Weekly Trade Log – Week ending Jan 4 2020

Given the holiday week, there were not a ton of trades to get into this week. The markets seemed to generally continue their relentless move upwards from 2019 with Friday providing a tiny bit of downward pressure.

It’ll be interesting to see what impact, if any, the current issues in Iraq/Iran have on the markets. Oil was up a bit; however general sentiment seems very bullish still.

Tom Preston over at Tastytrade has a really nice piece he published on Jan 2nd talking about implied volatility and the market ranges from mid 2019 to today; then showing where the current IV suggests we may be by June of 2020.

Quoting his post for possible pricing of 5 major ETF’s in six months (June 2020) based upon current market volatility and pricing:

SPY     68% prob landing between $294 and $347

QQQ    68% prob landing between $186 and $239

IWM    68% prob landing between $147 and $186

TLT     68% prob landing between $123 and $147

VIX      68% prob landing above $10.75

It’ll be interesting to see where this all plays out this year. I’d love to see some serious volatility expansion as it’s felt like thin pickings for trades recently.

Speaking of trades… this week I opened up a few positions specifically in SPX, XBI, TLT, XLE, EEM and TLRY, XOP all for the February options cycle.

These are all pretty much the same type of trade. Reasonable volatility in the underlying, respectable (in today’s markets) IV rank 20-40ish for most of these.

All but the TLRY and XOP positions are delta neutral positions, mostly built using iron condors; generally around the 33-16 delta strikes. I’m targeting a 50% profit target on initial credit for each of them – they are all defined risk positions.

TLRY is a very simple put credit spread – a generally bullish position. I am short the 12.5 put and long the 10’s for a credit of 0.36 per contract. With TLRY trading around 16, this is basically a short 16 delta put spread that has an approximately 78% probability of profit and 86% probability of hitting 50% target. If this plays out as I am anticipating, it’ll return a tidy 16% return on capital in a matter of a couple of weeks. Risk on each contract is very small at $216/contract.

XOP is exactly the flip of TLRY. It’s a simple call credit spread – a bearish position. Given the Iraq/Iran situation, I’m taking a bearish position for the next few weeks. It’s pretty far away as a 16 delta short strike with a >90% probability at 50%. I didn’t take in a huge credit on this one @ 0.16/contract for a $2 wide spread. I may put the put side on if volatility increases over the next week or so.

All of my SPX trades have been VERY short term lately; I expect this will continue for a while. If I chose to play the broad US equities for a normal position it’ll likely happen in SPY.

Anyhow, I closed a few things for profits this week and sold off some loser stocks from 2019 to realize some taxable losses… I’m still kicking myself for buying BYND at 85 and not selling when it got north of 200 – pigs get slaughtered. I also bought WORK right after the IPO, both of those had some sizable losses I can use to offset some gains for 2019.