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Wednesday, July 29, 2020

September SPX Unbalanced Iron Condor

Trade Details:

4 September SPX 2775/2765 Credit Put spread @0.65 credit each
1 September SPX 3490/3500 Credit Call spread @0.90 credit

Net Credit: $350
Max Risk: $3,650
50 days to Exp.

Friday, July 17, 2020

August RUT Elephant

Trade Details:

4 August RUT 1250/1240 Credit Put spread @0.80 credit each
2 August RUT 1640/1650 Credit Call spread @1.00 credit each

2 August IWM 164 Long Calls @0.66 debit each

Friday, June 26, 2020

August SPX Unbalanced Iron Condor

Trade Details:

4 August SPX 2430/2420 Credit Put spread @0.80 credit each
1 August SPX 3340/3350 Credit Call spread @0.95 credit

Net Credit: $415
Max Risk: $3,585
56 days to Exp.

Saturday, May 30, 2020

July RUT Elephant

Entered on Friday May 29

Trade Details:

4 July RUT 1140/1130 Credit Put spread @0.80 credit each
2 July RUT 1590/1600 Credit Call spread @1.00 credit each

2 July IWM 160 Long Calls @0.45 debit each

Wednesday, May 13, 2020

June RUT Elephant (2)

Second June RUT Elephant after the first one was closed

Trade Details:

4 June RUT 1030/1020 Credit Put spread @1.00 credit each
2 June RUT 1440/1450 Credit Call spread @1.00 credit each

2 June IWM 145 Long Calls @0.49 debit each
1 June IWM 105 Long Put @1.42 debit

July SPX Unbalanced Iron Condor

Trade Details:

4 July SPX 2260/2250 Credit Put spread @0.80 credit each
1 July SPX 3180/3190 Credit Call spread @0.90 credit

Net Credit: $410
Max Risk: $3,590
64 days to Exp.

Wednesday, April 22, 2020

June SPX Unbalanced Iron Condor

Trade Details:

4 June SPX 2160/2150 Credit Put spread @0.95 credit each
1 June SPX 3180/3190 Credit Call spread @1.10 credit

Net Credit: $490
Max Risk: $3,150
58 days to Exp.

Monday, April 20, 2020

June 2020 RUT Elephant

Trade Details:

4 June RUT 890/880 Credit Put spread @1.20 credit each
2 June RUT 1460/1470 Credit Call spread @1.05 credit each

2 June IWM 147 Long Calls @0.59 debit each
1 June IWM 89 Long Put @1.70 debit each

Sunday, March 15, 2020

Analyzing the Bear - thinking about long-term investments

One of the disadvantages I see in pure credit spreads trading is that the gains come to you almost like in slow motion. They also come in small sizes. The good old: many small winners (but larger losing trades).

And I say it is a disadvantage because when the markets rally really hard, you are inevitably left behind with a sub par performance.

It becomes even more challenging after a sudden down move. You suffer losses to the downside, the market does too, so no issue up to that point. But then if the market recovery is strong, you, as a credit spreads trader, just get your small wins, while the market gets to recover the losses much quicker.

Based on this observation, and the fact that we are in bear territory, I will prioritize my long term investment activity over credit spreads trading in this environment.

We were recently down 27% from the peak. I have been deploying some cash in long term investments but would like to add more. How low will the markets go is anyone's guess. But a look at bear markets since World War Two gives us some guidelines as to how bad things can get:


The Median bear is -31% from the peak and 15 months to reach a bottom.
The worst case is -56.8% with two other cases close to -50% peak to trough.

In terms of depth we touched -27% already. In terms of length, we are barely one month into this.
It looks like we are headed to a recession, and I feel there is no rush to deploy capital tomorrow. It is not that I have much cash sitting idle at this point anyways. So, this will be a good time to accumulate as much cash as possible.

If the S&P500 hits 2000, that is 41% down from the peak. I don't think you need to wait up to that point to start investing. In fact I already started nibbling. But that is a point where I would invest with confidence that the worst should be behind.

