monthly report

Options Trading Monthly Report May 2020

It’s time to report my options trading for May 2020.

May 2020 was a pretty exciting month overall. Even though I finished the month with a positive PNL, there are a few open positions that are deeply negative. I opened some straddle options that I don’t normally do expecting the market to stay put for a while. How wrong I was predicting that. The market is now trending higher and I am still hoping that it will come back down in the next couple of weeks. There are a couple of issues I need to fix.

  1. I keep trading strategies that are not in my favor
  2. I keep getting emotionally involved in the positions

Profit and Loss (PNL) by Strategy

Single

Selling one-leg Put continues to work well. I found this strategy to be the least stressful. One issue I found is a lack of opportunities. I need to work on the screening process to find more opportunities.

Vertical

Positions closed in May have worked well but I have a few open positions that are deep in the negative. As the market edges up, I kept positioning myself against it. While I enjoy being a contrarian, this has cost me numerous times in the past. I need to learn how to not get emotionally involved and become more mechanical in dealing with a setback.



Strangle and Straddle

I expanded trading strategies trying to benefit from the stagnant market movement. Even though the overall market was slowly trending upwards, when looking at some individual stocks they were not moving too much. My thinking was to sell Strangle and Straddle to capture the time value and decline in volatility that usually happens when the S&P 500 pricing moves up. A couple of such positions in the cruise line (RCL and NCLH) zoomed past the price range that would be profitable when the positions expire in the last week of May. My emotion got in the way and I did not get out fast enough. I am still holding these positions and hoping the price will drop before June expiration.

Diagonal

Towards the end of May, I started buying Diagonal which can be profitable when the market starts to move down. In case you are not familiar with Diagonal, it’s basically a calendar spread with a directional bias built into it.

I did close a few positions after the S&P 500 hit 3000 to minimize the risk. As of now, the overall market uptrend seems to continue so it will be interesting to see how these positions will play out in June.

Covered

Tried a Covered Call strategy with GRPN. I got in at the wrong time. I got out at the wrong time.

Spread Type Month PNL
SINGLE May  $          1,376
STRANGLE May  $               64
VERTICAL May  $               60
STRADDLE May  $               93
DIAGONAL May  $               24
COVERED May  $              (15)

Cumulative PNL for 2020 (March-May)

It’s pretty obvious Vertical and Strangle are the biggest losers. They are also causing me the most anxiety. I found myself waking up one morning started thinking right away about how to save the Strangle positions that were going wrong.

We shall find out how these Strangle positions will affect June PNL.

Spread Type PNL Trade Count
SINGLE  $          2,638 40
STRADDLE  $                93 3
DIAGONAL  $                24 6
COVERED  $              (15) 1
VERTICAL  $              (54) 2
STRANGLE  $            (251) 9

Plan for June 2020

It’s June 2nd today and I just closed a couple of deep in the red Strangle positions that pretty much wiped out half of the positive PNL I have accumulated so far.

I just finished reading The Pumpkin Plan wrote by Mike Michalowicz. In the book, he mentioned about identifying profitable customers and super focus on them rather than taking any offers you can find. This is not a new concept but I could totally apply this to options trading since it is very clear that selling one leg Puts is my best customer (so to speak). Selling Strangles…… Bad, bad customers.

I am going to put all my energy into selling one leg Puts from now.

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