It was a quiet week to close out 2020 and my first month or so of options investing. Very little to report, but here’s what I’m looking forward to next.
Currently, my account market value sits at $2,613, down 4.1% from the week prior and +4.5% overall. My GE call options have a current value of $550.50, ~21% less than my cost basis. VLDR closed the week down at $22.82, putting my value ~14% above cost. With VLDR’s entire week’s daily movement between $21 and $25.50, there was nothing much for me to watch each day. As my current CC doesn’t expire until Feb 19th, I’m still in waiting mode.
However, as I previously noted, I need to test my prior poor decision to roll early. As a reminder, on Dec 21st, I rolled my Jan 15th CC out to Feb 19th, for a net of $68 ($105 – $37) to close the position. I then opened Feb 19th for $140. Note: I’m ignoring commissions here, but I don’t for my actual P&L.
In retrospect, with discipline, I shouldn’t have considered rolling until Jan 4th or 5th – less than 2 weeks to expiry and about 45 days to the next expiration. So this coming week, I’m going to paper trade rolling my position to see what difference it would make. In general, I’ll look for the following:
- A red day on the underlying to close my position. Ideally, I’ll net a return on this closed position
- For example, my benchmark will be to reap >50% of the value I initially sold the call. In this case, buying for less than $52
- Next, I’ll look to write my next call
- As I don’t need to immediately write it, I could wait until a green day and
- Because I’m adding a second month, I will want the next CC to push my total return on invested capital to 10%
- I’ll still look for ~.3 delta and at least $30 strike. The $30 strike is my level, based on cost basis, that I’m comfortable letting the underlying go. A 50% return (plus whatever premium) is fine where I don’t feel bad if VLDR goes above breakeven ($30 + premiums).
Then for GE long calls, I’m not expecting to do anything again next week. Earnings aren’t until the last week of January, so I’m not considering any action until at least then.
As a last note, I’ve been reading reddit posts and other articles daily about what others are investing in / looking forward to. I have to remind myself that I don’t have unlimited funds and must prioritize how to deploy my limited investment. I am excited about SPACs and other high growth / high risk plays. Fear of missing out is real and I recognize it in myself. But, I’ve set a goal and, I think, a reasonable path to achieve it. Anything else is irrational and allow my emotions to cloud my judgement. I don’t need ’em! This is hard enough!