Paper Trading – Oct 2021

Lately I’m paper trading two strategies – covered call selling and the wheel strategy.

This is not the best time to try the two strategies as I have not completed the book on covered calls yet. In addition, this is earnings season and a lot of stocks are too near to expiry (less than 30 days) after they announce earnings.

Regardless, I want to try out the two strategies first to get a hang of them and see if they suit me psychologically. I am a big believer that psychology plays a big part in trading. For instance, I know that day trading is too emotionally stressful for me. So, I would like to try if options selling suits me better.

I’m trying out the strategies in two paper trading accounts with Think Or Swim (TD Ameritrade).

Positions Entered

Covered Calls

CROX

Stock: BTO
Date Entered: 22 Oct
Price: 150.42

Options: STO 19 Nov 150 Call
Date Entered: 22 Oct
Days to Expiry: 28
Price: 8.5
ROO: (8.5-0.42) / 150 = 5.4%

Pros

Stock passed the IBD screen tests with strong technicals and has just announced earnings.

Cons

Stochastic oscillator is moving up and nearing overbought zone.

Remarks

I did the analysis before market open. As the stock just announced earnings, stock price moved quite a bit after market opened. I failed to do a ROO analysis again before entering the two positions. Nonetheless, ROO is decent.

INMD

Stock: BTO
Date Entered: 28 Oct
Price: 83.86

Options: STO 19 Nov 82.5 Call
Date Entered: 28 Oct
Days to Expiry: 22
Price: 6.1
ROO: (6.1-1.36) / 82.5 = 5.7%

Pros

Stock passed the IBD screen tests with strong technicals and has just announced earnings.

Wheel Strategy

CROX

Options: STO 19 Nov 145 Put
Date Entered: 22 Oct
Days to Expiry: 28
Price: 3.9
ROO: 3.9 / 145 = 2.69%

Pros and Cons

As above

Remarks

I sold the PUT option with delta 30. The ROO is not very high probably because it is less than 30 days to expiry.

WAL

Options: STO 19 Nov 115 Put
Date Entered: 26 Oct
Days to Expiry: 24
Price: 2.1
ROO: 2.1 / 115 = 1.83%

Pros

Stock passed the IBD screen tests with strong technicals and has just announced earnings.

Cons

Stochastic oscillator is near the overbought zone.

Remarks

Bid-ask spread for options is very big. Nonetheless, sold a put option with delta 30. Although the bid price was 1.8, I was filled at 2.1, which is much more favourable than the bid price and not realistic for actual trading.

INMD

Options: STO 19 Nov 80 Put
Date Entered: 28 Oct
Days to Expiry: 22
Price: 2.7
ROO: 2.7 / 80 = 3.38%

Pros and Cons

As above

Remarks

Sold a put option with delta 30 but option was very close to being ATM when I first entered the position. Only 22 days to expiry, which is too close.

Positions Closed

No positions closed this month

Positions Skipped

Wanted to enter a position for PRFT but was shocked to see the bid-ask spread for the options.

I also did not enter a WAL position for my covered call portfolio as the bid-ask spread for the options was about 70 cents.


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