the final meeting of 2022, the Federal Reserve bumped the interest rate by only half a percent, setting the federal discount rate to 4.25%. The Misery Index dropping for the second month in a row to 10.9% bodes well for a stabilizing economy. However, it is still likely that the rates will continue to hike but at a slower pace.
I do feel more positive this week than in the last few months, but still a little gun-shy.
EPI votes a cautious DEFCON 3
Market Sustainability
This is a revamped section inspired by the “Kenny Rogers” strategy.
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 in which direction the market will move but rather if the current trajectory is sustainable.
If the VIX is below 20% (better yet, below 15%), then there is not much speculation about the future of the current market’s trajectory.
Put Options are frequently used as protection against existing investments falling. When the ratio rises, this indicates that the Marketeers believe a market decline is imminent.
If the S&P Put/Call Ratio is below 0.75, then there is a reasonable belief that the markets will rise.
The 4-week trajectory of the VIX Regression Channel took a decisive turn toward higher volatility:
- VIX spent most of last week between 20% and 25%, ending at 21%
- The current VIX is below the 9-Day SMA
- The 9-Day SMA is well below the 50-Day SMA
- The VIX’s Thrashing has been higher over the past 30 days.
The Put/Call Ratio for the S&P 500 index troubled through December:
- The S&P 500’s Put/Call Ratio wildly oscillated above 1.0 line
- The P/C Ratio ended last week at .89
- The 9-Day SMA is above the 1.0 line (1.04), suggesting growing market pessimism.
While the VIX has been steadily rising over the last month, the Put/Call ratio thrashing has exploded and is spending significant time above the “Troubled” line. I’m interpreting this as a general change in the Marketeer’s risk expectations as they are starting to shed (buying more Puts than Calls) their higher-risk investments.
I am cynical about what’s coming. So this week, I’ll hunker down a little and vote a DEFCON 2.
Market Sustainability votes a DEFCON 2
Investors’ Sentiment
Marketeers are consumers too. And when the economy is humming, investments are smoking. Conversely, when the economy is threatening their portfolios, they tend to run for cover.
Consumer Sentiment Index
A low Consumer Sentiment 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)
December’s finals show the beginning of a bounce, rising 5% over last month.
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 another 0.1% in Nov. (less than expected). One year increase was 7.1%, down from 7.7% last month 1.
- Unemployment Rate: Nov rate = 3.7%, flat from 3.7% in Oct.
- Misery Index = 10.8% (7.1% + 3.7%), down from 11.4% last month.
- (Note: Ideally, the Misery Index should be well below 10% for a growing economy.)
1 A year ago (Nov 2021), inflation was already sky-high at 7.0%. So being at 7.1% now means that we are actually up by 14.1% over the past two years (Biden’s Administration).
The Misery Index continues to be high as nearly half of all consumers believe our economy is moving in the wrong direction.
CSI votes a dismal DEFCON 2
Market Trajectories
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 in the country. The S&P is widely considered the best indicator of how all the U.S. markets are performing.
The Russell 2000 Index is commonly considered an indicator of the U.S. economic direction due to its focus on small-cap companies. The growth potential of small-cap stocks is attractive to Marketeers when economic expansion is expected. These same small-cap stocks are also the first to be jettisoned at the start of economic turmoil.
S&P 500 (SPX) = 3,845 – down 0.2% from 3,852 last week.
Russell 2000 (RUT) = 1,761 – down 0.1% from 1,763 last month.
Four/Two Months Trend (Updated 12/26/2022)
Four/Two Months Trend (Updated 12/26/2022)
Market Performance
- Both indexes turned indecisively bullish last month
- Short-term trajectories wild swings
- Short-term turned bearish with both 9-Day SMA below the 50-Day
- Long-term remains slightly bearish, with the 50-Day SMAs below the 200-Days. But this gap is closing.
The 4-month Trend Channels finally rotated slightly bullish. But the market’s downturn over the last 30 days will probably put that back to bearish in a few weeks.
