A good week: up 8% or so

Butterflies continue to pay off ...

That's IWM, SPY and QQQ ... just one-lot "iron fly" trades for the moment. Basically:

• Sell 1 put and 1 call at the money
• Buy 1 put and 1 call right at the .10 delta

... Take the trade off when you've achieved 1/4 of the credit ... in this case about $250 in SPY, $160 in QQQ, a bit over $125 for IWM. Not bad for around 8 days (typical) time in this trade.

I also have a TSLA trade on ... I skipped the main part of its recent price swoon (in my own account, though I had this on in one of my client accounts, unfortunately) after this analyst remark:

Tesla shares could drop to $10 in a worst-case scenario, Morgan Stanley says

Elon Musk says not so ... and I doubt it too. But it's below $200 and I'm willing to bet it won't go below $170 for the next 3 weeks ...

I also have a LYFT trade on that looks to be working ... LYFT just has not to swoon or soar for the next couple of weeks also.

Finally, I did one earnings trade that worked very well:

I just did a 1 standard deviation short strangle for a nice credit: $2.66 ... and I got a bonus on closing it! I had the standard 50% set for closing out price: $1.33 ... but I actually got filled at $0.95 ... more like 65% of the credit. Wahoo!

More next week ...

Excellent week ... with one glaring exception

Butterflies are beautiful ...

and profitable!

I closed profitable trades on in LYFT (again), AMZN and TSLA ...

I put on small butterfly trades in each of SPY, IWM and QQQ ... SPY and IWM each were closed out for their expected 25% of the initial credit profit within 7 days of entry of the trade. QQQ didn't quite make that, but I closed it out for a smaller profit to free up buying power for the "fabulous NDX trade" I've written about so often here.

And that turned out to be the glaring exception ... I was short the 7530 put (long the 7450 -- 80 points wide) and the NDX settlement this morning was 7511.94, damn it ... I got a $750 credit but lost then $1806 ... so net loss $1056 ... but since the possible loss was $7250, not too bad (only 14.56% of the amount I could have lost).

Two nuances of the NDX trade:

• At low volatility (like today) the short strikes aren't nearly as wide as they are as when volatility is higher.
• I put this one on just before 10am again, the way I had done consistently until the big loss several months ago. This one wasn't all the same: no monotonic up move all day, in fact down from 7600 or so when I put the trade on to 7580 at Thursday's close ...  and if I'd waited until then I'd probably been short the 7510 puts and made full profit.  I guess I'll have to move the trade time up nearer the close for next time ...

The 7511 settlement value was a shock, but showed weakness that further erupted Friday in the Nasdaq:

I'm going to put on the 3 butterflies again Monday a.m. ... More next week!

/ES futures cooperate (so I closed them out); earnings were not the whole thing, it turns out

Just when you think the /ES futures will go up forever, Mr. Trump steps in to knock them down:

Trade wars "good and easy to win?" Not so much

This returned volatility to the /ES futures and the market as a whole:

Back to the earnings discussion ... I was planning to do a lot more earnings trading, but I looked at the ones available two weeks ago and planned out my day on that Monday (April 29, I think it was) ... and even if I'd won them all I'd have made like $170 or so ... while risking at least $500 on every trade. So one loss could kill the whole day.

I went back and watched the "rising star" I had seen talking about this and I had missed 1/2 the discussion ... he said he wasn't trading just earnings but "moving toward indexes" ... sheesh.

I've had good success trading SPX butterflies in the past, so going smaller this time I've been using SPY, IWM and QQQ ... all with one-lot butterflies.

With the pop in volatility we got, this makes a huge difference in the credit we get for this butterfly trade:

              May 24                 June 7

QQQ        $5.12                  $8.46            +65.2%
IWM        $4.15                  $7.18            +73.0%
SPY         $5.70                  $11.37          +99.4%

Total risk on the SPY trade is about $1200, so if we take 1/4 of this credit, that's a 23% return ... in about 8 days (typically ... if we put these on with around 30 DTE, then 1/4 of the credit expires in about 1/4 of that time) ...

I actually closed the first set of these for small losses $100-$200 each, with about 15 days left in them ... Tastytrade's research shows that this is better than hanging on to see if such a trade will come back, and in this case the increased volatility seems to fully justify that.

I also am trading some other volatile underlyings:

More next week ...

