This month, I want to revisit my Vertical Bull Put Credit Spreads’ Exit Strategy – particularly when to exit a winning position. I want to take my painful experience of last year and craft a new strategy a bit more workable.

2023 Early Exit Strategy

2022 was a disastrous year for short-term Vertical Spreads. And it was even more devastating to junior traders like me. I blew through half of my trading budget because my Entry Strategies were unintentionally emotional and not so much phycological. Additionally, my Exit Strategy was way too shallow.

This month, I want to revisit my Vertical Bull Put Credit Spreads’ Exit Strategy – particularly when to exit a winning position. I want to take my painful experience of last year and craft a new strategy a bit more workable. But before I start on that, I want to document an important revelation learned.

Commentary Contents

• The Inevitability of Losing
  • Law of Large Numbers
  • 2023 Market Prognostication
• A Winning Exit Strategy
  • Rolling a Winning Spread
  • What Qualifies for Early Closing
  • What Qualifies as a Replacement
• Example

The Inevitability of Losing (The Flim Flam Flummox)

(Yes – mixing movie metaphors)

When trading short-term Vertical Bull Put Credit Spreads, there are NO exit strategies during a market meltdown. The best defense against a calamitous market is to pick up my ETFs and go home.

Implied Volatility (IV) drives Options premiums. When I put $2,000 down on a Spread for a $100 take-home price, I’m doing so assuming I have an 80% to 90% probability that Spread will expire worthlessly. But that’s only possible if I’m riding a bull market.

If my underlying takes a hit, IV will skyrocket and the premium price required to close my Spread will instantly be many magnitudes more than what I collected. However, I can mitigate this scenario a little by following my “How to Make Loss-Resistant Vertical Spreads” series of posts.

But if the bottom should fall out (yep, looking at you 2022) and the price of my underlying drop below my Long Strike, an immediate V-Shape snapback is highly unlikely.

Law of Large Numbers

The Probability Law of Large Numbers is a real bear. One budget tweet from Congress, one bale word from Powell, or one shot fired in Europe can turn my Vertical Spreads sour. This is why “Kenny Roger’s Strategy” for selling Vertical Spreads will be my primary Exit strategy for 2023.

2023 Market Prognostication

A 2023 recession is highly anticipated. Increasing unemployment, falling GDP, punishing interest rates… So why are the Marketeers taking this news with a yawn? I believe there was such a massive one-two punch last year that most market assets are far underwater, and significant cash was pulled. So, this year, the anticipated slate of bad economic news will be neutralized with large-scale bargain buying. So from the Marketeers’ point of view, 2023 market growth will be lethargically positive.

A Winning Exit Strategy (Daze and dizzy ’em)

I may not be able to avoid a loss when the markets turn sour, but I might be able to enhance a winning Spread when the markets are behaving by rolling a winning Spread – How To Roll A Vertical Spread In ThinkorSwim.

When I open a Short-Term Vertical Spread, I am making a bet that that position will close with a profit. This is like making the opening bet at the poker table after I get my initial set of cards.

But the problem with my Vertical Spread is that I can’t improve the stakes should markets improve – like upping the bet should the replacement cards I receive improves my hand.

Or can I?

Rolling a Winning Spread

I can roll winning Spreads the same way I roll losing Spreads – How To Roll A Vertical Spread In ThinkorSwim. But as I learned that rolling short-term losing Spreads might not be in my best interest (see last year), strategically rolling a winning Spread may make me a few extra bucks.

1. Roll to the same strike width and expiration date. This will keep my weekly max-risk rule in order (Budget, Goals, and New Rules for 2023 Vertical Spreads).
2. The Entry Rules for the replacement Spread need to be current market appropriate.
3. The aggregate premium collected needs to be more than the original Spread.
4. Don’t get greedy – take smaller incremental improvements.

