After a relatively volatile month of May, in June, I decided to scale back and wait for the market to pull back because some indicators were showing potential signs of market weakness.
How wrong I was. The market kept going up and I missed some upside opportunities by being on the sideline. Not only that, I decided to open some positions to hedge the potential market downturn and that did not pan out very well either.
Upon realizing my mistake, I jumped right back in when there were minor pullbacks in the market and deployed the free capitals that had been sitting on the sideline to work. It will be interesting to see if this move will yield a good return in the July report.
Nonetheless, despite my wrong prediction about the market, overall the account did continue to grow in the month of June.
Market Sectors of My Positions
There were some “blank” sectors because I initiated hedge positions using ETFs and they don’t belong to any particular sector. These hedge positions are simple debit or credit spread using Call and Put.
June 2021 PNL
The June monthly profit was about $96 so approximately 2% return using the initial account value of $5,025 at the beginning of the month for the calculation.
NOTE: How I Record PNL for the Wheel Strategy
If I have got assigned for underlying stocks I would sell Covered call on them. I do not record PNL for such positions until I am able to close them.
In other words, I do not record the PNL unless the “Wheel” is completed.
Below is a brief summary of how the PNL is recorded.
Sell Put: If it expires out of the money (not assigned with a stock) or closed out early, it is recorded in the PNL. If a stock is assigned, it is not recorded.
Sell Covered Call: PNL is recorded when the Call is expired out of the money or closed out. It is also recorded when assigned and the stock is called away, or the entire Covered Call is closed out.
Win Rate for Different Spread Types
“Single” represents selling a Put or a Call contract.
Since it requires both selling Put and Call to complete the Wheel Strategy, any positions (Selling a Put or a Covered Call) that were closed with positive PNL was recorded as a “Win”.
|Spread Type||Win||Loss||% Win|
Thoughts for the June Report and What’s Next?
While it went pretty well for June, as I am writing this in mid of July, the Russell 2000 index is in decline again and many of my positions are affected because the majority of the underlying for my options positions are small companies.
The hedge position that I opened (a Call Credit Spread) with the SPX is in red because larger companies are holding up pretty well, especially technology-related companies.
Lesson learned – “Choose the right vehicle to hedge !”.
Also, based on my historical trading performance, I am absolutely horrible when it comes to credit/debit spread. I know hedging is like buying insurance so I should not try to profit from my hedge positions. However, nobody likes to lose money even if it is meant to be lost.
I will likely stop doing the hedging strategy and just limit the number of positions that I open and keep more free capital when there is a potential market decline, then jump back in when the market hits the bottom and start its recovery.
- Thanks, FOMC Meeting. Here We Go Again –VIX & SPX Review 11/5/2022 - November 5, 2022
- The Market Bottom, For Now – VIX & SPX Review 10/23/2022 - October 23, 2022
- Wow, CPI Data Wild Ride! – VIX & SPX Review 10/16/2022 - October 16, 2022