Trading the Greek Gods: 2018

Friday, October 26, 2018

Premarket Friday, October 26

My Crystal Ball

If you feel you must dabble, then do so knowing risk is high. Quite high. Stick to your trading plan and if you don't have a trading plan, especially one that addresses risk management or position sizing, don't play in this market.

The $TIKUS shows constructive, but only 1-day positive behavior:

Click on the image to enlarge.

Thursday saw steady buying out of the starting blocks and this continued, more/less, all day long. This is good.

We also had over 700 stocks making new lows while only 43 made new 52-week highs. This is bad.

We also have some distance to go to get the cumulative tick to reverse and start moving upward.

Again, if you feel you must participate, then do so with caution.

~~~~~~~~~~

CSP Lists are updated and we may generate some weekly and monthly alerts today. Ensure that you look at earnings, as I do not suppress alerts based upon ER.

~~~~~~~~~~

As with all my ramblings, you are responsible for your own investment/trading decisions and I am not. Please do your own diligence, and please take ownership for your actions. Please read and acknowledge the disclaimer that is listed on the left on the web site page.

Regards,

Paul

Wednesday, October 24, 2018

Premarket Wednesday, October 24th

If you prefer to be long, here's what I'm thinking about today...

Many folks like to buy the dip (BTD), but the danger in this when the dip is still dipping is that we may all be dipshits... meaning... don't buy the dip until we have some indication of stability.

As of the close of markets last night we have no indication that there is stability in the market.

My tool to sample this is the Cumulative Tick:

Click on the image to enlarge.

This Cumulative Tick (CT) plot is of $TIKUS, which is a composite of all exchanges in the U.S. and shows what the broad market is doing. Others, such as the NYSE ($TICK), the Russell 2000 ($TIKRL), and other larger groupings of stocks all show more/less the same picture, so I'll stick with the $TIKUS.

Yesterday's action is located on the right side of the figure. The top plot is the 52w New Highs (green, almost flat), 52w New Lows (red, dominating), and the net between the two (yellow, very negative). When red is dominating we are in a contracting market -- prices are dropping, and many stocks are making new 52-week lows. I don't invest in new lows (I'm not a bottom fisher), so while you can go that route, I suggest that you seriously diversify before you put all your eggs in that strategy. It doesn't work over the long haul.

The middle plot is a filter, and it requires the element of time to move the red trace up or down. If buying/selling pressure is present, the red line will tick up (buying) or tick down (selling). If it is sustained you'll see continued movement in one direction or another.

You can see that for most of the morning yesterday that the markets were bearish, and then after lunch, we started a push that more/less recovered for the day. At the end we had some selling, as evidenced by the downward movement, but as we know, the day finished well off the lows of the day.

The crystal ball portion of the CT is in the lower pane. The white line is the instantaneous CT -- no filter, and it basically shows that there was an attempt to move upwards after the 10:30 am ET lows. One day does not make a reversal, and we will need to see continued progress of this white line, eventually crossing ALL the downward trend lines and pulling them upward. This often takes several days and is related to volume and conviction of the markets to step in and "buy the dip".

So, we're not seeing any indication that yesterday's action was a stability action -- we may continue downward quite easily from here -- or not.

Your crystal ball is as good as mine.

~~~~~~~~~~

Covered Call / Cash Secured Put Strategy

Only 4 stocks made the list this morning, meaning, they are showing enough relative strength and option action to warrant possible entry for selling a cash-secured put (CSP). Follow my Twitter feed ( https://goo.gl/UoGgBg ) if you want to see any generated alerts on these stocks and of course, you need to conduct further diligence on the underlying.

~~~~~~~~~~

As with all my ramblings, you are responsible for your own investment/trading decisions and I am not. Please do your own diligence, and please take ownership for your actions. Please read and acknowledge the disclaimer that is listed on the left on the web site page.

