Reviewing the books

In my July 29th blog entry I talked about spreads opened since May 5th, but didn't include the breakdown for each one.  Here they are, plus the ones since then, up through August. The number of contracts was not the same for each trade, but they even out to being close enough to the same.  Taken all together, I tried to make about 15 cents per set of contracts, knowing I could end up making nothing at all or worse, lose money, or worst of all, face a possible maximum loss of 75 cents per set of contracts if all went wrong.  It turns out I made 10 cents per set of contracts (each set being a short call and a long call. With the multiplier of 100 for this security, that's $10 per pair of long call and short call.)

Here are some notes I took,including the level UVXY was trading either when I opened the position or sometime during that day:

May 5, 2021  May14th exp spread opened 8 days out, while UVXY at 4.43 
Sold to open UVXY May14th 4.50 strike calls at 0.27
Bought to open UVXY May14th 5 strike calls at 0.17
Max profit: $0.10  Max loss: -$0.40
Sold to close 5 strike calls at 0.01
Bought to close 4.50 strike calls at 0.11  Closed for completely flat

May 10, 2021  May21st exp spread opened 10 days out, while  UVXY at 3.98
Sold to open UVXY May21st 4 strike calls at 0.29
Bought to open UVXY May21st 4.50 strike calls at 0.19
Max profit: $0.10  Max loss: -$0.40
Sold to close UVXY May21st 4.50 strike calls at 0.04
Bought to close UVXY May21st 4 strike calls at 0.44  Closed for partial loss of $0.30

May 17, 2021  May28th exp spread opened 10 days out UVXY at 4.40
Sold to open UVXY May28th 4.50 strike calls at 0.49
Bought to open UVXY May28th 5 strike calls at 0.37
Max profit: $0.12  Max loss: -$0.38 Closed for Max profit of $0.12

May 21, 2021  June4th exp spread opened 11 days out, UVXY at 4.36
Sold to open UVXY June4th 4 strike calls at 0.63
Bought to open UVXY June4th 4.50 strike calls at 0.47
Max profit: $0.16  Max loss: -$0.34  Closed for Max profit of $0.16

June 1, 2021  June11th exp spread opened 8 days out, UVXY at 36
Sold to open UVXY June11th 36.50 strike calls at 2.705
Bought to open UVXY June11th 37.50 strike calls at 2.455
Max profit: $0.25  Max loss: -$0.75  Closed for Max profit of $0.25

June 9, 2021  June18th exp spread opened 7 days out UVXY at 33.81
Sold to open UVXY June18th 38 strike calls at 1.55,
Bought to open UVXY June18th 39 strike calls at 1.43
Max profit: $0.12  Max loss: -$0.88  Closed for Max profit of $0.12

June 16, 2021  June25th exp spread opened 8 days out UVXY at 30.85
Sold to open UVXY June4th 36.50 strike calls at 1.6733
Bought to open UVXY June4th 37.50 strike calls at 1.55
Max profit: $0.1233  Max loss: -$0.8767  Closed for Max profit of $0.1233

June 30, 2021 July9th exp spread opened 7 days out UVXY at 27.78
Sold to open UVXY July9th 32.50 strike calls at 0.58
Bought to open UVXY July9th 34 calls at 0.42
Max profit: $0.16  Max loss: -$1.34  Closed for Max profit of $0.16

July 28, 2021 Aug6th exp spread opened 8 days out UVXY at 28.41
Sold to open UVXY July9th 32 calls at 1.30
Bought to open UVXY July9th 33.50 calls at 1.07
Max profit: $0.23  Max loss: -$1.27  Closed for Max profit of $0.23

August 16, 2021 Aug20th exp spread opened 4 days out UVXY at 23.70
Sold to open UVXY Aug20th 26.50 calls at 0.41
Bought to open UVXY Aug20th 27.50 calls at 0.34
Max profit: $0.17  Max loss: -$0.83 Closed for Max profit of $0.17

August 16, 2021 Aug27th exp spread opened 9 days out UVXY at 23.70
Sold to open UVXY Aug27th 26 calls at 1.13
Bought to open UVXY Aug27th 27 calls at 0.99,
Bought to cover UVXY Aug27th 26 calls at 0.12
Sold to close UVXY Aug27th 27 calls at 0.07
Max profit: $0.14  Max loss: -$0.86 Closed for partial profit of $0.09

August 24, 2021 Sept3rd exp spread opened 8 days out UVXY at 23.61
Sold to open UVXY Sept3rd 26.50 calls at 0.96
Bought to open UVXY Sept3rd 27.50 calls at 0.82
Max profit: $0.14  Max loss: -$0.86 Closed for Max profit of $0.14

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Consistently doing better than Dow, Naz, and Essenpee

I'm not even having the best summer possible, but you'll see that I'm a nose ahead of even the strong Nasdaq. And that's with the indexes getting a half-month head start on me, since I moved from one account to another, with this chart picking me up where I jumped in with my competitors.

