June 2025
+$11
Yes thats right. $11.
This month was a big learning curve and deep thought about how these trades do work, and how they could work.
I have been journaling and researching/reading every day and looking into what I can really do with credit spreads and how to make them more effective.
Stat review is near the bottom, but each section here were thoughts that I had and expanded on as the month went on.
SMB STRATS
SAD Trade
-As conviction goes up, reward goes up, risk goes down
-Starts off like mine, short OTM, add OTM, when confirms, add ITM.
-ITM adds are way of being aggressive.
-ITM adds flip RR from under one, to above 1. Trades like 3:1 instead of 1:4 become possible,
-This is done on over ext moves.
-This can also be used for breakout trades out of consolidation.
CRWV was my first SAD trade. But it was only the D I used. Was late to the party for speculation and anticipation. Definitive was clear though on a major level breakdown. Price at 145 and sold the 140C. Sold off all day.
Was in the sold at 8.81 and bot 145C at 6.30. Just 1 contract each.
Trade went against me at first back to vwap (clear chance to add on new pivot breakdown looking back) but eventually sold off another 10 pts and my 4pt OTM became a 4pt ITM and seemed likely to close at 0 for both for max P.
The SAD trade is a great way to add insult to injury. I win on the original spread and can use that credit to use as risk for an ITM or ATM spread to put on at major levels in the trade.
As for over extension trades this can work well with obvious targets the trade can reach.
As for flag/consolidation trades, the D can be entered at other breakout points or after another pb retest that goes in favor
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SAD Trades are a way to be more aggressive and skew RR in your favor by mutiples rather than fractions.
It is difficult though. Becuase now you have to be right by the exp and play catch up. Which makes me think thesee will work better on over ext moves rather than range breakouts. Data will tell.
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The reason you would want to do these on over moves is that that snap back is highly likely. SMB called the D high probability which I agree with.
The reason you would NOT want to do these on range trades is that market conditions matter more. If breakouts have not been working well, then getting those OTM spreads on is a lower probability that it does work.
It is much easier to see this working better on over ext names as its all been reversion to the mean. Range breakouts there is no reversion, just imbalance. IVs are high on over ext names, IVs are low on range bound names.
So on range breakout trades its like squeezing water out of a rock. It may be more beneficial to not get the OTM spread, and just fund a call option instead which will need to be cut asap rather than look to hold.
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So far my problem with my CRWV trade is that on its first major leg lower, both prems lost half value and ended up bouncing a bit under my sold strike.
So now I have to worry about this expiring ITM again.
But becuase I sold so early on, the chances that this goes all the way back up to the point my sold goes negative again is very low.
So while I do have to worry about it exp ITM, it will now have to get 8 points and some change above 140 for it to have the intrinsic value to make the trade unprofitable.
And I also have ot worry about the hedge, which more than liely will be a total loss. But at 8pts above sold strike, will be 3 ITM which would but value at 3 which is a $330 loss from where I bot it.
Max L is the strike distance minue the prem distance. So at worst I lose 250 to make 250.
I did leave out i was in the short at 8.80 and in the hedge at 6.30. If stock closed at 141 I would still be up $1.50 on the trade and walk away with $150
So even though the idea was wrong, becuase IV so high and prem so high, I can still make money on this idea. This could never happen on a low vol, low IV trade.
1 Day left in the trade we will see how it plays out in the price action.
It gapped up 6% and then went up to 10%, out on break for half max L.
Just like in the example, these are not necessarily hold til exp trades, more swing trades to take profit.
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EXAMINING THE HEDGE
Thoughts....
On all these pullbacks to the strike, what is being up really mean. My trade idea is to ride to exp.
If up 50% on the credit, then debit is near worthless, there may not be profit yet.
The credit/sell has to catch up with the debit bot in terms of prem.
S B
2 1
1wk later
1 .35
1 Wk later
.50 .12
The bot gets worse faster. It has more theta.
So my true profit only comes at a point where the sold catches up with original
Theres 2 forms of profit.
The original spread difference, ASSUMUNG BOTH EXP WORTHLESS
The if I want to buy it back right now profit WHICH IS DEPENDENT ON THE CURRENT SPREAD
My protection is a loss, and this loss gets worse faster.
When I say earlier that my hedge quickly no longer becomes a hedge, this is it.
I should never expect profit from my hedge. It is there because the broker requires it.
All in all when I put these trades on, I should only expect profit if my idea of the stock not closing above/below a certain level is correct.
When exiting a loser if i can get out breakeven that is a major gift.
There really is no such thing as exiting this trade early on moves against me and keeping a win. That would be pretty rare I would think.
There can be exiting premature when stock looks like it is going to get and hold above strike, but even then, proftiabel or loss is a toss up and depending on how much time left to exp, will determine that.
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RISK/EXIT QUESTIONS
I think what I am getting at here, is how can I manage these trades better and with clear sight on risk?