Regards,

Paul

Monday, October 22, 2018

CSP Scan List for Monday, October 22

~~~~~~~~~~

CSP Source List for Monday

The lists today are incredibly thin, which is an outcome of my screening processes. The lists are published here at https://goo.gl/XZKgwY

Going forward, the lists will expand/contract in relation to four primary criteria:

Does the stock have increasing revenues, earnings per share, and free cash flow on a QoQ, YoY, and TTM basis? Only select stocks where the answer is yes.
Is the stock price above the 50d MA?
Are the 50d MA > 150d MA > 200d MA?
Is the individual candidate equity emerging into a new uptrend on the daily and/or weekly time frame?

The first item is simply my definition of a quality stock. Substitute your own definition as necessary. For those of you who have been with me over the years, this is the "Greenfield Criteria".

The next two items are simple filters that really do have a material change on long-term performance. I've tested the heck out of these two conditions and I am 100% convinced that independent of the numbers (e.g. 50d, 150d, 200d), these two conditions reduce drawdown and provide a natural block to entering the markets in stocks that are bottom swimmers (bottom swimmers are terrible CSP candidates).

The last criteria is relatively new and was developed as a result of wanting to have fewer stocks assigned to me. Basically, having a stock in an uptrend is not sufficient -- the longer the uptrend, the more sensitive it becomes to any market weakness, causing the price to drop (sometimes rapidly drop). Hence, my intention is to enter into positions that are newly emerging and that have defined risk points below the entry level.

~~~~~~~~~~

Market Climate

From the CSP perspective, the broader market is still in a downtrend, and even if Monday is a majorly up day, several things need to change in order to have confidence to move into long positions (or sell CSPs).

My favorite crystal ball is the Cumulative Tick. If you are not familiar, this is a good starting point:

https://traderfeed.blogspot.com/2006/09/cumulative-nyse-tick-valuable-measure.html

I've modified the presentation, but the approach is the same:

Click on the image to enlarge

Three plot areas are shown; here is what you are looking at:

Top plots. Daily 52-week New High/New Lows. Red is the New Lows, and as you can see by my circles, far more stocks are making 52-week new lows relative to new highs (green). This is not an expanding market -- it is contracting. Contracting markets are not conducive to selling CSPs.
Middle plots: Daily "sustained filter" of the real time cumulative tick. The filter here is that the cumulative tick must be ticking higher or lower, on a net basis, minute-over-minute in the same direction in order to move higher or lower. When the line is flat there is not buying/selling pressure. When the line trends up (like last Tuesday), there is strong buying pressure. When the line trends down (like last Thursday), there is strong selling pressure. As you can see, Friday was net down, but not overly strong. It started slightly bullish in the morning and became weaker as positions were unwound, most likely to reduce risk into the weekend.
Bottom plots. Real-time cumulative tick and moving averages. The RT CT is white, the solid heavy red line is about a 10-day moving average. When both are trending down we haven't hit the floor, so going long when this is occurring is really risky. Selling CSPs before this bottoms is also really risky.

So, the lack of deep lists to alert on, and the downward push of the CT tells me that sitting on the sidelines today is not a bad risk-mitigation approach.

I do have some existing positions that I need to manage so you will see that activity through the Twitter feed.

~~~~~~~~~~~

Regards,

Paul

Update on Twitter CSP Alerts

Saturday, October 13, 2018

Applying the Fisher Transform to Option Selling

.
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.

~~~~~~~~~~

Administratia:

Please read Forward Testing blog entry regarding my Twitter CSP alerts. The link is here: https://fwdtest.blogspot.com/2018/09/csp-updates-for-friday-sep-28.html

~~~~~~~~~

The alerts files (monthly historical as well as the alerts generated as of the last trading day, after market open), are available here ( https://goo.gl/WbuJhS ). The archive subfolder contains historical alerts files that you can review.

Real-time Q&A with me, if I'm available, is through this link: https://discord.gg/4QAUqyd This is Dr. Jeff Scott's HGSI Discord forum and it's worth your time to join (free). I am @PaulDuncan at Discord and I typically watch the #cashsecuredputs-n-coveredcalls channel. Come say "hello"!