/ES continues its non-cooperation ... a couple of earnings losses illustrate a nuance

The S&P futures continued to be a drag for anybody short:

I continue to sell puts and wait for a pullback. *sigh*

I had a mixed week trading earnings, with one too-big loss, MMM:

I sold a 5-wide Iron Condor for 28 cents ... and had to buy it back the next day for $3.50. This was for 5 contracts, so that's a $1610 loss. Ouch!

I sold only 4 different underlyings that day:

EW
TXN
FB
MMM

... so taking $2000 in risk in MMM was too much, clearly.

There are at least 11 good ones available on Monday so I'm going to revise my strategy to going down to take the minimal risk I can in each and only then possibly scale up in a couple of the most volatile (and therefore lucrative) when I get that done.

3 of the earnings for next week ... more then!

Earnings season continues; leaving money on the table ... /ES futures update

Earnings season went into overdrive this week ... unfortunately I left money on the table on Monday:

First, one good thing happened early Monday:

I sold 4 Iron Condors on Friday and they were down 50% by Monday and closed out for a $100 profit (on about $900 of risk). I wish I'd sold 40 of them!

I made only one earnings trade: JNJ (a small winner) and then got distracted and left several other possible ones without pulling the trigger.

Two losers on Tuesday, CSX and BK ... both small losses (just under $100 and just over $100), fortunately. The 8 other earnings plays I did this week all won.

This was also the week we get to do the Fabulous NDX trade, which I sold for $559 (a one-lot) ... and on this one you get to keep all of it (minus a smidgen of commissions) when it expires worthless the next morning ... which happened as expected this time on Thursday a.m., since the Friday market was closed for Good Friday.

As far as the /ES, it's been zooming back and forth:

If it will just keep from zooming up I can continue to sell puts ... like the $925 batch (of two) I sold on Wednesday, expiring Friday the 26th ...

More next week ...

Opening of spring "earnings season" inauspicious .. short /ES painful, short LYFT just fine!

Three banks had earnings on Friday ... two won and one lost (JPM):

So after 3 earnings trades this "season" we're down a few dollars ... JPM lost more than the other two together won ..

I did dodge one bullet and made one smart trade, I think:

Since the /ES futures had been bouncing off 2900 and going back down every time they touched it, I thought, hey, a 2905/2910 short call spread! Why not? I didn't, though, and on Friday:

I am continuing to sell puts against my short /ES position, but this just gets it further away, darn it ...

But my best trade of the week concerns ride-sharing company Lyft ... I can't find the reference where this was mentioned, but I heard on Tastytrade, I think, that they've so far lost $17 for every ride they've given.

And their IPO has been less than stellar:

So I sold the 69/74 call spread expiring May 3 and should get 1/2 the credit on this on by April 22 or so ...

Earnings season takes off next week, with some big ones:

More next week!

I took a week off ... short /ES not working yet; undefined risk vs defined: 2 tests

I didn't post last week as I traded only 1 earnings trade, the ill-fated Walgreens-Boots Alliance (WBA):

There have been only two losing earnings trades the past couple of weeks, WBA and CCL:

Both were short strangles: undefined risk trades. Let's see how they actually performed vs a theoretically defined risk alternative.

First, CCL. This was a textbook case. It just broke barely through the short strike early a.m. after earnings, and I was able to close it at the suggested max loss: 2x the credit received, almost exactly. This is right at $50/contract loss.

WBA was much worse ... I didn't get to this one until it was priced $2.91, way above the same sort of max loss I'd have been shooting for ... I got almost the same credit, 25 cents for this one. So that $241 per contract loss.

Let's see what each of these would have been if traded as defined risk trades.

I've typically been using $5 wide strikes, so max loss would be $500 less the credit received. For a 25 cent credit, that's $475 max loss per contract. That's clearly much worse than either of the undefined risk losses shown here .... I'm not positive that this is representative of the typical, but it's compelling enough that I'm going to stick with this for most low-priced underlying and a few a bit more expensive too.

The not yet working trades I put on this past week: short /ES futures. I thought that when the /ES hit 2880 that wouldn't go much higher ... and then the jobs report came out happy and:

Darn it! But: I am selling puts against the short /ES positions, at the rate of around $375 per week per contract, so: it can't go up too much from here (can it?) and I'll be "reducing basis" every week in pursuit of profitability on this one.

More next week ...