Sunday, June 10, 2018

CSP Candidates for Monday, June 11 and Performance Update

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If you are on the blog page in a web browser from a computer, please subscribe to this using the "Follow by Email" link to the left.  If you're on a mobile device you should see something in the frame that allows you to subscribe.  Having your email helps me to notify you when Google mucks up email distribution.

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Another Disclaimer (and if this resonates with you over an email you sent me this past week please understand that no disrespect is intended):

None of these are recommendations to sell/buy, and I'm positing purely for educational purposes.  Make sure you understand this and that you acknowledge that YOU are responsible for what you do with this information, and I am NOT.  This information is posted with a "take-it or leave-it" mentality, meaning (simply) reader beware.

Rest assured:  the information presented here will change the minute the market opens on Monday.  Take that as a starting condition for reading further.

I'm happy to receive feedback and explain what I'm doing -- but I've settled into a rinse/repeat process and will not be changing anything to suit YOUR process unless I come to the conclusion that it will improve my performance.  I'm not trying to "tweak" another 0.1% out of this -- you can try and let me know how it goes, but to expect me to tweak and report back to you is simply not how this works.

'Nuff said about that.  Now, let's go make some money...

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Greenfield Criteria

Selling CSP premium relies on the selection of a quality stock and/or quality ETF.  If you start with a crap stock or ETF you're going to own it at a significant loss the day it is assigned, and this isn't the way to make money in the long haul.  My lists for the upcoming week can be found here:

Stocks:  https://goo.gl/Kv7Mbc
ETFs:  https://goo.gl/b6TkUS

The stocks adhere to my Greenfield methodology that I've written about countless times here in this blog and is unchanged in methodology.  The stocks are also on an sustained uptrend on the 50d, 150d, and 200d timelines.

The ETFs do not adhere to my revenue / EPS Greenfield methodology because it isn't relevant for ETFs.  This being said, they all are in an uptrend on the same 50d, 150d, and 200d timelines.

Proven.  Simple.  Consistent over multiple years.  Of the 20,000 stocks to choose from this will get you into the top 200 at any given time.  I'm not changing this criteria.

If you would like to be automatically notified when I update the folder, or if you want access to past stocks / ETFs, send me a note and I'll send you an invite from Dropbox.  You can reach me by making the appropriate changes to this email address:  GreekGodTrading [ at ]  gmail [dot com] and put the word "lists" in the subject.

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Here's what I'm seeing for possibilities for Monday.

Of course, once the markets open the conditions will change and these lists will change, but my intent of posting this on a Sunday for you is so that you can review and start sharpening your own saws...

Click on each image to open in a new window so that you can see the details.

OE June 15:


Here's what the columns mean, just to get you oriented:

PCredit:  This is the expected value that I think I can get from the given bid/ask spread.  Basically, I take the midpoint of the bid/ask and then take it down whatever the valid increment for the option, generally $0.01 or $0.05.

Premium:  A visual of PCredit * 100.

CashReq:  How much cash will be required, per lot of 100 shares.

#C... --> #Contracts:  The minimum number of contracts that I have to sell in order to capture the total premium that I need to meet my annualized objectives.  In the case of UWM, I need to sell 4 contracts at the $0.35 premium in order to receive the $120.00 in the next TotPrem column.

ToTPrem:  Those of you following along will note that for UWM, 4 * $0.35 = $140, not $120.  The $120 is the net premium that I will collect AFTER I close the position at $0.05 per contract.  Hence, this column is my accounting of what I actually will receive after I buy-to-close (BTC) the entire trade.

ROO:  Return on Option.  I use premium collected / strike rather than premium / (strike - premium) as the former is more conservative.

AROO:  Annualized ROO.  365 Days / Days Until Expiration * ROO.

BE:  If I receive the premium listed, my breakeven for the position if it either is assigned to me at the strike or if it falls below my strike while I own the option.  I generally do not use this value except for an indication of how much of a discount I am getting.

Disc:  Percentage discount that I receive if I get the premium indicated at the current (last) value of the stock price.

ProbAbv:  The likelihood of the strike being out of the money (OTM) at the end of OE.

D... --> Days to Expiration.  

IV Rank:  Implied Volatility rank, based on the last 21 trading days (approximately 1 month) compared to the last 252 trading days (approximately 1 year).

SPutBid:  Current bid for the PUT option shown

SPutAsk:  Current ask for the PUT option shown

SPut:  The option contract being evaluated

Strike: ...

