My Options Trading Unlocked – Newsletter 02 Feb 2024

Newsletter – Insights for Tomorrow’s Profits

02 Feb 2024

The advantage of a fresh start

Read on and learn more about my current positions

My goal is to share my options trading journey and help you profit from options trading. I write about my thoughts on options trading and finance in general. I provide information about my trading and my insights, that could be helpful to you in options trading, especially focusing on applying strategies and what I anticipate in the stock market for the upcoming weeks.

As we continuously strive to provide the most insightful and impactful content, I have decided to transition my update newsletter from a weekly to a monthly format. This decision is largely influenced by the significant time commitment required to produce a weekly newsletter. Crafting each edition involves preparation, analysis, and thoughtful reflection on relevant topics about options trading and market trends, a process that is both time-intensive and demanding.

By moving to a monthly schedule, it will allow me to dedicate more time to each newsletter, ensuring that every edition is more aligned with what I believe is interesting for option traders of all levels. This change also provides me with the opportunity to delve deeper into complex strategies and market insights, ultimately offering you more robust and comprehensive content.

Remember, for those eager to follow real-time developments, our Discord channel remains active for immediate trade updates of my portfolio and options discussions. I am excited about this new approach and confident that this change will enhance our journey in options trading together. So as from now, every month I will report on the status of my trading accounts.

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1. Overall Market Overview (Week from 02 Jan – 02 Feb 24)

When I prepare for trading or following the market and my positions, I focus on two aspects : the general trend of the market with the indexes, mainly the SPX and the volatility of the stocks with the VIX. The reason why is clear: the general trend of the market and stock volatility are essential for options traders because they directly impact options pricing, influence trading strategies, and offer opportunities for risk management and profit generation in the dynamic world of options trading.

And then again, I don’t want to over-analyse too: but basically the SPX trend and VIX levels are not far away.

The market decided to keep going higher during the last month of 2023 and it continued its move in January 2024. In the first week of 2024 it came back down a bit ending Friday on 4697 but then the rally continued all up to 4958.

I did make the argument lately, that the market looked pretty overbought, but clearly the market doesn’t believe this. The SPX remained strong throughout January. We will have to see what next week will bring.

SPX Chart – SPX 4958 $

Market outlook for next week : I must agree with the saying nobody knows anything. Although the graph doesn’t’ show any signs of weakness, I prefer to be not too much directional.

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VIX Chart – VIX USD 13.35

Over the 4 weeks of January, the VIX went up and down between 13 and 15, ending last Friday at 13.85, showing signs that an uptrend is possible (SMA 21 is bigger than SMA50 with SMA50 looking to bottom a bit).

It’s hard to imagine the VIX staying at this low level all 2024 … but again who really knows. I will keep a very careful posture when adding new positions for now.

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2. Results 2023

Here is a overview on last year numbers for all the closed positions of 2023 :

The trading summary of 2023 shows a nice high % of winners (90%) but the results are overshadowed by the 5 biggest losers of the year. Strangles were the most opened strategy, followed by shorting naked puts. These two strategies count for more than 50 % of the opened positions.

This is also the first year I get a descent amount of profit of covered calls sold in the context of the wheel strategy. Although it looks it was a profitable year, it was not! The profits (or losses) are always the sum of the results of the closed option positions only during that given period (profit/loss of assignment not included). I had too much short put positions in $FSR, who had a terrible year ending. As a consequence I was assigned 2000 shares, who are still very much under water. The loss in value of my $FSR position, together with 4 largest options losses (-$2060 in $W, -$1335 in $IWM, -$958 in ROKU and -$547 in UNH) have impacted my 2023 year result, ending with a loss of the net liquidation value of the portfolio of € 7091.

After reviewing the (mis)management of my positions in 2023 my main lessons are:

• Keep individual positions smaller in relation to the overall portfolio value
• Manage the losses earlier by earlier rolling/ adjusting delta or taking the loss earlier – hoping that the stock will return is not the best strategy.
• Increase the number of occurrences
• Keep the delta above 0,1 at all times (preferable between 0,2-0,3)

I will certainly act on this in 2024.

3. TOCF Portfolio Monthly Recap & Trading Plan – January 2024

a. Results January 2024 (02 Jan – 02 Feb 24) & currently open positions:

Here is an overview for all accounts of the positions and results of last week :

Results – Monthly performance

I’ll grade the performance of my trade plans as follows:

• ✅ I could closed the position according to the trading plan
• 🔶 Position did not go according to the trading plan, but after management I am satisfied with the results (positive or negative).
• ❌ Position that was mainly mismanaged – I need to learn and avoid these positions.