~~~~~~~~~~

Fisher Transform

The more I dive into the Fisher Transform ("FXfrm") the more I'm impressed with it's performance as an indicator to reveal turning points. If you are not familiar with the Fisher Transform, the equity-applicability of the transform was demonstrated by John Ehlers and you can read about it here:

https://www.mesasoftware.com/papers/UsingTheFisherTransform.pdf

The paper has some math, relies on knowledge of transfer and filter functions (concepts in control theory and electrical engineering), and can be tedious if you are not educated in those areas (or at best, rusty). Luckily, I'm a practicing electrical engineer, so plowing through the details was a flashback to my college days ( decades ago ) and the mental gymnastics were not insurmountable.

The take away Dr. Ehlers wants us to believe is this: turning points in a price series, after you apply the Fisher Transform, are amplified and as a result, there is unambiguous signal capability to enter or exit a trade.

It is a different post that I need to write, but I can confirm that "yes, the Fisher Transform has an advantage over moving average entries and exits", mostly because it has minimal to zero lag. Let's take that statement as a starting point.

~~~~~

The business problem that I'm attempting to solve is "How do I reduce the number of stock assignments when selling put options?"

When you sell a put option, if the price of the underlying equity is LOWER than the strike price of the put you sold at the close of markets on the Option Expiration (OE) day, the stock will be assigned to you at the strike price. So, if you sold the $50 put strike in XYZ, and the stock was $45 at the close of markets on OE day, then you will be assigned the stock at $50 and will have a $5/share paper loss (offset by any premium that you collected). To dig yourself out of the hole you need to:

sell calls against the position (now that you own at least 100 shares), further reducing the position break even by collecting additional option premium and betting that the stock will recover and move higher than the call strike price, and remain there until the call OE;
sell another put below your breakeven, and if assigned, it will lower the total position basis,
BUY another lot (minimally 100 shares) of XYZ at the lower price, lowering the position break even
Go back to step 1, rinse, repeat.

It should be obvious that if you are going to sell put options, then you want to be in stocks that are in an uptrend. Stocks that are in a downtrend will guarantee assignment and you'll be catching the proverbial "falling knife".

So, how do we identify stocks that are in an uptrend?

Enter the Fisher Transform.

The Fisher Transform has virtually zero lag and allows us to identify uptrends on any scale that we desire -- intraday, daily, weekly, monthly, quarterly, etc. It doesn't matter. What is important is that we can clearly see, using the Fisher Transform, whether the equity is in an uptrend or downtrend.

It's important to note that the Fisher Transform uses a past window of data, just like a moving average. Unlike a moving average, the window only tells the Fisher Transform what the current price is in regard to where it has been in recent history. So, if we have a 5-bar window, we're looking at evaluating today's price action with respect to the past 5 days, etc.

You get the idea.

Ehlers defaults his window at 10 bars for buying and selling and I'll state, without proof here, that this does appear to be the best window size for daily data. I have TradeStation Portfolio Maestro, which is backtesting software, and have been doing weeks of testing of this configuration. So, if we are looking at applying the Fisher Transform to daily data, we will consider the last 10 days of data to make buying and selling decisions. Hence, the daily trend is defined based upon this 10-day window.

Remember though, the Fisher Transform applies to any bar setting: hourly, weekly, monthly -- it doesn't matter, as the indicator works well independent of the bar setting. What DOES NOT work well is the default 10-bar window setting applied to other time frames, a 10-week-bar window does not appear to be the best setting for considering the weekly trend.

Repeat the same statement for monthly. Or hourly. Same caution applies.

My testing suggests that *if* I am to consider multi-time frame analysis, and require that they both be confirming each other, then a 5-week bar, combined with the 10-day-bar, provide the best portfolio performance in terms of bars to review. There are all sorts of nuances and caveats in that prior statement so please ensure you read it again and understand it. Put another way: if I'm running TWO windows, the daily window will be 10 bars in length and the weekly window will be 5 bars in length.

Some combination of daily and weekly bar status (both in uptrend, both in downtrend, one in uptrend, one in downtrend) give the best performance for entering and exiting a long position.

As it turns out, the *BEST* performance, using the SP 500 over multiple 10-year periods, results when we:

ignore the weekly status to enter a stock
enter on a change in the daily status from downtrend to uptrend
sell ANY TIME the weekly AND daily trends change from uptrend to a downtrend, OR
sell ANY TIME the daily trend changes from an uptrend to a downtrend, independent of what the weekly is doing.

This is good, but it's not exactly intuitive. A few comments:

I was thinking that the best time to enter a position was when both were confirming a new uptrend, so I tested for the daily changing to an uptrend and then waiting for the weekly to confirm. While this does work, it is not the "best" long-term performer. My only explanation is that the change in the shorter time frame from downtrend-to-uptrend catches the new trend in a quicker fashion, IF it materializes. If it doesn't, the rule 4 will catch the failure.
No comment on this rule - it should be obvious
This is a major sell signal -- when both are changing to a downtrend on the same day. This proves to be a very powerful indicator of a new downtrend and buying stock when both of these are pointing downward is not a great idea, especially if you are selling puts.
This was a bit counter intuitive to me, as I wanted to stay in the trade as long as possible and wait for the weekly to confirm. Rule 4 states IF the daily fails, get out. Bank your profit / cut your loss and simply get out. The weekly may confirm, or it may not. In looking at the trading logs, this rule has a greater number of whipsaws, but in general, is the better long-term performer.

So, applying the Fisher Transform to stock entry on the long side, if given the SP 500 basket, you can make money over time. How much money? Backtesting suggests beating the market in a consistent manner, but there are many other considerations (position size, number of positions, scaled entry/exit, etc.) that need to be considered. That will be for another series of blog entries.