S... --> Score.  An internal ranking system that I have developed to help me choose between various opportunities.  I generally pick the highest of all scores across all valid OEs as my order of preference when I sell a new position (but not always).

Here are the opportunities for stocks for the June 15 OE:


Note that there are 3 more columns, and these are all relevant in context of Earnings:

Date:  The expected Earnings Report (ER) for the underlying stock.  Green means "confirmed", white means "unconfirmed".  Blank means "unknown" and that you had better check other sources before selling the contract (e.g. TAL).

Time:  Generally, the expected time of the ER release.

Durn:  The number of days between today and the ER.

Commentary on June 15 OE ETFs and Stocks:

GUSH has a really high ROO and AROO for 5 days left to OE.  Really high.  Almost too high.  It looks attractive now, with the markets closed -- review it after the markets open Monday to see if maintains this premium level.  Warning:  This is a 3x ETF (extremely leveraged) from Direxion.

Make sure you know what each of the symbols represents in the ETF listing.  GUSH and ERX are 3x leveraged long ETFs, and UWM is a 2x leveraged ETF.

ADBE is at the top of the stock list, as you can see.  You also see that it has an IVRank of 94%, with a sweet premium.  You also see that it has ER slated for Thursday, June 14, after the close.  I do not sell premium in a CSP before ER and my free counsel (worth what you have paid for it) is that you should not either.

For full disclosure, I note that I have sold 9 contracts in ADAP (CSP) and one in ERX (CC), and they both expire in this OE date.

OE June 22:



I note that ADBE and RHT both have an ER before this OE.  I intend to avoid both of these underlyings until after ER.

OE June 29:




RHT has carried through to this OE date too, and I'm avoiding that opportunity.

OE July 6:




OE July 13:


No stocks are signalling an opportunity for the July 13th OE, at least on the Sunday before the market open for Monday.  This will most likely change on Monday AFTER the open.

OE July 20:

No ETFs are signalling an opportunity for the July 20th OE, at least as of this writing.


I note that RFIL has an ER before 7/20, and SM has no ER date listed.  EarningsWhispers says this about SM so do your research.  In fact, you should ALWAYS check EarningsWhispers and other sources before you sell a CSP -- an earnings miss is the easiest way to be assigned, in my opinion.

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Twitter

If you want to see what stocks and ETFs are signalling in real time then you can do this for free (a bargain!).  I have linked my TradeStation account to Twitter.  If you follow the Twitter handle "grems8544"  (  https://twitter.com/grems8544 ) and set it to alert you when I post, you'll get something like the following as your Twitter message:

TradeStation Alert AMTD:!P_Opt_CSPv1.3. AMTD 180608P60, Days2Exp=4, MinPrem=$11.53, MinCollect=$25.00x1, ROO=0.4%, AROO=38%, Prob=68%, Spread=$0.10, IVRank=61%. 6/4/2018 1:47:50 PM

Here is a breakdown of that message:

TradeStation Alert AMTD:!P_Opt_CSPv1.3:  this is simply the strategy name.  Nothing to do here.

AMTD 180608P60:  This is the CSP that is being evaluated.

Days2Exp=4:  This is the number of days to expiration, including today.

MinPrem=$11.53:  This is the minimum premium I must collect in order to hit a yearly annualized goal of (presently) 16% return on account.

MinCollect=$25.00x1: This is the premimum I want to receive ($0.25) and the number of contracts (x1).  Note that this value is greater than the MinPrem value above, and includes the assumption that I will buy-to-close the CSP at $0.05.  In doing so, if I receive $0.25, less commission (0.01x2), and less the $0.05, I'll still net $0.25-0.02-0.05 = $0.18 which is larger than MinPrem.

ROO=0.4%:  Return on Option

AROO=38%:  Annualized Return on Option for the Days2Exp

Prob=68%:  Prob of being ITM on OE

Spread=$0.10:  Current Bid/Ask Spread

IVRank=61%:  Current IV Rank

6/4/2018 1:47:50 PM:  Time of the Alert.

Note, the MinPrem and MinCollect levels are based upon my account size of about $85,000 and my money management rules that no single entry is bigger than about 7% of my total account value.  Your actual conditions are likely very different.

