Positions Closed

PRFT

Date: 1 Dec
Options: BTC 17 Dec 145 Call
Price Entered: 4.6
Price Exited: 0.92

Comment

Option hit the 20% mark and was closed using a limit order.

AMD, CROX, ENPH, INMD, PRFT

Date: 2 Dec

Too many positions to list down here. Refer to 3rd Dec journal entry below.

Journal

2 Dec

Yesterday night (US 1 Dec) was brutal. The night started with the indices moving up, and most of my stocks were in the green. I had a bad feeling about INMD as it was the only stock in the red. Given the strong market movement at that time, it was evident that INMD was weak. I considered closing my INMD position but it was near midnight for me, which was my bedtime. Hence, I got lazy and decided to give INMD one more chance.

The next morning, I woke up to see bloodshed on Wall Street yesterday night. I learned a lesson. Hope is not a strategy. When Omicron first caused the market to retreat, I should have been more ready to exit my positions instead of adopting a wait-and-see attitude with my (paper trading) money on the line. I was initially about two to three thousand dollars in profits (I think this is excluding the money I paid to roll my positions from last month), but all my profits have vanished more or less over the span of a few days. Now I am at a loss of $92. It would have been more prudent of me to protect my profits earlier given the uncertainty of the Omicron virus and the fact that the market bull run was more or less over-extended. I could have closed all my positions, waited on the sideline and enter again when things settle down. This is especially true given that I was profitable.

On hindsight, I should also have given more attention and priority (over sleep) to my trades. For instance, I should have acted to close my INMD trade yesterday (1 Dec) instead of choosing to go to bed. In addition, if I had bothered to check the charts for INMD, I would have seen that on 30 Nov, INMD was down a lot on high volume (7.62mil vs average volume of about 2 million).

Oh well, could haves and should haves…

Lessons Learned:

1. Hope is not a strategy
2. In times of uncertainty (e.g. an unprecedented pandemic?), it is better to close your positions (esp when they are profitable) BEFORE you wait and see
3. Night time is not for Netflix.
   If I want to make money from trading, I better devote more time to it, especially at night when the market is open. However, I try to avoid trading in the first hour after market open. Hence, I should be more active from 10.30am ET onwards, which sadly corresponds to 11.30am SGT.
4. In general, do not roll out and up. If the stock has moved a lot in the previous month, there is a relatively high chance it will pullback the next month. Rolling out and up increases the breakeven price of the stock and is not suitable for my risk appetite.
5. Do not rely on IBD to decide whether to close a position. When I last checked IBD 50 on 30 Nov (before market open), INMD was still #1 on the list despite its price dropping massively. After the plunge yesterday, both INMD and PRFT just disappeared from the list completely.

My plan now is to close my positions in the following tickers (for both the covered calls and wheel strategy portfolios): INMD, and PRFT. The reason is that they have both dropped (way) more than 7% from my entry price.

For ENPH, it dropped to less than a dollar away from the 7% mark. I wanted to close it initially. However, news just came in (literally as I am typing this) that it is participating in some program and market seems to be reacting positively to it. So, the greed in me is prompting me to wait again.

For CROX, the stock is currently (slightly) underperforming the S&P 500 based on the last 20 days. For AMD, it is outperforming S&P 500 but seems to be doing badly premarket at the moment.

I am keeping BLDR.

I will check all my positions again at 11.30pm (10.30am ET) and enter the orders to close INMD and PRFT. For ENPH, I will monitor and see how the market responds to the news today. If there is no major surge, I will close the position as well.

For CROX and AMD (both without compelling reasons to keep or close), I will monitor for a bit longer. If they ever go below the 7% mark ($149.11 for AMD and $155.98 for CROX, which includes the cost for rolling up previously), I will close them.

3 Dec

So, I ‘semi-followed’ my plan and closed my positions yesterday night at around 10.30am ET. The irony is, I happened to close at one of the lowest point of the day. If you refer to the chart below, you can see that after the initial rally at the opening, S&500 dipped to a low point at 10.45am before moving up and closing strong.

I sort of ‘panicked’ seeing the reversal from 10am to 10.45am and decided to close my CROX and AMD as well. I did not want a repeat of what happened on 2 Dec, where stocks reversed from a rally and closed low. Unfortunately, I closed near the low price of the day for all my stocks. This taught me a lesson:

Do not try to time the market.

I kept waiting for a reversal to occur, because I did not want to exit and see the market rally after that. It happened exactly that way yesterday. However, despite the rally after my exit, my greatest loser (INMD) still closed way below the price that I should have exited earlier (way below the 7% mark). If I had closed my positions earlier, I would cut my losses in INMD by more than 50%.

Speaking of which, I made a mistake in my calculations for INMD. I mentioned in my Nov paper trading post that “The stock did breach the 7% drop below my entry price of $83.86. However, if I close the position now, I will incur a loss of $1046.”.

Turns out, my calculations was wrong. I did not include the credit that I got for selling the Nov CALL. If I included that, my loss would only be $4.31*100, which was easier to stomach:

Cost of stock = 83.86
Credit for selling Nov Call = 6.10
Cost of rolling previously = 2.2
Cost to buy back option = 1.45
Credit for selling stock = 77.1

Loss = 83.86 – 6.1 + 2.2 + 1.45 – 77.1 = 4.31

Nonetheless, back then I still believed in INMD and was unwilling to stomach even a $356 loss (by rolling down to the $80 strike). Hence, I may not have closed my position too. Who knows.

Anyway, here’s some calculations to summarize what happened:

If I did not sell options, the loss will be $3428.

If I had sized my positions correctly (i.e. each stock accounts for about 20% of my portfolio), the percentage loss will be 25.5%*20% = 5.1%.

After accounting for the credit from selling options, net loss = $2318.

If I had sized my positions correctly, percentage loss = 19.2%*20% = 3.84%.

Lessons Learned:

1. Selling options does help to reduce losses
2. Close positions when stock drops by 7% (that reduces the INMD net loss by $517 and reduces the total percentage loss to 2.61%).
3. Even after the abysmal performance this month, the loss is not catastrophic. (I’m pointing this out to help me overcome my fear of losing).

6 Dec

I currently only have one position – BLDR – left for both my covered calls and wheel portfolio. From this point onwards, to make my portfolio more manageable (easier to track), I will only focus on the wheel portfolio. This portfolio started with a clean balance of $100k. My plan is to follow the wheel strategy:

• Start with cash secured puts.
• If assigned, sell covered calls.

Nonetheless, I will continue to monitor the BLDR position in my covered calls portfolio until this month’s expiration date and report on the final performance of the portfolio.

As of now, BLDR is still outperforming the S&P 500. The covered call position is currently ITM and I have no intention to roll out or roll up given the current climate. I’ll allow assignment if the position remains ITM on expiration date. Else, I will let the option expire worthless and sell the stock (unless I have reasons to close the position prior to expiration).

The wheel position is OTM at the moment.

I have no plans to enter new positions this week. Next week marks the start of 40 days before the Jan 2022 expiration date. I will start looking for new positions to sell puts next Monday.