~~~~~~~~~~

Remember, the problem that I'm trying to solve is "How do I reduce the number of stock assignments when selling put options?"

So far, I've produced an indicator that is optimized over multiple 10 year periods that enters and exits long positions in equities based upon daily and weekly behavior, but this doesn't really help me for options.

Or does it?

I note when I look at the individual trades, the average winning trade length is 17 days, and the average losing trade length is 16 days. This is between 2-3 weeks of holding the position, and is within my historical "sweet spot" of selling put option premium.

The premise is this: if the trade is profitable, then we know it is above the entry price at the time of exit (close of market on the Friday), and if we sold puts when the signal indicated to go long in the stock, the settings that produce the greatest number of winning trades should provide an edge to my trading.

Note, I really don't care about magnitude of those trades, only that they were profitable relative to the entry date.

I modified the selling rules of the system to only sell on a Friday at the close. I also decided to move to just the SPY instead of all of the stocks of the SP 500, simply because processing 500 stocks across multiple 10-year periods, 10-days and 5-weeks at a time is really time consuming. While the use of the SPY is not perfect, it gets me in the ballpark (I was able to duplicate relative behavior as shown above using the SPY so it's a valid proxy). I'll apply to the SP 500 or DJ Composite to fine tune once I get the SPY results nailed.

After considerable testing, the weekly/daily "windows" are unchanged:

10-day window for daily bars,
5-week windows for weekly bars.

The "best" setups, not measured for portfolio returns but measured as a percentage of winning trades, are a bit different than stocks:

weekly in a NEW downtrend, daily already in a downtrend, enter on transition to a new weekly downtrend
daily in a NEW downtrend, weekly already in a downtrend, enter on a transition to a new daily downtrend
SELL on the 3rd Friday after entry.

The average number of trades, with the SPY, is 128 +/- 5 trades across multiple 10-year sliding windows.
The average number of winning trades, again with the SPY, is 63% (about 81 trades), with 7 consecutive wins and averaging 17 days in duration.
The average number of losing trades, again with the SPY, is 37% (about 47 trades), with 4 consecutive wins and averaging 16 days in duration.

Until further notice, I'm going to use these settings.