Questions that need answers,
-When entering spread,
-What do I do when price hits my sold strike (answered below in SCHW ex)
-What do I do when I want to exit early in fear of it closing against strike
-JPM was a good example of this. There were many variables in favor of it beraking down further and breaking sold strike, yet it didnt.
-Notice I use the word fear here. That is emotion leaking into my process. Fear is not a process. This is when things happen where I say 'oh itll probably get worse ill just exit now to prevent a big loser later on. Which may be valid, this time. But over the course of 20 trades, I know from past exp this is a losing habit. Im a good trader, I have good ideas, I need to follow my ideas all the way through. Dilligence and Discipline.
-There were many reasons to be fearful and anticipate that JPM would get worse and close under strike and be a decent sized loser. Yet it never did break strike and ende dup being a win regardless. It is important to recognize I take these trades with the idea that it will not close under that certain sold strike level. My stop is set at that level, When it breaks that level, I now have a clear picture of what to do next. This is the game I play. I dont get fancy and exit early out of fear, I respect my rules and trade with them. I hold the trade, and when it breaks the strike, then I do XYZ.
-What does 'locking in a win' really mean
-There can be times where my trade is trading right around the sold strike near fridays close. It can be a tough call to judge if I should bail early and keep what I got or risk whats left.
-This has to be a judge by all given variables at the moment. If PA is against, market against, tape is against. MAs against, VWAP against, is it really worth the added risk (which can be multiples of rewards even during the last hour of the day) to hold out for the last bits? Some cases no. Take it and run when it begins moving against me. On to the next. Low Hanging Fruit.
-What does 'protecting a win' really mean
-Same as above. In fact, the above should go here.
-What does 'exiting a loser' really mean
-(answered below in SCHW ex)
-What does being up 90% really mean and should I take it off there
-I have seen several times that traders look to bail these spreads at +90% I have seen some really wild monthly op ex fridays close with some really wild moves in the last 10 minutes. I can see having a spread that is trading with 0bid, recovering and closing against my strike in the last 10 min of the day. I can see a Max L getting hit on this with ease. Its about risk management here. Protecting against a worst case scenario. It would make sense to at least have a stop on into the close on friday to protect gains. This has never happened to me, I dont seen it happening for soem time, but that doesnt mean it cant happen.
- I want that last 10%, In my case, 10% means an extra 20$ on average wins. Over the course of a year If I held on that extra 10% thats an extra $5500 I would sacrifice. On the other end if even one of those turned into worst case max loss, then that would get cut in half. So 2 of these cases means holding that extra 10% is not worth it. How likely are those cases to happen?
-The OTHER thing to consider is commisions. At .60c a contract, so $1.20 in and out for 1. I am looking at $3800 a year, JUST exiting these winners at 90%. In other words by letting it run to 0, I am saving almost $4000 a year in commissions.
-Setting a stop seems the best option here. Protects against giving it back, and protects against extra commissions just to lock the win.
-What are the scenarios I have to exit early
-I should consider exiting early when the following happens
-Market/MAs/Internals/PA clearly against idea AND stock is looking like it may get against strike and close against
-Stock is trading around Strike, coiling for another move that more than likely will go against it.
-Industry also against me.
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DISCUSSING WORST LOSSES AND EXIT PLAN
I finally had my oh shit moment
June 13 Israel Iran news, market took a overnight gap lower.
I was in SCHW and JPM, entire sector/industry had done that same thing, couple month strong move higher, coiled tight last couple weeks for a big bull flag, I got bull credit spreads on.
Overnight gap lower, under VA. Trapped.
Now there is nothing but sell pressure. Old longs bailing, new lows trapped, all running for exit to cover there ass.
SCHW was first to trigger under strike at 87. I know a few things here
1. Early morning volatility is bad for me to 'just get out'
2. Overnight gaps add to that
3. Market gap down adds to that.
4. Waiting on that 1st pull back is huge in terms of premium crush.
5. If i get out 3 minutes into the open, I am seriously taking a large hit on volatility affecting prem
I wait.
It builds a range between 87 and 86.60 for 5min, breaks down, still too early gotta let the dust settle.
Finds another bottom at
86.10 and 86.40, biuilds it out over the next 10 minutes.
Rest of sector/ind doing the same thing.
I wait for that pullback, we get above 86.40 and nothing, turns right back lower
I get out both sold/hedge around 86.25 for a nice -$1300 loss.
It was the right call, it ended up dropping all the way to 85.76 where I would be at max loss. Which I never want to see in my lifetime, which would have been -$2600.
So I got out right about halfway there. Looking back if I bailed as it went through my strike, I would have ended up somewhere around -$600.
INSANELY enough, SCHW ended up being the strongest and having the strongest rebound of the group and actually got back above my sold strike 87. It would be really dumb of me, to hold onto that entire down move, expecting it to recover and turn into a win. That is risking 2600 to make what would have been a 400 win. Which is not smart at any point.
So what needed to change here?
Should I have bailed through strike?
Should I have bailed on 1st range breakdown under strike?
Should I have a better plan? Yes.
