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May 2021 Trades

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schmeljones
Posts: 17
(@schmeljones)
Active Member
Joined: 1 year ago

Still no ITM expirations for me with 4-6 DTE, 8-10 delta options in 2021 so far! The last loss I posted was in late October last year.

Of course the first half of last weeks whipsaw was much scarier with longer dated, riskier options - I opened at $413 (XSP) Monday morning for Friday and was bracing for a deep ITM finish. But the puts recovered before expiration, and I was able to sell puts on Wednesday/Friday at elevated VIX/premium for the following week in the 390s.

The stark difference in last week's outcomes between 2 DTE and ~5 DTE has me wondering about how a strategy with "layered" expirations would perform in backtests. Say that at any given day, you have options expiring in 2 days, next week, and next month. Volatility would obviously increase and would be more correlated with actual S&P performance so not good from SRR perspective, but I wonder if this sort of hedging against different VIX spike widths would increase risk-adjusted return?

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earlyretirementnow.com
(@earlyretirementnowcom)
Joined: 6 years ago

Member
Posts: 297

@schmeljones Congrats! You're lucky that your expiration last week was Friday, not Wednesday! But must have been a rough ride! I wouldn't want to have that Delta exposure with an account designated to fund (almost) my whole retirement budget. 🙂

That staggered expiration system all sounds really cute but I always revert back to my old theory: I don't want any more equity beta as I have that already in my other brokerage accounts. I want the short-vol exposure and that's most efficient with short DTE because I can utilize the Central Limit Theorem.

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schmeljones
(@schmeljones)
Joined: 1 year ago

Active Member
Posts: 17

@earlyretirementnowcom Makes sense! My comments are definitely coming from an early career, 50%+ savings rate perspective. I'm pursuing this higher beta strategy with after-tax contributions until I get to 1 SPX contract at which point I'll switch over to BigERN Classic™️  and use as an "emergency fund".

Then new after-tax contributions will be 100% indexes and "getting cute" with longer puts underneath using 1.5x leverage in a separate account. I've wanted to implement a higher than 100% equity allocation as a starting point for a 10-year glidepath and I'm trying to think about how to do that with puts vs futures or margin...

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NavyPack
Posts: 185
(@navypack)
Estimable Member
Joined: 2 years ago

0Sold Friday AM close at 1145 EST at 3880 Strike for $1.25

Sold Friday PM close at 1600 EST with 3915 Strike for $1.05

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1 Reply
fi4wanderlust
(@fi4wanderlust)
Joined: 1 year ago

Eminent Member
Posts: 41

@navypack

Sold today's expire at $1.35 4050 strike. Also sold a call at $0.70 4200.

I finally popped my cherry last week and took a itm loss on Weds. I was on a hike in Kauai with no cell reception so I didn't find out until the market was closed! Luckily, I continue to sell at low 2-3 deltas so it only took a $1100 hit to my premiums. 

It's been about 2 months since I started and the results have been better than expected. I'm hoping for more volatility spikes so we can capture higher premiums!

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NavyPack
Posts: 185
(@navypack)
Estimable Member
Joined: 2 years ago

Moderate VOL and the just churn in place or slow drop is best for this strategy.  

Halfway recovered from last Wednesday ITM loss, and think full recovery by next Wednesday (2 weeks).

Side note: Need to start putting more taxes aside from salary to cover profits.

 

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earlyretirementnow.com
Posts: 297
Admin
Topic starter
(@earlyretirementnowcom)
Member
Joined: 6 years ago

I like those 3rd Fridays of the month. Sell the Friday morning options on Wednesday and start selling Friday PM on Thursday. Now that are all worthless and I can start the Monday option already on Friday morning!

I should be able to make up the loss from May 12 now!

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sl0244
Posts: 8
(@sl0244)
Active Member
Joined: 1 year ago

I started this strategy from 10/2020. 10/28/2020, 5/12/2021 are the two hits. 10/28/20 SPX PUT expired ITM and get back the loss in two weeks. for 5/12/21 PUT, I bought back at 5/11 with loss $1000. In the same week, most loss is recovered because of the high IV. So far, this strategy works great! Thank you EDN!

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earlyretirementnow.com
(@earlyretirementnowcom)
Joined: 6 years ago

Member
Posts: 297

@sl0244 Great! I'm glad you were able to recover from the loss so quickly. My recovery took a little longer. Should be back to zero by Monday! 🙂

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