This month’s Journal Entry feeds my nerdy side as I document my Cover Call Watchlist, which pulls live data from my ThinkorSwim trading platform into an Excel Spreadsheet. In addition, I will dissect my watchlist Excel spreadsheet and document how I calculated essential data points.

ThinkorSwim/Excel Watchlist for Cover Call Options

A watchlist will not take the place of knowledge, experience, or Precogs. But having a watchlist will boost my ability to track hundreds of different data points. At a glance at my color-coded spreadsheet, I can monitor over a dozen open Cover Calls Options and actively analyze a dozen other Cover Call possibilities.

Watchlist layouts are relatively personal. To me, the ones I found on the Internet were kludgy, clunky, and questionably organized. Some were missing information I thought essential, and others included data I felt was irrelevant. Most were too spartan – others way too flashy.

Likewise, anyone looking at my watchlist will see it just as bewildering.

I have been developing and using my Excel Vertical Spreads Watchlist and this Cover Call Watchlist for over five years. Having my watchlist as an Excel Spreadsheet allows me to make tweaks as I see fit. Both watchlists have proven to be greatly value-added.

For more information on my Vertical Spread Watchlist, see my posts:

Using Excel with ThinkorSwim
Custom Options Watchlist using Thinkorswim in Excel – PT 1
Custom Options Watchlist using Thinkorswim in Excel – PT 2

Disclaimer: This post is nothing more than my personal documentation of how I constructed my Cover Call Watchlist. The sole purpose of this post is to give me a way to reconstruct my Cover Call Watchlist in Excel should my workstation suffer a catastrophic event and must restart from scratch. This post is in no way a recommendation, suggestion, or advice on how to trade Cover Calls. It’s just general information.

Psychology of a Cover Call

I’ve spent a life’s career developing and building an investment portfolio in preparation for my retirement. I desperately don’t want to blow it all on a fullish get-rich-quick scheme. So my portfolio comprises quality buy-and-hold stocks and ETFs that I feel have a long-term bullish bias.

A Comparison

Social Security and AARP suggest that investors should plan for a year Hurdle Rate of 7% when projecting their investment growth. But my actual annual growth averaged 9% over the past three years and 13% over seven (all including the sad -22% loss in 2022).

And as a comparison, the 10-year average S&P 500 annual growth averaged 15%, which matches my 10-year average. Thus, if my (long-term) investment increases at a compound annual growth rate of 10-15% each year, I am satisfied.

Cover Call Criteria

If I have Stocks and ETFs just sitting in my brokerage accounts for years, can I use conservative Cover Calls to “milk” an extra percent or two? To do so, I need to organize my portfolio to be Cover Calls friendly.

• Structure all funds into 100-share multiples.
• Funds should have Weekly Options chains.
• The funds should be highly liquidable (ask/Bid Spread <3%).
• Only sell four weeks or less Cover Calls contracts.
• Don’t be greedy

Plan for the Inevitable

The assets I have in my portfolio are geared toward long-term growth. These are the only assets I would consider for a Cover Call. If an unexpected geopolitical event happens (China invades Taiwan, a new pandemic is declared, Kamela Harris becomes President), and the markets crash, all my Cover Calls will be winners.

Out of My Control

Corporate news, unforeseen geopolitical events, a tweet, etc., will dynamically influence the success or failure of a short-term option. These types of events are mostly unpredictable and destructive. Therefore, I need to keep myself aware of current events. Rule one to minimize out-of-my-control events is “Don’t be greedy!” All my Cover Call contracts are conservative.

Predictable Technical Indicators (maybe)

There are many things that, when left alone, will “accentuate” the current short-term direction of the underlying:

• The current trajectory of the underlying.
• RSI position.
• Put/Call Ratio.
• Implied Volatility.
• Probability of expiring OTM
• Probability of Touching

No magic potion will point to a winning Cover Call configuration. But, collectively, these indicators give me a sense that the underlying’s current trajectory is likely sustainable.