Bailing on strike breaktrough happened right at bell
Now usually vol makes spread insane at the open which is a big nono for bailing with market order, but algos usually are on top of the game where I can walk my limit orders up and down and get a fill that makes sense. That can be ok.
A few things are for sure though here.
The negative news, trapped traders, old longs, big old trends breaking down is a recipe for more downside. It is not a bad move to anticipate more selling at the open, rather than just buy the quick dip, That alone should make it ok to bail on a move lower through strike.
Also the strike breakdown happening to soon so fast without any pullbacks happening first is reason to HOLD for a pullback.
I like the idea of always holding for that first pullback.
So rarely, and I mean so rarely does a move just go and never come back and then build out a range without ever coming and testing a higher level.
Now if it doesnt, that means I am risking a MAX L. Which any given MAX L is not going to blow me up. At the worst a single MAX L would risk a whole month. But that is the absolutle worst case scenario.
I think this is where I need to be for a rule for exiting.
-If stock breaks through sold strike, we are now looking for an exit.
-Have to give it a pullback, or range creation.
-This is so Vol dies down, and theta has a chance to crush prem on any given pb or sideways action
-On next range breakdown. Out. 5min minimum range built.
-On pullback...
-If under strike, OUT on turn lower from vwap or significant level (1min/15sec range)
-If above strike, give it the chance to reset and make new range under
-If no range, OUT on new LOD, or range breakdown on if under strike
JPM was another oh shit moment, but it never got to strike.
I was however down much more on this than I was on SCHW. Why?
Larger strike spread. More Contracts in play.
It got to only 20c above sold strike, then like SCHW ripped.
If I had bailed on break of strike it would have been roughly a $2000 loss.
I ended up making $315 on the trade.
I risked $2000 to make $315
SCHW I risked Roughly $1300 to make $400
Why is JPM Risk that much more than SCHW
-Strikes spread
-Bigger $$$ Name
-Hedge is worse in terms of delta/theta
-Offers less protection
Is that a problem?
Yes and no.
If high conviction and clearly a great trade, take it.
If you have any doubts, risking that much on a 1:7 RR trade is not good.
I did have high conviction here, a rare news breaking market moving moment happened and made me squeamish, but this again is not commonplace.
This adds to the fact that this is all estiamted risk. I can only give my best guess as to what those option prices will be should my strike be broken and given a chance for pb/range breakdown.
It usually ends up being about half the max L which I need to settle on and stop trying to be so specfic about it.
SUMMARY
Plan for when stock hits sold strike established.
-Have to give it a pullback, or range creation.
-This is so Vol dies down, and theta has a chance to crush prem on any given pb or sideways action
-On next range breakdown. Out. 5min minimum range built.
-On pullback...
-If under strike, OUT on turn lower from vwap or significant level (1min/15sec range)
-If above strike, give it the chance to reset and make new range under
-If no range, OUT on new LOD, or range breakdown on if under strike
-------------------------------------------------------------------------------------------------------------------------- DETERMINING RISK PROFILE
When does it not makes sense to add anymore?
When is too far too gone?
Is there such a thing as too far too gone with spreads?
Prem is the only thing that matters here. Once I have direction right and it becomes quite obvious its going to hit, why not add more?
There is always risk. RR is always available.
The Max L on a trade is only changing depending on the premium bot/sold which is pennies compared to the Max L based on the strike.
Max L is strike difference - prem credited. So as prem drops as trade proves me right, the RR gets considerably worse as time passes on and prem decreases.
Starting a trade at making $10 to risk maxL of $100 is fine in some cases.
But as it develops, it turns into making $3 to risk maxL of $100 and that is not ok in the long run.
I want to add to my winners, not make my maybe trades bigger
The hedge is going to exp at 0 anyways, how much does a tight spread really matter?
It matters for losers in terms of recuding loss if it is a close next spread, but if wide spread, and loss very far away, then close or not its going to 0 fast. Might as well take the further spread.
If im able to get a spread on say sell 100call buy 101 call while price is at 90, well a 101 call is going to 0 very fast, why not get the 102, more prem to capture, why not the 105.
By the time, if by the time, the price gets up to 99, the 101 call may be worth pennies, but more than likely by the time (a day or 2 later) price gets up there, theta has eroded so much prem, I may as well have gotten the 105 as they are still both more than likely going to be at 0. The original hedge is not much of a hedge at all. Its there only because broker wants it to be.
This of course means bigger risk, bigger reward.
How much bigger risk needs to be determiend.
My MAX L is the spread * 100 - prem recieved.
An extra dollar on spread for hedge from 101 to 102 means my max L doubles.
BUT does that mean my estimated risk doubles as well?
My risk on the sold is always what I anticipate the sold to be at if price hits the sold strike.
The hedge is not making any difference here.
So If I sold a 101, or a 105, its still going to be damn close to 0 regardless, really not saving me any money.
Now at the start of the trade it can make sense to have a tighter spread, but as it continues to work and shows me things I like, I can add with more distanced spreads.
I am nearly never holding that trade to the point it hits the hedge strike. I think only once has that happened and on a trade that I shouldnt have been in for one, and two held on too long. This was before I had a clear plan for exit.
