Where did you trade MES for only $0.52? Thank you.

PK007 

Now that I have more data, thought it might be a good idea to populate it on a chart. Note, in order to show monthly numbers and not to make it too complicated, I will calculate the Profit/Loss and returns at the time when the last weekly option is closed for the month. This is to avoid trying to calculate realized/unrealized numbers exactly at the end of the month. November in this case, is only until the 16th and will change as the month progresses. Massive Disclaimer: Being a qualified accountant myself, I know how easy it is to make financial results look better than what they really are. In this case, a 15.8% return looks too good to be true. You must consider the following (I touched on it in my earlier post): 1. The return is only calculated on this one trade strategy using the margin requirement of 1 contract of the MES. It is extremely unlikely that you will put all your money into this one strategy. I definitely don't recommend it. 2. The wheel strategy WILL lose money if the underlying (in this case the MES) has a significant drop, lower than the short put strike and keeps on going lower. What is likely to happen in such a scenario is that I will get assigned and might not be able to sell covered calls, with reasonable premiums, but still a good distance away from the underlying price. This has happened to me before. One of the main reasons to record the strategy in this journal, is for me to learn. It’s more an experiment and for others to join in and make recommendations on how to manage the strategy better. When I do get assigned eventually, there are a few different variations of the strategy that might be useful to explore. So, it will be useful to have everything documented. I'm definitely not an expert in this strategy.

Yes, huge fat tail risk here. This strategy will crash and burn in a downturn, more so with the use of excessive leverage on futures option, no less.

SMCJB 

but you said... Since you must have the cash required to buy the stock/instrument if you get assigned, shouldn't the return be calculated based upon that cash amount that you have tied up?

SMCJB,

Selling 1 naked put at about 1 STD 8 days out today will reduce the buying power by $1,030 according to Tastyworks:



Buying 1 contract at market now will reduce the buying power by $1,254:



I used the latter for the ROI calc. I'm not sure when I get assigned 1 contract, if the buying power will increase from $1,030 to $1,254. I assume that will happen.

Mativen 

Where did you trade MES for only $0.52? Thank you.

Mativen,

Tastyworks

MES Trade Update:

PK007 

Mativen, Tastyworks

Apologies Mativen. I see there is an additional $1.50 in commissions when opening a trade. I missed it since on the statement it's not shown separately per trade.
No commission on closing the trade.


Sent using the NexusFi mobile app

Thank you.
I have a question, where did you see 1 SD in TastyWorks?

Mativen 

Thank you. I have a question, where did you see 1 SD in TastyWorks?

If you scroll up or down any of the options tables, you'll see dashed lines. The first will be 1 SD and the second, further away will be 2 SD.

See below a screenshot on the PC platform. On the mobile app, it says "1 SD" or "2 SD" at the line.

So, a couple of things happened on Friday the 3rd.

I got assigned 1 MES contract since the price closed below the strike price of the short put with a strike of 4550.
A couple of hours before the close and when it seems very unlikely that price will recover above 4550, I sold the 7 DTE call at the 4650 strike. Why 4650 and not 1 SD out like the puts? The problem is the credit was very low at 1 SD. I therefore chose 4650 in order to get more credit in the range of $50-$60. Similar to the short put up until now. I'n not too concern about it at this stage since overall, the strategy will still be profiable if price rises and close above 4650.

This might become an issue if price continues to fall, but we'll see.

Below is the situation as it stands now. The option contract is showing an unrealized loss of $80 at the time of this post. Will only show the unrealized profit/loss on the futures contract and the realised profit/loss on the option. Just makes it easier.

Going forward, I'll post an update once a week when closing the short call.

In hindsight, made a mistake yesterday. After I was assigned 1 contract at 4550 last week, MES rebound as you might be aware.

When it reached 4600, I decided to sell for a decent profit and also bought back the short call for a $20 loss. Net, the trade made $230. Of course it then went much higher and I missed out on an additional $250.

Anyway, will take note and over time see if this was in fact the correct decision.

I then continued with the strategy and sold a put 10 DTE.