If these six indicators convince me that the current trajectory is short-term bearish (30 days), I may lower my Short Strike just a little to increase my premium collected. If these indicators suggest to me that the underlying is bullish or we are within 30 days of the corporate Earnings Call, I will probably increase the Strike price or even pass on this position altogether.

A Matter of Perspective:

• If I believe that an investment would yield 10% over this year, I would say that it is an “ok” investment.
• If I believe that if I buy an asset today and in six months, that asset will be sold at a 10% profit, I would consider it.
• If I believe that if I buy an asset today, and in four weeks, I will sell it for a 10% increase, I would be foolish not to consider it seriously.

All of the above “ifs” are winners.

So, assume I sold an AAPL (Apple) Cover Call contract that has an expiration date of less than four weeks at a Short Strike Price that is 13.5% above the stock’s current value for an in-my-pocket $11.00. And also, assume that the probability of Apple rising 13.5% in less than four weeks is roughly 2.9% (97.4% Prob-OTM).

If AAPL fails to increase by 13.5% and the contract expires, then I will keep the 100 shares of AAPL, plus I keep the $11.00 to buy lunch today – I am happy.

If AAPL does rise and my shares are assigned at the 13.5% increase from when the contract was opened, then I locked in my profits, and I still have the $11.00 to buy a celebratory beer.

Therefore: The $11.00 profit I made from this Cover Call example would be an AROR 0.86% profit in addition to the 13.5% in less than a month. If I sold an AAPL Cover Call contract each month for one year, I would have pocketed an extra $132, which would be close to an additional 1% production from my 100 shares, that would have just been sitting there twiddling its stems.

Think of what it would be if I had 1,000 shares of AAPL.

Cover Call Assignments

There has been a time or two when one of my conservative Cover Calls was assigned because it unexpectedly skyrocketed above my Short-Strike. When this happened, I observed that after the excitement fizzles and the underlying is now overbought, the Marketeers will start unloading to lock in profits, and the underlying will retreat.

Therefore, if I have an underlying assigned, I typically enter a simple GTC Trade Trigger in my ThinkorSwim Trading platform to rebuy the underlying at the original Short-Strike Price. In a relatively short time, I will rebuy my assigned asset at the same Strike price, and I’m even.

ThinkorSwim / EXCEL

As a prerequisite to this post, I must install Microsoft Excel and TD Ameritrade’s ThinkorSwim (ToS) trading software on my PC. The post “Using Excel with ThinkorSwim” will review how to install ThinkorSwim on a laptop and configure it in Microsoft Excel.

Cover Call Watchlist – BIG PICTURE

I want the critical data for my watch list to be auto-updated and color-coded so I can monitor the lot with just a glance.

My watch list will consist of several Cover Calls opportunities or active contracts. Each Cover Call (opened or staged) has two rows as follows:

Color Codes:

• Yellow-filled cells = static data.
• Green-filled cells = underlying moving my way.
• Red-filled cells = underlying moving against me.

If I want to add more Options contracts, I just highlight any two-row pair and copy (Ctlr-C). Then I select the row I want to insert above then, right-click and select “Insert Copied Cells.”

Notes about my examples:

There is a lot of superfluous information throughout my watchlist spreadsheet. I will ignore these for now.

Developing My Cover Call Watchlist

Many cells in the top row of the Staging pair are simple references to the live date in the cell just below. See the section “Opening a Cover Call” below for how I change these upon, uhh, opening.

General Input Affecting All Prospective Cover Calls

• H7: Proposed Expiration Date
  • H7: 4/28/2023
• I7: Days to expiration.
  • I7 = =CONCAT(“(“,DATEDIF(TODAY(),H7,”d”)+1,”) Days”)
• L7: Put/Call Ratio threshold.
  • L7 = 0.95
    (If the ratio is above this value, underlying is likely to fall.)
    (If the ratio is below this value, underlying is likely to rise.)
• M6: Implied Volatility threshold
  • M6= 25%
    (If IV is above this value, underlying is likely to fall.)
• M7: Implied Volatility Percentile threshold
  • M7 = 50%
    (If IV% is above this value, underlying is likely to fall.)
• R7: Prob-OTM threshold.
  • R7 = 92.5%
    (As a rule, I won’t open a new Cover Call position if the Prob-OTM is below this value.)
• S7: Prob-Touch threshold.
  • S7 = 9.5%
    (As a rule, I won’t open a new Cover Call position if the Prob-Touch is above this value.)

