SPY Ladder….More Learning….More Tuition Costs….after 74 Days

We continued with our SPY ladder. As IC’s approached 21 DTE we rolled them out or up and out. . Where possible we did a vertical roll on a few of the IC’s using the credit from the Put side to roll up the Call side (want to minimize any incremental investment so limited the ability to roll) . In most situations we could only roll up the calls a few dollars.

In the graph below you can see an improvement in the return when the SPY fell for a few days…..followed by a decline when the SPY started to rise again.

Little hesitant going into June based on the upcoming dividend. Rolling calls that remain “in the money” will create a risk of assignment and I want to understand the risk associated with assignment.

So far we are losing $1,429 over the 74 days.

Current open positions are in the table below

Update on SPY Iron Condor Strategy – Losing $175 despite a lot of effort and trading……Schwab might be winning on commission……

Difficult week for the IC strategy. The continued rise of the SPY over the past 12 days has created challenges. We have had to roll up Puts and use some of the incremental premium to roll up the Calls (only investing incremental premium received or the maximum risk associated with the strategy will be increased).

We also rolled a couple of IC’s ‘up and out’ as the ‘days to expiration’ were approaching 21 days (Tastytrade.com mechanics on when to roll/close options). The IC’s we closed have generated a profit of $2,289. Unfortunately the open IC’s are generating a loss of $2,464. Overall the strategy is losing $175. For $175 it has been good entertainment…..except the purpose is to make money not just keep me busy.

We need a pullback in the SPY ….or at least for it to stop rising for the strategy to return to profitability.

Update on SPY “Ladder”…..Four IC’s Closed, Five Open….Profit of $2,255 after 47 Days

Our SPY experiment is hitting full stride. Our first four SPY’s are Closed and we have five open positions (green background in the table). The rise in the SPY last week created pressure on our positions. With SPY closing above $400 we have short calls at $400 and $403. We rolled up our Put spreads to increase our premiums and reduce maximum potential loss. All five of the open positions are currently losing money. We will look to close the positions as they hit 21 days before expiration (or hit 50% of maximum profit). If SPY continues to rise we will roll our Put spreads up until the short Put strike reaches the short Call strike. (Iron Condor becomes an Iron Fly at that point).

Closed MOS Covered Call/Iron Condor Position – Loss of $80, would have been much larger loss without IC

Yesterday we closed the position on MOS for a small loss. We opened the position as a covered call on 2/18/21 when we purchased 2,000 shares of MOS @$28.88 and sold 20 Mar 5 $29 Call options @$1.73. Shares jumped in price (blue line) but quickly fell back. We sold the shares on 2/26 for a small gain. When the stock was appreciating we rolled the short options up (to $30, $31, $33) as the losses on the short options were offsetting the stock gain. When the stock quickly pulled back the option premiums on the higher strike price were not enough to offset the losses on the stock. When we shut down the covered call the position we had lost over $3,500 on the options. We established the Iron Condor on 2/24/21. 30 Contracts April 16 +27P/-$29P and -$37C/+$39C. The IC performed well getting the overall position back to a loss of $80 (yellow and red lines).

Closed MU Covered Call/Iron Condor for profit of $4,346 in 52 Days

Yesterday (3/24) we closed our position in MU. We opened it on 2/1/21 as a covered call (Bought 200 shares @$79.71 and sold 2 Feb 12 $80 calls @$2.53. On February 23 we closed the covered call (Blue line goes flat) and opened an Iron Condor (Sold 20 Contracts April 16 +$65P/-$75P and -$105C/+$115C. Our goal was for the stock to remain between $75 and $105 so we could keep the premium collected. We closed the position yesterday as we were exceeding 50% of the max profit potential. The combination of CC and IC generated profits of $4,346 ($1,754 with the stock and $2,592 with the options).

Update on Iron Condor Learning/Strategy, Shutdown IC on MU today

One bright spot on a tough market day was closing the Iron Condor on MU. Details on the transaction are below. Profit of $3,360, a Return on Capital of 22% in 27 days, 83% Annualized. This is a much better return than I have been achieving trying to capture dividends over the past couple of weeks!

We followed the Tastytrade.com recommendations when we set up (51 Days to Expiration) and closed the trade (21 Days to Expiration or 50% of max profit….we closed it based on exceeding profit goal). We have a series of IC’s coming due over the next week…..but this will likely be the most successful. This is one of the few IC’s where we were able to get a credit equal to 1/3 of the width between the strikes ($10 width, $3.36 credit). The volume on MU options is high which helped with both the entry and exit. Other IC’s I have are more challenging to exit due to the wide spread between the bid and ask prices. The IC’s are above the 50% profit target but I can’t get filled and remain above the target. I may have to hold them through expiration.