Now, if the S&P reaches 1700, we are talking about practically a 50% fall from the peak and roughly an 11 Price to Earnings ratio for the market as a whole at that point. At that level of undervaluation, I would invest very aggressively for the long run. Even using more aggressive stuff like SSO (double leveraged SPX) and hold for 10 years. Of course the most aggressive the investment, the smaller the dollar amount to allocate to it.

For option traders, I would also consider a long term Bull Risk Reversal, which is a combination of a Short Put that  finances a long Call.

Just to illustrate (not that you should do this right now), but just for illustration purposes:
Using June 2021 options (to give ourselves some time for a sustained rebound), we can sell the SPY 200 strike Put for 13.97 (mid price) and Buy the SPY 310 Call at 11.07 debit (mid price again).

As a result you obtain a credit to your account of 2.90  ($290 dollars for playing 1 Put and 1 Call) and you have a strong bullish exposure via the 310 Call option and the short 200 Put. If at expiration in June of 2021, the SPY is between those two numbers 200-310, then you just made $290 dollars. If the markets rally hard, you make a killing.

Now, this play is not for everybody. It is very aggressive and I also assume the willingness to take SPY stock assignment if by expiration, the SPY is below 200 (equivalent of S&P500 below 2,000). Because of the 2.90 credit received, if the assignment at 200 happens, my real cost basis is 197.10 for 100 shares of SPY. If one is willing to hold SPY shares at 197.10 for the long run, as a long term investment, there should be no problem with this play.

A 100 share assignment of SPY stock at $200 means $20,000 dollars of capital (half of that in a US margin account). Also, just to enter the options trade, the broker will freeze some margin capital in your account. As of now, ThinkOrSwim tells me that it would freeze $3,118.30 in buying power. Tastyworks is saying $3,109.31. So, definitely not for every body, but it is something that many (me included) can consider.

A position like this one can become way more attractive at lower market prices. I pulled the above numbers after Friday March 13 close, when the S&P500 closed at 2,711.02. But just the day before, March 12 when the S&P closed at 2,480, it could have been the 185/290 June 2021 SPY Bull Risk reversal for 1.45 credit. A much lower assignment point (SPY 185) and also a much lower Call strike price of 290 not 310 (meaning market doesn't need to go as far up as before). Of course it can get even more attractive at lower market levels.

You can also play a pure straight forward long Call option. I just don't like this alternative a lot right now because all options are too expensive due to the super high volatility. As the markets move up, the VIX would crash, eroding the value of your Call option in the process. Yes, it wins via directionality but loses some due to the reduction in volatility. That's why I like the addition of the sell of that overpriced Put.

You can also consider long term investments in selected companies. These are some of my favorite American names in no particular order:

In Canada I like the telcos, Telus (T.TO) is my favorite. Banks too, TD is my favorite along with the Royal Bank RY.TO. Canada National Railway (CNR.TO) is one of my all time favorites. Add a couple of utilities, EMA, FTS. All those at the right price can offer nice returns and dividends in the long run.

If you just happen to hate individual stock picking, you can go with the indexes directly. SPY, or VYM (which is the Vanguard High dividend yield ETF), etc.

Picking the exact bottom is impossible. Also unnecessary. It doesn't need to be perfect, just long-term effective. Because we will never pick an exact bottom, there will be pain to endure. Those investments are very likely to show some losses for a while. So, you need to be mentally ready for it and not bail needlessly. Whatever strategy you choose, only apply it when you have the conviction, while also deploying a capital amount that you are not likely to need to touch to cover living expenses in many years. This will give you the necessary 'staying power'.

We have interesting times ahead and perhaps a life-changing opportunity that will be cherished a decade or two from now.

It is sad that people are dying because of COVID-19 and that many others are likely to lose their jobs as a result of a recession. If a recession finally happens and the vaccine is, as most experts say, months away at this point. But that's outside the control of us, mundane, small investors. We must be strategic and plan ahead with a cold head. Determine how we will protect our investments and how we can improve our financial situation for the future of our families. It is better to do so, in moments like this one: during a weekend, while emotions are not rolling and before the panic in the markets and the media cloud your judgement.