The Russel 2000 Index made an unceremonious rout south by dropping 155 points (over 8%) in just two weeks. When the Marketeers shed this much high-risk, low-cap stocks in such a short time suggests challenging times ahead.
The 50-Day SMA for both indexes turning bullish. But the 200-Day SMAs are still feeling the effect of pre-election indecision – bearish.
Run-up news of an anticipated lower interest rate hike was met with a positive market reaction. Even when the 0.5% rate hike was announced, the market’s response was still tepid. But, it wasn’t until after Fed Chairman Powell’s Speech on Thursday that spooked the Marketeers and was followed by two days of severe selloffs.
Pull back on the reigns a little, I’ll drop down to a cautious DEFCON 3
Market Index votes a cautious DEFCON 3
My sentiment for this coming week:
Of the four indicators:
- Ecopolitical Influencers softening – cautious DEFCON 3
- Market Sustainability suggests a possible downturn – DEFCON 2
- Investors’ Sentiment shows a consumer base not excited about our economic future – dismal DEFCON 2
- The market indexes are squeamishly bullish – cautious DEFCON 3
Trading Readiness Level for this week
DEFCON 2
This Week’s Guidance
Most of the significant market events are now past us (doom and gloom from pre-election scaremongering). Inflation seemed to have peaked, and the market’s trajectories are weak-knee bullish. And the paranoid Marketeers are quite cynical of our economy and fear the recession will be long and hard – like the upcoming winter.
- Markets closed for CHRISTmas on Monday, Dec 26. Will be open all day Friday CHRISTmas Eve-Eve.
- No new Spreads this week (DEFCON 2).
- Evaluate each Spread Entry Rules
- Do not open and Vertical Spread that will expire after 12/31/22 (accounting reasons)
(What is CHRISTmas? The 25th day in December when I recognize and honor the birth of Jesus CHRIST – Son of God.)
Entry Rules
(Updated 11/15/22)
No new Spreads this week.
Exit Rules:
(Updated 11/30/22)
- Consider early close following this schedule:
- Current AROR > opening AROR
- % Max gains positive
- Allow NO leg to expire ITM and be assigned!
Profit and Loss Statements
(As of 12/30/2022)
Note: I’m no longer posting a “Cash Balance Sheet” or the “Cash flow Chart.” In reality – it has no value. Transferring out $525 each month as my “paycheck” is a bit dopey and counterintuitive. The best measure of my performance is to simply compare my Trading Account to an equivalent investment in SPY.
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, 2022) | $28,000.00 (Cash) | $28,000.00 (58.9523 shares @ $474.96) |
| Funds Added | $13,580.48 (Premiums, Int., Div.) | 0.88 shares (Dividends Reinvested) |
| Funds Removed | -$25,133.22 (Early Close & Fees) | $0.00 (Fractional Shares Sold) |
| Market Changes | $0.00 (Open Spreads’ Fair Market Value ) | -5,151.22 (Gain/Loss) |
| Ending Balance | $16,447.26 (Mark-To-Market) | $28,848.78 (59.5895 shares * $404.18CV) |
| ROI | -41.3% | -18.4% |
Schedule for this Week
Goals for this week: (12/27/2022 – 12/30/2022) (Week #52)
- Document lessons learned or new thoughts in Commentary Section
- Open one or two Vertical Options Spreads
- Update Trading Log as trades occurs
Monday:
- Determine/update this week’s market sentiment section
- Review/tweak Trend-Channels for all stocks on the watch list
- Set target expiration dates for all Options as follows:
- Bull Credit Spreads: Dec 30, 2022 (6-8 weeks)
Note: 8 weeks out put the expiration date into 2023. I want all Spreads closed before the end of 2022.
- Bull Credit Spreads: Dec 30, 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.)
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 this week’s 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.
- Watch one Webcast or take one online mini-course to be completed by Friday.
