MAR'24 and APR'24 - Reflections and Results

Mr.Arete
May 25, 2024
4 min read

Reflections

I am going to reflect upon three broad subjects today namely:

MAR'24 and APR'24 Monthly Options Results
Tailored Custom Strategy that never loses
Potential set ups for major profits for Q3/Q4

1 - MAR'24 and APR'24 Month Options Results

Picture references attached below:

In summary, Mar'24 and Apr'24 saw a loss of $420 per 1 contract and -$380 per 1 contract respectively.

This is driven by two main reasons:

Many of the bi-directional trade set ups done during earnings did not materialize. For some strange reason, many stocks actually did not move as much as intended this quarter post earnings.

For example, we were expecting a +/- 8% move post earnings for big tech names but some moved a mere +/- 5%

For our trades to be profitable, we needed the stock price to move substantially after earnings in either direction. The reality is, some did not which resulted in some losses.

Next, did a $SPY put to hedge the downside in Feb'24 as I had other bullish positions opened only to see the market dropping (and hence bullish positions making a loss) and thereafter seeing a recovery (which makes my $SPY bear put a loss). Almost feels like the market is rigged at this point but it was interesting to observe this happening. I think we can all agree that betting against $SPY is almost always a bad idea.

Additionally, did a bear trade on $GE which seemed overbought and stated for reversal which did not happen. This was also my first credit spread trade done in a long time and what a way to start off with a loss.

If you noticed, all the bearish trades are the ones which loss haha. Not that my decisions are influenced by any news/media outlet but this goes to show that if you trade solely based on the news you are likely not going to make it out profitable as an options investor or Stocks for that matter.

Since Q1'24, literally every news outlet was pointing towards a recession. If you look back now from where we are in May'24, we are clearly in a bull run.

With that being said, going to keep executing and staying consistent.

2 - Tailored Strategy which can never lose

Amongst all the volatility and "in-decisiveness" in the markets in Q1 this year, I wanted to tailor an options strategy which would not be affected by these volatile and confusing price movements as I was honestly sick and tired of the way the market was behaving.

Say for a $330 stock, after earnings it can drop to $300 and then recover back up to $330 again in 4 days. This is not how a stock usually would move. You can clearly see from here, even if you did the right trade and bought a put option, you would have lost all your profits in 4 days. Similarly, if you bought a call option, you would likely take the loss a day after earnings only the see the stock rise up again to place you in a profitable trade (if you held). Usually if a stock drops or rises after earnings, it tends to stay in that range for awhile... this clearly did not happen this year.

Before I share the summary of how this strategy works, we need to understand these conditions:

These can be done weekly or bi weekly depending on whether there are good options arbitrage
Suitable more for people with >100K Portfolios (although there is a way to get around that if you have a smaller account ;))
Returns might seem small but if you multiply it by the number of weeks, it is not small

Let's examine an example for $AMZN on 14th Apr'24

From there you can see, by expiry (the bold line) we are guaranteed at profit of $83 no matter where the future stock price of $AMZN goes.

From an ROI perspective, that's a $83 / $18,500 = 0.5% return in 2 weeks.

0.5% might seem small but it actually isn't. Furthermore, this is guaranteed.

We have got 52 weeks in a year. That means if we do this every 2 weeks, we can do this 26 times.

26 x 0.5% = 13% guaranteed.

This is a great strategy that already gives above average returns. There are more ways to beef this up slightly even more (such as "loaning" out your 100 shares to IBKR to receive an interest) but the main point here is, you can use options and pair them with stocks to help you safely and consistently achieve a above average return.

Using the same $AMZN example, for those we are more advanced, you can even take it one step further and trade this during earnings.

See below, we are risking $100 to potentially make $400.

R:R => 4:1

I will stop here now as I do not want to get too much into the details. The key takeaway for this topic is while options can and have the reputation of being "risky", it actually isn't if you actually know what you are doing and why you are doing it.

3 - Potential set ups for major profits for Q3/Q4

To conclude this blog post, I will share some tickers which I personally will have a stake in and do see opportunity for nice profits in the next 2 quarters. I entered most on 23rd May'24.

I will share the charts but will not write down the technical analysis for them here... and give some strike prices for you to consider. If you have not already learnt TA and price action, I urge you to :-) $AMD (Target $175)