Update on Put Strategies

Table below is tracking the open Iron Condors (IC), Bull Put Spreads (BuPS) and Diagonal Bull Put Spreads (DiagBuPS). So far the combination of put strategies is generating a profit of $5,231. We have $135,300 of capital “reserved” against the positions. Return on Capital is 3.87% in less than a month. The Diagonal Put Spreads are showing a loss…not unexpected as the goal is to write additional Put options against the base position over the next several months. Not included are a couple of adjustments. The initial IC on ABT was too “tight” (difference between the strike price of the short put and short call). We closed the position and established a new one with more width. We also reduced the size if the position from 30 contracts to 10…..we don’t have enough experience for IC with 30 contracts. The position was closed for a $1,200 profit that is not included. We made similar adjustments to the DXCM and SPY positions (wider width) at minimal cost.

It has been challenging to achieve the “tasty trade” recommendation of generating premium = 1/3 of the width between the strike prices (example long put at $110 and short put at $115 …..$5 spread x 1/3).

Unfortunately it is very time consuming to track the strategies. The download from Schwab does not include the “strategy” information even though Schwab do include it in the online account summary information. Downloaded historical and current information needs to be put in a table and queried. Over time I hope to figure out a more efficient way to track the individual strategies. Recommendations are welcome!

Iron Condor (IC) on ABT, DXCM

Our IC on ABT lost money this week as ABT stock increased in value. The table below shows the current status (ignore the -15 ABT 02/19/2021 $127 Calls as they are part of a covered call).

The “wings” of our IC include a call spread of $125/$135 (10 point spread) on the upper side and put spread $110/$120 (10 point spread) on the lower side. When we established the IC we received $13,255 in premium for selling the two spreads.

Max Profit = Premium Received.

Max Loss = Spread between the wings (10) * #contracts (30) * 100 shares per contract – Premium Received = $16,745.

Current stock price of $128.23 is above the lower strike on our call spread.

To realize max profit we need ABT to be between $120 and $125. When we set up the IC it seemed like a reasonable assumption. In hindsight I should have used a wider range. A wider range would have reduced the premium received (Max Profit) but increased the probability of the stock remaining inside the range. Position is currently losing $1,225.

The position has a lot of time left (expires March 19) and ABT may drop back. If the price goes above $135 we will incur the maximum loss. We do have an option of rolling up the Put from $120 to $125 which would generate additional premium and reduce the maximum loss.

Yesterday I established a new IC on DXCM following the earnings announcement. Took the lesson learned about wider range. The options in the table below with the quantity 20 and -20 make up the IC. The spread between the put spread ($360) and call spread ($460) is much wider than what we did on ABT IC. The stock has a $100 range to move and allow us to make maximum profit. Our Max profit is the sum of the premiums received ($15,680). Max Loss is the spread of the wings (20) x number of contracts (20) x 100 shares per contract – Premium Received = $24,320. Current profit is $1,340…….

Iron Condor on SPY, Mar 31 363/383 394/414, net credit $10.35

Yesterday we opened our first position trading the SPY (ETF or electronic traded fund that tracks the S&P 500).

We established an Iron Condor with the positions in the table below. We received a credit of $5,176.62 (maximum profit potential. Maximum loss is the spread between the strike prices of the wings ($20) x 500 shares – credit received = $4,823.

SPY can go up or down….key is staying between the short put strike price of $383 and the short call strike price of $394. SPY was at 389 when we set up the trade.

CHWY Iron Condor Mar 19 $75/$95, $125/$145 Net credit $5.29

Executed a trade today based on a Tastytrade.com recommendation. If you are not familiar with Tastytrade.com I highly recommend you visit the site. I think it is the best web site for learning about options and trading strategies. Today they had a recommendation for an Iron Condor on CHWY. We followed the recommendation but modified the “wings” a bit. Stock was trading at $109 when our trade executed (table below).

Our goal is for the price of CHWY to remain between the strike price of the short put $95 and the strike price of the short call ($125) on Mar 19. Maximum potential profit is $2,646.72 in 31 days (credit received when we established the position). Tastytrade recommend exiting if you hit 50% of max profit or $1,323. Maximum potential loss is $7,353 ($20 spread on put/call strike prices x 500 shares – premium received).

I am looking to gain experience with Iron Condors so this will be ” hands on” learning.