8 position were closed last month. Details about all the trades are posted in the discord channels:

• ✅ 09 Jan 24 – Closing $UNG Put for a 53 day 93% return, resulting in a net P/L of $34,00 with a ROC of 13,77% and an Ann ROC 93%
• 🔶 11 Jan 24 – Closing $MRNA Straddle for a 51 day -2% return, resulting in a net P/L of $-22,00 with an Ann ROC -2%
• ✅ 11 Jan 24 – Closing $AAPL Put for a 7 day 190% return, resulting in a net P/L of $92,00 with a ROC of 3,7% and an Ann ROC 190%
• ✅ 21 Jan 24 – Closing $IWM Strangle for a 23 day 59% return, resulting in a net P/L of $90,00 with a ROC of 3,77% and an Ann ROC 59%
• ✅ 26 Jan 24 – Closing $XBI Strangle for a 49 day 11% return, resulting in a net P/L of $24,00 with a ROC of 1,55% and an Ann ROC 11%
• ✅ 26 Jan 24 – Closing $SBUX Put for a 16 day 29% return, resulting in a net P/L of $20,00 with a ROC of 1,29% and an Ann ROC 29%
• ❌ 19 Jan 24 – Assigned 1500 shares $FSR in MX account and 500 shares in TT account at strike $6
• ✅ 18 Jan 24 – Closed two test 112 option position in futures /MES and /MCL, resulting in a net P/L of $75,66
• ✅ 26 Jan 24 – Closing $SOFI for a 26 day 210% return : BTC 1 P for $0,16 resulting in a net P/L of $50,00 with a ROC of 15,15% and an Ann ROC 210%

11 positions were rolled and I was assigned 1500 shares $FSR in MX account and 500 shares in TT account at strike $6. The break-even of the shares is $4.91, meaning that there is plenty of work to do in FSR.

Option Income – Jan 2024:

• 📈 Set Goal $1350 of option income : 🟩 🟩 🟨 ⬜️ ⬜️ ⬜️ ⬜️ ⬜️ ⬜️ ⬜️ – finished below the monthly target $ 363.66 / $1350 (= 27%) 🔴
• 🟢 Realised Net Profit/Loss : $ 363.66
• The profits (or losses) are always the sum of the results of the closed option positions during that given period (profit/loss of assignment not included)

Portfolio Net Liq Values – 02 feb 2024:

• 🔴 Mexem : € 48737 (monthly change : € -1159 or – 2,32 %) or in dollars $65007 (Monthly change : + $482 or +0,7%)
• 🔴 TastyTrade TT : € 6209 (monthly change : € -494 or – 7,36 %) or in dollars (influence exchange rate!) $65007 (Monthly change : + $482 or +0,7%)
• 🟢 TastyTrade WH : € 3161 (monthly change : € +20 or + 0,6%) or in dollars (influence exchange rate!) $65007 (Monthly change : + $482 or +0,7%)

Total value for the 3 accounts :

• 🔴 in euros : € 58107,09 (monthly change : € – 1633,69 or -2,73 %)
• 🔴 in dollars (influence exchange rate!) : $62794 (monthly change : $ -3362 or – 5%)

The open unrealised P/L is ($10439.80), a strong negative mainly due to the FSR performance, responsible for ($8378) unrealised loss.

Info – Interpretation of the exchange rate : I am from Europe and my base currency is euro. I am trading the US markets from a MEXEM account held in euros and from a Tastytrade account held in dollars. This means that I have and express my open positions and profits/losses of the US markets in dollars on both accounts. The Net Liq for me is only relevant in euros, taking into account the exchange rate (which sometimes is an advantage and sometimes not). This explains the difference in results between euros and dollars and for me the evolution of the Net Liq in euros is what matters ultimately.

Comments

Last month I’ve also decided to take the loss on my $IWM inverted strangle. $IWM had been going up for weeks now and was to hard to defend: a loss of $1536.

It’s a universal experience that losses often evoke feelings of frustration, disappointment, and even fear. These emotions are a natural part of the human psyche when confronted with financial setbacks. Acknowledging and understanding these emotional impacts is crucial for traders, as unmanaged emotions can cloud judgment and decision-making, leading to further losses. This emotional aspect is an inherent part of trading psychology and affects every trader, regardless of experience or skill level.