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Performance through 6/10/18:

I'm pleased with the CSP strategy.  Here are the annualized performance metrics on two time scales:

December 1, 2017 - June 10, 2018:  14.35% gain
February 2, 2018 - June 10, 2018:  24.11% gain

I make the distinction only because December 2017 and January 2018 were "get the rules in place" periods, and I made some significant errors.  The period February onward to date has been stable in rules and performance has been consistent and steadily positive.

Here is the option equity curve for all trades starting December 2017 to date:


As you can see, I was on track for a good start but a few trades in Dec and Jan knocked me down hard, below my starting equity.  Some of these CSPs have resulted in assignment, turning them into CC's, so here is the overall stock performance equity curve:


There is no trendline because I've had less than 20 trades out of over 150 convert into CC's.  The lumpiness is due to my buying-down if a position drops, resulting in the initial leg being recorded at a loss but the new leg being recorded at a gain when all of the shares are called away.

Here is another view, on a weekly basis, of what I am experiencing for the options side of the house as well as the stock side of the house:

The week-over-week options performance:


The week-over-week stock performance:


As you can see, not all CC's result in a positive outcome for the week in which they were closed.  This is because if, for example, a stock is put at $40 and then it is called away at $40, my net cost will be -$14.95 per transaction (-$29.90 total), or nearly -1% (-0.75%) when commissions are included.  That is, in fact, what you see for the "red" colored weeks in the stock performance graph.

The "wicks" and "tails" on the candlesticks arise out of additional transactions for that week which offset gains or losses, as appropriate.

The y-axis on each graph is accurate:  I've added $8,197 to the account since December, and my starting equity on December 1, 2017 was $72,926, or a gain of 11.2% or so.

This past week was a good week overall, with my MU position being called away at parity.  Here are my closed transactions for the week:



Going into this week, here's what I'm holding on the option side:


and here is what I'm holding on the stock side as part of my CC's:


If my plans work out, my position in ERX will vaporize this Friday and the ETF will be called away.

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As with all my ramblings, you are responsible for your own investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.

Regards,

pgd

Tuesday, May 22, 2018

CSP Candidate Video Summary, 5/22, Before the Close

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If you are on the blog page in a web browser from a computer, please subscribe to this using the "Follow by Email" link to the left.  If you're on a mobile device you should see something in the frame that allows you to subscribe.  Having your email helps me to notify you when Google mucks up email distribution.

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Here's a quick video summary about 10 minutes before the close on 5/22, showing you how I am looking at different CSP candidates:



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As with all my ramblings, you are responsible for your own investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.

The good, the bad, the ugly:  this is automated and real time so there is no hiding:  Get Notified of My Actual Trades in Real Time, as well as alerts to my CSP candidates:  https://twitter.com/grems8544

Regards,

pgd

Thursday, May 10, 2018

Meeting Reminder and Trade Candidates for May 10

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If you are on the blog page in a web browser from a computer, please subscribe to this using the "Follow by Email" link to the left.  If you're on a mobile device you should see something in the frame that allows you to subscribe.  Having your email helps me to notify you when Google mucks up email distribution.

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Online Meeting Saturday, 5/12, 11 a.m. ET

Here is the dial-in and webinar info:

https://global.gotomeeting.com/join/753850757

You can also dial in using your phone:  United States: +1 (267) 507-0007

Access Code: 753-850-757

First GoToMeeting? Let's do a quick system check: https://link.gotomeeting.com/system-check

Attendance is limited to the first 25 callers.  I'm not increasing the number of seats unless the poll here indicates more than 25 are going to attend, as it costs me money with Citrix.

Here's what I'm covering unless I hear from you:

1) Introduction
2) Quick overview on what is a Cash Secured Put (for beginners!)
3) Quick overview on what is a Covered Call (for beginners!)
4) How to calculate Return on Option (ROO) and Annualized Return on Option (AROO)
5) Basic sequence in rotating through Cash Secured Puts / Covered Calls
6) Stock Selection for CSP/CC strategy <===== most important!
7) Don't Ignore Option Delta and Why
8) How to Determine the "Correct" Duration to Expiration and Strike Price to Sell the CSP.
9) Position Size -- How Not to Explode Your Account
10) Executing the Trade
11) Buying the CSP back -- or Not
12) Being Assigned Isn't So Bad
13) Selling the Covered Call -- Back to Duration to Expiration and Strike Price Selection
14) Buying the CC back -- or Not
15) Goodbye CC!
16) Rinse, Repeat
17) Repairing a Position where the Stock that has Dropped In Price
19) Just Cut Your Losses -- or Not
20) What is *REALLY* possible in terms of Annual Return for THE PORTFOLIO?
21) Open Discussion

I will do what I can to record the session and make the link available.  PLEASE attend in real time if you can though -- it makes for a better experience for all.

