The year is off to a good start with the first week generating a return over 4% versus S&P 500 at 1.83%.
Open positions and changes are in the table below. Lots of Diagonal and Vertical Rolls on Friday as the market was moving up. Carrying unrealized gains of $123,627.
December was a good month generating capping off a great year. I wish the account had a history of performing at that level but that would not be factual. Historically a return of 2% per month was the target. Some months we met the goal, some months we missed. In 2020 the combination Covid and politics created an environment that was very conducive to covered calls and high premiums. It is highly unlikely the return of 80%+ will be repeated in 2021….but one can always hope.
We outperformed the SPX by a wide margin (87% vs 16%). Key to the performance was selling most of our positions in early March as news of Covid created uncertainty. This gave us cash to fully invest in April after the crash and participate in the rally. As the say…….Good to be Lucky…..Lucky to be Good.
Covid created an environment that freed up much more time to spend on investing. In the past I would spend about 10 hours a week trading. Now I spend five or six times that…..and probably over trade. Optionsbistro.com has been a fantastic resource for both trade ideas and learning.
Hope some of my experiences and sharing of strategy/trades has helped you make a higher return in 2020. Look forward to the start of a new trading year on Monday!
Last Friday the CC position on CVX was expiring. We made the decision to “diagonal down” from May 22 $95 to May 29 $90 as the stock price had fallen under $90. This was very conservative as we were giving up on stock appreciation over $90 in exchange for the option premium of $1.93. So far this week the position has increased in value by $130.
This week we have another decision. CVX stock has increased in price to $91.30. If we do nothing the stock will get called away if it remains over $90 today. CVX is a stock we are interested in holding so we will either do a “calendar spread” (Buy back May 29 $90 and sell Jun 5 $90) or do a “diagonal up” (Buy back May 29 $90 and sell a higher strike price Jun 5 $91, $92, $93,….).
A calendar spread is conservative (more downside protection and less upside). Diagonal Up can be aggressive depending on how high the strike price is above the current strike price. The higher the strike price, more upside….higher the strike price, less downside protection. We will likely sell a $91 or $92. The goal for this position is to generate $2-300 a week in option premiums and collect the dividends when available.
