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May 2021 Trades
I will start a new topic for the May trades.
Well, there you have it! My puts went ITM today. I had strikes between 4060 and 4080 expiring today. The 4060 were safe but the others went ITM by $9.46 on average.
This was the first major loss since 2/24/2020 (573 days), wiping out just under 3 weeks worth of option premium. I also had three very small losses in between:
- 6/12/2020: Several $1000 but still less than 2 weeks of option income
- 9/23/2020: Just a few $100, due to playing around with same-day options
- 10/19/2020: Just a few $100, due to playing around with same-day options
So, it's just the cost of doing business. I had pretty good intuition (a.k.a. luck) in setting the strikes just about where I thought a bad 2-day run might end up in the current vol environment. I guess I could have done better by waiting to roll the options on Monday. I did most of the trades early that morning in the first 3h of trading when the index was at around 4230. Right before closing, the index had dropped all the way to 4188 and I could have sold the Wednesday options at much lower strikes. It's just the luck of the draw. Sometimes the market goes in your favor sometimes against you when you roll your options early in the morning.
My Friday options have strikes between 3525 and 3625 and a premium about 50% above my target. Now is the time to shift up the risk and recover the loss!
Let's hope this is just a temporary pullback and we don't fall another 10% over the next 2 days! 🙂
Thanks Big ERN for details. I had puts at 4055 and 4080, so lost a bit.
Sold Friday at a 3 delta at 350 points OOM and 3710 strike for $2.10, which is double recent and 50% increase from recent sales.
Thanks for the update, Big ERN. I had a similar result. I shorted 4085s early on Mon. and they were in the money just over 20 bucks. If I had better timing luck and put the trade on later in the day, I probably would have kept all the premium as you mentioned. I hedged w/ short SPY and short /ES futures and mitigated about half the loss. I gave back about 3 weeks of income.
I hope to incorporate timing/technical analysis for better entries as well as short signals for hedging in the future as I watch the market all day. It is quite unnerving when the market reaches your strikes. The negative gamma makes the p/l swings wild and hedging very dynamic (a lot of work where you can't take your eyes off of it).
The market is rallying hard today to throw a little salt in the wound. The upside is I sold Friday's 3580s and barring an 1987 event, they should be good.
I wouldn't advise hedging to anyone. ERN and Spintwig have done the backtests and the stats speak for themselves. If most traders fail, any attempt to improve the results opens the door for a more probably reduction in return w/ added headache and time committed. I am a full time, discretionary trader. I watch every tick in the market and can make quick adjustment. Even then, I botch it and often wish I hadn't monkeyed with a hedge.
I too sold puts on Monday morning (thus undoing the luck of having covered calls assigned Friday). The wound was pre-salted.
ERN did you just pay cash to buy your puts back, roll them, or accept assignment?