As I recount my 5-year journey in the world of Vertical Bull Put Credit Spreads, I liken the strategy to the seductive but ultimately unfulfilling Mrs. Robinson. I shared my struggles, doubts, and moments of despair. Yet, small victories always rekindled my hopes, and I kept searching for my own “Options Income” of success. But now is the time to say, “Goodbye, Mrs. Robinson.”

“Goodbye, Mrs. Robinson…”

COMMENTARY CONTENTS

• 2023 Results
• 5 Years Comparisons
• 5-Year Conclusion.

The air hangs heavy with the scent of stale coffee and regrets, as I surrender to the hypnotic twinkling of price changes on my Thinkorswim trading platform. Another month had passed, and another journal entry to pen. But this time, it feels different. This time, the weight of five years of selling Vertical Spreads presses down on me like the suffocating plastic wrap of my college degree.

Five years ago, I embarked on this journey. A wide-eyed Benjamin Braddock of the trading world, seduced by the siren songs of Vertical Spread income. It seemed so simple, so elegant: collect premiums, profit from market rises, avoid assignments, and live happily ever after in a land of passive income.

But reality, as it often does, had a way of deflating grand illusions. Like Mrs. Robinson, Vertical Spreads proved seductive and alluring, offering fleeting moments of pleasure (green days) followed by the bitter sting of disappointment (red days).

I poured over charts, devoured trading vids, and religiously followed the advice of self-proclaimed gurus, all in the hopes of unlocking the secret code of passive income. But the more I traded, the more I felt lost in a sea of probabilities and Greeks, drowning in a pool of my own analysis paralysis.

Was I chasing a phantom, a mirage in the desert of trading? Was Vertical Spread income just another lie, another plastic-covered diploma promising a future that never came?

As I stared at the screen, the ghosts of past trades flitted before me: the missed opportunities, the boneheaded decisions, the arrogant overconfidence that led to humiliating losses. The echo of Mrs. Robinson’s words, “You’re a fool, Benjamin,” reverberates in the silence of my mind.

Maybe Options income wasn’t a gilded cage, but a garden that needed tending. Maybe the value wasn’t in chasing quick Vertical Spread profits, but in learning to cultivate patience, discipline, and a healthy dose of humility to make me a better trader.

So, as I close this year’s chapter of my trading journal, I do so by realigning my sense of purpose. The new path ahead may be long and winding, but I’m no longer the naive Benjamin Braddock I once was. I’m armed with the scars of experience, the lessons learned, and the quiet determination to keep searching for my own Options Income of success.

And who knows, maybe one day, I’ll find myself standing on a beach, overlooking a vast ocean of opportunity, the sun setting on a past filled with mistakes and the dawn of a future brimming with possibilities. And as I let my Spread inventory gently unwind, I’ll smile and whisper to myself, “Goodbye, Mrs. Robinson. I’m finally getting the hang of this Options thing.”

2023 Results

After flailing through a year of revised reporting and resuscitating motivation, I’m going to end this year with a moral win.

The ETF SPY has bested my total return efforts. If I had invested my entire $20,000 budget in SPY, I would have ended the years a couple hundred dollars richer.

But I crushed it on AROR.

The dollars I budgeted for this year were not all invested (I’m guessing a little over half on average). So, those dollars that were at risk outperform an equal (staggered) investment in the ETF.

¹ Calculated separately by averaging each position’s individual ARORs (M2M AROR for all open assets + actual AROR for all closed positions).
² Unrealized Profit or Loss (M2M value + max gains of all open positions).
³ Actual dollars received.
⁴ Net unrealized appreciation on my portfolio.

The higher AROR suggests that the money I did have at risk showed a greater return than what I would have had at risk all year with an equal investment in SPY.

5 Years Comparisons

This 5-year chart does not bode well in supporting the use of Vertical Spreads as a viable passive income component. Even if I cross out the first two years as the price of learning, investing in the SPY was still more profitable – to say nothing about easier.

