Friday, January 5

Options Trading Dec 2023

Took me the longest time to understand options. Now that i have somewhat understood what it is about and how to trade it. I decided to trade with small account of around USD 1,000 using just one strategy called vertical spread. Probably also the only strategy i can do with a small account.

A vertical spread is an options trading strategy that involves buying and selling two options of the same type (either both calls or both puts) on the same underlying asset, with the same expiration date but different strike price.

My first month of trading have so far been profitable. Hope this goes on. 

NameStrike PriceOptionNo. of CtrIn PriceOut PriceProfit / Loss (Less Fees)%Expiry DateExit Date
AGNC$8.50 Sell Put10.330.1016.32 49.4529-Dec-20235-Dec-2023
Nike$105.00 Sell Put-   
Nike$103.00 Buy Put10.560.3011.32 20.2129-Dec-20235-Dec-2023
Amazon$144.00 Sell Put-   
Amazon$139.00 Buy Put11.070.5241.32 38.628-Dec-20236-Dec-2023
Veeva$175.00 Sell Put-   
Veeva$170.00 Buy Put11.601.0046.64 29.1515-Dec-202312-Dec-2023
Estee Lauder$136.00 Sell Put-   
Estee Lauder$131.00 Buy Put11.240.07103.32 83.3215-Dec-202314-Dec-2023
Meta$305.00 Sell Put-   
Meta$300.00 Buy Put11.230.3079.64 64.7519-Jan-202418-Dec-2023
Pepsi$165.00 Sell Put-   
Pepsi$160.00 Buy Put10.700.3521.64 30.9112-Jan-202429-Dec-2023

Trades are based mainly on bull put vertical spread (bullish).

First Trade

Sell Put (Short Put): The seller (writer) of a put option, on the other hand, expects the price of the underlying asset to remain above the option's strike price. They want the option to expire worthless, enabling them to keep the premium received for selling the put.

My first ever option was on AGNC investment corp. Took a sell put option trade with strike price of $8.50 and premium at $0.33 expiring 29 Dec 2023. Meaning if price drops to $8.50 or below on expiry, i would have to buy 100 shares of AGNC at $8.50 each less $0.33 premium collected.   ($8.50 - $0.33 = $8.17, $8.17 x 100 = $817). If price remains above $8.50 at expiry date, i would just keep the $0.33 x 100 = $33 premium.

I did not wait till expiry, with over $800 locked in one trade means less funds for other trades. Therefore i closed it early for small profit by collecting partial premium ($0.33-$0.11 = $0.22). And after fees of around $6, i ended up with profit of $16.32 ($0.22 x 100 = $22, $22 - $6.68fees = $16.32). 

Second Trade

Bull Put Spread (Credit Put Spread):

  • Sell a put option with a higher strike price.
  • Simultaneously buy a put option with a lower strike price.
  • Both options have the same expiration date.
  • This strategy profits when the share price remains above the higher strike price.

My second trade, which has been the blueprint for all other trades was on Nike. 
Did a vertical bull put spread on this one. 
  1. Sell a Put Option:

    • Sell a put option with a strike price of $105.
    • Receive a premium of $2.25 per share.
  2. Buy a Put Option:

    • Simultaneously, buy a put option with a lower strike price of $103.
    • Pay a premium of $1.69 per share.

    Both options expire on 29 Dec 2023.

If price remains above $105 on expiry, i keep the net premium of $56 ($2.25 - $1.69 = $0.56 x 100)
If price drops between $105 and $103, i make a partial profit. (Profit = Net Premium Received - (Higher Strike Price - Current Stock Price)
If price drops below $103, i suffer maximum loss. Maximum Loss = Difference in Strike Prices - Net Premium Received = $2 - $0.56 = $1.44 per share.

Price was within range of strike price on a few occasions, to ensure i don't actually suffer a loss, i exited early with small profit of $11.32 after fees ($0.56 - $0.30 = $0.26 x 100 less $14.68 fees = $11.32)

Total profit for Dec 2023 came up to $320.20 after fees and at 45.20% return. 
Looking forward to Jan 2024. 
Below are some trades for Jan 2024. May to profits be with me. ;)

Open Trades In Jan 2024
NameStrike PriceOptionNo. of ContractsIn PriceOut PriceProfit / Loss%Expiry DateExit Date
United Health$520.00 Sell Put
United Health$515.00 Buy Put11.100.4154.32 49.3812-Jan-20244-Jan-2024
Microsoft  $355.00 Sell Put
Microsoft  $350.00 Buy Put11.120.000.0026-Jan-2023
Elevance Health$455.00 Sell Put
Elevance Health$450.00 Buy Put11.360.000.0026-Jan-2023
Fortinet$55.00 Sell Put
Fortinet$50.00 Buy Put11.160.000.0016-Feb-2024


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