Basic Staging Configuration

• A11: a drop-down list to record the current RSI movement. Possible picks are “RSI ^ 65”, “RSI ↑”, “Flat”, “RSI ↓”, “RSI v 35”
  • A11 = “RSI ↓” (Note: rising, the bull may be sustainable)
    • Conditional Formatting Yellow: Cell Value equal to =$B$6
    • Conditional Formatting Greem: Cell Value equal to =$B$5
    • Conditional Formatting Yellow: Cell Value equal to =$B$2
    • Conditional Formatting Red: Cell Value equal to =$B$3
• A12: a drop-down list to record 20-day and 7-day trajectories. Possible picks are “Bull ↑”, “Bull ↓”, “Flat”, “Bear ↑”, “Bear ↓”
  • A12 = “Bull ↓” (Note: the 20-day trajectory is bullish, and the 7-day trajectory is bullish. The bull may be sustainable)
    • Conditional Formatting Green: Cell Value equal to =$A$5
    • Conditional Formatting Red: Cell Value equal to =$A$2
    • Conditional Formatting Yellow: Cell Value equal to =$A$4
    • Conditional Formatting Yellow: Cell Value equal to =$A$3
    • Conditional Formatting Red: Cell Value equal to =$A$2
• B11: the account this Cover Call will be opened
  • B11 = Brokerage
• C11: the underlying asset
  • C11 = AAPL
• D11: Option type. A drop-down list to select either “Calls” or “Puts”
  • D11 = Calls
• D12: suggested Short Strike price is either 1SD above or 1SD below the current asset price, based on D11.
  • D12 = =(IF(D11=”Calls”,1,-1)*J12*M11*(SQRT(I11/365)))+J12
    • Conditional Formatting Red: =AND($D11=”Puts”,$D12<$E12)
    • Conditional Formatting Red: =AND($D11=”Calls”,$D12>$E12)
• E11: Number of contracts.
  • E11 = -3
    (If neg., then I’m selling Cover Calls. If pos., then I’m buying Cash Secure Puts.)
• E12: the staged Short Strike (manual entry)
  • E12 = 185
• F11: the OPRA code for the calculated Short Strike Put/Call Option
  • F11 = =IF(E12=””,””,”.”&C11&TEXT(H12,”YYMMDD”)&LEFT(D11,1)&E12)
• G11: Earnings Date (manual entry).
  • G11 = 5/4/2023
    • Conditional Formatting Green: =DATEDIF(G11,H12,”d”) > 45
      (Green if more than 45 days away.)
    • Conditional Formatting Red: =DATEDIF(G11,H12,”d”) < 31
      (Red if less than 31 days.)
      (Note: if the underlying’s earning date is close to this contract’s expiration date, then the Marketeers will start speculating if the call will be positive or negative. Therefore, the underlying’s value can make big speculative moves one way or the other. So I may want to prepare for this.)
  • G12: Ex-Dividend Date (manual entry).
    • G12 = 5/12/2023
      • Conditional Formatting Red: =$G12<($H$22 + 7)
        (Red if within 7 days after expiration.)
        (Note: if the underlying’s Ex-Dividend date is close to this contract’s expiration date, then I may want to consider the strategy of ‘Chasing Dividends’ after this contract expires.)

