2020: Week 9

Weekly Peformance Chart

This will be a week that is talked about years from now. Virus scare. Corona Crash. Whatever we end up calling it in the future, it will be a source of conversation for those who participated in the market during this event. I was stressed out this week. Not because I was worried about losing money, but because I knew there was opportunities to be taken advantage of and I had neither the resources or time to fully leverage them. That doesn’t mean I was sitting on my hands, however. Although perhaps I should have been . . .

First of all, I am grateful that my options in EEM expired last Friday. If that position had gone until Monday I would have ended up way outside of the range of my Iron Condor.

New Positions

On Monday, after the initial big drop, I wanted to get involved. I struggled with what I was seeing, what I wanted to do, and what I knew I should do. I knew I should wait and see what was happening. Since I can’t be glued to the market all day I don’t have the feel for intra-day movements like a day trader might. Along with everything else, I saw that Ford (F) had dropped again.

Instead of averaging down a few more shares I decided to use options to make my play. I truly believe Ford won’t stay as low as it is long-term, so I bought a long call option at $9 strike, expiring 9/18, for a $20 premium. This should be enough time to see that option gain value. I don’t necessarily expect it to close above $9 by then, but I have no intention of holding this until expiration anyway. My goal is to sell this option for $40 at the least. If Ford recovers earlier rather than later my second goal is to sell it for $62 to cover what I have paid for my 5 shares of Ford.

SPY

On Tuesday I once again watched in awe as the market continued to drop. I was not panicked. I still am not, but I hadn’t been paying enough attention to the major news outlets. They are selling panic in calm voices, and the market seems to be buying it. I sold a bullish SPDR S&P 500 ETF Trust (SPY) credit spread for $22 premium with spread on the 311/310 puts expiring on 3/20. While I’m still comfortable holding this position, I definitely should have waited another day or two to make a move.

Thursday it was truly hard to ignore just how much the global economy was starting to sell off. This is when my old psychology reared its ugly head, and instead of staying in cash, or taking a conservative position in line with the downtrend, I decided surely the market can’t go down from here. Yes, me, the one trading with $200, said to the global market, “This far and no more!” As you can guess the markets did not listen.

I decided I wanted to double down on my “this is going to bounce back” idea and I bought a debit spread. It only cost me $20. I bought a $330 call for $25 and sold a $338 call for $5 expiring on 3/13. Hypothetically I could earn a maximum of $720 if SPY climbs back up to where it was last week. Realistically I’m looking to grab maybe $40 or $50 off of this trade. Even more realistically, I will probably lose money on this one.

Friday I finally got smart and balanced my positions. I bought a bearish debit spread on SPY 270/269 puts expiring on 3/20 for $25. If SPY goes below 270 by 3/20 I’ll make $75. This definitely stabilized my portfolio, but with my luck the market will just hang out in the same range for the next three weeks and I’ll lose on everything.

Risk Management

What I should have done was buy a put debit spread first instead of buying the call debit spread. This would have balanced out the directionality of my portfolio earlier. Most of my positions are bullish except for XBI and my SPY put debit spread. XBI is a neutral position, however it is pretty closely correlated to SPY so even then I’m not diversified appropriately.

I’ll take my licks, learn my lessons, and move onwards and upwards.

Position Brief

It’s not as bad as it looks . . . I can’t actually lose more than the $25 I paid for my SPY put debit spread. For some reason it’s registering -$6 beyond that. I have a feeling it has to do with the volatility, liquidity, and possibly Robinhood’s system.

TickerPositionUnrealized P/L
SPYDebit Spread (Exp: 3/13, $330/$338 Calls) -$7.00 (-35.00%)
SPYDebit Spread (Exp: 3/20 $270/$269 Puts) -$31.00 (-124.00%)
SPYCredit Spread (Exp: 3/20 $311/$310 Puts) -$88.00 (-400.00%)
XBIIron Condor (Exp: 3/20 $80-$97 Strikes) +$2.00 (+5.71%)
F5 Shares -$7.40 (-17.41%)
DOGE2235 Shares +$0.5587 (+12.50%)

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