CSP VIII: End-of-Week Results of 14 5-DTE 1% Trades

The S&P lost 4.1% this week. Did my 1%-return 5DTE trades make any money?

The 7 trades I put on the worst-performing ETFs from the previous 5 days ALL ended the week ITM, and overall lost money. But more about them later in the weekend when all the shares get assigned.

The 7 trades I put on the best-performing ETFs all ended OTM, and every single trade made money. Here they are in alphabetical order, so as not to play favorites or front-load the results:

  • DUST I got to play 3 different times: the original 22.5P opened Monday and closed Tuesday for a net profit of $13.68 after trade commissions (0.66 each way). Then I sold the 24P which closed Friday for a net profit of 18.68. Then at 15:45 Friday, just 15 minutes before the close, with spot at 28.75, there was enough juice still in the Puts to sell the 24.5P for 0.15. DUST would’ve had to drop over $4, 15%, to hit that strike, so it seemed like a safe play. And $15 premium against 2450 collateral was 0.5% in one day, so it more than met my 1%/week metric. I put a 0.05 BTC order on it, but it didn’t fill, so I got to keep the full premium minus one commission, or $14.35. Total premiums: 13.68 + 18.68 + 14.33 = $46.69. Since 3 different strikes (and thus 3 different collaterals) were involved, I think it makes sense to average 22.5, 24, & 24.5 to get an average strike price of 23.67. Multiply by 100 for an average collateral over the week of $2,367. Divide the 46.69 net profit by that to get 1.9% net return for the week.
  • FAZ ended the week at 28.05, but the original sold put waaaay down at 21.5 (sold for 0.23) stayed open all week. I had a 50% take-profit BTC on it, but I fudged a little Friday noon and moved it down to 0.05 because the put was so far away from spot. And I don’t know why, but I see this a lot with TDA: despite their claim of a Nickel Buyback program where they don’t charge you a commission to buy back a sold (shorted) option (Put or Call) for 5c or less, my 0.05 order never filled, so I got to keep all the original premium minus one commission, so $22.34. 1.0% for the week.
  • JDST same as above. The original 13P for 0.15 rode through the whole week and didn’t get closed on its 0.05 GTC BTC order. So $15 – 0.66 = 14.34, divided by 1300 gave 1.1% for the week. Not sexy, but slow & steady wins the race.
  • LABD is another one-and-done: 19.5P sold for 0.25, expired worthless Friday. 24.34/1950 = 1.2% for the week.
  • SOXS was a double-bagger: sold 43.5P for 0.45, closed Tuesday for 0.20. Sold 46.5P for 0.55, expired worthless Friday. $23.68 + $54.34 = $78.02. Dividing by average collateral of 4,500 gives 1.7% for the week.
  • SQQQ also a double-bagger: sold 43P for 0.46, closed Wednesday for 0.20. Sold 45P for 0.60, closed Thursday for 0.04. That was at 10:38, and there wasn’t enough juice in the options to sell a 1DTE <30Δ for 1%. So $24.68 + 54.68 = 79.36 net premium. Average collateral of $4,400, so 1.8% for the week.
  • TZA was CRAZY: 5 separate trades in 1 week. I wouldn’t have believed it if I hadn’t seen it play out. Monday’s 33P at 0.37 closed Tuesday for 0.16. Sold the 34P for 0.41, which closed Wednesday for 0.17. Sold the 36P for 0.37, it closed Thursday for 0.05. Sold the 40P for 0.47, closed Friday for 0.03. at 14:13 Friday, sold the 45P for 0.12, and it expired worthless. Total premiums: $19.68 + 22.68 + 30.68 + 42.68 + 11.34 = $127.06. I calculated the average collateral as (33 + 34 + 36 + 40 + 45)/5= 37.60. Times 100 is $3,760, so 127.06/3760 = 3.3% for the week. Very nice.

So these 7 trades based on the 5-day best-performing ETFS returned 1.9%, 1.0, 1.1, 1.2, 1.7, 1.8, & 3.3%. So each and every trade made at least 1% for the week, and none were problematic. None ever went ITM or even got close. Can we do a simple average of those and say that’s what the strategy returned this week? I think so, because each is expressed on a percentage basis, and even though they were 1-lots, if you were trading this way for real you’d probably want to do equal dollar amounts in each. They average to 1.7%.

I have to tell you, that beat my expectations. I really didn’t think it would net 1% overall for the week, figuring that at least 1 might go ITM and lose money, thus being a drag on the others. And I knew going in that I was going to do 50% take-profits. And I knew from experience that a few of them would close early, like Wednesday, maybe Tuesday, but I didn’t expect that 4 of them would give me the opportunity to recycle the capital within the same week; 2 of those only twice, 1 three times, and 1 a whopping 5 times.