Why the large dips?  I sometimes set up spreads of different varieties that leave me temporarily in the lurch.  By design, they smooth out (unless they don't, but so far so good.)

Didn't change anything when moving, though (complete account transfer), and here's the detail before the early June move.

Some squawk and rail all day long about trading, and some of us just sit here quietly and do it.

Follow me on Twitter: @grapeswhiz

Another one coming in hot

I admit, I can't resist creating my own money. I like writing the check to myself and letting other people sign it. Sign it over to me, please.

Last week, started a UVXY credit spread comprised of calls sold at the 32 strike and calls bought at the 33.50 strike. After all, what if my idea is a bad one and I'll end up being the one writing the check to someone else?  Gotta limit the damage; thus the 33.50 calls.

What will happen tomorrow?  I don't know, but my record is good.  See this post and this post for rundowns of last year's adventures in serial credit spread transactions.  This is only a supplemental strategy in my portfolio. I'm not even having the best month possible, but it could be worse, so I'm not complaining too much. (Moved to a new account in June, thus the lack of May data.)

Slow and steady and repeated proven strategies wins the race. Is there a chance of reversal of fortune and erosion of my gains due to the relatively risky trades I am making?  Sure - in fact, I go in with high odds stacked against me, assuming I were trading a random no-bias upward or downward instrument. Understanding the underlying security is responsible for my repeated, reliable (over longer if not shorter time periods) and continuing positive growth.

Follow me on Twitter: @grapeswhiz

Create income with credit spreads

Let's look at a slice of time we will call May 5th through July 9th.  This represents eight weeks of short call spread management for which I have tracked data which is about to be unpacked in detail.

Of significant note is that VIX traded in and around the 19.00 point on both May 5th (the day I opened the first spread in this series) and July 9th (the day the last spread in the series expired.)

Selling call spreads on UVXY either just above the money or way above the money (well, as far above the money as I could while still collecting premium worth my while), I took on a risk that looked like this: For every dollar in maximum loss I might incur, I hoped to actually lose nothing but instead make 22 cents. 22 cents represents the maximum profit my spreads would make, in the hoped-for event they'd expire worthless after the credit (with debit netted against it) was deposited in my account at the outset of the trade. $1.00 in this equation represents the maximum loss I'd sustain upon exercise, should both call strikes expire in the money. That's the worst-case scenario for a short call spread.

In other words, to enter this room and play the game, I had to hold up a dollar, pledging to hand it over should I roundly lose the game. But I hoped to instead make, in the case of this particular series of spreads I opened sequentially over the eight weeks, a maximum of 22 cents.

As stated above, I didn't do this all in one trade; I opened eight spreads and let them each expire, except for two. Those two were closed by me before expiration because they weren't going well. As it happens, those were the first two in the series (way to start a baseball game by striking out for the first two innings.)  After that, the remaining six spreads came in for maximum profit, so the end result was: I didn't lose either the maximum $1.00 or any amount under it; I came out on the winning side. But instead of the maximum 22 cents striven for, I actually brought in 7 and a half cents. Yes, I only brought in about a third of what I hoped to.

Doesn't sound so great, right? Consider that I dealt with many contracts. So I ended up with +$, and I'm never going to complain about that.  

This was a series of trades in which the running profit/loss total changed with each new transaction. I started out with a result that was pretty much break-even, then took something approaching max loss on the next spread. I could have handled that one better, but I watched in resentful denial sprinkled with a good helping of wishful thinking until I finally salvaged what I could before expiration. Then, to cheer me up dramatically, the next six spreads expired in textbook max-profit fashion. When you're down in a pit, you can sit there and think about it, or you can start climbing out, which is what I did. I faced the fear (of additional loss) and pressed forward.

Why did I end up making a profit?  Was it because the underlying security went my way over the course of the eight weeks (nine, including time to expiration on the last)? See the VIX chart. It wasn't that the VIX declined - in fact you can see a dramatic spike which was not unrelated to my one bad outcome in this series - but the underlying security, UVXY, did decline between May 5th and July 9th. While I don't always know what the VIX will do, I have a reliable idea of what UVXY will do under various conditions as compared to the VIX. Understanding the movement of my security - not predicting it with complete certainty over all timeframes but simply knowing what makes it move and in what direction under different circumstances - allows me to employ a strategy with better chances of success than average.

Follow me on Twitter: @grapeswhiz