July 2021 was the second month I traded options in the US market. I had my second and bigger loss, and I earned less money this month compared to last month. But I believe that I gained a lot of experience that will be useful for me in the future.
You can read all of my options trading recaps here.
What options strategies I am trading
I sell cash secured puts, covered calls and credit spread (bull put).
I won’t be going into the details of each strategy, because it’s gonna take another 1000-2000 words. I will write a separate post regarding covered call and credit spread (bull put) in the future when I have the time =) in the meantime, you can use Google or YouTube to learn about them.
What platforms I use
I use Moomoo to trade sell secured puts and covered calls. I had written a post on the step-by-step ways to trade options in Moomoo.
I use Interactive Broker (IBKR) to trade credit spreads because Moomoo doesn’t allow credit spread yet.
What are the sizes of my accounts
At the beginning of the month, my fund sizes are US$ 11,950 in Moomoo and US$ 860 in IBKR.
Trading Recap
Trading Recap #1: TSLA Sell Credit Spread Bull Put (Profit: $114.73)
Strike Price: $560/555
Qty: 1
Date open: 15 Jun 2021
Expiry date: 9 Jul 2021
Days to Expiration: 24
Stock Price at Open: $607
Delta at Open: 0.24
Date Closed: 9 Jul 2021 (exp)
Days in trade: 24
Option Price at Open: $1.17
Option Price at Close: 0
Fee: $2.27
Profit: $114.73
Return: 114.73/405 = 28.3%
Annualized: 430%
This is my first ever credit spread (bull put) option strategy. The reason I decided to try credit spread is because this strategy doesn’t require as much capital as cash secured put and covered call; I just need enough money to cover the maximum loss. Since most of my fund are locked in my SG portfolio and my Moomoo account, I only deposited USD 750 to IBKR for the purpose of trading credit spread.
I choose TSLA because Tesla was not trading at its peak in June 2021, so there’s potential for the share to go up. I am bullish that TSLA will go up in the near future. My strategy is to do credit spread bull put at strike price of 10% below current price. On 15 Jun 2021, Tesla was trading at $607, so 10% below 607 is around 546, hence I chose strike price of 560/555.
I use IBKR Mobile App to submit this trade. You can see in the screen capture that the probability of winning is 74%, max profit is $95, probability of losing is 24% and max loss is $405. The estimated premium I’ll collect is $95, however, after I clicked order, IBKR is able to give me a better premium at $117 (lucky me!).
Between 15 Jun and 9 Jul, Tesla had ups and downs but the price never touched 560. Therefore, my credit spread expired worthless. This gave me the confidence to continue trading with this capital-light strategy.
Trading Recap #2: AMC Sell Cash Secured Put (Profit: -$184.42)
Strike Price: $46
Qty: 1
Date open: 29 Jun 2021
Expiry date: 9 Jul 2021
Days to Expiration: 10
Stock Price at Open: $58.8
Delta at Open: Forgotten
Date Closed: 2 Jul 2021
Days in trade: 3
Option Price at Open: $0.99
Option Price at Close: $2.78
Fee: $5.42
Profit: -$184.42
Return: -4%
Annualized: -487%
I missed the easy money that I got from selling my first AMC CSP on 2 Jun 2021 (which you can read in my previous recap), so I decided to sell CSP again on AMC. And yes, I have forgotten the anxiety that AMC option gave me in the past.
On 29 Jun, I sold a CSP contract on AMC with strike price of $46. AMC was trading at $58.8 when I opened my position. I purposely chose a short expiration, which is 10 days. I chose $46 strike price because I did not think that AMC would fall 20% within 10 days. It’s a meme stock and there are so many apes supporting each other by buying and hodling the stock for long-term, until the hedge funds get squeezed.
Well, AMC price dropped the next day, and the day after it, and the day after it. 3 days of consecutive price drop is too much for me to handle. On 2 Jul (which is 3 days after I sold the CSP), AMC stock has fallen to $48 and the put option has risen to $2.78. “This is it, I deserve this,” I told myself. I bought the put option to close my position and sealed my fate with a loss of $184.
In hindsight, AMC would be closing slightly higher than my strike price at $46.19 on the expiration date of 9 Jul. If I didn’t close my position at a loss, my option would expire worthless and I’ll still keep the premium of $99. But, looking back, I shouldn’t have made this trade. I shouldn’t sell CSP when a stock is trading near its peak. I should’ve waited until the stock is near its bottom.