The practical risk doesn’t scale proportionally with spread width because the short leg dominates the trade’s risk profile
^^^ Is from Grok and I think that nails it.
There of course is the 1 off gap against that does end up going near max L. Thats the risk I take. This is another form of being more aggressive.
How bad would that hurt though.
Well formula for MAXL is simply spread x 100, so each dollar spread i move out i add another 100 per contract to the Max L.
In tail end risk this is not exponetial. So this is good! This is a solid plan to increase aggressiveness in trades and make more money.
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What do W/L look like with wider spreads/less Hedge
So I am curious. A rough estimate I can guess that on all my losers I can pretend that the buy/hedge is cut in half to simulate an extra strike out. What would stats look like.
As of June 23, I am up $4549. With hedge cut in half that drops too $1692.
That is actually much more than I expected.
But now what does that $1692 look like with extra prem removed from bot hedges on winners. (ex I bot at .20 and sold at .35 for .15c prem, instead it would be bot at .10 for .25c prem)
Now we jump up to +$10,450
These are pretty generous prem bumps. Lets just play with an extra 10% cut on prem for hedges and see what it does to the current +$4549
If all winners and losers had 10% less prem on the hedge my new total would be +$7274
A 10% less prem led to an extra 38% in gains. Thats notable.
Currently
Average loss is -$305
Average win would be $203
With 10% prem reduction in hedge
Average loss is -$333
Average win would be $235
And thats without adjusting exits.
Adjusting exits for half bot prem it changes to
Average loss is -$505
Average win would be $242
With only a 10% cut to prem on loss hegde exits
Average loss is -$430
I need more data still, but I like the numbers. My SCHW loss is the largest by nearly 100% to the next one. ($1350 to $700) so that skews the data quite a bit. Of course more risk. But without more, less reward.
Now here is the other thing, as of Jun 23, I have 42 wins out of 55 trades. Of those 42 wins, 37 of them had the hedge go to 0.
So a 76% WR with a 88% ride to 0. That other 12%, Those 5 trade, 1 accidental exit. 2 an early exit to protect what couldve been a quick end of week reversal, also experimental trade with trying an aggressive add with closer to price strike. 1 a breaking news exit for gain to protect. And last was to save 2 cents at near friday close to save $20 on what was going to 0.
In other words 98% of the time, that hedge is going to 0 anyways and shouldnt expect a wider spread to save me any money on that end. Should still expect 0 here.
AND THE OTHER THING, is I am including my learning curve trades which were 9/11 with an average win of a whopping $42. So adding an extra couple pennies on top really not amounting to anything major. 25% of wins arent showing nearly any improvement in averages.
WHAT DO TRADE AVERAGES LOOK LIKE WITHOUT THOSE
Avg Win
$237
Avg Win with 10% removed from Hedge (Reflects a strike further out)
$290
Avg Win with 50% removed from Hedge (Reflects a strike much further out)
$467
Avg Win with Hedge less than .05c (Reflects lowerst Hedge I can buy)
$643
Now obviously thats nice, but RISK FIRST. What does this do to my estimated risk with this strategy?
Avg Risk on Winners
$1154
Avg Risk Win with 10% removed from Hedge (Reflects a strike further out)
$1234
Avg Risk Win with 50% removed from Hedge (Reflects a strike much further out)
$1500
Avg Risk Win with Hedge less than .05c (Reflects lowerst Hedge I can buy)
$1763
Now this is interesting.
273/1154 for a .24RR
290/1234 = .24RR
467/1500 = .31RR
643/1763 = .37RR
The smaller the hedge the larger the RR.
This is all experimental of course but .24 to .37 is large enough that even account for some errors, that is notable.
All my formulas and stats take into account that the hedge is a loss, so the smaller the hedge to begin, the smaller loss subtracted from profit (sale credit), the higher the RR.
In dollar terms of risk though, my average win almost triples while my average risk only goes up 35%
Seems to good to be true, next step is losers then.
Avg Loss
-$399
Avg Loss with 10% removed from Hedge (Reflects a strike further out)
-$397???
Avg Loss with 50% removed from Hedge (Reflects a strike much further out)
-$398?????
Avg Loss with Hedge less than .05c (Reflects lowerst Hedge I can buy)
-$385
So hold on. For starters a few of my losers turn into wins. Theres no way thats correct.
I suppose it is.
-Time Decay on Sold leads to wins
-Time Decay on Hedge leads to larger loss
-When I exit these losers
-How many were profitable on sell side,
-And how many hedges and how big were the losses on the hege
That may be reason for larger losses
Of my now 14 losers, 5 of them would be winners if I had used a tiny hedge. 5 of them would be winners even if hedge was reduced by 50%.
Reason being the sells were profitable but because the hedges never caught up in the same manner they just added to the losses.
Now my total loss amount is -$5595
With the 90% hedge removed it raises to -$5394
Not much of a differnce, only thing that changes is Win Rate then.
