March options trading update

So in February when I made 300% more options income than usual I wrote it was due to a temporary spike in market volatility and won’t happen again going forward. Well, I was wrong. 😅

I continued to capitalize on the high implied volatility in the options market in March, and earned $8,077, breaking my previous record.

This makes a total of $28,104 in options income since I started in April of last year.

Weekly options

I usually trade monthly options, or contracts with expiration dates 30 to 60 days away.

But I’ve noticed some really high premiums on weekly options for a lot of companies.
So I’ve started to sell weekly Puts on $SHOP, $ETSY, and $NFLX.
This approach keeps the duration short which minimizes risk to some degree.

If options are about to expire in the money I just roll them forward to the following week. Occasionally I may decide to take ownership of the underlying, or the contract expires out of the money because the underlying’s price increased.

The only downside to trading weekly options is it does take more time to manage these trades.
The cost is also higher of course. I spent $73 on trading commissions in March, the most I’ve ever paid, lol.

Transaction Details

• I sold 47 Puts which is a record.
• I rolled 11 options forward.
• No assignments in March, although there were some pretty close calls.
• I have now made $2,000 from $BLK via option premiums, without ever owning the stock, lol.

Purple = Short strangle
Teal= Roll

New learnings

I started to track my daily Theta to see how much time value I can capture over time. During the course of March, it appears I was able to earn 40% of the total Theta value. Theta refers to the time decay of an option. An option loses value as time moves closer to its maturity if all else stays equal. As someone who sells options short, I rely on Theta to make a profit. Ideally I want to sell the option high, and let the option expire worthless which is what happens over 95% of the time.

My March Theta averaged $651 per day. It’s important to know this number because the higher it is, the more money I should theoretically earn. 🙂

Let’s see how April turns out. The Theta value is found in my IB Trader Workstation program on the top right.

Looking ahead to April trading

I’m pretty sure we’re not going to see another record high in next month’s update. $8K of monthly income on a $330K portfolio is simply not sustainable. Otherwise, why aren’t there more people just trading options at home instead of working a 9 to 5 job? Lol.

I’m concerned I may be taking on too much risk that is not obvious to me yet. But I do expect my options income to drop to $2,000 to $3,000 per month going forward.

In any case the 2 year and 10 year US treasury yields inverted, which is a sign that a recession is coming to the United States over the next 6 to 18 months.

I think there will be another pullback in the financial markets before that happens. So I am keeping an eye on my margin requirements, account liquidity, and being careful not to get caught swimming naked, as the saying goes, haha.

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Random Useless Fact:

People often overestimate how smart they are.