Trading Recap #3: NIO Sell Cash Secured Put (Profit: $ 105.66 )
Strike Price: $40
Qty: 1
Date open: 14 Jun 2021
Expiry date: 20 Aug 2021
Days to Expiration: 53
Stock Price at Open: $47
Delta at Open: 0.23
Date Closed: 6 Jul 2021
Days in trade: 22
Option Price at Open: $2.19
Option Price at Close: $1.08
Fee: $5.34
Profit: $105.66
Return: 2.64%
Annualized: 43.8%
In the previous month, the longest to expiration I ever had was 42 days. It was NIO and I made profit of $37 in 6 days due to bearish trend. This time, I wanted to earn more, I was greedy, I decided to choose longer expiration to get more premium, and hopefully to get better profit from time decay. If this is sustainable, then I may want to switch my strategy to longer expiration dates so that I don’t have to make so many trades in a month.
I sold NIO CSP on 14 Jun with strike price of $40 and expiry date of 20 Aug (that’s 53 days to expiration). NIO was trading at $47 when I opened my position, which means my strike price was around 15% below stock price. The premium I collected was $219, that’s quite a lot for $4,000 collateral!
For the first 2 weeks, NIO price moved between $47 and $45. At the end of 2 weeks, my paper profit was only 10%. 1 week later, NIO price was at $50 and my paper profit finally reached 52%. The next trading day, NIO fell to 49.7 and my paper profit fell to 50.6%. “No, I can’t do this anymore, I waited 3 weeks to earn 52% and now it wants to go down? No way, I’m out,” I told myself.
From the beginning, I never had the intention to hold this until expiration. I intended to hold until I can get at least 70%. But it was so hard to achieve 50%, let alone 70%. Out of the 3.5 weeks I’m in the trade, only 1 week was bullish, the other 2.5 weeks were bearish. I couldn’t handle the thought of losing my paper profit that I’ve earned so far. I couldn’t handle the volatility, so I gave up and closed my position on 6 Jul. I bought back the put option at $108. After deducting fees, my profit is $105.66. Still decent.
In hindsight, I made the right move to close my position, because I closed it when NIO was almost at the resistance level (which is $50). After I got out, NIO kept falling. Had I held my option to expiration, I would get assigned NIO stock at $40 because NIO was trading at $36.6 on 20 Aug.
Looking back, this was a trade well-managed. And this trade made me realized that I couldn’t handle the volatility and the slow time decay of options with longer expiration.
Trading Recap #4: JD Sell Covered Call (Profit: $89.58)
Strike Price: $80
Qty: 1
Date open: 21 Jun 2021
Expiry date: 20 Aug 2021
Days to Expiration: 46
Stock Price at Open: $71.1
Delta at Open: 0.24
Date Closed: 23 Jul 2021
Days in trade: 32
Option Price at Open: $1.5
Option Price at Close: $0.55
Fee: $5.42
Profit: $89.58
Return: 1.12%
Annualized: 12.7%
This is another trade where I want to test whether trading longer expiration options is suitable for me. This time, instead of CSP, I’m selling covered calls. I already had 100 shares of JD which I bought at $71. Previously, I sold CC at strike price of $74 and I quickly regretted it and exited the trade with $37 loss. Now, I know that the price I’m willing to sell my JD is $80, hence I sold CC at strike price of $80. I chose 20 Aug as expiry date simply because I wanted higher premium.
I opened the position when JD was trading at $71.1 on 21 Jun. The expiry date is 46 days later, on 20 Aug. I collected $150 premium when I sold this CC.
In the first 2 weeks, JD was very bullish and kept going up until $79.2. It seems like $80 is the resistance level. Then, it started falling down to $70.9 by the end of 3rd week. (Wow, 10% drop in just 1 week). In the 4th week, it’s bouncing up and down between $73 and $76.5, and my paper profit is still negative. In the 5th week, JD’s price was still between $73 and $76 but time decay finally caught up and I was finally at 60% profit.
I’ve waited for 5 painful weeks and I’ve only gotten 60% profit. Furthermore, JD is on a bearish trend and it’s very unlikely to hit $80 by 20 Aug, so, rather than prolonging the pain, I decided to close the CC on 23 Jul and bought back the option at $55. I also realized that choosing longer expiry date for the sake of higher premium is just not worth it.
Trading Recap #5: JD Sell Cash Secured Put (Profit: $72.56)
Strike Price: $68.5
Qty: 1
Date open: 6 Jul 2021
Expiry date: 30 Jul 2021
Days to Expiration: 24
Stock Price at Open: $72.5
Delta at Open: 0.24
Date Closed: 22 Jul 2021
Days in trade: 16
Option Price at Open: $0.85
Option Price at Close: $0.07
Fee: $5.44
Profit: $72.56
Return: 1.06%
Annualized: 24.2%
Once upon the time, I thought I was smart enough when I came up with this idea, “If I sell both CC and CSP of a particular stock, that means I can profit in both direction! Since I’m holding JD’s CC, why not I also sell CSP? Some more, now JD is almost at the bottom, CSP sure win.”
JD’s recent bottom was $67 in May 2021. I sold JD CSP on 6 Jul 2021 at strike price of $68.5 when JD was trading at $72.5. This is a shorter expiration trade with 24 days to expiration.