Duration / Cost Basis / Sustainability

• H11: Open date for the contract.
  • H11 = =TODAY()
• H12: expiration date
  • H12 = =H$7
• I11: Days to Expiry
  • I11 = =IF(H11=””,””,IF(NOW()>=H12+”15:00:00″,”Expired”,IFERROR(DATEDIF(TODAY(),H12,”d”)+1,0)))
    • Conditional Formatting Grey: Cell Value equal to “Expired.”
    • Conditional Formatting Yellow: Cell Value between 3 and 5
    • Conditional Formatting Red: Cell Value less than 3
• I12: Suggested actions.
  (blank if staging, but once open will display “Watching”, “Consider”, “Sell”, or “ITM” based on this equation;)
  • I12 = =IF(T12=””,””,IF(Y11>Y$6,”Sell”,IF(AND(V12=0,I11>7),”Consider”,IF(IF(D11=”Calls”,J12>E12,J12<E12),”ITM”,”Watching”))))
    • Conditional Formatting White (no fill): Cell Value equal “Watching”
      (Just monitoring)
    • Conditional Formatting mixed (no fill, font green): Cell Value equal “Consider”
      (Consider rolling)
    • Conditional Formatting Red: Cell Value equal to “ITM”
      (I may want to buy-to-close – avoiding tax implications)
    • Conditional Formatting Green: Cell Value equal to “Sell”
      (Candidate for a roll)
• J11: Current price of the underlying asset or the asset price when opened.
  • =J12
• J12: Current value of the underlying asset
  • J12 = =IF(C11=””,””,RTD(“tos.rtd”,,”LAST”,C11))
    • Conditional Formatting Red: =AND($D11=”Calls”,$J12>$J11)
    • Conditional Formatting Red: =AND($D11=”Puts”,$J12<$J11)
• K11: Current Option premium or premium when opened
  • K11 = =K12
• K12: Current Option premium
  • K12 = =AC11
    (See “Support Calculations” below)
• L11:Past Put/Call Ratio
  (This is here just to let me know which direction the ratio is moving.)
  • L11 = 0.796
• L12: Current Put/Call Ratio
  • L12 = =RTD(“tos.rtd”, , “PUT_CALL_RATIO”, C11)
    • Conditional Formatting Red: Cell Value less than $L11
    • Conditional Formatting Green: Cell Value greater than $L11
• M11: Implied Volatility
  • M11 = =(VALUE(RTD(“tos.rtd”,,”IMPL_VOL”,C11)))
    • Conditional Formatting Green: Cell Value greater than $M6
• M12: Implied Volatility Percentile
  • =(VALUE(RTD(“tos.rtd”,,”IMPL_VOL”,C11))-AG11)/(AF11-AG11)
    • Conditional Formatting Green: Cell Value greater than $M7

Live Status

• N11: Ask / Bid Spread
  • N11 = =IF(AC11=0,0,(AD11-AB11)/AD11)
• O11: Break Even Price
  • O11 = =IF(F11=””,””,E12+(((U11-V$6)/ABS(E11))/100))
• P11: Headroom above Short Strike at open
  • =IF(F11=””,””,(O11-J11)/J11)
• P12: Headroom above Short Strike currently
  • P12 = =IF(F11=””,””,(O11-J12)/J12)
    • Conditional Formatting Green: Cell Value greater than P11
    • Conditional Formatting Red: Cell Value less than P11
• Q11: Annualized Rate of Return (AROR) at open
  • Q11 = =U11/(H12-H11)365/(ABS(E11)100*J11)
• Q12: Annualized Rate of Return (AROR) currently
  • Q12 = =IF(W11=””,Q11,W11/(TODAY()-H11)365/(ABS(E11)100*J11))
    • Conditional Formatting Green: Cell Value greater than Q11
    • Conditional Formatting Red: Cell Value less than Q11

Live Probabilities

• R11: Probability of OTM
  • R= =R12
    • Conditional Formatting Green: Cell Value greater than $R$7
    • Conditional Formatting Red: Cell Value Les than $R$7
• R11: Probability of OTM current
  • R11 = =IF(F11=””,””,VALUE(RTD(“tos.rtd”,,”PROB_OTM”,F11)))
    • Conditional Formatting Green: Cell Value greater than $R11
    • Conditional Formatting Red: Cell Value less than $R11
• S11: Probability of Touch
  • S11 = =S12
    • Conditional Formatting Green: Cell Value greater than $S$7
    • Conditional Formatting Red: Cell Value Less than $S$7
• S12: Probability of Touch current
  • =IF(F11=””,””,VALUE(RTD(“tos.rtd”,,”PROB_OF_TOUCHING”,F11)))
    • Conditional Formatting Green: Cell Value less than $S11
    • Conditional Formatting Red: Cell Value greater than $S11

