My Options Trading Unlocked – Newsletter 26 Nov 2023

Newsletter – Insights for Tomorrow’s Profits

26 Nov 2023

Track every trade by strategy for review and improvement

Read on and learn more about the benefits of tracking in a journal and I will show you how I do it.

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. Thoughts and Opinions

“Track every trade by strategy to review and improvement”

Why do I keep a trading journal? And why should you? Let me repeat why I believe every trader needs a trading journal.

In the dynamic world of trading, maintaining a detailed trading journal is an essential practice for both novice and experienced traders. The significance of tracking every trade by strategy for review and improvement cannot be overstated. A trading journal is not merely a record-keeping tool; it’s a powerful instrument for self-reflection, strategy refinement, and performance enhancement.

Ever since I’ve started trading options, I have been tracking my results in an own made spreadsheet to see what has worked for me and what didn’t. An options trading journal has allowed me to easily check my results and filter all the data to review my actions. Here are some of the direct benefits of keeping a journal:

1. Enhanced Decision-Making: A trading journal provides clarity in decision-making. By documenting each trade, traders can review their thought processes and outcomes. This reflection helps in understanding the effectiveness of different strategies and making informed decisions in future trades.

2. Identification of Strengths and Weaknesses: Tracking trades allows traders to identify patterns in their trading behaviour. This includes recognising successful strategies and pinpointing areas that require improvement. Understanding these aspects is crucial for long-term success in trading.

3. Risk Management Analysis: A well-maintained trading journal includes details about risk management strategies (IVR, Delta,…). It helps in evaluating the effectiveness of position sizing, stop-loss levels, and take-profit strategies. This analysis is key to minimizing losses and maximizing gains.

4. Performance Tracking: Regularly reviewing the trades recorded in a trading journal facilitates tracking of both short-term and long-term performance. This practice is instrumental in devising strategies for growth and improving trading skills. It also helps in setting realistic performance goals (traders usually overestimate their goals).

5. Emotional Discipline: Trading often involves emotional highs and lows. Who hasn’t closed a trade quickly after a spike of fear? A trading journal helps in maintaining emotional discipline by providing a detached view of trading decisions and their outcomes. It encourages traders to rely on logic and strategy rather than emotions.

6. Detailed Review and Learning: By documenting every trade, including technical and fundamental notes, traders can conduct a thorough review of their trading decisions. This practice fosters a culture of continuous learning and adaptation, which is vital in the ever-changing trading environment.

In conclusion, a trading journal is an indispensable tool for any trader committed to achieving and sustaining success in the markets. It serves as a mirror reflecting the effectiveness of trading strategies, a guide for risk management, and a mentor for continuous learning and improvement.

Although I must admit that keeping my Option Trading Journal up to date after every trading day requires discipline, it has absolutely improved my performance because collecting the data made me review and reflect about every trade even more. Without tracking trading data, I would’t know exactly what is working and what is not. It helps me to re-assess my option positions, and find the spots where I can and need to improve, and let’s me reflect of my upcoming action and trading plan.

The journal I use has become a perfect trading history logbook for reviewing strategies and past mistakes and successes. I have been tweaking this last, new and improved spreadsheet completely to my liking and now it helps me to track my positions, to review my results, filtered for a specific period or stock and to take actions by calculating triggers and indicating colour alerts whenever required.

Beginning option traders should start a trading journal right from the start, because I am convinced it is simply one of the most effective ways to improve your trading performance.

I hope this overview was helpful to you. If so, or if you have any questions, please let me know in the comments

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2. Overall Market Overview (Week from 18 Nov – 22 Nov 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.

Only 4 trading days this week due to Thanksgiving, but the market decided to keep going higher this week : the SPX index closed 45 points up (1 %) from 4514 to 4559.

One can argue that the market looks pretty overbought, but the SPX remained strong and closed with a green candle. Although the graph is showing signs of topping out. We will have to see what next week will bring.

SPX Chart – SPX 4559 $

Market outlook for next week : It looks like their is some resistance showing at this level but I must agree with the saying nobody knows anything.

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VIX Chart – VIX USD 12.46

Over the last two weeks the VIX dropped from 13.80 down to 12.46, breaking below the 13% floor and the lowest level in three years !!

It’s hard to imagine the VIX staying at this low level… but again who really knows. The last couple of months the VIX always bounced back up from the 13 level so also now the candles give a pattern of bottoming out. With the rally of mid september to a VIX of 22, it may be very wise to be careful on adding new positions for now.

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3. TOCF Portfolio Weekly Recap & Trading Plan

a. Results week (20 Nov – 24 Nov 23) & currently open positions:

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

The November profit target is set at $1350. Currently my result for november is $685, so it will be hard to reach it this month.

The portfolio’s performance over the past two weeks has 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.

Last week I could close 1 winning position, resulting in a realised Net result of $137.00

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 ($8251.00), a strong negative due to the FSR performance.

c. My Trading Plan for upcoming week:

At portfolio level :

• The MX account is in euro en the TT accounts in USD.
• Sum of the net liquidation values of the 3 accounts = $66237.00 USD (or 60,494.00 Euro with a -292.95 euro or -0,4% over last week.
• Theta level has fallen considerably by closing plenty of positions this 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 $40 (meaning if the SPY goes up $1, my portfolio value will down up $40 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 0,07 at the moment. I can certainly live with the 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 :

• It looks a bit that $PYPL and $LYFT have started their recovery. I will keep selling CCs aggressively of these stocks to bring down the cost basis.
• $FSR currently my to big position of the portfolio is still my biggest problem child at this moment. 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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4. 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, MARA, LYFT, ORCL, UNH, SMCI, FSR, PYPL, IWM, MSFT, GOOGL

5. Other stuff – info & links

• 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.

• All In Trading Options Journal :
  • Based on some user input, I tweaked the spreadsheet a bit. Biggest change is the calculation and dashboard showing the cost basis of the wheel strategy.

• Trading Options Wheel Strategy:
  • After the update of the Options Wheel Strategy Spreadsheet, also the strategy page was updated: https://www.tradingoptionscashflow.com/the-options-wheel-strategy-explained/ – Updated DEMO video is published also today : https://youtu.be/oPGIx11PGfA
  • 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.