True enough, my prediction was right (well, it’s more like I was lucky). JD was bearish in the first week, it fell to $70.9 before steadily going up. 16 days after my open position, JD was up at $76 and my put option was worth $7. I had reached 90% profit, so I bought back the put option to close my position.
Trading Recap #6: NIO Sell Cash Secured Put (Profit: $36.46)
Strike Price: $41
Qty: 1
Date open: 13 Jul 2021
Expiry date: 23 Jul 2021
Days to Expiration: 10
Stock Price at Open: $45.6
Delta at Open: 0.16
Date Closed: 22 Jul 2021
Days in trade: 9
Option Price at Open: $0.46
Option Price at Close: $0.04
Fee: $5.54
Profit: $36.46
Return: 0.89%
Annualized: 36.1%
I must’ve had itchy fingers when I opened this position. Just 7 days ago, on 6 Jul 2021, I exited Trade #3 because NIO was on a bearish trend and I couldn’t handle the volatility. Now, on 13 Jul 2021, I must’ve thought that NIO had reached a safe support at $45.
I opened by position by selling CSP at strike price of $41, with a lower-than-usual Delta of 0.16 just to be safe. It was a short expiration with 10 days to expiration.
Obviously, stock market is going to go wherever it wants. In the first week, NIO continued falling to $42.8, against my expected direction, and my paper profit was negative. Then, on 19 Jul, the tide began to turn. NIO went up each day until the $46 range on 21 Jul. On 22 Jul, which is 1 day before expiration, I have reached 90% profit, so I decided to close the trade and not wait for expiration because NIO was bearish again.
In hindsight, NIO closed at $43 on the day of my option expiration. Had I held on, my option would expire worthless. But I didn’t regret my decision to close early. It was so worth paying $4 to close my position and have a good night sleep, rather than suffering from anxiety for another day.
Trading Recap #7: AMC Sell Cash Secured Put (Profit: $62.32)
Strike Price: $28
Qty: 1
Date open: 22 Jul 2021
Expiry date: 30 Jul 2021
Days to Expiration: 8
Stock Price at Open: $38.2
Delta at Open: 0.1
Date Closed: 30 Jul 2021 (exp)
Days in trade: 8
Option Price at Open: $.65
Option Price at Close: $0
Fee: $2.68
Profit: $62.32
Return: 2.23%
Annualized: 101.5%
By now, I’ve been burned twice by AMC, both mentally and financially. But, when I saw that AMC was trading at $38.2 which is near its nearest support at $33, I didn’t want to miss this opportunity. I believe that when a stock is near the support, the next trend is most likely bullish.
I sold a CSP with strike price of $28 (which is 26% lower than the current price) and Delta of 0.1 (means 90% chance of winning). I was being extra-careful. It has only 8 days to expiration.
After I opened my position, AMC was on a sideway trend. I held this option to expiration because there was no sign of extreme drop, and I wanted to break the bad omen that I had with AMC. Throughout the entire period, AMC was well above $35. On 30 Jul, AMC ended at $37 and my option expired worthless. My extra careful action paid off.
Open Positions by 31 Jul 2021
I have 2 open positions by 31 Jul, which I will close in August. One of them is in Moomoo and the other one is in IBKR. Because they’ll be closed in August, I will write about them in August’s recap.
Lesson Learned
Even though I have a trade journal where I recorded brief anecdotes of my trades, I find that writing trade recaps in blog form helped me so much in remembering what to do and what to avoid when making trades. As time goes on, I’ll make use of these lessons learned to finetune my strategy to be a better trader.
Lessons learned from July’s trade are as follow:
1. Options with more than 45 days to expiration is not suitable for me. I prefer to profit from time decay, rather than from predicting the direction correctly. Those options with more than 45 days expiration doesn’t lose much value due time decay in the first few weeks. The time decay reduce option value more during the final 1-2 weeks to expiration.
2. Don’t sell CSP when the stock price is near peak. If you must, make sure strike price is less than recent support. This mistake cost me $184 this month (in Trade #2).
Summary
Total premium earned in July 2021 = 296.89
Yield on fund size = 296/12810 = 2.3%
2.3% is less than half of what I earned in my first month, but it’s still above my monthly target of 2%. For that, I am grateful. And I’ve certainly learned a lot more in this second month of my journey in option trading.
FYI, I track my option performance daily using my simple spreadsheet. That’s how I get to know how much profit I have made versus time decayed at any point in time. I would close my option early if I’ve gained a lot of profit (more than 70%) within a short time.
That’s all for this month. See you in next month’s trading recap! If you want to get notified of my new posts, do subscribe to my email.
If you find this post helpful, feel free to buy me a coffee :)
thansk a lot once again !
You’re welcome!