What Qualifies for Early Closing

Knowing when to consider rolling a winning Spread early is highly subjective. For me, I will consider closing a winning Spread using the following criteria:

1. Calculate a target closing threshold price using the table below.
   • <% of Max Gain> = VLOOKUP(QUOTIENT(<Expiration Date> – TODAY() + 1, 7), $J$2:$K$9,2)
   • <target price> = (1 – <% of Max Gain>) * <Max Gain> / 100
2. Consider rolling if the current Spread’s premium value is less than <target price>.
3. Do not roll unless I already have a planned replacement.

	J	K
1	Weeks to Expiration	% of Max Gain
2	0	100%
3	1	100%
4	2	95%
5	3	90%
6	4	85%
7	5	80%
8	6	75%
9	7	70%

What Qualifies as a Replacement

The replacement Spread needs to be a winner:

• The expiration date is to be the same as the original
• The Spread’s headroom (% between the opening value of underlying and the Short Strike) should be the same or more than the original
• Entry Rules for the current market conditions.
• DON’T BE GREEDY. Improving the aggregated max gain by just a few bucks is best. The replacement Spread will have a to-short time frame and will not be able to bounce back if the underlying pulls back too much.

Example

As an example, consider the following:

QQQ:235p/220p/X1 – Open 01/13/22 – Expires 03/03/23 – Max Gain = $45.00 – Open Price = 277.98
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 93.0%, Headroom= 15.5%, Max Loss= $1,455, AROR=22.5%

— Well, a real-world example will have to wait until the next Trade Journal Post.

You can like the life you’re living,
you can live the life you like.

– Roxie Hart (Movie: Chicago)

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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 mostly old news.

(As of 01/27/2023)

This section reviews four indicators:

• Ecopolitical Influencers,
• Market Sustainability,
• Investors’ Sentiment,
• Market Trajectories.

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.

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Yikes – Yawns – Yays

• Biden’s Presidency fatally wounded – Yikes
• Russia inflicts pain on Ukraine – Yikes
• US hits debt ceiling – Yikes

• Recession cometh – Yawn
• Hitting the US debt limit – Yawn

• CPI falls in Dec – Yay
• PCI falls in Dec – Yay
• Misery Index = 10.0% – Yay
• Fed’s rate pause on the horizon – Yay
• Is the global chip shortage over? – Yay
• 4th Qtr GDP exceeds – Yay

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Geopolitical

• Like the Russia Collusion hoax, COVID-CON, and Trump’s classified documents crisis, the anarchist wing of the Democratic Party (aka the Progressive-WOKE Left) has again overplayed its hand. Now President Biden is taking it on the chin as various classified documents have been found in the many nooks of his many homes. I’ll bet that every president in the past 100+ years has self-declassified documents and taken them home for later memoirs. So should the FBI now raid Obama and Clinton’s homes? (Note: the tactics of foraging for insignificant peas and using social/national media to inflame into a mindblowing crisis, inflict maximum political retribution, and cower all opposition have worked well for the Climate-Change movement. So why won’t it work for politics?) So, is the proverb “what’s good for the goose is good for the gander” now racist?
• Ronald Reagan won the cold war with the Soviets by forcing them to spend more than they could afford. It now appears that Putin is taking a page from that same book. Lobbing missiles from afar is much cheaper than the missile defense systems necessary to shoot them down. And now western nations, including the US, are re-evaluating how much more money we want to spend to continue defending the non-NATO Ukraine’s territorial integrity. Although this does not bode well for the Ukrainian people, it may be a sign that the west is losing motivation.
• The global chip shortage was a major component of last year’s inflation runup. Affecting cars, phones, and other electronic devices, shortages of crucial semiconductors exacerbated the supply chain debacle and jacked up the prices of products and services. But several major tech companies are reporting that the Chip-Crisis may be over.
• Hitting the Debt Ceiling will require the Treasury Department to take “extraordinary measures” (again) to keep the government from defaulting on its bills (again). But using the debt ceiling to negotiate concessions has been a long-term tactic of both parties, and we always wind up at the edge of default. Every time we get here, the markets always react badly. But it’s always a short-term problem.