Price

• T11: Current premium price received for selling (opening) contracts
  • T11 = =IF(T12=””,ROUNDUP(K11,2)+Z11,K11)
• T12: Current premium price paid for buying (closing) contracts
  • T12 = <blank> (See “Opening A Cover Call”)
• U11: Total premium amount
  • U11 = =IF(T11>0,(T11(ABS(E11)100)+V11),0)
    (If Staging, this amount will dynamically change.)
    (If opened, this amount is the premium received with opened.)
• U12: Current premium value
  • U12 = =IF(T12=””,””,(T12(ABS(E11)100)+V12))
    (If Staging, this cell is blank.)
    (If active, this cell is what I have to pay if I close early.)
• V11: Expected fees on opening
  • V11 = =IF(E11=””,””,-U$3-(ABS(E11)*V$3))
• V12: Expected fees on closing
  • V12 = =IF(T12=””,””,IF(K12<0.05,0,V11))
• W11: Running Tally (premiums collected – current value of the contract)
  • W11 = =IF(T12=””,””,IF(U12<>””,U11+U12,U11))
• X11: Max Gain
  • X11 = =U11
• Y11: % of Max Gain
  • Y11 = =IF(W11=””,””,W11/X11)
• Z11: Add to Premium (doing ‘what-ifs’)
  • Z11 = 0
    (I can add or subtract a couple of pennies to the premium to see how it affects the Staged contract.)

Support Calculations

These are typically ‘behind the scenes’ supporting calculations that I did not want to clutter up my Watchlist. Some of these are irrelevant and are ignored.

• AA11: Intrinsic Value
  • AA11 = =IF(J12<E12,””,(J12-E12)E11100)
    (This only shows if the open contract is ITM)
• AA12: Extrinsic Value
  • AA12 = =IF(AA11=””,””,W11-AA11)
    (This only shows if the open contract is ITM)
• AB11: Bid value of the contract
  • AB11 = =IF(OR($F11=””,RTD(“tos.rtd”,,”BID”,$F11)=”N/A”),””,RTD(“tos.rtd”,,”BID”,$F11))
• AC11: Mid value (the current transitional price of the contract)
  • AC11 = =IF(F11=””,””,(AD11-AB11)/2+AB11)
• AD11: Ask value of the contract
  • AD11 = =IF(OR($F11=””,RTD(“tos.rtd”,,”ASK”,$F11)=”N/A”),””,RTD(“tos.rtd”,,”ASK”,$F11))
• AE11: Asset Risk
  • AE11 = =O11100ABS(E11)
• AF11: 52/w High IV (used to calculate IV%)
  • AF11 = 48.4%
    (Manual entry from ThinkorSwim)
• AG11: 52/w Low IV (used to calculate IV%)
  • AG11 = 25.2%
    (Manual entry from ThinkorSwim)

Staging a Cover Call

I will follow these steps when staging a possible Cover Call contract in my Watchlist:

Using the ThinkorSwim Charting function:

1. Set the Target Expiration Date (H7) to an expiration date four weeks out
   Ex. 5/19/23
2. Set the RSI (A11) according to ThinkorSwim’s chart above
   Ex. RSI ↓
3. Set the 20/7 Day Trajectory (A12) according to ThinkorSwim’s chart above
   Ex. Bull ↓
4. Set an estimated Short Strike (E12) for the underlying (C11) that will calculate a Prob-OTM that is less than R7 and the Prob-Touch is less than S7
   Ex. 185
5. Continue for all pre-set underlying.

Once all the pre-set underlying are set. selecting

Note:

1. If the trajectory, RSI, Put/Call Ratio, and IV are all in harmony with a bear direction for the underlying, then I may consider higher probabilities for an increased premium. If these matrixes agree to a continued bull direction, I would consider lowering the probability thresholds or foregoing a contract for this week. If these matrices send mixed messages, it’s a judgment call.
2. If the Ex-Dividend date is within the contract’s duration, I may want to consider other strategies to “chase dividends.”
3. If the Earnings date is within the contract’s duration, I need to consider that unexpected corporate news can have a late effect on the Prob-OTM.

