Day 17 - A Meta Spread

Trading Update

I wrote yesterday about how it is going to be hard for me to stay out of action in the markets. I had also mentioned about the possibility of opening a credit spread.

I found a trade that seemed reasonable enough to bet on. META was trending lower at the start of the day. I ended up selling an end-of-week expiry credit spread at ~11 ∆. Considering its recent bullish run, my bet is META will not fall that far in the next 4 days.

I did not close any existing positions. I continue to look for the LEAPS to get to 15-30%. However, if I sense the underlying are losing steam and cannot accelerate fast enough, I am going to close out the trades to free up some capital.

Portfolio Status

Here is the status of my open trades at the end of the day today.

The LEAPS mostly traded sideways, with not a lot of movement. The META Put Credit Spread took off and have already gone past 50% of premium received - which is what I typically target to exit a profitable trade. Hopefully, META can hold its position or improve on it, and then I will feel more comfortable closing the open spread.

Here is a Year to date view of the portfolio.

Trade History

Here are the last few trades I made.

AI Analysis of Trading History

Here is what my preferred AI has to say about these trades.

Question:

Can you analyze this data for me and provide any insights or recommendations from this data?

Answer:

Let me analyze this options trading data and provide some key insights and recommendations.

The following analysis was generated by AI.

Portfolio Performance Analysis

Overall Statistics

• Total Net P/L: $1,766.00
• Number of Trades: 19
• Average P/L per Trade: $92.95
• Win Rate: 74% (14 profitable trades out of 19)
• Largest Win: $600.00 (PLTR LEAP)
• Largest Loss: -$170.00 (MSFT Put Credit Spread)

Strategy Breakdown

Credit Spreads (Put & Call)

• Most frequently used strategy (9 trades)
• Average return: 1.7% of capital at risk
• Success rate: 89% (8 wins, 1 loss)
• Typical holding period: 1-6 days
• Average credit received: ~$100-200 per trade

LEAPs

• 5 LEAP trades
• Mixed results: 2 losses, 3 wins
• Strongest performer: PLTR LEAP (+20.7%)
• Notable returns on longer-dated options
• Average holding period: 1-6 days (relatively short for LEAPs)

Cash Secured Puts (CSP)

• 3 CSP trades
• 100% success rate
• Lower percentage returns (0.3%-2.3%)
• High capital requirement but consistent returns

Asset Concentration

• Heavy focus on tech stocks (PLTR, META, MSFT, GOOGL)
• PLTR most actively traded (5 trades)
• META and MSFT showing consistent profitability

Risk Management Analysis

• Average Capital at Risk (CaR): ~$2,500 per trade
• Risk/Reward ratios generally favorable
• Good use of defined-risk strategies (spreads)
• One hedge position (PLTR Put)

Recommendations

• Position Sizing
  • Consider standardizing position sizes
  • Current CaR varies widely ($400-$10,900)
  • Aim for more consistent risk exposure per trade
• LEAP Strategy Refinement
  • Current holding periods (1-6 days) are very short for LEAPs
  • Consider longer holding periods to benefit from time decay
  • Look for opportunities to sell covered calls against LEAPs
• Diversification Opportunities
  • Current portfolio heavily concentrated in tech
  • Consider adding non-correlated sectors
  • Look for opportunities in ETFs for broader exposure
• Trade Management
  • Implement consistent profit-taking targets
  • Consider rolling successful trades forward
  • Set mechanical stop-losses for credit spreads
• Strategy Optimization
  • Focus on credit spreads given high success rate
  • Consider implementing iron condors for range-bound stocks
  • Explore calendar spreads for longer-term positions
• Risk Management Improvements
  • Standardize position sizing to 2-5% of portfolio per trade
  • Implement portfolio-level Greeks management
  • Consider VIX-based position sizing adjustments

Based on this analysis, I notice you have a solid foundation with a positive win rate and good risk management through defined-risk strategies. Your credit spreads are particularly effective, while your LEAP trades show mixed results but with some notable wins.

All right, not a bad summary! Exactly as one would expect from a foolish AI for a foolish trader. This analysis was obtained by using Anthropic's Claude (https://claude.ai).

It will be fun to try this at some cadence. Watch this space on my future updates.

Disclaimer - Nothing on this site is financial advice, come and stay here for entertainment!