#olivemyoptions

I booked a flight to France. I’ve been saying I’d go since 2020.

Some things have come up that made me reconsider. Luckily, I usually end up doing the things I plan even if my actions don’t actively build up towards it lol. Ty subconscious mind.

2 weeks ago, I had a losing trade. The market crashed and I moved out my contract because I didn’t want to risk assignment. In my case, moving out those trades when volatility was high helped me gain more premium (in exchange for more risk). The original trade itself was only worth $2.70, but after rolling a couple times, I now collected $18.60. 

This morning, the contract was due to expire. I could have closed out my contract at $1.15, capturing $17.45 of premium ($18.60 total premium - $1.15 cost of closing). I had another trade that was worth $16.10 that I could have closed for $1.75, capturing $14.35 premium...But I waited. The market was going up and I knew if it kept trending, I could get out at a lower cost.  What a mistake. After trending upward, the market started to decline. I had 3 options

Roll out the contracts again to capture more premium. This would be a bad idea if the market kept trending downwards. 

Hold onto contract, hoping the market will go up. I would be in trouble if the market kept dropping.

Close contract out at the current market price...I can afford this and still get out with some premium. Just not as much premium as this morning.

So....I got out, closing the contracts at $6.80 and $9.80, I received a profit of $11.80 and $6.30 for the contracts. In total I made $18.10 instead of $31.80.

At the end of the day, I made much more premium than I thought I would, when I originally got into these trades at $2.70 so I should be happy I made the profit I did. I am...but I have a little bit of remorse having left money on the table. 

When you have to adjust your trade, you really aren’t trying to capture the additional premium, you’re just trying to buy yourself more time so you can get out break even. 

I closed out of my bearish butterfly with 20% profit! Yay. I barely held it for 24 hours. P exciting. The timing was luck, as well. The market dropped low in the AM, allowing me to exit my trade. By 10:30am, it sky rocketed. If I didn’t commit to getting out at 20% profit, I would have been stuck holding a losing position/needing to manage it.

The downside to all of this is that the market was low because Russia attacked Ukraine. It’s absolutely heartbreaking to see videos and photos people fleeing their country and running for shelter. This morning, one of my coworkers mentioned that her mother-in-law, who lives near the capital of Ukraine, woke up to bombs setting off :(. She said her goodbyes to her sister, in case they don’t see each other after this. The rest of her night and morning was spent helping elderlies, that she takes care of, move into a bomb shelter :(. My heart goes out to everyone who’s been affected by the invasion. 

The market is down today. You know what that means - bearish butterfly :). I tried to go in yesterday but my trade didn’t execute (not enough demand for the qty I ordered). V unfortunate. My friend executed his trade yesterday and made 20% profit today. Pretty good for a one day hold! Anyway, I went in on a weekly contract (surprisingly) 60 days out. Wish me luck!

This strategy makes market crashes seem fun. Which is much needed being that my other strategy are spooking me out. I’ve already adjusted a couple trades. However, all of this is teaching me that I need to be less reactive by developing rules on how to manage trades when times are bad . 

Ideas for defending or hedging against bullish trades that aren’t performing well:

Adjust the trade by moving it out to the next contract for a credit

Adjust down if (Cost to close) + (net credit) - (New premium) = Positive Credit

Buy out of the money PUT for cheap

Bearish Butterflies

Strangles

Closing early

Selling calls on stocks I own at 75% + OTM 

Roll calls if the stock spikes up again

Allow stocks to be sold even if its less than the strike price I got it for if this means I can trade successfully with the value left over

I have a hard time accepting losses, but I need to remember to treat my portfolio like a casino house. Casino’s don’t need to win 100% of the time. In fact, they only win about 52% of the time. but that 2% is enough to make them millions. Losses are okay if I can make up for it in wins.

Since the month is coming to an end, I thought it would be a good idea to review my goals. 

Income (Long term goal - be a full time investor):

Make more than what I made last year via option trading. 

Feel confident in my trading ability.

Trade everyday

Watch a little bit of trading lectures everyday

Work with my dad and Jordan to develop hedging strategies to limit loss every week

Try new trade strategies every quarter

Building habits for my hobbies (Long term goal - feel comfortable creating and expressing myself):

Daily

Journal everyday

Write tumblr posts everyday even if I don’t post them :)

Monthly

Make planner spreads every month

Travel journal for each trip

Create mini vlogs once a month

Health (Long term goal - enjoy and crave a healthy lifestyle):

Drink water everyday

Back exercises everyday

Take a dance class this year

Minimalism (Long term goal - maintain minimalistic + organized habits)

Physically organize or clean something everyday

Digitally organize or clean something everyday

Travel (Long term goal - be a nomad for the next couple of years):

Visit my aunt in France

Take my parents to SE Asia

I closed out my trade at 26% profit! Not bad for a 5-day hold. It feels good that my first real bearish butterfly did well and was fairly easy. I think luck had a lot to do with it. This trade performs well when the market dips, which is exactly what happened. This week, SPX closed at 4348. It gets complicated when the market moves in an unfavorable direction. Sometimes, the strategy requires you to close your current trade at a loss and reposition - the idea is, adjusting your position should help you achieve the profit target. There can also be times where you have to walk away from the entire strategy losing everything you put into it.

More often than not, your wins should cover your losses. Reading this, you might think, if you net profit in the end, what’s the issue? The issue is more of a mental obstacle. Accepting a loss each time you readjust, not knowing if things will pan out or if it’ll just lead to a bigger loss is scary when you’re in it. Not allowing speculation to clutter your judgement and sticking to the rules can also be p difficult. I didn’t think it would be so challenging but when you have skin in the game...things change.