This is why I am embracing also this loss in trading, not a sign of failure, but a mark of my growth and resilience. It teaches me to refine my strategy, strengthen my discipline, and build the wisdom necessary for long-term success.

The portfolio’s performance over the past weeks has also been significantly overshadowed by the underwhelming results of Fisker Inc (FSR) stock, in which the portfolio is overly invested. I have currently 2000 shares which continues to perform worse at this moment. I expect a battle for profitability, although I am still a believer in the great future for this stock.

Completely in accordance with my strategy. In case you missed it my strategy document or you hadn’t had the time yet, here is the link again to “Developing my strategy and profit goals guide”. Any thoughts or comments you may have on this trading strategy document, please don’t hesitate to email me or write them in the comments of the page.

c. My Trading Plan for upcoming week:

At portfolio level :

• The MX account is in euro en the TT accounts in USD (hence the difference of previous amounts).
• Theta level is still too low, so this is an action point for the coming weeks. I will look for opportunities to bring back up the portfolio theta, keeping in mind the low VIX
• I have been aiming to keep a descent delta/theta ratio. I have corrected the spreadsheet in a way that holding long stock is now also part of the calculation making the Spy B weighted delta correct for the whole of the positions. The sum of the SPY Beta Weighted Deltas of my three accounts is $40 (meaning if the SPY goes up $4, my portfolio value will down $40 and vice versa). This rather high delta is of course caused by the shares I have in portfolio.
• I am aiming for a 1:2 ratio (or lower) with neutral delta/theta. My positions have made a nice recovery and after adjusting some positions where required, the delta/theta ratio is at 0,79 at the moment. I can certainly live with the small short ratio, but the theta is too low. But again, I need to keep the low VIX in mind.

Most of my open positions are in the red. I will have to continue battling to get the assigned stock back up to profitability by looking for opportunities for covered calls.

At individual stock level :

• I will certainly adjust my positions in $INTC and $GDX next week, rolling the untested side.
• The IC in $SAVE is hard to adjust and I will probably leave it because the max loss and risk was determined at entry.
• I will continue wheeling on $PYPL and $LYFT. I will keep selling CCs aggressively of these stocks to bring down the cost basis.
• $FSR is currently my biggest problem problem child. In $FSR I need a recovery move to $5. A few times good news or the absence of bad news will make the stock recover I hope.

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3. Weekly Watchlist

I will keep my attention to the open positions and I don’t intent to add any more given my current, relatively high allocation :

$AAPL, $SOFI, $AMD, $LYFT, $FSR, $PYPL, $MSFT, $AI, $TSLA, $GDX, $AMD, $NIO, $INTC

Other ticker I am watching : $IWM, $MARA, $U, $SQ, $MU

4. Other stuff – info & links

• I have noticed that users often ask the same questions about the spreadsheets I provide via the webshop. Hence the reason why I have started a page with Frequently Asked Questions (FAQ) – And if you have any specific questions, please do take a look at the FAQ Page about the use of our spreadsheets.

• As a reminder, you can always follow my opening and closing trades via the discord channel. I’ve made the decision to refrain from duplicating content from the Discord channels here in my newsletter. This in order to optimize my time and focus and provide the most value to you, primarily on improving my trade management skills and sharing my experiences with you all. When there is a particular trade I feel warrants a comprehensive analysis, I will definitely include all pertinent details and figures in the newsletter.

• I have noticed that more traders are understood the importance of tracking your trades and showed interest in our spreadsheets. I have been receiving a couple of questions of users of the spreadsheet how to get the updated versions. Just to be clear, the normal updates of a spreadsheet are always free and the best way to get them is by making an account when buying and subscribing to the newsletter to get info about possible updates. This will allow you to always download the updates. Take a look at this article which explains how : https://www.tradingoptionscashflow.com/benefits-of-creating-a-tocf-shop-account/ . If you bought the earlier version on Etsy, drop me an email and I’ll give you a free download of the updated version at no extra cost.

• A permanent project is to improve the page My Approach to a methodic Options Trading Strategy and Profit Goals. I am really hoping to exchange some thoughts with you all on this topic, so leave me your thoughts in the comments of that page!

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I hope that providing some insights in my trading and my thoughts, will trigger some thoughts and maybe ideas that will help you with your trading and helps to become an even more profitable options trader. Don’t hesitate to contact me to talk options.

Thanks for reading the TOCF Newsletter, great and happy trading!

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P&K

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Please do leave your thoughts below in the comments.