Now my average loser NOT including the new wins skyrockets to -$897
So we must look at risk
Avg Risk on Losers
$1107
Avg Risk Loss with 10% removed from Hedge (Reflects a strike further out)
$1194
Avg Risk Loss with 50% removed from Hedge (Reflects a strike much further out)
$1486
Avg Risk Loss with Hedge less than .05c (Reflects lowerst Hedge I can buy)
$1808
This is right in line with winners.
So to judge if this is worth it, what is the relationship with how much bigger my winners are compared to how much bigger my losers are. And not counting the losers that turn to wins, strictly losers.
Avg
237/399 = .59
Avg w/10%
290/469 = .62
Avg w/50%
467/753 = .62
Avg w/Tiny
643/897 = .75
The ratio is clearly better with smaller hedges. My wins get larger at a better rate than my losers do.
All the while my risk increases but the bottom line is my winners outweigh my losers. And with a higher win rate.
To sum up what I got here, I can expect my average loser to increase about 20-30% by moving 1 strike out on the hedge, and I could expect my winners to increase roughly 20-30% as well.
That works well for starting positions, because
Risk increases as well the wider the strikes.
And since I want to add to my winners and make them larger
I can expect a tiny hedge to more than double the average win while only increasing risk by roughly 50%
Also not expecting any extra money saved by exiting hedge early to save some pennies.
Hedging smaller in the long run proves more profitable HOWEVER, the black swan event will hurt.
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BOOKS
Decided to get some books on Credit Spreads. Getting books is always a good idea. Notes are here
OPTIONS TRADING HOW TO TURN EVEYRY FRIDAY INTO PAYDAY USING WEEKLY OPTIONS
(Bet bigger, Be more Aggressive)
-A way to be more aggressive is use wider spread.
-KaChing method. Buy protective quarterly option, sell the weeklies.
-Honestly, book wasnt that great for me. Lots of trhings youve already seen, not much new stuff. Didnt take away too much.
Finished that one.
Next Book is CREDIT SPREAD OPTIONS FOR BEGINNERS by FREEMAN PUBLICATIONS
Its a shorter one, first half a repeat of all books just explaining what options and greeks are, but the 2nd half looks promising for some new info, Will have to discuss in next months.
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STAT REVIEW
I now have enough data for some realistic nunmbers, im going to include half of my May trades as thats where my consistent stat keeping started. I am also removing all trades prior to half may as they will skew stats and averages due to poor record keeping. So everything I did above is worth a redo come next August.
Some straight numbers then well get to deeper dives and questions I had asked myself throughout the month
FOR ALL TRADES (Going down my list of all variables tracked)
46 Trades 78% WR Avg +$83
Avg Position size 12
27 Bear Trades
19 Bull
From In price to Sold Strike % Difference Avg 2.6%
Avg Buy .51
Avg Sell .84
SOLD OPTIONS
Avg Delta 23
Avg Theta 64
Avg IV 47
BOUGHT OPTIONS
Avg Delta 13
Avg Theta 58
Avg IV 54
Avg BP $4124
Avg Risk $1285
Avg Max P $281
Avg Max L $3843
Avg Estiamted RR .24
Avg MAX RR .15
Avg % against me 1.34%
Avg % to stop 98.9% (A 100 means it hit stop, 98.9 means on average, the trade at worst got within 1.1% to my stop from my in price)
Avg Ratio to Stop .52 (1 means hit stop, 0 means never went against, .5 means halfway to stop)
Avg MFE on Bought $.76
Avg MAE on Sold $1.35
Avg MFE $ on B $249
Avg MAE $ on S $580
Avg MAE Total $-331
Avg % to Max L 14%
Avg MAE RR -.20 (On Avarage, trades only got to 1/5 $$$ what I was risking)
Avg % MFE on B 55%
Avg % MAE on S 75%
Avg B Out .14
Avg S Out .36
Avg P/L $102
Avg Commission $18.63
Avg Trade +$83
6% of trades entered in before break of prev d close
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39% before pred Hi/Lo
80% before prev W Hi/Lo
52% Touching BBands
39% RSI >70 or <30
63% Flags
40% Para/Cap
52% Flat top
68% Fib S/R
61% Prev S/R
52% Ind Chart Favor
39% Ind TB Favor
24% Ind Perf Favor
ATR 7.8
46% Broke Current HOD/LOD
20% Broke Prev HOD/LOD
39% Was I ever Stressed
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ALL the following are variables on Day 1,2,3
Most trades are opened on Wednesday which reflects Day 1, Thursday day 2. Since friday is Exp, Rarely do I have a day 3 to fill in so those numbers will always be low.
VWAP Close in favor
59%
37%
2%
Close PrevD in Favor
63%
33%
2%
Close from Open in Favor
54%
30%
2%
SPY Close in Favor
48%
30%
7%
Ind Perf in Favor
26%
2%
2%
Frequent Queries Day 1,2,3,
Day 1
Size 28
Close Green
50%
56%
55%
Day 2
Size 31
50%
59%
55%
Day 3
Size 22
50%
43%
52%
Day 4
Size 64
44%
48%
57%
I am also tracking option metrics upon entry and eod and end of following days.
