Trump adds volatility back to the market; a profitable week for my trades

The Trade War rattlings finally got to the market on Monday, and really all week:

So by the time I put the trade on Monday the 2770/2800 call spread wasn't looking as much of a cash cow, so I sold both sides 2765/2795 call spread with 2650/2620 put spread ... got $4.00 credit, which is about a 15.3% return in 4 days (as it expired Friday worthless).

On Wednesday, for Monday expiration it was getting up there again so I sold just the call spread 2760/2790 for $5.60 ... a 22.9% return! This looks very likely to expire worthless on Monday.

For Tuesday (unusual expiration because Wednesday is the 4th of July and market is closed)  I may have gotten a little carried away and taken on too much risk:

I sold the 2720/2750 call spread early Thursday for $8.35 ... that's a 38.5% profit should I be so lucky!

It was looking grim early Friday but then some new Trade War news hit and the market closed at 2718 ...

So if Trump will just continue being wacko through Tuesday, I can get out of this one and go back to normal .... which I think I'll just make the 1 standard deviation iron condor (16 delta on both sides), except closer (and therefore taking more  risk) on the call side if/when it gets back near 2800.

And in any event, I'll be ready to roll when necessary ... as we all should be!

More next week ...

Fat-fingered trade leads to profitable insight

I typically put on all trades with the same strikes for the few accounts I'm trading for. But week before last, I wound up with one account short the 2770/2800 call spread in SPX, when no other account had this.

Anyway, I rolled this out 2 days when it was in the money, but just "straight across" (same strikes,  not further away from the money),  thinking that since the market top was something like 2809 months ago and we have plenty of trade war pressure that it would come in a few points any time ...

But it didn't for several expirations (Monday, Wednesday, Friday) for SPX and I kept rolling it ... and making around $2000 every couple of days in this account (on 4 contracts, risking about $10000) ...

I finally figured out what was happening and that I needn't limit this to the fat-fingered account but could get my other accounts in on this profitable action.

So for as long as this lasts I'm going to run this trade "until my hands bleed"  (as Sosnoff would say ...)

What could go wrong?

First, the market could burst way up past 2800. I'll be really, really surprised if this happens ... but I should be able to roll 'up and out' and still for a small credit several times to make sure this ends profitably.

The other possibility:

If this happens, volatility spikes and I can go back to the previous system and make a better return than I have been making previously.

But the lovely thing about just selling this call spread without the (much less profitable) put spread (because it's further away) ... We're then immune to the "meteor strike" problem ... so I am going to bump up the risk a bit to 25%/25%/25% (so 75% will be "in play" for a few hours Monday, Wednesday and Friday) ...

Otherwise this week: AMZN behaved, returning about 5.7% on risk ...

Here's to further sideways action!

Rolling clarified further: delays profits until the next expiration then wahoo!

A much better week this week! Since AMZN's volatility was so washed out after last week, I tried TSLA this week and had a similar experience:

Part of the boost was Elon Musk buying $25 million worth of TSLA stock this week ...

But selling the 8 delta call was way up at 365, so enough room that I didn't have to roll out to the next week (though I was watching carefully) but all 4 legs expired worthless as desired.

Even better, the narrow winged SPX trade I rolled over Monday (unnecessarily, it turned out, as the market closed just below my 2785 short call) came in fully for Wednesday along with the other trade I had on (short 2805 call: plenty of room) ....

And this was "expiration week" (for monthly options) so I also put on the Fabulous NDX trade, which won again and returned about 11% on a wide-winged 1 standard deviation iron condor ...

And the way I'm thinking about the effect of rolling ... based on this week it seems like compressing a profit spring:

And letting it burst out the next week ... one account I'm trading went from $34400 to $40900 this past week ... though this includes about $900 in scalping profits.

Probably another TSLA 4-day trade going on tomorrow a.m. and I'll report again next week!

A tough week ... Sosnoff proved right again and rolling clarified

I tried Amazon for the Monday-Friday trade, and by Wednesday it looked dead:

But I was short the 1697.5 calls, and it settled back between 1683 (where it closed on Friday) and 1690 after Thursday. So it paid off for full profit.

SPX wasn't so good:

It went straight up 40 points ... pulling back a little on Thursday before bouncing back up to the top on Friday.

I'm short the 2785 calls for Monday expiration, so right now it looks a little too exciting ...

As for the question I had last week about rolling: Tom Sosnoff recommended in email that I stick with wider strikes, but I thought I could narrow the strikes if I intended to roll losing trades.

Wrong! It's much easier to roll for a credit with wider strikes, and much easier to get further away from the money on the roll.

I'm actually wondering about the value of rolling at all with wide strikes ... Shouldn't I just take the (small) losses and move on? I can still roll anything that looks like it's going to lose big, and will have to roll anything that isn't cash-settled (as AMZN this past week was looking to lose I got a bunch of emails from Tastyworks saying they might have to take action to close the trade ... I assured them I was watching! and it worked out anyway ...)

But let's look at the profitability of the SPX trade without rolling (and with 30-wide wings) ... currently it's something like 20 wins, 4 losses: 83.33% ... and the wins average probably 6% of the amount risked, losses average maybe 25% ... Monte carlo results with these parameters & risking 20% of the account on each trade ... is not good enough (mean up not quite 100% over about 3 years) ...

But: (1) volatility is back to the bottom so I should be making more than 6% when it returns and (2) I've only been running this system for several weeks and still easily could be better than 90% win and (3) there are some other trades that are part of the deal, notably the Fabulous Almost Always works NDX a.m. settled one, coming up again this coming week ...

And finally: I tried scalping /ES futures for the first time starting Friday, and so far so good ... up several hundred dollars on a 1-lot of several little scalps.

Tomorrow I'm going to try the Amazon trade again ... fingers crossed!

Another 100% winning week ... profit of over 3.9% on the biggest account I'm trading

It was a zig-zag week that stayed enough in a range to pay off without anything extra required:

I was thinking after Tuesday I needed to be ready to roll on Wednesday, but no such problem ... then after the "trade war restart" late Thursday I was expecting a sharply down day ... but instead I guess the jobs report was too thrilling ...

Anyway, it's June 1 and I'm going to make a couple of small changes to the system for this month:

• I'm going to take a little more risk, around 20% of the account on each trade. This means that there will be 40% of the account in play most of the time, and 60% in the few hours of Monday, Wednesday and Friday when all 3 trades are active at once.
• I'm going to mix in some relatively more volatile individual stocks for the Monday to Friday trades, starting with Amazon this coming Monday. I'll also look at TSLA, CMG and a few others.

And the other change I started on in May that I'm absolutely going to keep: I'm going to be absolutely ready to roll any trade that seems to need it near expiration on Monday, Wednesday and Friday.

(A question that then occurs: if one is ready to roll any potentially losing trade, why widen the strikes?)

And I'm going to experiment with a big change in my own account; my agreement with others keeps me from doing this for them. I'm going to try selling strangles (i.e. a naked call and a naked put) on some earnings announcements.

I was looking at Costco, which had earnings this past week ... I actually tried to get on an Iron Condor trade just before the close but couldn't get filled. But just for kicks I tried looking at the strangle later ...

Costco's price is around $200, and I didn't realize that the margining for naked options was so small ... around $3000. The credit for a relatively wide strangle was $5.63 (i.e. $563), which amounted to 13.5% if held to expiration (and probably 10% if you took it off at first crack of the market the next day).  And in fact this would have paid off, as Costco went nowhere after the announcement.

I'll pick my spot on these, but this should make a nice extra boost in returns and doesn't seem superbly risky for a 1-lot ...

More next week ....