This Month’s Trade Activity
(As of 12/30/2022)
Volatility was too high, and the ETSs were too intense to feel comfortable if the markets could sustain any one direction for the length of time. I should have come to this position back in March.
Spread Count Summary:
| Year 2022 | Month Dec | Week #52 | |
| Vertical Bull Put Credit Spreads | 32 | 1 | 0 |
| Vertical Bear Call Credit Spreads | 15 | 0 | 0 |
| Iron Condors | 8 | 0 | 0 |
| Total | 55 | 1 | 0 |
Current Dollars at Risk:
| Year 2022 | Month Dec | Week #52 | |
| Vertical Bull Put Credit Spread | $0. | $0. | $0. |
| Vertical Bear Call Credit Spread | $0. | $0. | $0. |
| Iron Condor | $0. | $0. | $0. |
| Total Dollar Risk | $0. | $0. | $0. |
| Max Risk Allowed | $28,000. | N/A | $4,000. |
Note: no new Spreads this week.
Options Buying Power:
Unallocated dollars available to open new Vertical Credit Spreads:
| Current Cash Balance | $12,245 |
| Set-Aside Dollars for Existing Spreads | $0,000 |
| Cash Available for New Spreads | $12,245 (Options Buying Power) |
Vertical Spreads Opened This Month
(11/28/2022 – 12/30/2022)
QQQ:244p/225p/X1 – Open 11/30/2022 – Expires 12/30/22 – Max Gain = $65.00 – Open Price = 281.09
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 91.7%, Headroom= -12.9%, Max Loss= $1,935, AROR=40.2%
Check (✔) rule passed.
| Unfriendly Spread | Risky Spread ✔ | Friendly Spread | |
| DEFCON | 1 or 2 | 3 or 4 ✔ | 4 or 5 |
| Underlying’s Put/Call Ratio | > 1 | < 1.0 ✔ | < 0.75 |
| Underlying’s IV% | > 50% | < 50% ✔ | < 25% ✔ |
| VIX | >25% | < 25% ✔ | < 18% |
| Cur Val | below 9-Day SMA ✔ | below 9-Day SMA ✔ | above 9-Day SMA |
| 9-Day SMA | below 50-Day SMA | above 50-Day SMA ✔ | above 50-Day SMA ✔ |
| 50-Day SMA | below 200-Day SMA ✔ | below 200-Day SMA ✔ | above 200-Day SMA |
| 30-Day Regression Line | bearish | flat (± 5∘) | bullish |
| 60-Day Trend Channel | bearish | bullish ✔ | bullish ✔ |
| Strike Width | 20+ | 10 – 20 ✔ | 5 – 10 |
| Short Strike Prob OTM | > 100% | > 90% ✔ | 75% – 85% |
| # Spreads per Week | 0 | 1 ✔ | 2 |
- The expiration date is only 30 days out. I want all Vertical Spreads closed by EOY
- Short Strike is 12.9% below the current QQQ price. With the elections over, with Ukraine/Russia conflict pausing, with pressure on the Feds to be a little softer, with Congress likely to pass EOY Appropriation Bills without much fanfare, I’m figuring that a new correction-level drop within the next 30 days is mostly unlikely (said that before).
