FY 2024 Results + Feb'25 Reflections

Intro

Consistent with my objective to document down my journey in Arete, this post is really catching up on three months of backlog. Writing this post has been bugging my mind for a long time and I am glad to finally be able to sit down and do it.

In Nov'25, I landed a new role in a new company. I knew the first 3 months will be extremely important to establish myself as a valuable partner in the team. Compiling my knowledge from books and conversations with my mentors and friends, I wasn't going to sit on my laurels immediately after landing the role. I was on full gear for the past 4 months since Nov'24, prioritizing my performance and momentum in my career, which explains why I consciously took the decision to take a step back writing the blog; now that things have finally stabilized, I am back baby !

Special thanks really to all my seniors and mentors who I connected with, not necessarily provide me the concrete answers, but whom I could bounce ideas off and ultimately make my own decision and course of action in the negotiation and contract signing phase of my new role. Big thanks ! I am happy with my new role, the challenges it brings and the financial progression that comes with it.

Throughout the months of supposedly MIA from the blog, what I did continue to do was continuing to trade options, and document my monthly results in my channel. I also sat down and re-think-ed how do I make options trading more passive and systematic - happy to share I discovered a strategy which really resonated and connected the dots. More to come below.

FY 2024 YTD results

For 2024, due to my life changes mentioned above, full year 2024 is represented by Jan-Nov only.

In Oct'24 MTD, we made $820, and in Nov'24 MTD, we made $350.

For FY 2024 (Nov'24), we made a total of $8,000+ with an annual ROI of 78% assuming a $10,000 capital.

Overall, great year in 2024. However, landing a new role in my day job and having to dedicate more time to it in Q4 made me think about how to make options more passive. While 2024 was a year of good returns for me, it still required some time to monitor the trades and manage them. As more life commitments come my way, I need to make it more passive, and I am implementing this new strategy starting in Jan 2025.

Strong start to Jan'25, muted by market correction in Feb'25

2025 option strategy

Without getting too much into the technical details while still wanting to share to you readers here the rationale behind my 2025 option strategy, here the set of parameters governing the set of this strategy:

1. In the long term, the markets are always trending up. This means in the long term, being directionally bullish works.

2. A 100% win rate is unrealistic, plan for a 70% win rate, or even a 50% win rate. No one can ever time the direction of the markets, so don't expect you to win all the time.

3. A low risk-reward ratio is required. This links to point 2, if say we have a 50% chance of winning across a series of 100 trades, we need our profit per trade to outweigh our risk per trade in order to be profitable in the long run.

4. The market can never continue to sell-off 20% - 30% each month for 3 months consecutively.

5. We must be able to quantify and stomach drawdowns in periods where the market sells off.

   
   

The strategy which I am implementing for 2025 is what I call near At-The-Money put credit spread.

Let's just call this "Arete ATM" strategy.

Put credit spread because... it is bullish directionally (covering point 1), ATM because I'll have a risk-reward ratio of at least 1:1 (covering points 2 and 3), in the event of a market sell off of >20%, my risk is limited, quantified and I will be able to plan for such drawdowns (covering points 4 and 5). This strategy also gives us the flexibility to do trade adjustment (a more advanced concept) to repair a trade and make it profitable. Finally, this strategy is almost passive, I can open and close the trade once per month per ticker. To explain more clearly, I will use real examples to illustrate below.

Dec'24 and Jan'25 Results

We made a total of $3,000 per 1 contract set in Dec'24 and Jan'25 combined. This was also the first month implementing Arete ATM for Jan'25, which rewarded us with good returns from a absolute quantity perspective.

I also got the chance to test my trade adjustment, which worked out eventually for $ADBE. Here's what happened...

In Dec'24, we did:

--> 440/435 PCS for $ADBE expiring in Jan'25 with $2.50 credit, giving us a 1:1 risk reward. 3 contracts.

--> 470/465 PCS for $ADBE expiring in Jan'25 with $2.30 credit, giving us a nearly 1:1 risk reward. 3 contracts

In Dec when we did the trade, $ADBE just announced earnings, dropped from $550 to $475, and then dropped from $475 to $445. That's a 14% drop and another 6% drop within the same month, and a 19% drop in one month.

This is important information because:

• to point 2, the market may sell-off anytime at any given point in time

• if a naked put is sold, losses are unlimited

• the traditional 10:1 risk reward, sell OTM put option strategy will wipe out all your gains, making it impossible to repair the trade. It takes 10 winning trades to make up for this 1 losing trade, the odds are criminally stacked against you... yet this is the most common strategy shared in forums online.

We took a "loss" of 6 x $250 = $1,500. I say "loss" because this situation is temporary and I will have a plan to save the trade at a later time, which is true to my statement in point 4.

We rolled the $ADBE to 425/420 expiring in Feb'25 and collected again $2.50 premiums for another 6 contracts. In total we collected 6 x $250 = $1,500.

As expected, given that $ADBE has dropped >20% in 1 month, despite strong fundamentals in their business, they recovered back to close above $425 in Feb'25. Therefore, we collected +$1,500 to negate the -$1,500, closing at a breakeven over the course of 2 months.

Could $ADBE have fallen even more? Maybe. In that case, we would have "loss" another $1,500, bringing our losses to -$3,000 BUT we can always take the decision to scale up the # of contracts.

Let's assume $ADBE drops another 20% in Feb'25 to $355, what are the chances of it dropping by another 20% in Mar'25 (the third consecutive month) ? Quite low if you ask me, and if it does, it usually means a broader market sell-off. When that happens, on the third month if we got the balls of adamantium, we could do 12 contracts of Arete ATM, receive a total of $3,000 premium to negate the "loss" in the first two months, assuming we do a $2.50 premium with a $5 wide spread.

For more advanced option traders, we can in fact tip the scales slightly in our favor by taking a trade with a lower risk-reward ratio, for example a $3.50 credit, and receive $4,200, which will yield us +$1,200 if $ADBE doesn't drop any further. The only consideration point for this is, to obtain a lower R-R ratio, it usually means we need a slightly stronger bullish directional movement, which I believe is reasonable given that the stock has been beaten down so much, even a 5% recovery will put our trade into a winning trade.

I hope this explanation here is simple enough for you to understand why I believe this strategy works in the long run, is highly passive, and can make you profitable too.

As I was saying, Jan'25 was off to a fantastic start. Then Feb'25 came and along with it, news of US imposing tariffs on imports from other countries... and other macro-economic factors and protectionist type policies threatened to be implemented under the Trump administration. Long story short, despite healthy earnings reports for several companies, the entire market sold off a little.

Despite this, we managed to close Feb'25 with a slight profit of $1,475.

Our biggest loser was $TSLA, which dropped from $400 to $250 from Jan'25 to Feb'25, a whopping -37.5% !

Insane. Those who did the traditional sell put, they sit on un-imaginable losses.

Despite such a big sell-off in the overall market, we do have $TLT to hedge which was nice and I am glad to end Feb'25 with a drawdown which is manageable (to point 5). If the market starts to recover in Apr'25 onwards, I am confident the profits will start rolling in - it's all about patience and staying invested and not over-leveraging.

I'll see you guys in Q2, all the best and I will update again in April.

Godspeed as always,

Arete