¹ SPY growth includes reinvestment of quarterly dividends
² As a % of the $20,000 hypothetical investment.
³ As a % of the $20,000 budget.
⁴ Declaring the first two years as the cost of my education, excluding the results from my 5-year study.

Describing the market’s behavior between 2020 and 2023 requires a nuanced approach, as it was a rollercoaster ride of emotions and economic complexities.

2020: The COVID Crash saw a dramatic plunge in all the major Markets. Fear of lockdowns and a massive recession drove all indexes to multi-year lows. But then came an unprecedented recovery fueled by massive stimuli.

All my Monthly Vertical Spreads dropped deep into max-loss. Then, duped by my own arrogance, I presumptuously changed my strategy to trade in a bear market. But the mid-year V-shaped recovery nailed all those as well.

2021: Massive government money fueled a Tech sector boom as our economy relied on digital services during the pandemic. No work for more pay sucked the life out of our precariously balanced supply-and-demand system.

2022: High inflation from over stimuli plus the interest rate hikes was the one-two punch that again knocked the air out of my Monthly Vertical Spread inventory.

2023: Ultimately good, but who knew? Geopolitical tension with the Russia-Ukraine war and the Israel-Hamas wars sent mixed signals from the energy and tech sectors. Navigating through some uncertainty reclaimed the losses of the year before.

Overall, the markets between 2019 and 2023 can be characterized by massive volatility swings, unprecedented government intervention, the rise of Social Media manipulations, and significant sector rotation.

The detrimental economic effects of COVID were the most significant 5-year influencer. And who knows what will happen in the next five years? But the resiliency of our system seems to prevail no matter what happens (as long as we keep the woke-left mittens off it).

5-Year Conclusion.

I’ve learned that Monthlys are about as sturdy as a sandcastle during high tide. One wrong step, one misplaced tweet, and my Vertical Bull Spread will turn into a busted romance faster than I can say “plasticized dreams.”

I also learned that there is a significant performance difference between being partially invested and fully invested. My next month’s journal entry will review (again) how I monitor my performance. Although I’m reporting that I “could have done better” this year. The reality might actually be that I did do better. I’ll find out next month.

I must be careful that Yearlys does not become my new Mrs Robinson. So next year, I need to keep my head cool and my eyes sharp and not get blinded by the promise of Lamborghinis before I’ve even crossed Wall Street.

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 Dec 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. The impact of U.S. political polarization 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

• Israel pushes through Gaza – Yikes
• Ukraine military support flails – Yikes
• US adopting Soviet-style democracy – Yikes

• Feds hold Interest Rate – Yawn

• AI and medical advancements – Yay

Geopolitical

• Not heeding calls for a slowdown, Israeli troops have been marching through Gaza. And as such, a surprising number of Palestinian sympathizers are disrupting governments around the world. If their mantras were “Free the hostages” instead of “From the river to the sea,” then the aggression would likely drop from a boil to a simmer. Israel’s existence in that part of the world is crucial. Without Israel’s forceful neutralizing influence, several ruthless Islamic factions would push and compete to turn the entire Middle East into a Caliphate (which, mind you, is the stated goal of Hamas). A Middle East free-for-all will disrupt economies in Europe, South/Central Asia, and North Africa.

• Without a 2024 Federal Budget, last year’s budget is still in effect, which pleases the Democrats to no end. The applicable budget battles will start raging soon after the new year as the laddered CR starts to apply pressure. The gambit created by Speaker Johnson starts Jan 19, then again by Feb 2. So, I expect dire histrionics from the click-craze media to interfere with a recovering economy for a month.

