My Options Trading Unlocked – Newsletter 17 Dec 2023

Newsletter – Insights for Tomorrow’s Profits

17 Dec 2023

Taking a loss in the $IWM strangle

Read on and learn more about my current positions

My goal is to share my 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 week. Every week I report on the status of my trading accounts.

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1. Overall Market Overview (Week from 11 Dec – 15 Dec 23)

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 again this week : the SPX index closed 115 points up (+2,5 %) from 4604 to 4719.

I did make the argument last week, that the market looked pretty overbought, but the SPX remained strong and closed with a strong green candle. It now looks to continue the uptrend. We will have to see what next week will bring.

SPX Chart – SPX 4719 $

Market outlook for next week : I must agree with the saying nobody knows anything. I prefer to be not too much directional.

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VIX Chart – VIX USD 12.28

Over the last weeks the VIX went down even further from the low level of 12.35 last week, ending this week at 12.28, a new yearly low and staying below the 13% floor and at the lowest levels in three years !!

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

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2. TOCF Portfolio Weekly Recap & Trading Plan

a. Results week (04 Dec – 08 Dec 23) & currently open positions:

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

One position was closed last week, and I have rolled 3 positions. Details about all the trades are posted in the discord channels.

I’ve decide to take the loss on my $IWM inverted strangle. $IWM has 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 profits (or losses) are always the sum of the results of the closed positions during that given period. The open unrealised P/L is ($8118.25), a strong negative mainly due to the FSR performance.

• 📈 Set Goal $1350 : ⬜️ ⬜️ ⬜️ ⬜️ ⬜️ ⬜️ ⬜️ ⬜️ ⬜️ ⬜️ – finished above the monthly target $(1536) / $1350 (= -113%) 🔴
• Realised Net Profit/Loss : $-1536
• Portfolio Net Liq value : € 59598 (Weekly change : € -294 or – 0,49 %) or in dollars (influence exchange rate!) $65007 (Monthly change : + $482 or +0,7%)

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 20 Puts open which continue to perform worse every week. I expect a battle for profitability after assignment with this stock, although I am still a believer in the great future for this stock.

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.

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.
• Theta level is still too low by closing plenty of positions this last 2 week. So this is an action point for the coming week, 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 $0,27 (meaning if the SPY goes up $1, my portfolio value will down $27 and vice versa)
• 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 0,27 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 :

• $LYFT has recoverd and I am making a small winner on my wheel trade at the moment with the $16 CC. Also $PYPL has started its recovery. 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 as it did on last Friday.

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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, UNG, MRNA, FSR, PYPL, IWM, MSFT, GOOGL, MRVL

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 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, a great weekend and happy trading!

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Let’s generate cash flow together !

P&K

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Please do leave your thoughts below in the comments.