Weekly Options Trading Review: October 12 through October 16, 2020

Rather than listing out every trade I made last week, going forward I am most likely going to highlight a couple trades only. Like my options trading skill level at this point, this is all still a work-in-progress and hope to settle into a posting routine that is regular, sustainable and still achieves a level of transparency.

First, the basic numbers: Closed 18 trades for $23.63 profit (78% win rate). Opened 17 trades.

This week I plan to highlight two of my biggest losers to date: a trade in Nike and Tesla. One of which I would probably make again, the other I hopefully have learned something from and won’t make the same mistake in the future.

First is my trade in NKE.

NKE Call Credit Spread (October 16, 2020 $125/126 @ +$.22 Credit)

  • NKE Call Credit Spread (October 16, 2020 $125/126 @ +$.22 Credit)
    • Contracts: 1
    • Max Profit: $22
    • Collateral: $100
    • Max Loss: $78
    • Opened: September 22, 2020
    • Closed: October 13, 2020
    • P/L: -$73

I opened this trade the day before earnings were to be announced. I made a guess that, due to COVID-19, the earnings report would not merit the recent rise in the stock. I guessed wrong, as Nike’s online presence appears to be taking off. In addition to the stock price immediately blowing past both my short and long strike prices, implied volatility had increased as well. So not only did I pick the wrong direction of the move, I also was on the wrong side of volatility. On top of all this, the liquidity in NKE options trading isn’t all that great. If I was set on making a trade, I should have either waited until after the earnings to see what happens, or I really wanted to make a speculative play, buy either a long put or call so that I still have defined risk and I don’t lose to the increased volatility, as well. I’m curious how a basic calendar spread would have done here.

Next is my trade on TSLA.

  • TSLA Call Credit Spread (October 16, 2020 $423/425 @ +$.75 Credit)
    • Contracts: 1
    • Max Profit: $75
    • Collateral: $200
    • Max Loss: $125
    • Opened: September 25, 2020
    • Closed: October 13, 2020
    • P/L: -$97

This one is my biggest loser to date. It is my first time trading a spread with more than a $1 spread, with this one being $2. I took in a decent premium thanks to the high implied volatility, limiting my possible loss to $125. One thing I also was able to do was sell some put spreads below the market, effectively making an iron condor. I rolled those up a bit as I approached expiration, picking up a credit each time to help decrease my total loss. Tesla goes all over the place, often for no apparent reason, which is why we see such high premiums in the option contracts. For that reason, I will chalk this one up as just a loser and nothing more, rather than a bad trade like the Nike one above.

My biggest winner from the week? Not surprisingly: TSLA. I made $25 on a Put credit spread at $388/387 with the same expiration as the previously mentioned Call credit spread. I was actually able to roll this one up closer to the money for an extra $6, putting me at $31 on the put side for TSLA. Not enough to cancel out my loser, but certainly is better than just taking the full $125 loss I would have had if I didn’t react at all.

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