Socioeconomics 

• 2022 closed its doors with a slight drop in inflation. Down a meager (but encouraging) 0.1%. December’s Consumer Price Index (CPI) showed the first month-over-month decrease since April 2020. But the CPI is still 6.5% higher than a year ago. But December’s Producer Price Index (PPI) fell a whopping 0.5%, much more than the expected 0.1%. This is a good sign that the ever-increasing inflating rate over the past year and a half may have ebbed.
• There is a growing consensus the Federal  Reserve will only raise rates one or two more times. This may be bad news for bondholders, but it could be good news for my Vertical Spreads. With the inflation rate of increase finally tilting, the need to push up the terminal rate beyond 5% is being re-evaluated.
• Will the Fed dial down February’s rate hike to just 0.25%? With inflation thought to be easing (too early to tell), Markeeters are becoming bullish. December’s inflation report showed a slowing rate of 6.5%, down from 7.1% the month before. But it is still above the 2% target, so it ain’t over until it’s over.
• 2022, as bad of a market year as it was, ended with a bang. The 4th quarter GDP came out at 2.9% – better than expected. Less than the 3.2% growth in the 3rd quarter of 2022, 2.9% is still positive, which nullifies the first two quarters’ decline (-1.6% and -0.6%). This makes the full-year 2022 growth > 2%. We’ve had better years of growth, but I’ll take this as a win.

EPI votes a DEFCON 3

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Market Sustainability

This is a revamped section inspired by the “Kenny Rogers” strategy.

Market volatility has waned quite a bit over the last couple of weeks (VIX 20%). This suggests to me that the Marketeers are growing more comfortable with the current trajectories – which is bullish. This supports a falling Put/Call Raito So, The VIX is not solidly below 20%, nor is the Put/Call Ratio solidly in Good Shape. I’m going to remain cautious for this week.

Market Sustainability votes a cautious DEFCON 3

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)

January’s preliminaries continue the December bouns with another 5% jump.

Misery Index

With the copious amount of economic pressures throughout the nation this past 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: fell 0.1% in Dec. (expected). One year increase was 6.5%, down from 7.1% last month ¹.
• Unemployment Rate: Dec rate = 3.5%, down from 3.7% in Nov.
• Misery Index = 10.0% (6.5% + 3.5%), down from 10.8% last month.
  • (Note: Ideally, the Misery Index should be well below 10% for a growing economy.)

¹ A year ago (Dec 2021), inflation was already sky-high at 7.0%. So being at 6.5% now means that we are actually up by 13.5% 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. But the temperature of our economy appears to be moving lower as our consumers start to regain confidence in our economic trajectory.

I’m optimistic that we are now moving in the right direction.

CSI votes an optimistic 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) = 3,973 – down 0.6% from 3,999 last week.
Russell 2000 (RUT) = 1,867 – down 1.1% from 1,887 last month.

Market Performance

• Both indexes remained indecisively bullish last month
• Short-term moving bullish, with both indexes’ 9-Day SMA above the 50-Day
• Long-term remains slightly bearish, with the 50-Day SMAs slightly below the 200-Days. Gap continues to close.

The end-of-year market downturn is because, I believe, the Marketeers selling to lock in cap-gains losses for taxes (I know I did that). But once 2023 ranged in, many went on a buying spree to pick up discounted assets. The past 20 days has been a sharp reversal of the December selloff, hopefully, to but the trajectories mack into a longer-term bull.

Pull back on the reigns a little (because of the 60-day trajectories), 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 – DEFCON 3
• Market Sustainability suggests a possible downturn – cautious DEFCON 3
• Investors’ Sentiment shows a consumer base not excited about our economic future – optimistic DEFCON 2
• The market indexes are squeamishly bullish – cautious DEFCON 3

Trading Readiness Level for this week

DEFCON 3

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.

