Time to get mechanical. I can’t continue to hope the stock returns in my favor and instead trying to reduce basis. I will list the options I have here and what I plan on doing to help reduce that basis.
The only problem with some of this may be buying power. I am using nearly 100% of my buying power so will also try to close some winning positions or close my naked options.
- I have a 140/145 short call spread with AAPL trading 141. I think this is still in play but if AAPL gets up to 142, I will put in a short put spread in the same expiration to add more credits. I could get $1.21 per contract
- I have 2 AMGN positions. The first one expires in 8 days with a deep ITM short put vertical at the 167.5/175 – so a max loss. I will try to go inverted in the 8 day expiration as well as put on a further dated short call spread wrapped around a $2.50 loss per contract
- I have an Iron Condor gone wrong in HTZ. This happened to me last time and eventually they self corrected. I have a 17.5/20/22.5/25 iron condor. I will be moving down the call spread and turn it into an iron fly. I might go inverted here as well and lock in a $2.50 loss per contract
- I have a short put spread in JNJ that has gone past the breakeven point. If it doesn’t turn around tomorrow for a near scratch, I will also turn this into an iron fly
- With some good positive momentum, I am going to release some capital by closing out all of my NFLX positions for a small gain
- My TGT position has gone way past my short put spread with the iron fly. I will now roll down to be inverted as well as sell short call spreads in other expiration cycles to reduce basis
- I don’t’ think there is a way to reduce basis in Yelp but will try to sell other call spreads as well as roll out in time right before earnings
It will be up to me to follow these tomorrow as I monitor my positions going into the weekend. I don’t know if this method is better content for you guys but let me know
Talk about market turmoil. The market had its biggest down day in quite awhile and almost made it two days in a row. It wiped out almost 2 months of gain and this did not help a lot of my positions. I am now actively trying to hope the market has a couple of more days of correction. While waiting, I am moving positions around as well as rolling them out in time.
This is tough to do because some of the next expiration cycles fall within earnings and I don’t know how I want to do that now. I think this is a lesson learn for either trying to stay out of earnings completely or accept more probability of profit instead of profit dollars. As I experience some of the worst days for my account, I am actively learning how to prepare for this in the future.
In the meantime, I am also trying to lower my cost basis in the underlying that have caught me underwater by selling further OTM options in earlier expiration cycles. I know that this is risky and not part of the mechanics but I am more of a risk taker than most. This could end up biting me but I am picking my spots carefully. I hope the market turns around in the short term but the positions I have on turn around as well.
This is a wrap for today.
Last week was hectic, I had so many expiring positions and not enough time to check them. I was on vacation the second half of Thursday and was not expecting time Friday. I think this is one of the reasons we try to close positions for profits or roll positions earlier than anticipated. The issue here is most of mine were close to either being a winner or big loser so I had to take my chances. Some of these are defined risks so I didn’t have a problem doing it.
I scathed by this time around with the same two positions hurting me. I do have a few more weeks left in the AMGN and COST positions. I keep telling myself to be more mechanical and take profits quicker and I will try to do that. One of the things I do like to do is to not recognize losses on my position and this is one of the things that is hard to deal with. I don’t like losing so will do what I can to make it better.
Another thing I was unaware of today and would like to thank Tastyworks for informing me was of a potential dividend call. My position in PM was going ex-dividend tomorrow and they alerted me of that. I had to close the position for a lost but will probably put on a small position with the same assumptions to try and break even.
My life is back to normal and I will be doing this more often. I am also trying to get back on an exercise routine so I can’t be up late writing instead of sleeping.
I’m trying hard to write everyday but the last 2 weeks have resulted in a weekly recap. I only closed a handful of trades this week for profits. The majority of my trades this week were to roll my positions into April. I also have continued rolling my COST and AMGN positions further out to try and scrap that trade. I also put on a few new positions towards the end of the day as I got my available buying power back.
I also started trading again in my Roth IRA. It is a smaller account so I will be mainly doing one lots and will try to not have more than 10 positions at once. This way it is more manageable. I think I will end up being more mechanical with this account because I will not be checking it as often. I will also being doing a lot more defined risk strategies.
Going into this endeavor, I really didn’t think I would be selling naked options. I have only done a handful and they really do work faster than defined risk. I think as my capital increases, I will do more and more of it. It is still scary every time I put one on but they have treated me well.
I really hope you guys are enjoying this so far. Please let me know if you have any questions and I will do my best to answer them. In the meantime, let’s keep this learning process going as well as the profits.
This week has been quite busy with regular work getting in the way. I was unavailable to check the markets ordo anything Tuesday – Thursday. Most of the items that were close to expiration, I rolled out. I also set a lot of GTC orders so that if one of my profit thresholds were met, I would be able to get out of the trade. Overall we had a good week. We closed out of trades for about ~$1,000 profit.
What problems did we have? COST had earnings this Thursday and we were already near our max loss. The had bad earnings which was a positive for us so we are hoping next week, the IV contracts as well as they have a bit of a bounce up so we can close out for a small winner. AMGN is one of the stocks that is testing us as well. It has already breached on the call side. We do have a lot of time left so I am just trying to close this one out for a scratch instead of dealing with some of the headaches that might come along. All in all, our portfolio is in good shape.
One of the things I want to emphasize with options is that the first trade you put on is not the last. There are so many things you can do with rolling out or up or both that can help you manage a trade. I have utilized so much of that in order to turn some of my losers into winners. I still have some decent losers on my plate but have been able to limit those as we continue on. I hope all of you are enjoying this and I might be able to put out another strategy piece later this weekend.
Enjoy a lovely Saturday!