CSP Candidates for Monday, June 11 and Performance 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.

~~~~~~~

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