DIA: 320p/300p/X1 – Open 12/14/2022 – Expires 12/30/22 – Max Gain = $42.00 – Open Price = 343.60
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 92.5%, Headroom= -6.9%, Max Loss= $1,958, AROR=47.8%
Check (✔) rule that applies:
| Unfriendly Spread | Risky Spread ✔ | Friendly Spread | |
| DEFCON | 1 or 2 | 3 or 4 ✔ | 4 or 5 |
| Underlying’s Put/Call Ratio | > 1 ✔ | < 1.0 | < 0.75 |
| Underlying’s IV% | > 50% | < 50% ✔ | < 25% ✔ |
| VIX | >25% | < 25% ✔ | < 18% |
| Cur Val | below 9-Day SMA | below 9-Day SMA | above 9-Day SMA ✔ |
| 9-Day SMA | below 50-Day SMA | above 50-Day SMA ✔ | above 50-Day SMA ✔ |
| 50-Day SMA | below 200-Day SMA ✔ | below 200-Day SMA ✔ | above 200-Day SMA |
| 30-Day Regression Line | bearish | flat (± 5∘) ✔ | bullish |
| 60-Day Trend Channel | bearish | bullish ✔ | bullish ✔ |
| Strike Width | 20+ | 10 – 20 ✔ | 5 – 10 |
| Short Strike Prob OTM | > 100% | > 90% ✔ | 75% – 85% |
| # Spreads per Week | 0 | 1 ✔ | 2 |
- The expiration date is only 16 days out. I want all Vertical Spreads closed by EOY
- CPI rose less than expected, Congress has a bipartisan framework for a 2023 Omnibus bill, bipartisan support of a CR this week, and Feds are widely expected to NOT raise interest rates by 0.75% (inflation may have topped out). Most EPIs are tame or old news. All intrinsic pressure continues to be bullish. The likelihood of the DOW losing 7% in the next two weeks seems unlikely.
Vertical Spreads Currently Cooking
(As of 12/30/2022)
All Spreads closed for end-of-year accounting.
Vertical Spreads Closed This Month
(As of 12/30/2022)
QQQ:240p/220p/X1 – Open 11/18/2022 – Expires 12/30/22 – Max Gain = $73.00 – Open Price = 283.56
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 91.0%, Headroom= 15.4%, Max Loss= $1,926, AROR=32.9%
At Close: Prob. OTM=98.9%, Headroom= 17.5%
Income to open: $0.73 premium collected * 100 shares * 1 contracts = $73.00
Cost to close: $0.00 premium paid * 100 shares * 1 contracts = $0.00 (closed worthlessly)
Net Profit = $73.00 to open – $0.00 to close – $1.00 fees = $72.00
AROR = ($72.00 / 42 days in play) * 365 / $1,927 = 32.9%
QQQ:245p/225p/X1 – Open 11/30/2022 – Expires 12/30/22 – Max Gain = $65.00 – Open Price = 281.09
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 91.7%, Headroom= 12.9%, Max Loss= $1,935, AROR=40.2%
At Close: Prob. OTM=98.6%, Headroom= 15.7%
Income to open: $0.65 premium collected * 100 shares * 1 contracts = $65.00
Cost to close: $0.00 premium paid * 100 shares * 1 contracts = $0.00 (closed worthlessly)
Net Profit = $65.00 to open – $0.00 to close – $1.00 fees = $64.00
AROR = ($64.00 / 30 days in play) * 365 / $1,935= 40.2%
DIA: 320p/300p/X1 – Open 12/14/2022 – Expires 12/30/22 – Max Gain = $42.00 – Open Price = 343.60
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 92.5%, Headroom= 6.9%, Max Loss= $1,958, AROR=47.8%
At Close: Prob. OTM=92.6%, Headroom= 7.0%
Income to open: $0.42 premium collected * 100 shares * 1 contracts = $42.00
Cost to close: $0.00 premium paid * 100 shares * 1 contracts = $0.00 (closed worthlessly)
Net Profit = $42.00 to open – $0.00 to close – $1.00 fees = $41.00
AROR = ($41.00 / 16 days in play) * 365 / $1,958= 47.8%
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.
My Options Trading activities include cover calls, cash-secure puts, Vertical Spreads, and other options strategies. Cover calls and cash puts assume that I already have a sizable portfolio and accumulated cash to generate a meaningful income. But short-term Vertical Spreads do not require a substantial cash investment to make some fun money. – This blog’s sole focus is short-term Vertical Spreads.
This blog is my Options Trading Journal. I will record my weekly Option Contracts 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 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.”
No comments! Be the first commenter?