Week in review (Jun 5 - 9) - Monster losses incoming?
Should've cut my losses.
Instead, I ignored my rules, and decided to go with the hope/pray strategy.
As a result, I'm sitting on some monster losses right now, mainly with ADBE and TGT. ADBE has earnings next week as well, so those losses may get locked in soon.
I haven't actually closed any of these positions, so technically they are not losses yet. 🙃
All this made me realize I suck at cutting my losses when I should.
So, I've decided to revise my strategy a bit this week:
My max loss will simply be my position size. If I enter a $5 wide credit spread, then my loss will simply be my entire position, minus whatever credit I take in. As long as the Max Profit is enough relative to the Probability of Profit, then expected value should be positive. Right?
E.g.: I sell one $5 Bull Put Spread on NKE (i.e. Sell strike @ $95, Buy strike @ $90). I take in a $0.80 credit. So my max loss is $420 ($500 - $80). Based on my portfolio size this is around 1.5% risk. If the probability of profit is 85%, then it will be profitable.
With this strategy, I no longer have to worry about cutting my losses. Just simply let it run its course.
Will this work? No idea.
Here are the trades I opened and closed this week:
Opened:
| Ticker | Action (open/close) | Type | Date | Expiry | Sell Strike | Buy Strike | Premium | Qty | Fee | Net |
|---|---|---|---|---|---|---|---|---|---|---|
| NKE | open | BPS | 2023-06-01 | 2023-07-21 | 95 | 90 | 0.82 | 2 | 1.13 | 162.87 |
| IWM | open | BPS | 2023-06-01 | 2023-07-21 | 160 | 158 | 0.26 | 4 | 8.58 | 95.42 |
| DD | open | BCS | 2023-06-01 | 2023-07-21 | 72.5 | 75 | 0.45 | 2 | 0.2 | 89.8 |
| ADBE | open | BPS | 2023-06-02 | 2023-07-21 | 390 | 385 | 0.8 | 2 | 1.34 | 158.66 |
| XLE | open | BPS | 2023-06-05 | 2023-07-21 | 74 | 70 | 0.6 | 1 | 1.4 | 58.6 |
| ABBV | open | BPS | 2023-06-05 | 2023-07-21 | 130 | 125 | 0.75 | 1 | 1.4 | 73.6 |
| TSLA | open | BCS | 2023-06-06 | 2023-07-21 | 250 | 255 | 0.95 | 1 | 1.4 | 93.6 |
| TWLO | open | BCS | 2023-06-07 | 2023-07-21 | 75 | 80 | 1.05 | 1 | 1.6 | 103.4 |
| NFLX | open | BCS | 2023-06-07 | 2023-07-21 | 480 | 485 | 0.62 | 1 | 1.41 | 60.59 |
| NKE | open | BPS | 2023-06-08 | 2023-07-21 | 97.5 | 95 | 0.43 | 1 | 2.1 | 40.9 |
| VMW | open | BCS | 2023-06-08 | 2023-07-21 | 145 | 150 | 1.2 | 1 | 0.6 | 119.4 |
Closed:
| Ticker | Action | Type | Date | Expiry | Sell Strike | Buy Strike | Premium | Qty | Fee | Net | Profit/Loss |
|---|---|---|---|---|---|---|---|---|---|---|---|
| SYF | open | BCS | 2023-05-24 | 2023-07-21 | 33 | 37 | 0.6 | 2 | 0.2 | 119.8 | -140.4 |
| SYF | close | BCS | 2023-06-05 | 2023-07-21 | 37 | 33 | -1.3 | 2 | 0.2 | -260.2 | |
| NKE | open | BPS | 2023-06-01 | 2023-07-21 | 95 | 90 | 0.82 | 2 | 1.13 | 162.87 | 41.39 |
| NKE | close | BPS | 2023-06-02 | 2023-07-21 | 90 | 95 | -0.6 | 2 | 1.48 | -121.48 | |
| IWM | open | BPS | 2023-06-01 | 2023-07-21 | 160 | 158 | 0.26 | 4 | 8.58 | 95.42 | 40.93 |
| IWM | close | BPS | 2023-06-02 | 2023-07-21 | 158 | 160 | -0.13 | 4 | 2.49 | -54.49 | |
| XLE | open | BPS | 2023-06-05 | 2023-07-21 | 74 | 70 | 0.6 | 1 | 1.4 | 58.6 | 26.2 |
| XLE | close | BPS | 2023-06-08 | 2023-07-21 | 70 | 74 | -0.31 | 1 | 1.4 | -32.4 | |
| ABBV | open | BPS | 2023-06-05 | 2023-07-21 | 130 | 125 | 0.75 | 1 | 1.4 | 73.6 | 2.2 |
| ABBV | close | BPS | 2023-06-06 | 2023-07-21 | 125 | 130 | -0.7 | 1 | 1.4 | -71.4 | |
| TWLO | open | BCS | 2023-06-07 | 2023-07-21 | 75 | 80 | 1.05 | 1 | 1.6 | 103.4 | 36.8 |
| TWLO | close | BCS | 2023-06-07 | 2023-07-21 | 80 | 75 | -0.65 | 1 | 1.6 | -66.6 |
- Closed Net Profits: $7.12
Notes and Lessons #
Cut my loss on SYF, which was a good decision. Wish I had done the same with all my other losers which I'm still holding.
Still managed to squeek out $7 of profit 😂.
Let's see how my new strategy plays out.