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CSPs I'm Watching for 5/10 Sell

First, definitions:

MinPrem:  The amount I must collect from an option trade in order to meet an annualized goal, adjusted by my current win rate.
PCredit: The midpoint of the ask/bid for the stated option, reduced down to the next lower trading increment (if the increment is available).
Premium:  Expected premium that I will receive on the trade if the PCredit value is accepted by the market.
CashReq:  The amount I must have in the account to place the trade.  These are CSPs in a retirement account.
#:  This is the number of contracts to sell.
ToTPrem:  The amount of total premium that I expect to receive, adjusted for either (1) a buy-back point at some designated level of profit (80%, 90%, etc.) or (2) a buy-back point at $0.05.  Right now these reflect a $0.05/contract buyback.
ROO:  Return on Option.  The amount obtained by dividing the premium by the cost of the position.  For a cash secured put, this is (Premium Received / (Strike Price * 100 - Premium Received) )
AROO:  Annualized Return on Option.  Take the ROO * 365 days/year divided by days to OE.
BE:  Breakeven.  This is the new break-even value for the underlying, and is the strike price minus the premium received.
Disc: The amount of discount the BE represents relative to the last good quote.
ProbAbv:  The probability that the option will close above the strike price.
D...:  Days to Expiration
IVRank:  Implied Volatility Rank.  A number from 0 to 100 that shows the percentile that the stock is moving over the past 21 days relative to the last 250 (or so) trading days.  Higher IVR means more collected premium, lower means less.
SPutBid:  The current bid price for the option.
SPutAsk:  The current ask price for the option
SPut:  The contract being reviewed
Strike:  Duh
S...:  An internal scoring mechanism that I use to rank potential candidates.  The numbers mean something to me and not you, so don't worry about them
NPEarnings:  Last reported earnings by the company.

OE:  Options Expiration.  The day the option expires.  Days to OE is the date of expiration minus today's date.

Things I'm watching for today (click on the images to enlarge):

May 18 OE:

June 15 OE:

June 1 OE:

June 8 OE:

June 22 OE:

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I hate holding across earnings release and generally oscillate all day on whether I should buy a put.  I did not for ROKU, and it did not disappoint yesterday.  I should close ITM for both calls with OE tomorrow and do very well.

Here are my present holdings going into the open today:



There have been no changes to my stock equity curve from the last report, but the option equity curve continues on the same upward path:

Option transactions (net $3,560), 112 total transactions, 93% win rate:


Account value before the open is $83,899.16.  

The drop at the beginning of the curve is due to panic and not following my trading plan (VMW, OLED, WYNN).  Stupid me and I'll NEVER make those mistakes again.  You can see that the losses exceeded over $2,000 and with an average trade profit of $50.30 (as of today), it has taken me quite some time to claw my way back.

Money management says no single entry should be larger than $5,992 and no position/risk should be larger than ~$12K.

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As with all my ramblings, you are responsible for your own investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.

I look forward to your participation this Saturday.

The good, the bad, the ugly:  this is automated and real time so there is no hiding:  Get Notified of My Actual Trades in Real Time:  https://twitter.com/grems8544

Regards,

pgd



Monday, May 7, 2018

Reminder: Online Meeting 5-12; Brief Status Update

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If you are on the blog page in a web browser from a computer, please subscribe to this using the "Follow by Email" link to the left.  If you're on a mobile device you should see something in the frame that allows you to subscribe.  Having your email helps me to notify you when Google mucks up email distribution.

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Online Meeting Saturday, 5/12, 11 a.m.

Here is the dial-in and webinar info:

https://global.gotomeeting.com/join/753850757

You can also dial in using your phone:  United States: +1 (267) 507-0007

Access Code: 753-850-757

First GoToMeeting? Let's do a quick system check: https://link.gotomeeting.com/system-check

Attendance is limited to the first 25 callers.  I'm not increasing the number of seats unless the poll here  indicates more than 25 are going to attend, as it costs me money with Citrix.

