Below you will find all of the trades I closed out in October 2014. I plan to post a summary of my complete (not cherry picked) credit spread portfolio each month, and in the future I will share trades as I make them. Why am I doing this? Because bragging about my winning trades strokes my ego, of course. :)
Though that last statement might be partly true, I am really divulging my trades for more worthy reasons. For one, I want to share my successes and failures so others can see what I do every day—and hopefully we can start a conversation. You see, trading is a solo sport that results in a lot of second guessing of oneself. When I review the trades of others I feel less lonely and, more important, I learn. Which leads me to the second reason: through dialog with other traders I hope to become a better trader myself. Also, I enjoy helping new traders by explaining the rationale for my trades. Lastly, I am seeking a kind of validation by sharing my trades—particularly my successes. After all, this is a trading and investing blog and on Wall Street you live and die by your trades. I invite you to use my trading performance to help you decide whether you want to bookmark and share on social media my blog posts.
Shut Up and Show the Trades
| Ticker | Type | Spread | Expire Date | Open Date | Closed Date | Open Credit | Closed Debit | Profit / Loss |
|---|---|---|---|---|---|---|---|---|
| SPY | Put | 181 / 183 | 11/22/14 | 10/8/14 | 10/30/14 | $0.22 | $0.03 | 10.67% |
| SPY | Put | 179 / 181 | 11/7/14 | 10/9/14 | 10/27/14 | $0.18 | $0.03 | 8.24% |
| SPY | Put | 172 / 174 | 11/22/14 | 10/12/14 | 10/27/14 | $0.22 | $0.03 | 10.67% |
| SPY | Put | 168 / 170 | 11/14/14 | 10/14/14 | 10/23/14 | $0.27 | $0.03 | 13.87% |
| SPY | Put | 167 / 169 | 11/22/14 | 10/14/14 | 10/23/14 | $0.20 | $0.03 | 9.44% |
As you can see, October was a great month of trading. Credit spread traders yearn for months like this. The VIX spiked on fears related to the Ebola crisis, tensions between Russia and Ukraine, and suspicion that the market correction we have all been expecting was imminent. When volatility (VIX) spikes we can collect bigger amounts of premium when selling credit spreads.
It remains to be seen whether or not we are going to retest the lows we hit in October. I think the market will continue to rise or will flatten out. October marked the start of the last quarter of the year, and I believe that when the S&P 500 hit its low fund managers started to buy. A spike often occurs in the last quarter because fund managers want to close out the year on a high note—that is, with profits.
Corporate earnings have been great in 2014, Ebola seems to be under control (the media coverage was overblown), and the situation in Russia is not likely to have a major impact here at home. When the S&P was falling I was selling put credit spreads all the way down—typically out 30 to 45 days—with the knowledge that the market would pick back up or at least not drop too far. Corrections typically pull back 10% from their highs so I was watching the 180 level on the SPY, figuring that any put spreads I could sell below that would have a high chance of returns.
When the fear sell-off was done the VIX came back, causing the put spread to have nice gains. Most of the trades I closed in October 2014 closed a week or two earlier than normal due to the swing in volatility.