In addition to the above, I'll require the following of the stocks:

the underlying stock is above its 200d, 150d, and 50d moving average
the underlying stock is optionable,
the 13-week average volume is at least 150,000 shares.

Other GGT criteria that I use, such as revenues, EPS, and free cash flow cannot be backtested, as that data is not available, but I will use GGT base criteria for going forward.

Stay tuned.

~~~~~~~~~~~

You can reach me most times at the following site: https://discord.gg/4QAUqyd

Regards,

Paul

Tuesday, August 21, 2018

The Strength of GGT Stocks Relative to the Market

~~~~~~~

I received an email this morning asking if the GGT stocks were "that much better" than simply picking an index.

Good question.

The answer is -- GGT stocks are absolutely better than a simple index. Here's the structure and proof:

1) Take the current list of passing GGT stocks.
2) Sort by Open Interest descending. AAPL will be at the top using the list published here for 8/21. The greenfield chart for these stocks, sorted OI descending, is provided below bullet 4):
3) Build an index of the top 50 stocks. I used equal shares only because it's the easiest to demonstrate, but equal weight of prices (say allocate $1,000 per symbol) is possible too.
4) Compare the GGT50 to the index on multiple time periods -- Since Jan 1, April 1, and July 1:

Greenfield 50 Sorted OI Descending:

The GGT50 Index Compared to the VXF:

(Click on the image to enlarge)

Compared to the SPY:

(Click on the image to enlarge)

Note that the left panel of the SPY has January 1 as the starting date, the middle panel is April 1, and the right panel is July 1.

Compared to the Russell 2000:

(Click on the image to enlarge)

Note that the left panel of the IWM has January 1 as the starting date, the middle panel is April 1, and the right panel is July 1.

A few observations jump out at me:

1) On the longest holding period, which is the leftmost panel of each picture, the stocks of the GGT index mirror or are more/less not "explosive" relative to the index. Once the market begins to move, the GGT stocks appear to move at a higher clip upward than the underlying index (VXF, SPY, IWM).

2) The right panel, which is comprised of stocks from a scan of the 20th of August, is referenced to the start of July. This shows the biggest contrast, because the stocks selected for the 20th of August are the most "fresh".

3) The middle plot suggests that there is a period where the GGT stocks mimic the index, and after a certain point, the GGT stocks exceed the index. The visible divergence of the middle plot from IWM starts around the beginning of June, or roughly 50 days ago. Using the VXF or SPY, it appears to become really visible around the end of April or the beginning of May.

Combined, these three observations point to a requirement that there needs to be some updating of parameters for stocks so that the weakest ones are sold and the strongest ones are kept.

I'll take a look at enhancing this finding and developing some rules around it. Of course, owning 50 stocks is not practical (might as well as buy an index, right?) but there are ways to mimic a basket of stocks through two related concepts called correlation and orthogonality.

[Simply put, if two stocks move exactly the same, there is no need to include both of them. These stocks are said to be highly correlated. Additionally, if two stocks are selected and only one moves upward but the other does not change, then these two stocks are uncorrelated and can be considered orthogonal. It is highly desired to reduce a large basket of stocks down to stocks that are uncorrelated and orthogonal while keeping the behavior of the reference basket.]

~~~~~~~~~~~

As with all my ramblings, you are responsible for your own investment/trading decisions and I am not. Please do your own diligence, and please take ownership for your actions. Please read and acknowledge the disclaimer that is listed on the left on the web site page.

You can reach me most times at the following site: https://discord.gg/4QAUqyd

Regards,

Paul

Sunday, August 19, 2018

Weekly CSP - CC Performance Posted

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.

~~~~~~~

I have posted details on the overall performance of my CSP / CC strategy, which is live and is capitalized with $86K of real money. Good (mostly) /bad (a few) /ugly (only 1 or 2) results since December 2017 to present are fully exposed.