The if long, it obviously helps to have more calls than puts to add to my case, that among other variables, I give an x if the change from EOD to EOD helps my position or not.
From Open of trade to Close
Beta 12%
Vix Vol 44%
Hist Vol 7%
52wk IV 32%
IV Percentile 46%
P/C Ratio 37%
P/C OI Ratio 2%
EOD 1 to EOD 2
Beta 16%
Vix Vol 28%
Hist Vol 8%
52wk IV 20%
IV Percentile 24%
P/C Ratio 52%
P/C OI Ratio 44%
Put Vol 48%
Call Vol 48%
Total Contract Vol 48%
Avg Vol 36%
Avg Put Vol 24%
Avg Call Vol 16%
Put OI 56%
Call OI 44%
10 Loss -$4526, Avg -$452
Avg Position size 12
Back in mid may, this was probably half the size it is now.
WINNERS LOSERS
36 Wins +$8370, Avg $232 10 Loss -$4526, Avg -$452
33 Wins Exp at 0.
Avg Position size 11 14
Bear Trades 19 2
Bull 17 8
From In price to Sold Strike % Difference Avg 2.5% 2.8%
Avg Buy $.36 $1.06
Avg Sell $.63 $1.59
SOLD OPTIONS
Avg Delta 20 32
Avg Theta 69 47
Avg IV 43 65
BOUGHT OPTIONS
Avg Delta 11 20
Avg Theta 63 42
Avg IV 51 67
Avg BP $4382 $3195
Avg Risk $956 $1431
Avg Max P $254 $376
Avg Max L $4126 $2825
Avg Estiamted RR .26 .32
Avg MAX RR .12 .29
Avg % against me .97% 2.56%
Avg % to stop 98.46% 100.49%
(A 100 means it hit stop, 98.9 means on average, the trade at worst got within 1.1% to my stop from my in price)
Avg Ratio to Stop .42 .89
(1 means hit stop, 0 means never went against, .5 means halfway to stop)
Avg MFE on Bought .55 1.54
Avg MAE on Sold 1 2.63
Avg MFE $ on B $180 $499
Avg MAE $ on S $385 $1283
Avg MAE Total $-205 -$784
Avg % to Est Risk 20% 58%
Avg % to Max L 9% 33%
Avg MAE RR -.15 -.46
(On Avarage, trades only got to 1/5 $$$ what I was risking)
Avg % MFE on B 51% 69%
Avg % MAE on S 60% 130%
Avg B Out $.01 $.64
Avg S Out $.02 $1.58
Avg P/L $247 -$420
Avg Commission $14.60 $33.12
Entered in before break of prev d close 6% 10%
before pred Hi/Lo 39% 40%
before prev W Hi/Lo 81% 80%
Highest OI available? 14% 30%
Touching BBands 44% 80%
RSI >70 or <30 33% 60%
Flags 67% 50%
Para/Cap 33% 50%
Flat top 56% 40%
Fib S/R 75% 40%
Prev S/R 67% 40%
Ind Chart Favor 47% 70%
Ind TB Favor 36% 50%
Ind Perf Favor 22% 30%
ATR 8.3 6
Broke Current HOD/LOD 44% 50%
Broke Prev HOD/LOD 17% 30%
Was I ever Stressed 25% 100%
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ALL the following are variables on Day 1,2,3
Most trades are opened on Wednesday which reflects Day 1, Thursday day 2. Since friday is Exp, Rarely do I have a day 3 to fill in so those numbers will always be low.
VWAP Close in favor 58% 44% 3% 60% 10% 0%
Close PrevD in Favor 56% 36% 3% 90% 20% 0%
Close from Open in Favor 50% 36% 3% 70% 10% 0%
SPY Close in Favor 42% 31% 6% 70% 30% 10%
Ind Perf in Favor 28% 0% 3% 20% 10% 0%
Happy with PA at Close 31% 28% 6% 40% 0% 0%
Frequent Queries Day 1,2,3,
Day 1 50% 55% 53% 48% 59% 59%
Size 28 28
Day 2 49% 56% 59% 53% 70% 43%
Size 33 23
Day 3 52% 42% 49% 45% 45% 58%
Size 21 26
Day 4 44% 48% 57%
Size 64
I am also tracking option metrics upon entry and eod and end of following days.
The if long, it obviously helps to have more calls than puts to add to my case, that among other variables, I give an x if the change from EOD to EOD helps my position or not.
From Open of trade to Close
Beta 13% 10%
Vix Vol 39% 60%
Hist Vol 6% 10%
52wk IV 32% 30%
IV Percentile 48% 40%
P/C Ratio 42% 20%
P/C OI Ratio 3% 0%
EOD 1 to EOD 2
Beta 16% 17%
Vix Vol 37% 0%
Hist Vol 11% 0%
52wk IV 21% 17%
IV Percentile 26% 17%
P/C Ratio 53% 50%
P/C OI Ratio 42% 50%
Put Vol 47% 50%
Call Vol 42% 67%
Total Contract Vol 47% 50%
Avg Vol 37% 33%
Avg Put Vol 21% 33%
Avg Call Vol 21% 0%
Put OI 53% 67%
Call OI 42% 50%
Notables
So to start, I still need more data. 10 losses not really enough to gain any concrete evidence.