• Is the US moving towards a Soviet-style democracy? Do we only have true democracy when candidates are hand-picked by woke activists? In Russia, unapproved candidates simply disappear when running for a high office. Thankfully, no one here has “disappeared,” but is that where we’re going?
  • I’ve been barraged by hysterical woke analysts claiming that if Trump is elected by the totally duped citizens, all forms of democracy will fall, and we will have total autocracy. Declaring that the unapproved Trump needs to be removed from the 2024 ballot to prevent stupid Americans from casting the wrong vote. These people need to take some Xanax and chill!
  • The Colorado Supreme Court did the US a favor – not by kicking Trump off the Colorado ballot but by short-circuiting the whole, “reimagined” 14th Amendment provision and passing the buck to the Supreme Court. The high court must now decide if Trump is guilty of insurrection and exercise the 14^th Amendment.

Socioeconomics 

• The advancements in AI and Medical research could be the next Gold Rush. Even though AI is getting a lot of apocalyptic press, we should understand that the 2023’s version of AI is still pretty stupid. Gobbling up a high volume of nonsense from bloggers like me only forces it to regurgitate nonsense. But as the AI’s overlords work feverishly to control the beast’s diet, we should start seeing giant steps in modern medical science – such as quantifiable Alzheimer treatment, magical weight loss pills, and tailored cures for some cancers.

Ecopolitical Influencers: Cautious DEFCON = 4

This Month’s Guidance

For the long-term (one year out): The ominous events of last month have passed, and the trajectories of the Broader Markets appear Bullish. CHRISTmas-related retail sales are next month, but consumers appear willing to buy even with high inflation. I think the Short legs on my Vertical Bull Put Credit Spreads could rise for a few months before the election pressures them down. And maybe I could close early for a +16% AROR profit.

A Sept ’24 expiration will carry the election effect.

For the short term (Dec ’23): The past three weeks saw a near 10% recovery in the S&P 500. The VIX has hovered below 15% for most of the month leaving calculated premiums barely worth it. It seems the Marketeers are betting on a Santa Rally next month.

Profit and Loss Statements

(As of 12/29/23)

My Performance vs. SPY

Hypothetically, instead of depositing $20,000 in my Options Trading Account, would I’ve done better if I bought $20,000 of the ETF/SPY?

¹ Calculated separately by averaging each position’s individual ARORs (M2M AROR for all open assets + actual AROR for all closed positions).
² Unrealized Profit or Loss (M2M value + max gains of all open positions).
³ Actual dollars received.
⁴ Net unrealized appreciation on my portfolio.

This Month’s Trade Activity

(As of 12/29/2023)

Spread Count Summary:

Current Dollars at Risk:

Note: no new Spreads this week.

Options Buying Power:

Unallocated dollars available to open new Vertical Credit Spreads:

Vertical Spreads Opened This Month

(12/04/2023 – 12/29/2023)

What might be a missed opportunity, I held off opening new Spreads in December because of the presumed end-of-year profit taking. After two months of unbelievable runups in the index, I wondered if my Marketeer buddies are pumping for a dump.

But the end-of-month inflation reports are jazzing the Marketeers. Markets are soaring.

One of my more “persuasive” indicators is the Russel 2000 (IWM). If Marketeers are pouring into the small-cap markets (which they are – big time), then there is a general belief that the bull is on the run.

Vertical Spreads Currently Cooking

(As of 12/29/2023)

QQQ:325p/320p/X4 – Open 11/17/23 – Expires 09/30/24 – Max Gain = $284.00 – Open Price = 384.46
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 78.6%, Headroom= -15.6%, Max Loss= $1,716, AROR= 18.7%
Currently: Prob. OTM= 85.8%, Headroom= -21.1%, AROR= +51.9%

IWM:160p/155p/X4 – Open 09/05/23 – Expires 06/28/24 – Max Gain = $269.00 – Open Price = 353.21
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 77.7%, Headroom= -14.6%, Max Loss= $1,744, AROR= 17.8%
Currently: Prob. OTM= 89.3%, Headroom= -21.9%, AROR= +27.5%