Here's what I'm covering unless I hear from you:

1) Introduction
2) Quick overview on what is a Cash Secured Put (for beginners!)
3) Quick overview on what is a Covered Call (for beginners!)
4) How to calculate Return on Option (ROO) and Annualized Return on Option (AROO)
5) Basic sequence in rotating through Cash Secured Puts / Covered Calls
6) Stock Selection for CSP/CC strategy <===== most important!
7) Don't Ignore Option Delta and Why
8) How to Determine the "Correct" Duration to Expiration and Strike Price to Sell the CSP.
9) Position Size -- How Not to Explode Your Account
10) Executing the Trade
11) Buying the CSP back -- or Not
12) Being Assigned Isn't So Bad
13) Selling the Covered Call -- Back to Duration to Expiration and Strike Price Selection
14) Buying the CC back -- or Not
15) Goodbye CC!
16) Rinse, Repeat
17) Repairing a Position where the Stock that has Dropped In Price
19) Just Cut Your Losses -- or Not
20) What is *REALLY* possible in terms of Annual Return for THE PORTFOLIO?
21) Open Discussion

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CSPs I'm Watching for 5/7 Sell

First, Acronyms:

OE:  Options Expiration.  The day the option expires.  Days to OE is the date of expiration minus today's date.
ROO:  Return on Option.  The amount obtained by dividing the premium by the cost of the position.  For a cash secured put, this is (Premium Received / (Strike Price * 100 - Premium Received) )
AROO:  Annualized Return on Option.  Take the ROO * 365 days/year divided by days to OE.
IVR:  Implied Volatility Rank.  A number from 0 to 100 that shows the percentile that the stock is moving over the past 21 days relative to the last 250 (or so) trading days.  Higher IVR means more collected premium, lower means less.

Things I'm watching for today:

CLR 180615P60:  I'm looking to collect at least $106 in premium, even if I buy the position back at for $0.05.  Hence my entry limit is $115, the ROO is 1.95%, the AROO is 18.29%, and the Probability of Success is 71.7%.  The only bad thing is that IVR is 15.  ER is 8/1/18 and support/resistance are quite favorable, with a large secondary support level at $60.89.

CLR 180622P60: meets the same criteria as above.  Looking to collect $125.06 premium with 46 days to OE, including a buyback at 0.05.  ROO is 2.30% and AROO is 18.26%.  Prob is 70.14%.

WLL 180622P40:  same premium target with same 46 days to OE.  3.49% ROO, 27.72% AROO, but only IVR =2.  Put is below strong support levels of 43.12 and 41.57.  ER is 7/30/18.

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Holdings

Here's what is in my basket right now:


 My ROKU position is beating the heck out of me, but I keep selling calls against it so will keep on doing what I'm doing.  Everything else is moving like clockwork.  Here are the good/bad/ugly equity curves through 5/6/2018 for all option and stock transactions since 12/1/2017:

Option transactions (net $3,224):



and stock transactions (net $1,694)


 There is no 20d simple moving average (SMA) line with the stock equity curve because I have not had 20 transactions for the underlying (only recorded when a stock is put or called).

If you recall, this is being done on an account size that is now $82,427.

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As with all my ramblings, you are responsible for your own investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.

I look forward to your participation this Saturday.

Regards,

pgd

Get Notified of My Actual Trades in Real Time:  https://twitter.com/grems8544


Monday, April 16, 2018

CSP Candidates for Monday, April 16

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If you are on the blog page in a web browser from a computer, please subscribe to this using the "Follow by Email" link to the left.  If you're on a mobile device you should see something in the frame that allows you to subscribe.  Having your email helps me to notify you when Google mucks up email distribution.

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I've been a traveling fool the past two months and time to detail updates has been lacking.  If you have specific questions, email me.  I am fully committed to my CSP / CC strategy and am staying nearly 100% invested.  My starting equity is in the $75K range, so my position size is less than or equal to $7,500.  Here are the numbers and corresponding equity graph:



Click on the image to enlarge.

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Here are CSP positions that I'm looking to enter for Monday, April 16.  These will change after the open so if the conditions persist, I'll most likely place the trade.  These stocks all meet my criteria AND have favorable divergent effective volume.

Click on the images to enlarge.  If a given weekly expiration is not listed, it is because there are no candidates lighting up my watch list prior to the open.  Of course, this may change after the open, but ...




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As with all my ramblings, you are responsible for your own investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.

