CSP VII: Day 4 update on the 14 Trades

Monday I was bragging about the 7 trades from the 5-day worst-performers list, but today (Thursday) they’re showing their true colors: 5 of them are ITM, meaning the ETF prices have fallen below the puts I sold (3 were ITM at Wednesday’s close). Which means I’m losing money. And not just intangible, extrinsic value, but real, hard dollars. Because of course a put works like this: if I sold you a $10-strike put contract on XYZ, and the stock price is now $9, you could exercise that contract and make me pay you $10 for shares that are only worth $9. Now, for “reasons”, early assignment on puts doesn’t happen often, and these “underwater” puts may stay that way until expiration on Friday, but at that time I’ll surely be assigned. So let’s look at these and see what’s going on.

The troubled trades are FAS, SOXL, TNA, TQQQ, & UPRO. 4 of those are among the 5 that closed Monday and I sold new puts on. And for TNA & TQQQ, those new puts closed Wednesday, so I sold new puts again. So that’s something we’ll need to noodle on: maybe 5DTE trades are okay, but less than that not so much? But I think the main factor is that these were ETFS that were trending down as measured by last-5-day performance. Normally you’d only want to sell puts on up-trending symbols, so that you’re at least trading “with the market” for that symbol. But I did this on a whim, kind of a comparison against the control group of best-5-day performers. So in real life let’s not do that again, but only sell puts on tickers that are trending up, or at least solidly flat.

  • FAS: the initial 21Δ 62P sold Monday morning for 1.20 and closed at 11:16 the same day for 0.49. At 11:21 sold the 17Δ 64P for 0.84. Spot at 12:42 Thursday is 61.71, and the 64P is worth 2.82 at Midpoint. The true, or intrinsic value is 64.00- 61.71 = 2.29, so we can see that most of the 2.82 is real dollars, but 0.53 of it is still time value, which will continue to decay to zero today and tomorrow. For this experiment, I’ll let that ride and probably take assignment. 1) that’ll make the end-of-week return calcs easier, and 2) I can then use that position to sell CCs against, documenting that in a CCS thread, and seeing if it’s recoverable and how long that takes. But I have a normal 50% GTC BTC order on it just in case it rallies. And note that I collected premiums of (120 – 49) + 84 – 3*0.66 = $153.02, so I’m not in the hole as much as it seems. The $153 covers part of the unrealized loss of $282, leaving a real loss of only $129. Divide by the collateral of $6400 and the position is down 2%. Not bad, but it wipes out (2) 1% gains from the other trades.
  • SOXL 9.5P opened for 0.16, closed Monday for 0.05. Sold 10.5P for 0.14. At 12:50 Thursday, spot is 10.48, just below the sold strike, but the position is still in the black because of the $21 of premium collected.
  • TNA 32P opened for 0.62, closed Monday for 0.29. Sold 33P for 0.46, closed Wednesday for 0.21. Sold 34P for 0.37. At 13:04 Thursday spot is 32.00. Position is losing $108, or 3%.
  • TQQQ 21P opened for 0.36, closed Monday for 0.16. Sold 22P for 0.30, which closed Wednesday for 0.12. Sold 23P for 0.33. At 13:24 Thursday spot is 22.30, so the trade is just slightly negative after accounting for the premiums received.
  • UPRO 33P opened for 0.75, closed Monday for 0.35. Sold 35P for 0.80. Here I messed up because 0.80 is 2.2% of the strike, so I think I meant to sell the 34P, which was Midpoint 0.50 at the time. (The 33P wouldn’t have worked because it was trading at 0.30.) At 13:33 Thursday spot is 33.12 and the trade is down by $70, or 2%.

Meanwhile, the 7 trades from the 5-day best-performers list have all behaved, and none are ITM. 3 of them are still the original trades from Monday, but 3 have been triple-dipped for a nominal 1% each time, and one is on its 4th sold put. I’ll tally up all the trades after Friday’s close.

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