Aug 23, 2024 Update

Hey traders! This week brought decent profits despite two red days. Just as volatility was dropping, we encountered these red days, keeping premiums high. My main strategy right now is the rolling 7 DTE Put Vertical, which shouldn’t be as affected by these changes. I hope to continue earning $140 with each roll, but my more realistic target is $90.

Thursday saw nearly a 1% drop, allowing me to observe how my two strategies responded. The rolling put vertical lost significant value, even though the strike wasn’t close to being tested. Conversely, the butterfly had a closer strike but lost much less. Both strategies managed to recover fully on Friday, despite the price not completely bouncing back.

This downturn wasn’t significant enough for me to practice managing these spreads, but I need to spend time this weekend deciding how to handle a downturn. I have several options for managing broken wing butterflies, but I lack a set plan for the rolling put vertical.

The strong upward momentum faded this week as we approached the previous high. I anticipate a small pullback before the trend resumes, which is why I moved all my put strikes lower to minimize potential losses. The worst-case scenario is a pullback that breaks through all my strikes, forcing me to close for a loss or pay a large debit to roll down. I should be relatively protected against this, by making a solid management plan, but I’m not near delta neutral due to the put vertical spread.

Trade by Trade:

Roll Trade 1 to 2: In conjunction with the theta decay from the weekend and the positive price action on Monday, I was able to collect a decent amount of profit, so I rolled into this trade.

Roll Trade 2 to 3: Even thought the market went down between Monday and Wednesday, I rolled the spread as per the plan. The previous strike was 1450 (3% below current price) but now my short strike is 1470 (2.5% below current price). This did allow me to collect more premium than I would have otherwise so I’m happy with the current risk profile.

Roll Trade 3 to 4: On Thursday morning, the market went down around 1% (which is exactly what I was worried about on Wednesday) so I did a defensive roll for a $30 credit in order to bring my strikes down slightly. Fortunately the current trading price is still no where near my strike price so theta decay should keep giving me profits as the theta for this new spread is still above 40.

Roll Trade 4 to 5: Friday was gladly a green day again, so I was able to get my normal profit of $140 on the roll as usual. It’s great that I’m able to consistently get well over my target credit of $90, but there is a possibility of downswing soon so I need to decide how to change my plan for such a situation.

Close Trade 6: I continued holding this spread this week and was able to gain a decent profit from it. It performed well even on both red days and bounced back quickly which I was happy to see. I was able to close this on Friday since it hit my profit target earlier than expected.

Open Trade 7: I opened this spread since the previous one closed. I went for lower deltas, but larger strike distances so I was able to still get a decent credit on open. The max loss for this trade is a little below $3k but I have an 80% PoP and the breakeven is around 5480 (3% below current price).