• Two new Spreads this week
• Follow the Entry Rules below

Profit and Loss Statements

(As of 01/27/23)

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)	$20,000.00 (Cash)	$20,000.00 (52.2972 shares @ $382.43)
Funds Added	$258.61 (Premiums, Int., Div.)	0.0 shares (Dividends Reinvested)
Funds Removed	-$5.10 (Early Close & Fees)	-$0.00 (Fractional Shares Sold)
Market Changes	-$164.50 (Open Spreads’ Fair Market Value )	$1,175.51 (Gain/Loss)
Ending Balance	$20,089.01 (Mark-To-Market)	$21,175.51 (52.2972 shares @ $404.91 CV)
ROI	0.4%	5.9%

Schedule for this Week

Goals for this week: (01/23/2023 – 01/27/2023) (Week #4)

• 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: Mar 17, 2023 (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 01/27/2023)

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 2023	Month Jan	Week #04
Vertical Bull Put Credit Spreads	5	5	2
Vertical Bear Call Credit Spreads	0	0	0
Iron Condors	0	0	0
Total	5	5	2

Current Dollars at Risk:

	Year 2023	Month Jan	Week #04
Vertical Bull Put Credit Spread	$7,245.	$7,245.	$.
Vertical Bear Call Credit Spread	$0.	$0.	$0.
Iron Condor	$0.	$0.	$0.
Total Dollar Risk	$7,245.	$7,245.	$2,901.
Max Risk Allowed	$20,000.	N/A	$2,500.

Note: no new Spreads this week.

Options Buying Power:

Unallocated dollars available to open new Vertical Credit Spreads:

Current Cash Balance	$20,253
Set-Aside Dollars for Existing Spreads	$7.500
Cash Available for New Spreads	$12,753 (Options Buying Power)

Vertical Spreads Opened This Month

(01/03/2023 – 01/27/2023)

SPY:350p/335p/X1 – Open 01/26/22 – Expires 03/17/23 – Max Gain = $45.00 – Open Price = 402.01
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 92.4%, Headroom= 13.0%, Max Loss= $1,455, AROR= 22.1%

Check (✔) rule passed.

	Unfriendly Spread	Risky Spread ✔	Friendly Spread
DEFCON	1 or 2	3 ✔	4 or 5
Underlying’s Put/Call Ratio	> 1 ✔	< 1.0	< 0.75
Underlying’s IV%	> 50%	25% – 50% ✔	< 25%
VIX	>25%	18% – 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
20-Day Regression Line	bearish	flat (± 1∘)	bullish ✔
60-Day Trend Channel	bearish ✔	bullish	bullish
7-Day RSI	above 65 ✔	between 35-35	below 35
Strike Width	20+	10 – 20 ✔	5 – 10
Short Strike Prob OTM	> 100%	> 90% ✔	75% – 85%
# Spreads per Week	0	1 – 2 ✔	2 or more

• Although the Put/Call Ratio is above 1 it is 1.1.
• 7-Day RSI is 67.4 and in the unfriendly camp. But the last few times it was, can the CV fell, it never fell below the Trend Channel.

DIA:300p/285p/X1 – Open 01/24/22 – Expires 03/17/23 – Max Gain = $54.00 – Open Price = 336.24
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 90.8%, Headroom= 10.8%, Max Loss= $1,446, AROR= 25.7%

Check (✔) rule passed.

	Unfriendly Spread	Risky Spread ✔	Friendly Spread
DEFCON	1 or 2	3 ✔	4 or 5
Underlying’s Put/Call Ratio	> 1 ✔	< 1.0	< 0.75
Underlying’s IV%	> 50%	25% – 50%	< 25% ✔
VIX	>25%	18% – 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 ✔
20-Day Regression Line	bearish	flat (± 1∘)	bullish ✔
60-Day Trend Channel	bearish ✔	bullish	bullish
7-Day RSI	above 65	between 35-35 ✔	below 35
Strike Width	20+	10 – 20 ✔	5 – 10
Short Strike Prob OTM	> 100%	> 90% ✔	75% – 85%
# Spreads per Week	0	1 – 2 ✔	2 or more

The long-term trajectories are turning bullish, with a definitive short-term bull. The differences between the Risky and Friendly Spreads are narrowing. I do plan to open a second Spread later this week should the current market sentiment continues.