Some standouts and things to note for future reviews. Winners have a much lower delta and theta and IV than the losers have. That tells me my losing trades I am picking strikes to sell that are closer to ITM, or higher up fruit than the low hanging fruit, further out strikes.
Losers have 4 trades with 17 or higher delta (17,18,18,19)
That gives me a separation point. I want to see stats on Wvs L with Delta above 20 and under 20.
Numbers do correlate to more risk more reward on losers, avg risk not that much larger.
Avg Max L is suprisingly low though.
RR higher on losers which still correlates to closer strike selections.
Winners only making it to .42 against me on average.
11 wins (31%) went more than 50% to stop.
This is a good case for adding
Winners only getting down 1/8 what I am risking
Losers getting down half of what im risking.
-Which is good meaning theta has a lot of prem crush in there
% to Max L is notable. For losers only 33% on average with the worst being 62% and still wasnt account crushing.
Entry before prevd close/high any of that made no difference.
8/10 losers were touching BBands. Tells me catching knives or tops and paying for it. Must be sure to wait for better signals.
Winners clearly coming out of ranges/failed breaks and selling the tops or bottoms of it.
Winners clearly have Fib levels and prev S/R involved.
Only 1/6 of winners broke the prev lod/hod.
As for things closing in favor, it actually looks like my trades work better when things DONT close in favor.
BUT Day 2 is where numbers totally change. only 1 or 2 of the 10 have VWAP, the Open, Prev D close, SPY or Ind close in favor.
Day of entry doesnt seem to matter, but the next day follow up, does matter.
And that is huge for adding to trades. Need more data still.
Queries dont matter.
Option metrics dont seem to matter either. I want to keep going with this though, need more data.
Wvs L with Delta above 20 and under 20.
ABOVE 20 Delta W L
Avg B .58 1.66
Avg S .98 2.43
BP 2400 2075
Est Risk 924 1585
Max P 349 425
Max L 2046 1652
Est RR .34 .36
Max RR .19 .43
% Against 1.1 1.9
% To Stop 98.9% 100.7
Ratio To Stop .51 .8
MFE B .91 2.37
MAE S 1.55 3.63
MFE B $ 282 637
MAE S $ 495 1204
MAE Total $ 213 567
%Est Risk 25 33
%Max L 14 33
Mae R -.19 -.12
MFE % 65 58
MAE % 61 61
P/L 318 -170
UNDER 20 Delta W L
Avg B .16 .16
Avg S .32 .33
BP 6158 4875
Est Risk 985 1200
Max P 169 301
Max L 5987 4584
Est RR .17 .25
Max RR .05 .09
% Against .88 3.53
% To Stop 98.1 100.2
Ratio To Stop .33 1.02
MFE B .23 .3
MAE S .5 1.12
MFE B $ 89 291
MAE S $ 286 1400
MAE Total $ 197 1109
%Est Risk 15 95
%Max L 4.3 33
Mae R -.12 -.96
MFE % 39 86
MAE % 59 234
P/L 156 -875
Under 20 of course smaller buys and sells.
Much more BP required for lower delta, Higher MAX L
Risk is 35% lower on under 20. But tail end risk ends up 3x higher.
RR is better on higher delta
Higher delta seems to have a slight edge towads less volatility as in lesse movement towards stop. Lower makes sense becuase its also further out so needs more distance covered. Need more trades.
Hard to make a clear discenrment with w l and high low delta with MAE. MAE the same on winners which means risk is controlled well for the most part.
P/L tells me RR overall is less as wins are smaller and loss larger.
Overall I think this marks mid 20s as a top in terms of delta. Lower increases risk, smaller RR and bigger tail end risk, while also keeping in mind higher WR and lower hanging fruit. Higher than mid 20s I risk being wrong more often but lower est risk and higher RR.
Somewhere between .15 and .25 seems to be a sweet spot.
That combined with starting at tight spread strikes, then adding as it works with further out strikes combines bset of both worlds.
BULLET POINTS LEARNED
-You can still make money on a spread and have the stock close against you ITM. (CRWV)
-When exiting early, Breakeven is a gift.
-When exiting early, expecting to have profit is rare.
-Exiting early should be used when stock has either hit strike against me and out on first PB
-Or When stock has rel str/weak against you and you are protecting what profit you have
-Theta decay hurts your hedge faster
-Spread trades are 95%+ of the time meant to hold to exp, and strictly be right on the idea it wont close above/under certain strik
-2 Full R losers can eliminate a week of profits.
-Risk is not completely contained. You cannot 100% accurately predict what your loss is going to look like when sold strike is hit.