Regards,

pgd

Sunday, March 18, 2018

Tracking SQM, EXEL, Performance, and CSP Candidates - March 17th Update

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If you are on the blog page in a web browser from a computer, please subscribe to this using the "Follow by Email" link to the left.  If you're on a mobile device you should see something in the frame that allows you to subscribe.  Having your email helps me to notify you when Google mucks up email distribution.

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I've been on the road quite a bit the past two weeks so have not had an opportunity to write.  Today is my attempt to provide a catch up on what has been happening.

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Update on SQM

I continue to hold 100 shares of SQM and the SQM 042018C55 call.  My cost basis has been lowered and my last blog entry here describes how I have achieved a present cost basis of $52.78, down from the put-to-me level of $55.00.  The $55 call will be bought back at $0.05 if the price drops that low.

Late on 3/15 I rolled the SQM 031618P50 put to the SQM 042018P50 put for a net credit of $1.40.  My basis continues to drop from $53.96 to $53.96 - $1.40 + 0.02 (commissions) = $52.58.  The put will be bought back at $0.05 if the price drops that low, but given the existing price of SQM, I think there is little chance of that happening.

SQM closed at $49.66 on 3/16.

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EXEL was Put to Me

EXEL closed at $24.64 on 3/16 and because I held the $25 put, I now am the proud owner of 100 shares of the stock.  

EXEL just experienced a major drop from $29.50-ish to $23.24 over 5 days and is losing attractiveness for me.  I'd like to get out of the position.  They do not report earnings until late May, so there is no pending earnings report in the next 4 weeks. 

I sold the EXEL 031618P25 contract on 2/16 for $0.47 and collected $0.46 (commission).  The basis for the stock is presently $25.00 - 0.46 = $24.54, so even though the stock was put to me at a supposed loss, I still have a slight paper-profit in the position.

Obligated money ($2500 in this case) needs to work.  My money management rules and win/loss results to date show that I need to collect at least $40 premium to hit or exceed a 12% annualized rate of return, so this opens up selling any call from the April 23 to the April 27.

I want to get out of the position with a high probability of profit, and I want this profit to exceed 12% (annualized).  This means, at a minimum, the return on option needs to be in excess of 0.12 * 35 (days to expiration) / 365 (days in a year) = 1.15% ROO.

If I sell the April 22 call at the bids that are published ($2.65) this weekend, my basis will drop to about $21.89 and I'll make about $0.11 when/if called away.  This is 0.44% on the position and annualizes to 4.6%, and is too small for what I need the money to generate over the next 35 days.

If I sell the April 23 call at the bids that are published ($2.20) this weekend, my basis will drop to about $22.34 and I'll make about $0.66 when/if called away.  This is 2.64% on the position and annualizes to 27.5%.  This has a high probability of occurring and is in my target ROO zone, so I'm seriously considering selling this call on Monday after the open.

Here's the profit and loss for this proposed trade, noting that I want to get out of the trade in April (with a high probability of profit):

Click on the image to enlarge.

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Trades over the Last Two Weeks

Despite not writing, I've been busy placing orders to sell positions.  Here are the tables for both accounts since my last entry:


Click on either table to enlarge.

I sorted each by contract so that you could see what was opened/closed within the past two weeks.  many were bought back (Buy to Close) at $0.05 as the stock price moved away from the option.  Because these are cash-secured puts, the money is then released to sell another put.  

Rinse/repeat.

Here are my holdings going into the open on Monday, March 19th:


I note that the stock position Open P/L% is incorrect, as there is no way to assign premium capture to the underlying when the stock is put to you.  My actual basis for each of the stock positions is lower than indicated (which is the entire purpose of this strategy).

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Performance Since 2/1

I received an email this week asking about performance for the CSP - CC strategy that I'm forward-testing, in real time, for all of you to see.  Here is the equity graph since 2/1/18:

Click on the image to enlarge.

The equity graph is relatively accurate, but I note with some disdain,  TradeStation does not accurately track closed sequences where stocks have been put to you, so the entries of the blog found here (AMAT, MU, SQ) are NOT included in the graph or the performance statistics that follow.  This is a bug that TradeStation users have been dealing with for years, and TradeStation simply does not care to fix.  Frustrating.


Noteable are the following statistics since 2/1:
  • 36 trades, 33 are profitable (91.67%)
  • Average Winning Trade:  $30.53
  • Annualized Rate of Return:  14.3%
  • Percent Time in Market:  77%
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CSP Candidates for Monday

Here are candidates that I'm looking at for Monday:

April 20th Monthly OE:

May 18th Monthly OE:

March 23rd Weekly OE:

March 29th Weekly OE:

April 6th Weekly OE:
Click on any table to enlarge.