Opening a Cover Call

Once I enter a cover Call Contract, I want to save those date values representing the contract at the opening. I will return to my staged row-pair and do the following: (Using the IRA1/DIA pair for illustration.)

1. Select cells B17 thru G18 and fill Yellow. This is my visual flag that this underlying is now an open contract.
2. Select cells H17 and H18. Copy (Ctl-C) and value-paste back into the same cells. Fill both Yellow.
3. Select cell J17. Copy, then value-paste. Fill Yellow.
   (Note: This is the value of the underlying at open. ThinkorSwim (Ameritrade) will text me when the position opens, and in that text is the actual value of the underlying when opened. I typically will manually update this cell with the actual value.)
4. Select K17 and manually enter the premium price received. Fill Yellow.
5. Select cell L18, copy, and value-paste in cell L17.
   (L17 is already filled Yellow.)
6. Select cells R17 and S17. Copy, and value-paste back into R17 & S17. Fill Yellow.
7. Select T18. Manually enter “=-K18”.
   (T18 represents what I would have to pay if I buy-to-close this contract now. So it is the negative of the current opening premium price.)
8. Log the new contract in my “Trading Log” sheet.

Now, as this contract progresses toward expiration, I can watch if it is moving favorably or If I need to consider closing early.

Closing a Cover Call

The ideal condition for closing a Cover Call is letting it expire worthless. But I might be able to milk a few extra bucks by rolling a bearish contract by a Strike or so (I have to caution myself that this is where greed can really shoot me in the foot). I need to follow the same strategy as documented in my post, Exit Strategy – Rolling Winning Vertical Bull Put Credit Spreads.

1. Reverse the steps outlined in the “Opening a Cover Call” section above.
2. Update my log sheet with closing information.

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Other Posts from Options Trades By Damocles

This Month’s Market Sentiment

This Market Sentiment Section is typically completed the first week of the month. By the time this journal is published, it will be mostly old news.

(As of 04/28/2023)

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

• Debt Ceiling Looms – Yikes
• Saudis joins China – Yikes
• DPRK spikes nuclear war – Yikes
• 2024 Presidential Election is starting – Yikes

• Dethroning the US Dollar – Yawn

• CPI dips and Unemployment tips – Yay

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Geopolitical

• The BRICS vs. the G7 is all about dethroning the US Dollar as the standard for the global economy. The U.S. Dollar is the world’s reserve currency from the world’s strongest economy. As a result, all other countries are pegging their currencies to the dollar. But technically, this honor is mostly about bragging rights (hence the reason China desperately wants to use theirs instead). But having two standards will significantly disrupt global trade. If BRICS successfully peels away the dollar, then economic isolation will occur – this won’t happen. I’m not worried about this until there is a widely accepted global digital currency to take its place.

• Saudi Arabia is taking steps to join the Shanghai Cooperative Organization (SCO) – a China security bloc version of NATO.

• The Korean peninsula remains ground zero for the world’s first nuclear exchange. Going beyond test-firing nuclear-capable rockets, now deep-water nuclear torpedos, flyovers of nuclear-capable B-1B bombers, and nuclear-armed subs are upping the ante. A first-strike exchange would not only end the post-WWII hermit government, but it would also create a humanitarian crisis as refugees pour into China, South Korea, and Russia. It would also stymie economic growth in China, Japan, and South Korea (to say nothing about the US, Europe), and the rest of the interdependent world. So I would expect the second bomb to drop after the first strike will be the financial markets around the world.

• The 2024 run for the White House is ramping up. So gird up your loins as the Hysterical Woke Media ramps up doom and gloom over all the universe if we don’t elect a Black-Trans-Climate-Crazy scapegoat as president.