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SPY:360p/345p/X1 – Open 01/18/22 – Expires 03/03/23 – Max Gain = $59.00 – Open Price = 399.85
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 90.5%, Headroom= 10.0%, Max Loss= $1,441, AROR= 33.4%

Check (✔) rule passed.

	Unfriendly Spread	Risky Spread ✔	Friendly Spread
DEFCON	1 or 2	3 ✔	4 or 5
Underlying’s Put/Call Ratio	> 1 ✔	< 1.0	< 0.75
Underlying’s IV%	> 50%	25% – 50%	< 25% ✔
VIX	>25%	18% – 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
20-Day Regression Line	bearish	flat (± 5∘)	bullish ✔
60-Day Trend Channel	bearish ✔	bullish	bullish
7-Day RSI	above 65 ✔	between 35-35	below 35
Strike Width	20+	10 – 20 ✔	5 – 10
Short Strike Prob OTM	> 100%	> 90% ✔	75% – 85%
# Spreads per Week	0	1 – 2 ✔	2 or more

There were more “Friendly” checks than “Risky” and only 2 Unfriendlies. The mood of the Marketeers is definitely mellowing as overall volatility is falling upon improved inflation and the prospects of muted interest rate hikes.Besides – the

I added a new rule: 7-Day RSI. Friendly < 35 or Unfriendly > 65. In between is a shrug.

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DIA:310p/295p/X1 – Open 01/18/22 – Expires 03/03/23 – Max Gain = $52.00 – Open Price = 340.10
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 90.4%, Headroom= 8.8%, Max Loss= $1,448, AROR=29.2%

Check (✔) rule passed.

	Unfriendly Spread	Risky Spread ✔	Friendly Spread
DEFCON	1 or 2	3 ✔	4 or 5
Underlying’s Put/Call Ratio	> 1	< 1.0	< 0.75 ✔
Underlying’s IV%	> 50%	25% – 50%	< 25% ✔
VIX	>25%	18% – 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✔
20-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 ✔	2 or more

There were more “Friendly” checks than “Risky” and only 2 Unfriendlies. The mood of the Marketeers is definitely mellowing as overall volatility is falling upon improved inflation and the prospects of muted interest rate hikes.

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QQQ:235p/220p/X1 – Open 01/13/22 – Expires 03/03/23 – Max Gain = $45.00 – Open Price = 277.98
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 93.0%, Headroom= 15.5%, Max Loss= $1,455, AROR=22.5%

Check (✔) rule passed.

	Unfriendly Spread	Risky Spread ✔	Friendly Spread
DEFCON	1 or 2	3 ✔	4 or 5
Underlying’s Put/Call Ratio	> 1 ✔ (1.1)	< 1.0	< 0.75
Underlying’s IV%	> 50%	25% – 50%	< 25% ✔
VIX	>25%	18% – 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
20-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 ✔	2 or more

• Short Strike is 15.5% below the current QQQ price.
• Most of the short-term matrixes are fairly bullish (IV%, P/C Ratio, 20/7 day trajectories). The current VIX is only 18.3%, suggesting that there is relative calm in the moods of the Marketeers.
• The longer-term matrixes include post-election effects, end-of-year sell-offs, and the Santa Claus rally.

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Vertical Spreads Currently Cooking

(As of 01/27/2023)

All 2022 Spreads closed for end-of-year accounting.

Vertical Spreads Closed This Month

(As of 01/27/2023)

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%

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.”