Those multi-plays really juiced the returns, as you can see from the numbers. The “singles” returned 1.0, 1.1, & 1.2%. The 2 “doubles” made 1.7 & 1.8%. The “triple” made 1.9%. And the “quintuple-play” made 3.3%.

Remember my “How hard do we want to work for this” post? I don’t mind at all working this hard for that kind of weekly return. 1.7%/week simple-annualizes to 88%/yr, but compounding using the Rule of 72, your money would double in 42 weeks, just under 10 months. I realize I’m counting my dollars before they’re hatched, but I wanted to put that 1.7% week into perspective

But if I had used the Easiest method, what would the return have been? I would’ve done the same amount of work Sunday to load the trades, but then say I didn’t look at the account again until the next weekend. These all filled at my asking price, so I get to count all 7 trades as active (that won’t always be the case), but then what? Best case return-wise, let’s let them all run to expiration without buying to close (not advisable). The premiums were $25, 23, 15, 25, 45, 46, & 37. But you have to subtract the 0.66 cost of selling the options, so we netted $24.34 on the first one, 22.34 on the next, etc. Using those values, and dividing by the strike/collateral, I get returns of: 1.1%, 1.0, 1.1, 1.2, 1.0, 1.0, & 1.1%. Those average to 1.07%.

That’s the absolutely-best case of spending maybe 30 minutes on the weekend putting in 7 trades, and then not looking at it again until the next weekend. And that’s IF all the trades went in, and IF they all expired worthless. And that doesn’t seem like a big difference, right? 1.07% compared to the 1.7% I got by recycling the trades as they closed. It’s just a measly 0.6%, right? But with say 100k invested, at the end of the week would rather have $1070 or $1700? Because that’s what the difference really means.

If you could do that for 52 weeks, always with 100k, it’s the difference between income of $55,640 and $88,400. Is an extra couple hours a week of your time worth $33,000? 2hr/wk x 52w = 104h. $33k/104h = $317/hr. I thought I was already being conservative with the extra 2hr per week, but make it 5 just to ensure it’s bounding, and you’re making $127 an hour to track those trades through the week and re-deploy that capital. I personally think it’s worth it, because I don’t know about you, but I’m not making that kind of hourly wage in my day job.

BUT, that was all very-best-case where all the stars aligned. Now let’s add one piece of realism: remember that for reasons, you should always try to buy back your short puts and not let them just expire. I’m not talking about a “take-profit” point, but just a few cents to make sure we’re out of the trades by Friday. A lot of people use 5 cents for that, and that aligns with TDA’s practice (and probably most others) of buying back cheap short options for no commission. So after the close Monday, when you get home from work, put 0.05 GTC BTC orders on all 7 positions. That literally takes 20 seconds each, but let’s stretch that out to 5 minutes. Now don’t look again until the weekend.

So using that idea, NOW we have to subtract $5 from all our net premiums. We may get lucky and TDA doesn’t close some trades, like we saw this week for a couple, but let’s bound it like that. This is the A Little Harder method from my other post. So NOW the net premiums are $19.34, 17.34, 9.34, etc. Doing the math, average return for the week is now 0.88%. Note that that’s <1%, but that’s because going into this I didn’t account for BTC’ing at 5 cents. If I had, I would’ve chosen the next strike up in 6 of the 7 trades, but doing that would have put those trades at a higher delta, “closer to the money”, and just a bit riskier.

Now compare that 0.88% in the hypothetical set-it-and-forget it scenario to the 1.7% actually returned this week using the Hardest criteria. It’s very nearly double what a prudent hands-off approach would’ve returned.

If you’re learning Cash Secured Puts for the first time, this might all seem overwhelming, but it’s really not. Open a paper-money account and start playing with it. Pretty soon, scanning the ETFs, determining the strike to sell, entering the trade, and setting the BTC orders will become second-nature. It’s not hard work for sure, and if you’re learning about options then you already like trading and probably have done a lot of it with mutual funds, ETFs, maybe stocks. Options are just another “thing” you can trade, and you open and close positions just like you do with anything else.

It’s late Friday now. Over the weekend when the 7 ITM trades from the worst-performing ETFs list get their shares assigned I’ll make a post about that, then go into a Covered Call series as I try to recover the losses from those by selling calls against the stocks. If you remember, that’s the other side of The Wheel strategy. I favor the Put side, and prefer to avoid being assigned, but for illustration purposes I took assignment on this week’s losers just so I could run CCs on them and document that.

Over the weekend I’ll also set up new CSP trades, this time sorting my ETFs watchlist by best 1-month performance, instead of 5-day as I did this week. It’ll be interesting to see if that works out about the same or not.

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