June options trading update
I earned $1,014.18 trading options in June. Not a great month, but better than May when I lost money. 😅
The difference this time is I made more conservative trades than before. I chose high probability outcomes even though the rewards are smaller. I also sold more spreads than usual to protect my downside.
A couple of option positions expired in the money and were assigned.
- Meta (META) 100 shares at $160/share.
- Etsy (ETSY) 100 shares at $130/share.
New Learnings
- The market can go against you very abruptly.
There was a huge stock market rally on June 24. But then things turned ugly again and by June 28 the market was back down again overall. Stocks are so volatile right now it’s easy to lose a lot of money trading options if you’re not careful. - No stock is safe in a bear market.
Cash generating machines can have their valuations compressed because a slowing economy sinks all boats. This means high quality companies that normally trade at a premium like Google and Meta could see their stock prices fall more than you would expect. - The market operates in cycles.
Energy stocks held up well in the first half of the year. But it looks like they are faltering too now. This could be a good time to sell oil and buy growth.
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Random Useless Fact:
The largest fish species alive today is the whale shark, growing up to 12 meters or 39 feet long.
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Not a bad month income-wise! Not too sure about Etsy though. My wife loves them but I can’t imagine their business growing very much.. only so many people want to order hand-made trinkets online.
Long term Etsy probably won’t grow as much as some of the other stocks I like. It is a great company to trade options with though because the premiums are pretty good and the company financials are solid.:)
coinbase +9K an the total P&L is only +1k, that’s weird
Ah yes. I actually had a loss of $13,680 on June 1st because I bought to close (BTC) my existing COIN short put position. This is documented in the spreadsheet but can be easily missed because the cell isn’t wide enough to accommodate all the digits. I’ll do a better job showing this more clearly if it happens again. 🙂
And if anyone’s wondering my thought process… I basically gave up on the stock after it plunged to $70/share. So I closed my options position even though I had take a huge loss. However, after seeing Kathie Wood double down and buy more Coinbase I took another look at the company. I decided to give it another shot and sold another put option to open a new position. Long term I expect the stock to go back up and for my option to expire out of the money. A lot of the value form COIN comes from cryptocurrencies, particularly bitcoin. If BTC does well, Coinbase should profit.
Thank you for your answer 🙂 Keep up with the good work, it’s impressive 🙂 One more question, for the Puts that you sell, do you post collateral? How does it work with IB? My discount broker requires a 30% minimum collateral(in a margin account) if I sell a put. How does it work with IB?
In a way yes, I do have to put up collateral with the Puts I sell. But I don’t need to produce the cash right away.
Since I am currently borrowing against margin I have a negative cash balance. I think it’s currently around -$130K.
I’m not totally sure but based on what I can see how it works is for example I’ll have a starting excess liquidity of $100K. This represents how much my portfolio needs to fall before IB liquidates my holdings automatically.
Let’s say I sell a put option with a strike price of $200. If it gets assigned I’ll have to pay $20K to buy 100 shares. 30% of this $20K is collateral, which is $6K. So as soon as my put option transaction goes through my excess liquidity drops from $100K to $94K. And of course each day this number will fluctuate with the market.
However my margin balance doesn’t change yet. If my option gets assigned, then my portfolio’s cash balance (margin debt) will see a change of -$20,000. Otherwise I don’t incur any extra margin cost.