October options trading review
This month I received $1,485 in premiums from selling options on a portfolio worth about $290,000. 😀
The biggest premium earned this month was from a BlackRock put option, a whole $259.
I did an in-depth video explainer here in case you missed it.
My options trades and other investments were discussed in a recent episode of the Explore FI Canada podcast.
An Alternative Investment Path to FI
I had a fun conversation with Chrissy and Money Mechanic on how to reach financial independence by using alternative investments.
What all 3 of us have in common is we invest with borrowed money to leverage our assets and create higher investment returns.
And huge congrats to Chrissy because she and her husband recently achieved FIRE. 🙂
It’s especially impressive since they have 2 children and only relied on the income of one working spouse.
The podcast episode touched on a lot of different topics including video games and meme stocks, haha.
If any listeners want additional details about my research strategies, risk management, or how I find asymmetric opportunities let me know.
If you’re a relatively new reader here you may find some interesting trivia in the episode about myself and my wide interest in investable assets.
And check out their other episodes as well, as they interview lots of amazing folks across the country. 😀
Options progress so far in 2021
Altogether I have made over $7,500 selling call and put options in my non-registered margin account.
The more options I trade the easier it becomes to manage larger positions. 🙂
October trading breakdown
Here are some key points from this month.
- I sold 12 put options.
- I bought 2 options to close my positions, including one roll with ContextLogic (WISH.)
- My total trading commission was $24.
- I rolled my $WISH option forward so nothing expired in-the-money in October. 🙂
Below is a table summarizing my transactions.
- Initial underlying price – The market price of the underlying stock/ETF when I made the options trade.
- Price difference % – How much the underlying will have to rise or fall to be In-The-Money (ITM).
- Initial days to expiry – How many days remain until the option expires, from the day that I traded it.
- Initial Delta – Measures the initial probability of an option expiring ITM. eg: if a put option has a Delta of -10%, there is a 10% chance it will be exercised.
Once again none of my options have been assigned in October. However, I have a couple of call options sold in September that are currently in the money.
Expecting November assignment
I have 2 CNQ.TO calls with a strike price of $48, and 1 TD.TO call with a strike price of $86.
Both expire in November, so maybe this will be the first time my options get assigned.
What’s funny is that most of my options are Puts. However, the 2 options that are likely to be assigned 18 days from now are actually Calls. This speaks to how overvalued the stock market is. It just keeps going up with no signs of falling. Maybe being forced to sell right now isn’t so bad. I can reduce my margin debt, and lock in some profits for the year, which helps to spread out my tax burden across time. 🙂
If my TD and CNQ stocks get called away my plan is to sell put options to buy them back again, hopefully at a lower price than I sold them at.
Let’s see how things play out. 🙂
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Random Useless Fact:
Scenes in movies are not always in real time.
“I bet I can beat him.”
Nice. That’s some impressive monthly income! I mainly sell puts and the past few months have been brutal. I’m still rolling, collecting additional income with each roll.
Keep on rolling dude. 🙂 That’s what I’m doing as well, selling puts on stocks that I don’t mind owning. I find more than anything, patience is a huge advantage when it comes to using theta strategies. You have to be super confident that your plan will work out eventually, even though if things look bad at the moment, lol.
Hey Liquid! Thanks for the shout-out, my friend. It was so much fun chatting with you. Your take on investing and the world in general is so unique.
I’ve learned a lot from you, and was thrilled to be able to share your story and a bit about your investments (both serious and wacky) with our audience!
PS Yet another HILARIOUS meme—love it! I do the same thing when I watch movies! LOL.
Same here, Chrissy. It was really fun. At first I was worried I’d be a nervous wreck, but you two created a very relaxed and welcoming atmosphere and the outcome turned out better than I expected, lol. My favourite part about the FI community is getting to have conversations with like-minded folks like you. 🙂
Hi Liquid, if your option for TD and Cnq get assigned do you need to do anything on your end or the brokerage does it automatic and nothing need to be done on your end. Can your share is the idea behind this. Thank you!
Hi Prisha. Thanks for the question. I don’t have to do anything. My options should be assigned automatically. I believe there is a fee for assignment, but I don’t know how much it is.
I will have more information in my options update post next month. 🙂
Also, keep in mind I don’t have to let my options be assigned. I could buy back the option I sold to close my position and keep my underlying stocks. Or, I could roll my options into the future and continue to hold a short position.
Thank you liquid for quick response.very informative. So to buy back option you sold do you just buy the same covered call this time and pay the premium. Meaning from your portfolio select that previous call position and select buy option this time?
Exactly. When I first sold the option I took a negative position.
If I buy back the same option my position will go from -1 to 0.
This will free me from any further contractual obligations with that particular option.
Thank you so much! appreciate it
Thats amazing man. Keep it up!
You recently tweeted about two minings stocks that you purchased. Are you planning on blogging about those stocks and why they are a strategy against inflation for you?
I’d be very interested to learn about that.
Thanks for the comment RSK. Yes, I bought some Copper Mountain and added to my Ivanhoe stock position.
I think copper and other base metals will go up in price if we see higher inflation. Another force pushing for this is the transition from fossil fuels to renewable energy. Copper is needed for a lot of infrastructure surrounding clean energy and electric vehicles.
I will have a more detailed blog post coming up. 🙂
That steady graph going up. Congrats man, imagine what it’ll be like doing a YoY comparison in 2022.
Thanks David. That’s a great idea having a year over year comparison. The US central bank is expected to finish tapering by summer of 2022 so we’ll see how that impacts the markets. 🙂
You were great on EFIC. Can’t wait for them to have you on again. I feel like you could do an entire episode on option trading. Maybe once you’ve had some ups and downs you could give your view and explain how to handle different market scenarios.
Thanks for the kind words and feedback. It would be cool to have an entire episode dedicated to options. I’m not sure if most of their audience is interested in it. Maybe it’s a topic better suited for the FI Garage podcast because that one tends to be more technical. 🙂
I can’t say for certain but it looks like we’re overdue for a correction in the markets. I’m looking forward to see how resilient my options strategy is in a downturn, lol.
Yes, the downturn will reveal ‘who is swimming naked’. We should do an deeper dive on Options on the FI Garage, both the accountant and I are employing a similar strategy as you. Would be interesting to talk about some of the other strategies too.
We can certainly do that one of these days. 🙂 I think the Accountant has more experience with options than me because he started earlier. You guys can reach out to discuss further. You have my email. 👍
Hi Liquid, big fan of yours! Thank you for sharing your knowledge! What is a good level/percentage of “buying power” you hold in your margin account? Are you worried that if a market crash were to occur, you may have all your puts assigned and have to buy the stocks?
Hey JJ. I have about $100K of unused margin right now, which gives me about 20% more buying power. So I shouldn’t have to put more money into my account unless the market falls 20% or more.
If that happens I have a HELOC I can borrow from at a low interest rate.
I’m not concerned about having my put options assigned because I would probably be buying the stocks anyway if they fall by that much. Last year in March I spent about $100,000 buying cheap stocks. With options I can do the same but the buying will just be automatic. 🙂
Curious if you would be willing to add the implied volatility you sell the put on your spreadsheet? I like to sell some puts and find that to be useful information.
That’s certainly something I can do for next time. Thanks for the suggestion, Dave. 🙂