March Trading Recap

I’m going to start documenting my options trades here again. Starting fresh. Let’s dive in.

March 4, 2017

$AGN

- Context 
- Sold The April 21 (38 DTE) Iron Condor on $AGN
- Short $225 Puts, $250 Calls
- Long $220 Puts, $255 Calls
- Max Risk: $315
- Max Profit: $209, Probability of Profit: 58%, POP50%: 68%
- Delta Neutral

Rules
- Manage at 50% Profit if UNCH or 25% profit before 30 DTE
- If tested at or before 30 DTE, roll the untested side
- If Max Loss is reached after 30 days, roll up/down untested side, roll out/up tested side. Close at 20 DTE

Results
On 3/21, I closed this trade for a $56 Profit (25% of Max Profit) to take risk off the table and redeploy. I did this because on 3/21, we saw a 1% drop in the S&P that I’ve been looking for and didn’t want any systemic risk that could lead to a gap loss.

$MRO

- Context 
- Sold The April 21 (35 DTE) Jade Lizard on $MRO
- Short $15 Puts, $16 Calls
- Long $18 Calls
- Max Risk: $135 or Assignment on the short put
- Max Profit: $104, Probability of Profit: 54%, POP50%: 57%
- Short Delta

Rules
- Oil had a 10% down day today
- $MRO has been pretty stationary 
- If $MRO approaches short calls, roll up and out 1 week
- Close @ 50% profit by 20 DTE or 25% profit by 30 DTE, whichever comes first.

Results
On 3/21, I closed this trade for a $26 Profit (25% of Max Profit) to take risk off the table and redeploy.

$GM

Context
- GM has an inflated IV Rank of 46%
- Dividend Yield at 4.18%. I don’t mind owning this while selling calls and collecting the dividend.
- Sold the $36 put @ 26 Delta
- Max Profit: $61
- Max Loss: Assignment

Rules
- Roll once if tested on the short side. Take assignment if tested again.
- Close @ 50% Max Profit if $GM rallies

Results
On 3/17, $GM has fallen and I’m short 41 Delta. I rolled out one week per my rules to bring in an additional credit. Now I’m sitting at a $146 Max Profit if $GM recovers or a $34.54 assignment price. I’ll baghold if assigned.

$SPY

Context
- Volatility is super depressed. We’ve gone 108 days without a 1% down day in the S&P. Vol is cheap right now so I want to get long volatility. Ideally, for a credit vs a debit.
- Sold a modified Iron Butterfly on $SPY

The Set-Up
- Sold the June ATM $237 straddle
- Long the puts and calls 10 strikes away. Instead of buying a one lot on the wings to hedge risk, I bought 2x so I will profit from a large move in either direction if $SPY gaps far away from my short straddle.

Visualizing this modified Iron Butterfly with PNL

Risks

  • Selling this at 90 DTE, Theta won’t be working as fast for me.
  • Loss range is appx +/-$13 width. $SPY could easily just continue to coast 50 Cents per day in either direction without any real significant vol expansion potentially leaving me right at the Max Loss.
  • Short Straddle is fairly narrow. If $SPY stays rangebound, $233-$239 is where I gain money from the straddle side.

Rules for the Trade

  • If 25% of profit received, close the trade and redeploy
  • At 60 and 45 DTE, if short strikes are tested w/o a >1% daily move in $SPY, manage untested side.
  • If untested by 60 or 45 DTE, leave the trade on and allow theta decay to accelerate until 25% of profit received

Rationale Towards Large Movement

Obv we’ve gone 108 days without a 1% down day in the S&P

So looking at the following calcs at expiration:

  • 1% down = $234.63 (short straddle is almost at breakeven)
  • 3% down = $229.89 (loss)
  • 5% down = $225.15 (about max loss)
  • 10% down =$213.30 (profit from extra put)

Results
- 2 Days after putting this trade on, $SPY hit a 1% down day. Volatility doubled and I closed this out at a $65 profit and redeployed the same set-up using the modified ATM straddle.