Note, these are not recommendations for you -- they are simply what I am considering for ME.  You absolutely must do your own due diligence on these, and you must take ownership for your actions.

I note that MIK has an ER in 4 days, so you'll want to look at each of these in that context.

These all meet the following criteria, at least with the market-closed ask/bid pricing:
  • My minimum total collected premium requirements between Monday morning, March 19th and the OE date (the duration the money would be tied up);
  • Probability of being OTM on OE > 68%
  • Minimum annualized return on option (AROO) > 12%, including a $0.05 buy-to-close order and commissions
  • Total risk is 10% of portfolio value, or < $7,500 per position.  This is why you see a "1" or "2"  or "3" in the "#..." column, which is the number of contracts to buy to fill a full position.
I also note that these will change after the open, but not by much (generally).  Some may or may not meet the criteria stipulated above just after the open.

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If you see anything wrong in my calculations, please let me know. 

As with all my ramblings, you are responsible for your own investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.

Regards,

pgd














Thursday, March 8, 2018

Tracking SQM - March 8th Update

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SQM History

I sold SQM 180216P55 on 1/18 for $0.95, lowering the basis by $0.94 (to include $0.01 commission), for a new cost basis of $54.06.

100 shares of SQM were put to me on 2/16 at $55.00.

I sold SQM 180316C60 on 2/20 for $0.85 and bought the call back on 3/1 for $0.05, with a $0.01 commission, netting $0.79.  The cost basis reduces to $54.06 - $0.79 = $53.27.

I sold SQM 180420C55 on 3/6 and collected $0.50.  Commissions reduce this to $0.49, and the new cost basis is $53.27 - $0.49 = $52.78.  I still hold the $55 call and will buy it back to close the leg if it drops to $0.05.

In another transaction, I sold SQM 180316P50 on 2/16 and received $1.05, and after commissions, $1.04.  The basis for this put, if it closes below $50 on 3/16, will be $55 - $1.04 = $53.96.  I still hold the $50 put and will buy it back to close the leg if it drops to $0.05.  If this put expires worthless on 3/16 the credit received will offset the shares that I currently hold.

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SQM Strategy as of 3/8

The major drop in SQM's price has me looking for ways to continue to lower my basis on the stock without taking on significantly more risk.

My longer-termed outlook on SQM is unchanged.  On an EPS/revenue basis, although some slowing has occurred, the stock is a good stock.  The YoY and QoQ historical numbers are positive, and there are less than 250 companies on all the exchanges who can claim the same.  I feel that there is low risk holding SQM for the near-term (1-2 months).  There is higher risk with holding in the May-July time frame, as the slowing in earnings may continue and drop below last year's levels.

If I were to buy shares on the market today, say at $49 limit, I would have a cost basis of ($4900 + $5278) / 200 shares = $10,178 / 200 = $50.89.  The $10,178 value is about 36% larger of a position in any one stock than I like to have, so this is less than ideal.  If I were to do this I would have to close the SQM 180316P50 leg so not to have further exposure, since that leg could be assigned at any time (theoretically) if the underlying is trading under $50 (it is presently near the money).  Presently, the 180316P50 leg would close for nearly $2.00, taking my basis back up (with the $49 stock purchase) to around $51.89.

If I sit pat and do nothing, my present basis of $52.78 holds provided that SQM closes above $50 on 3/16.  The open put leg will expire worthless and I keep the $1.04 that I collected (net of commissions).  This would drop my basis on the stock that I hold to $51.74.

If I sit pat and do nothing, and if the price of SQM is below $50 on 3/16, then another 100 shares will be put to me at $50, but because I received $1.04 credit (net of commissions), my true cost for these 100 shares is $48.96.  My new cost basis would be ($4896 + $5278) / 200 shares = $10,174 / 200 = $50.87.

Sitting pat and lowering my basis to $51.74 (SQM closes above $50 on 3/16) or $50.87 (SQM closes below $50 on 3/16) is my best approach forward at this time.

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If you see anything wrong in my calculations, please let me know.

As with all my ramblings, you are responsible for your own investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.  Nothing I've written here is to be used as a recommendation to buy/sell any security -- you need to do your own work.  I'm simply giving you a detailed glimpse into my thinking.

Regards,

pgd