• The line in the sand for raising the US debt ceiling has been drawn for July. We already hit our debt limit in January and are now juggling the books to pay current bills. Biden’s shoulder-chip (made out of zero-carbon wood) is an emphatic ‘keep the spending and debt-be-damn.’ The Republicans want to reel in large chunks of Biden’s nefariously named “Inflation Reduction Act.” Will we go to the brink? Yes. And this will have a major negative effect on my open Vertical Spreads? Yes. But now that I’m only dealing with Yearlys, I will hope that any market damage done will be long past by this time next year.

Socioeconomics 

• The Consumer Price Index (CPI) rose in March by a less-than-expected 0.1% after increasing 0.4% in February, making it the smallest 12-month increase since May 2021. And unemployment stayed steady at 3.5%. This (sort of) signals the breaks on slowing inflation are working. But prices are still astronomically high (just not getting higher) from two years ago. Either we need a healthy dose of deflation, or, as President Biden stated, “This is the Climate Change economy – get use to it!”

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This Week’s Guidance

Inflation seemed to have peaked, and the market’s trajectories are weak-knee, long-term bullish. But the short-term trajectories (20 and 7 days) tell a different story. The RSI for SPX is below 50 and falling, suggesting that the current downturn could continue. The short-term economic outlook seems sketchy.

• Be cautious with new Spread this week
• Follow the Entry Rules below

Profit and Loss Statements

(As of 04/28/23)

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	$1,164.77 (Premiums, Int., Div.)	0.23 shares (Dividends Reinvested)
Funds Removed	-$19.48 (Early Close & Fees)	-$0.00 (Fractional Shares Sold)
Market Changes	-$664.50 (Open Spreads’ Fair Market Value )	$1,353.14 (Gain/Loss)
Ending Balance	$20,480.79 (Mark-To-Market)	$21,353.14 (52.2972 shares @ $403.30 CV)
ROI	2.4%	6.8%

To date, a simple buy-and-hold of SPY bests my Vertical Bull Put Credit Spread efforts by 5.3%. But this is only the fourth month – eight more months to go.

This Month’s Trade Activity

(As of 04/28/2023)

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 Apr
Vertical Bull Put Credit Spreads	11	1
Vertical Bear Call Credit Spreads	1	0
Iron Condors	0	0
Total	12	1

Current Dollars at Risk:

	Year 2023	Month Apr
Vertical Bull Put Credit Spread	$2,823.	$1,155.
Vertical Bear Call Credit Spread	$0.	$0.
Iron Condor	$0.	$0.
Total Dollar Risk	$2,823.	$1,155.
Max Risk Allowed	$20,000.	1,667

Note: no new Spreads this week.

Options Buying Power:

Unallocated dollars available to open new Vertical Credit Spreads:

Current Cash Balance	$21,145.29
Set-Aside Dollars for Existing Spreads	$4,000
Cash Available for New Spreads	$17,145.29 (Options Buying Power)

Vertical Spreads Opened This Month

(04/03/2023 – 04/28/2023)

SPY:365p/345p/X2 – Open 04/04/23 – Expires 03/15/24 – Max Gain = $345.00 – Open Price = 411.13
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 70.2%, Headroom= -11.2%, Max Loss= $1,655, AROR= 21.9%
Currently: Prob. OTM= 70.5%, Headroom= -11.0%, Max Loss= $1,668, AROR= 8.4%

Rule 1: Sell Only Major Market Index ETFs	Yes (SPY)
Rule 2: 50-Day SMA above 200-Day	Yes (see chart)
Rule 3: 20-Day Regression Line Bullish	Yes (see chart)
Rule 4: AROR > 15%	Yes (21.9%)
Rule 5: Prob-OTM > 70%	Yes (70.2%)

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Vertical Spreads Currently Cooking

(As of 04/28/2023)

QQQ:255p/245p/X2 – Open 03/23/23 – Expires 03/15/24 – Max Gain = $332.00 – Open Price = 311,39
(Vertical Bear Call Credit Spread)
At Open: Prob. OTM= 73.9%, Headroom= -18.3%, Max Loss= $1,668, AROR= 20.2%
Currently: Prob. OTM= 76.7%, Headroom= -18.8%, Max Loss= $1,668, AROR= 29.8%

Vertical Spreads Closed This Month

(As of 04/28/2023)

No spreads closed this month.

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.”