Rather than repost all of the details here I'm simply going to provide a link to my channel at Dr. Jeff Scott's Discord group:

https://discord.gg/4QAUqyd

I strongly recommend that you join the discussion there and review not only my summary for the past week, but the postings of others who are navigating this market using their own tools and strategies. This is a high-quality, no BS group, and is worth your time.

~~~~~~~~~~~

As with all my ramblings, you are responsible for your own investment/trading decisions and I am not. Please do your own diligence, and please take ownership for your actions. Please read and acknowledge the disclaimer that is listed on the left on the web site page.

Regards,

pgd

Friday, June 29, 2018

Preopen CSP and CC Candidates for June 29th

Here's what is appearing on my watchlists for the open. The number following the symbol is the minimum bid I'm looking to receive to make my targets:

6/29 OE (today): nothing

7/6 OE:

ERX 180706P35, $0.35

GOOS 180706P55, $0.55

WLL 180706P50, $0.51

7/13 OE:

MOMO 180713P40, $0.55

7/20 OE:

DIG 180720P40, $0.75

GPRK 180720P20, $0.85

7/27 OE:

MOMO 180727P40, $1.05

8/17 OE:

CLR 180817P60, $1.55

I note that CLR has an ER on 8/1, before OE.

~~~~~~

For those of you who want to focus on the Dividend Champions, here is what I'm seeing:

7/27 OE:

V 180727P125, $2.75

I note that V has an ER on 7/25, just before OE, so you may want to look at some advanced spread strategies.

~~~~~~

All of these candidates are subject to change after the open, once the bid/asks are updated. The only way to see real-time alerts is to follow my dedicated Twitter feed, @GreekGodTrading

~~~~~~~~~~~

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. Please read and acknowledge the disclaimer that is listed on the left on the web site page.

Regards,

pgd

Wednesday, June 27, 2018

Twitter Name Changed for Cash Secured Puts-Covered Call Scans

Sunday, June 10, 2018

CSP Candidates for Monday, June 11 and Performance Update

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...

~~~~~~~

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.

~~~~~~~

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.

~~~~~~~~~~~~~

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.

~~~~~~~~~~~~~

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.

~~~~~~~~~~~

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

~~~~~~~

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

.
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.

~~~~~~~

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.

~~~~~~~

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:

~~~~~~~~

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.

~~~~~~~

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

.
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.

~~~~~~~

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

~~~~~~~

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.

~~~~~~~

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.

~~~~~~~

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

Click on the image to enlarge.

~~~~~~~

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 ...

~~~~~~~~~

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

Trading the Greek Gods

Friday, October 26, 2018

Premarket Friday, October 26

Wednesday, October 24, 2018

Premarket Wednesday, October 24th

Monday, October 22, 2018

CSP Scan List for Monday, October 22

Update on Twitter CSP Alerts

Saturday, October 13, 2018

Applying the Fisher Transform to Option Selling

Tuesday, August 21, 2018

The Strength of GGT Stocks Relative to the Market

Sunday, August 19, 2018

Weekly CSP - CC Performance Posted

Friday, June 29, 2018

Preopen CSP and CC Candidates for June 29th

Wednesday, June 27, 2018

Twitter Name Changed for Cash Secured Puts-Covered Call Scans

Sunday, June 10, 2018

CSP Candidates for Monday, June 11 and Performance Update

Tuesday, May 22, 2018

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

Thursday, May 10, 2018

Meeting Reminder and Trade Candidates for May 10

Monday, May 7, 2018

Reminder: Online Meeting 5-12; Brief Status Update

Monday, April 16, 2018

CSP Candidates for Monday, April 16

DISCLAIMER

Blog Archive

Followers

About Me

Search This Blog

Friday, October 26, 2018

Wednesday, October 24, 2018

Monday, October 22, 2018

Saturday, October 13, 2018

Tuesday, August 21, 2018

Sunday, August 19, 2018

Friday, June 29, 2018

Wednesday, June 27, 2018

Sunday, June 10, 2018

Tuesday, May 22, 2018

Thursday, May 10, 2018

Monday, May 7, 2018

Monday, April 16, 2018

DISCLAIMER

Blog Archive

Subscribe To

Followers

About Me

Search This Blog