Week of 5/19
What a great week! I decided it was time to take the training wheels off and explore some other strategies. Using vertical debit spreads, which is just the reverse order of the vertical credit spread I have been doing, gave me the ability to be short delta and maintain my long theta priority. There is no reason to take a trade where time is not working for you. Here is a little info on the thought process of strategy selection
Hi IV (tend to be long delta)
- -Earnings = put credit spread
- -Dip in market= put credit spread
Call credit spreads will not necessarily see a reduction in vega if you get a directional move down. That is why I stay on the put side
Low IV (tend to be short delta)
- -Market top= put debit spread (primarily as hedges against the put credit spreads)
- -Ranged market= calendar spread ( these are slow trades)
Both can be used interchangeably at market top depending what you believe the resolution will be.
Utilizing a mix of these strategies keeps my portfolio balanced, to some extent. It also helps in finding trades when the market is not helping out much.
We had the first sign of volatility in a long time, and I took advantage in a big way with that AMZN trade. I don’t normally trade in more than one lot, but when AMZN gives you a dip to buy and then gives you another chance to more than double your credit, you sell the second lot. I happened to have several hedges on the day that the market shook a bit which helped with overall performance. They were not especially large but it is good on those days to have something to scoop up some profit. It is healthy to find opportunities in both directions. I am also implementing a number of trades requirement of five to ten active trades at all times. For the statistical advantage to play out, I need a large enough number of occurrences. That is subjective, but for this account size, those numbers are sufficient. You will notice I have a lot more trades this week than in previous weeks. I ended the week with eight trades on the board. I have not booked a loss in quite a while and half anticipate a little string of losses coming soon.
Just to recap this week
- Added two new strategies (vertical debit spread and calendar spread)
- Set number of trades goal at 5-10 active