-The only absolulte risk certainty is MAX L
-1 Bad mismanaged Loss, can eliminate 4 wins.
-When a trade goes bad, it gets bad fast, and gets worse even faster.
-90% is not enough to get out due to commissions and yearly gains. Set a stop to protect. Dont cover it all to protect.
-Exiting early is acceptable in rare circumstances.
-Primary risk point is the sold option.
-10% Prem drop in hedge makes a 30% difference in end results. Both in favor and against.
-90% Drop in prem more than double average win while average loss only increases
-95% of wins go to 0.
-On Thursday, waiting for a pb can sometimes make the RR not worth it and miss the trade altogether.
-It is better to get in on the way up than not at all or at a worse RR.
-1% against is a warning sign
- -25% to Est Risk is a warning sign
-Breaking PREV Days hi/lo is a warning sign
-Only 4 winners went past 40% est risk (Risk 1000, 400 down is problem)
-Entry before prevd hi/lo does not matter. Enter how I would with day trades and add as it works
-Over ext spreasds are trouble. Make sure multiple variables are in favor and waiting for obvious entry
-Range trades performing better
-Winners have fib and prev s/r levels in favor.
-Day after entry closes / Price Action in favor is very important (80%)
-Higher delta spreads, while likely having a lower win rate, offer better RR and more predictable losses, making them easier to manage psychologically and financially.
LAST MONTH GOALS
Finish SMB Program
-Finished and rewatching
Dig more into when its acceptable to hedge a further out strike than the next one.
-Confidence?
-Something else?
-This was a risk understanding issue. Becuase I didnt have a clear picture on how much and what I am truly risking, it was hard to understand what moving spreads really does to my trades. Now after this review id say it is acceptable once trade proves itself. Save your biggest risk for your best performers.
Trade more! Get more Data!
-Got more, need more still
Time to sell SPY Monthlies? Where is line in sand? Create Charts of Trends.
-Business idea. Discuss in next month.
Begin spreads out of consoldaiton. Not just Overextended.
-Spreads worth it?
-Just Equity instead?
-Supercharge? (Credit buys the Long Option)
-Did plenty this month and they were the best performers. Most wins came from ranges.
Avg MAE Ratios
-Avg prem
-Got them and as usual winners dont got very far against me.
-Averages
- -1% against me.
- 40% of the way to stop
-20% of risk at worst
-.15RR against MAE
-86% of winners never went more than 40% of my est risk against me.
More info on opening trades at bell
-Spread widens, tough ins, adds later on at better fills despite better prices
-Created a trading exit plan because of exactly this.
Revisit the following
Drill down what my strategy is when it comes to spread trades.
-Strike distance?
-Learned how different hedges will allow better RR or worse.
-As well as BP and max L.
-Avg Prem?
-Dependent on delta and learned how it effects RR
-Avg IV?
-Nothing noted here. Maybe revisit in July
-Over ext?
-Need to wait for better setups. Got ahead of myself and caught mostly losers.
-Range Breakouts?
-Surprisngly the best setups were range plays
-Fund a call option trade?
-Have not done this yet. No reason not to if the setup and theme is there
I learned A TON this month. What a learning curve jump. This has been one of my deeper dive posts I have done in a whiel and it feels good. Keeps my edge sharp.
Plenty to work on. I think this month mainly revolved around risk. How it comes about what variables change it, how can I manage it and use it to advantage. Next month needs to be about how well I implement these new plans, what performance looks like using them, and adding and stepping on the gas.
NEW GOALS
What is Threshold for entering a trade
-Prem?
-Delta?
-Strike Spread?
-1:3 or 1:4 Min RR?
Stop Threshold
-50% of MAX L hit means its probably gonna fail. Why is it worth holding on to see if comes back in favor?
-60% of MAX L just bail?
-This still gives room to allow vol to cool off, a pb to occur, and range to form
-No exiting in 1st 5 min of day.
-Partial Exits?
-Half out on strike break?
-If add back in, can mean bigger better prem.
-Major news break means decrease size?
-Reduced risk which clearly the news increased it.
-Once a trade is 'Gone,' add on pbs to 1hr?
-Find plan here
-There is a point on my losers that justifys not being in the trade before it gets to the strike. What is it?
-MA curl against and loss of VA/Major level
-Huge OI levels lost?
-Trading plan of
-.20ish delta to sell
-Starter with tight spread
-Add wider
-Add even wider
-Only adding bigger risk to winners
-Adding tight spread on losers is OK as long as PA on HTF is still favorable
-Do not add to trades that hjave lost all MAs.
-Market is pumping and a lot of my trades are worth adding calls. How can I do the hero trade.
-Only 4 winners went past 40% est risk (Risk 1000, 400 is problem) Add this to risk plan, if down 40% and MAs are bad PA bad, HTF PA lost, just bail?
-Combines Swing Variables and Spread variables for one giant trade log
-Compare June/May MAE stats to July. Similar?
-Avg IV. Anything notables? W v L?
-How well are trading plans working?
-Spread increase as it works?
-Exit plans?
-25 delta?
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