DIA:315pp/310p/X4 – Open 08/09/23 – Expires 06/28/24 – Max Gain = $260.00 – Open Price = 353.21
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 76.6%, Headroom= -10.8%, Max Loss= $1,740, AROR= 16.6%
Currently: Prob. OTM= 89.9%, Headroom= -16.3%, AROR= +28.0%

SPY:405p/400p/X4 – Open 07/19/23 – Expires 06/28/24 – Max Gain = $284.00 – Open Price = 452.13
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 74.5%, Headroom= -10.5%, Max Loss= $1,716, AROR= 17.2%
Currently: Prob. OTM= 87.4%, Headroom= -15.0%, AROR= +20.6%

IWM:165p/155p/X2 – Open 06/16/23 – Expires 05/17/24 – Max Gain = $326.00 – Open Price = 186.96
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 71.8%, Headroom= -11.7%, Max Loss= $1,674, AROR= 21.0%
Currently: Prob. OTM= 89.5%, Headroom= -19.1%, Max Loss= $1,674, AROR= +27.2%

Vertical Spreads Closed This Month

(As of 12/29/2023)

The run-up during the last two months of 2023 allowed me to exit early on a few of my Yearlys Vertical Spreads. The exit rules that I followed were:

• Current gain > 60% of max gain
• Current AROR > opening AROR
• Current AROR > current SPY AROR

If all three of these are met, I will declare the investment a winner and close the position.

QQQ:315p/310p/X4 – Open 09/13/23 – Expires 06/28/24 – Max Gain = $272.00 – Open Price = 372.24
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 78.3%, Headroom= -15.4%, Max Loss= $1,728, AROR= 19.6%
At Close: Prob. OTM= 91.2%, Headroom= -23.1%, AROR= +34.0%

Income at open: $0.68 premium collected * 100 shares * 4 contracts = $272.00
Cost to close: 0.23 premium paid * 100 shares * 4 contracts = $92.00 (closed after 107 days)
Net Profit = $272.00 to open – $92.00 to close – $8.00 fees = $172.00
AROR = ($172.00 / 107 days in play) * 365 / $1,728 = 34.0%

QQQ:325p/320p/X4 – Open 07/12/23 – Expires 06/28/24 – Max Gain = $336.00 – Open Price = 371.09
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 73.9%, Headroom= -12.4%, Max Loss= $1,664, AROR= 20.7%
At Close: Prob. OTM= 89.1%, Headroom= -20.8%, AROR= 27.8%

Income at open: $0.84 premium collected * 100 shares * 4 contracts = $336.00
Cost to close: 0.29 premium paid * 100 shares * 4 contracts = $116.00 (closed after 167 days)
Net Profit = $336.00 to open – $116.00 to close – $8.00 fees = $212.00
AROR = ($212.00 / 167 days in play) * 365 / $1,664 = 27.8%

Currently, SPY is enjoying a 26.6% AROR. This trade is better (small victory)

QQQ:305p/300p/X4 – Open 06/27/23 – Expires 06/21/24 – Max Gain = $296.00 – Open Price = 363.60
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM= 76.7%, Headroom= -16.1%, Max Loss= $1,704, AROR= 17.4%
At Close Prob. OTM= 90.1%, Headroom= -22.1%, Max Loss= $1,704, AROR= 24.0%

Income at open: $0.74 premium collected * 100 shares * 4 contracts = $292.00
Cost to close: 0.26 premium paid * 100 shares * 4 contracts = $104.00 (closed after 164 days)
Net Profit = $296.00 to open – $104.00 to close – $8.00 fees = $184.00
AROR = ($184.00 / 175 days in play) * 365 / $1,704 = 24.0%

This was closed following my new Exit Rules of achieving more than 50% of max-gain and over 125% of the opening AROR. As a result, I outperformed the baseline S&P 500 estimate for this year of 23.2%.

This is functionally a break-even.

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 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.”