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Tuesday, February 25, 2020

April SPX Credit Put spread

As per the rules, it is a short term oversold environment:

Trade Details:

4 April 2770/2780 Credit Put spread @0.65 credit

Total credit: $260
Max Risk: $3,740
Days to expiration: 52

TRADE UPDATE - March 9, 2020

Adjusted the Credit Put spread downwards
Closed 4 April 2770/2780 Credit Put spread @3.10 debit

The Loss is 2.45 per = $980

Opened new Credit Put spread
 4 April 2250/2240 Credit Put spread @0.85 credit
Total credit $360

TRADE UPDATE - April 17, 2020

4 April 2250/2240 Credit Put spread expires
Profit $360

Combining the earlier loss of $980 with this win of $360 we have a net -$620 
This represents a -16.6% return on Risk

Check out Track Record

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Sunday, February 9, 2020

Enhanced Investing - January 2020 Results

The first month of the year was a relatively quiet one for the Enhanced Investing account, with only 8 closing transactions. Far from the 16-17 average. We closed the month with a profit after commissions of $229.68. As a reminder, this is on a $25,000 account at Tastyworks, with 2:1 margin. Below are the details per position:

Eight short Puts closed and one Covered Call. That was all. The total realized gain represents a +0.9% growth for the account. Yeah, not a whole lot. This represents an annualized 11% return.
We keep riding a WBA stock position, assigned during 2019, and now it is also likely that we will be assigned XOM shares during the month of February. It’s ok. I think it is a very undervalued name. After the assignment, if it finally happens, I’ll start to sell Covered Calls on those shares. We’ll see how the month unfolds! Thanks for reading.

If you enjoyed this content, consider acquiring the Enhanced Investing Course. Where you will learn to properly value companies and adopt strategies that truly minimize your risks while increasing your probabilities of making money. Read more details.

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Thursday, February 6, 2020

March 2020 RUT Elephant

Trade Details:

4 March RUT 1530/1520 Credit Put spread @0.60 credit each
2 March RUT 1765/1775 Credit Call spread @1.00 credit each

3 March IWM 177 Long Calls @0.31 debit each

Friday, January 24, 2020

March 2020 SPX Unbalanced Iron Condor

Trade Details:

3 March SPX 2985/2975 Credit Put spread @0.70 credit each
1 March SPX 3450/3460 Credit Call spread @1.20 credit

I went with a 3x1 ratio instead of the usual 4x1. Totally at my discretion. I feel it is not the right time to be overly exposed on the downside.

Net Credit: $330
Max Risk: $2,670
56 days to Exp.

Monday, January 13, 2020

Long term investing in 2019 - Canadian Portfolio

Back to the TFSA Account I have in Canada (American Roth Equivalent).
This is an interesting account to me because, since I'm no longer a Canadian Resident, I can't inject any more fresh cash to this account. So, whatever it grows is from pure stocks appreciation, dividends and of course dividends reinvestments.

2019 was a good year. 
I failed to beat the TSX index for the first time, but the market was nicely up, so I don't really care.

Monday, January 6, 2020

Options Trading Results - 2019

This is about my Credit Spreads/Iron Condors/Elephants trading activity. I also do Covered Call writing and Cash Secured Puts but that's separate, and I call it Enhanced Investing.

Here's the summary for 2019

February 2020 RUT Elephant

Trade Details:

4 Feb RUT 1520/1510 Credit Put spread @0.65 credit each
2 Feb RUT 1750/1760 Credit Call spread @1.05 credit each

4 Feb IWM 176 Long Calls @0.20 debit each

Sunday, January 5, 2020

Leveraged ETFs Portfolio - 2019 Results

This is my small account inspired by the Volatility and Leveraged Instruments to Lazily beat the Markets series.

I'm happy to report it is not such a small account anymore. 2019 was a great year for the Leveraged Portfolio. But like they say, an image is worth a thousand words. Here's a snapshot of the Track record page after market close on December 31:

Friday, January 3, 2020

Trend Sniper system performance and a decision

Well, Happy New Year!

It's now time to analyze the numbers for all the investing/trading approaches that I use and today the focus will be spot Forex Automated Trading.

The LT Trend Sniper is the Forex system I implemented back in 2012, which I have been trading with real money since 2013.

In 2019 the performance was, let's say below my expectations, even though things were going relatively well for a good chunk of the year. Below is a trade by trade break-down: