BlueWaterSailor: trading journey and journal

BlueWaterSailor said:
[laugh] I'm ex US Army MI. So it fits... but only by some sort of retcon magic.

But the "BlueWaterSailor" tag is pretty straightforward - I'd say that 20+ years of living aboard, cruising, and sailing the open ocean gives me good title. :)
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It is simpler than that. Gosh, even you do not see yourself? Look at your avatar icon. You're on a sailboat, which is on the water, and your sails are wrapped in blue tarps. Blue, water, sailor. Hehe

Or am I off on this assessment?
 
Overnight said:
It is simpler than that. Gosh, even you do not see yourself? Look at your avatar icon. You're on a sailboat, which is on the water, and your sails are wrapped in blue tarps. Blue, water, sailor. Hehe

Or am I off on this assessment?
More...

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:D
 
$138.39 TLT 191101P137.5 / C140 / C140.5 $0.82
Jade lizard in TLT

$138.60 TLT 191115P138 $1.32 IRA
ATM short put; I'm balanced between wanting that premium and wanting to get assigned so I can start on the capital appreciation and selling calls - so I've put it up at ~50 delta.

I've decided to convert as much of my IRA to stock (by initially selling puts) as I can, and sell calls on it. It's been sitting there not doing anything - which just seems wrong for a guy who does options. Or at least has a clue about active investment. Since TLT seems to be somewhere near the bottom of its range, happens to be one of the indexes that I've become used to trading, and is also within the price range that I want - into the basket it goes. At least if it drops and stays below 138 at expiration; if not, I get to do it again.

I've also decided that I really like the idea of jade lizards - especially since I "reinvented" one with ROKU. That is, I came up with a strategy for the characteristics that I wanted, executed it and watched it behave exactly as I wanted it to - and only then realized that something that awesome would already be in use, and have a name. ("Jade Lizard", egads. Who the hell comes up with these things?) It turned a tiger that would throw itself, roaring, from -$200 to -$600 in an hour or two into a cute fluffy kitten that would barely struggle up to -$210 making piteous squeaky noises all the while (come on, stick with me here; poetic license, y'know) and then fall back to -$50 or so. And that max loss decreased every day - with $10 coyly peeking around the P&L corner several times today. In effect, it turned a naked call into something that replicated the behavior of a naked put - plus eliminated all upside risk. I couldn't be more pleased than if I invented it myself... which, in a sense, I did.

The take-home with JLs as an entry strategy is that I get to collect a bunch of extra credit up front in return for keeping less of it if the price goes up more than a certain distance from the current one. In other words, if I'm mildly but not super bullish. Given that TLT is often a slug - except for those moments when it hits the turbo button - I think of it as a pretty decent fit for that strategy.

Had several other trades up for sale today, but they didn't quite make it. Came within a penny, then skittered away. Oh well... I'll get'em Monday.
 
So, no trades Monday - with quite good reason. I think I'm finding a middle ground between just sitting on my hands and getting into poor-quality trades, all without compromising. Good trick, neh? It doesn't work all the time, but here's how: I look at my Usual List of Suspects - SPY, IWM, TLT, etc. - and see if any of their premia at my preferred expirations and strikes are anywhere close to being reasonable. I.e., to what I got paid for them, or at least their older relatives, in the past. Record keeping has its benefits, y'see.

If they are, I'll put out an offer in that range - and then walk away. I don't watch them, I don't suffer over them... on the rare occasion that one of them comes in, I'll consider my remaining liquidity and then decide whether to cancel the rest of them or not.

Yesterday, none of them were so inclined - and that was just fine by this sailor. Sitting there without even a single oar in the water would not be.

Today:

$117.35 WMT 191115P115 $1.20 IRA
Now that I've figured out the problem with ATM strikes (getting the stock for near current price, duh; the higher premium doesn't make up for it), I'm shooting for ~30 delta which gives me a decent strike for entry.

$109.55 LOW 191115P108 $1.55 IRA
Ditto.

I've decided to run the wheel in my IRA - pretty similar to what I'm doing in my regular account, but with a slightly different emphasis. Whereas in the latter, I'm interested in producing a good return (and learning, primus et primoris), here my main focus is building a basket of stocks, both for dividend and diversification purposes - and continually reducing their cost basis via the wheel. If they get called away - shucks! I guess I'll just have to take that profit and suffer...

WMT and LOW have been on my small and rather exclusive list of single names that I'm willing to trade in addition to indexes. And now, via the same type of aggressive price discovery I've discussed here before, they've been dragged into my clutches. Come to me, my little darlings... ahem. Perhaps I'll turn down the sound on the classics channel.

(Although Christopher Lee and Peter Cushing... there never was a Dracula or a Van Helsing worth a damn after those two. Ah, well.)
 
$83.38 SBUX 191115C90 / C105 -$0.40
Closing out 1/2 of the fly. Total credit: 4.17-0.40=3.77, current closing cost: 6.82, a -$305 P&L. I'll see how earnings goes, and either go inverted, roll, or close depending on the results.

$29.92 TWTR 191115C38.5 / C40.5 -$0.02
Closing call side of fly; total credit 1.70-0.02=1.68. Yeah, I could have just held it for a $30 max loss, but I don't mind paying $2 to practice the mechanics here.

$138.71 TLT 191115P138 -$1.08 $24.00 IRA
Decided to get out of the too-high strike for a nice bit of credit.

$138.71 TLT 191101P137.5 / C140 / C140.5 -$0.41 $41.00
I'll take 50% on this thing that's been sitting there doin' nothin'.

$110.78 LOW 191115P108 -$0.96 $24.00 IRA
15% in one day is reasonable.

Non-wheel trades:

$13.14 VIX 191218C15 / C18 -$1.21 -$121.00
Long VIX near the bottom of the usual range. Debit trades are not my usual cuppa, but seems like a reasonable opportunity (92% PoP on $179 max profit.)

Nice active day today, despite the low VIX; intraday SPY was all over the place, and although I'm not much for range trading, this would have been a good day for it.

The market has no compunction about providing endless opportunities to screw up, and gleefully kicking me right where it hurts when I do. To be fair, most of my mistakes these days are artifacts of inexperience rather than just dumb shit like entering a spread upside down (done that) or sending an order to the wrong account (done that); it's stuff like "hey, the ATM premium is nice and juicy - and since I want to own this stock anyway, why don't I sell that one?" (The secret answer, which came to me about two minutes after I clicked that 'Send order' button, was "because you'll be paying nearly the current price for the stock instead of getting it at a lower strike - and the premium is only a fraction of what you'd save by buying it lower down. Duh.") But really, I'm being a bit unjust to myself here... my knowledge of finance for almost all of my life could be described as the product of nada and nil raised to the power of bupkes, and looking at columns of numbers with dollar signs made me want to either back away slowly or reach for the rum bottle. And now, I'm trading, keeping P&L logs, and thinking about how useful an education in basic accounting would be.

I'd have stared in disbelief and frank alarm at any crazy person who told me, a year ago, that this is what I'd be doing now.

I'm still severely lacking in practical experience, and even in basic knowledge about what to do when the market does its usual number on me. But I'm making pretty good inroads, picking things up and figuring them out, and somehow managing to keep the firehose from ripping my lips off. Plus, even the little bits of cash that I make here and there with my trading - and now, the fairly steady growth of my sim account in futures - are pleasantly encouraging.

(Futures: started only a couple of days ago, and am already up $385. 24 trades so far - mostly in CL, GC, and MNQ - and only three of those got stopped out. Yet another brand of fun to add to the list.)
 
Followup to last post:

I've been keeping track of the total cost for any given entry on a spreadsheet and modifying it (keeping track of either total credit or basis) when I roll; that works fine when I'm rolling the whole thing, but breaks when I close or roll only a part of it, as with the above flys. So, what I really need are the prices for each leg.

The annoying part here is that TradeStation does not show you that info without going through a stupidly complicated process (fire up a separate application, generate a report, visually search a long listing and pick out the relevant entries from a good dozen columns without any headings, and copy them out.)

The other option - doing P&L the way TS itself does - really messes with my head and seems just as difficult to keep track of. They apply all credits and debits from trades directly to my account, then show the running P&L (which is, of course, going to be negative for all credit strategies). Any rolls for credit are treated the same way. The problem is that I can't see what the actual profit or loss of a given change is going to be. E.g., the TWTR fly above: because of the initial $170 credit on the $200 max risk, this trade had a max loss of $30. I closed the call side for $2 because there was nothing left in it (it was trading from 0.01 to 0.07)... and now, max loss shows as $122. If I mentally unpick that mess, what it means is that the call side was worth $90, which was added to my account - and disappeared from the P&L reckoning. It's been added to my daily "Closed P&L" figure (which is useless, unless it's the only P&L I have for the day - no way for me to see only the last addition). So, my max loss is still only $32 - the original $30 plus the $2 I lost in closing that call spread - but there's no place where I can see that number. Or know whether a given trade is profitable or not without 5-10 minutes of manual fiddling. Utterly unnecessary and totally frustrating - as well as being seriously dangerous to my account health; early on, I made the mistake of trusting the numbers I saw and closed ostensibly profitable trades... which instantly blew $1500+ out of my account. My biggest loss so far.

By contrast, TastyWorks shows, and lets me filter by various criteria, the history of any trade I've made with them - just by clicking the history tab. So, it's not like it's impossible... it's just impossible in TradeStation.

I need to come up with a rational way of handling this. Without it, I have no clue about the real value of my trades... and this "partial closing" process just showed me a huge hole in my accounting procedure that is simply not tolerable.
 
Non-wheel:
$12.33 VIX 191218C15 / C18 -$0.99 -$99.00
Buying another one in VIX. I guess this is what they call averaging down... with VIX at below 13, I'm willing to ride it.

Wheel:
$83.21 SBUX 191115P75/P90 -$7.40 -$363.00
My first market-caused loss of any meaningful size; guess it had to come some time. Reasons: unfamiliarity with flys, slow to act when the price dropped (10 points... yikes), not in love with holding SBUX.

It keeps coming home to me - on the principle of "if you don't learn it the first time, you'll have to pay tuition twice over" - that the most meaningful thing in trading is your own psychology. The emotional 'texture' of losing out on this trade was very odd, but similar to what I felt before in smaller ones that went south on me: frustrating and distracting, and a feeling of relief when I decided to just let it go. I don't want to say that I'm feeling particularly chipper about losing money, but once it happens - as opposed to while it's in the process of becoming an ever-larger loss - it doesn't feel like any sort of a big deal.

I guess it's just another case of "chop wood, carry water."
 
$140.87 ROKU 191115C150 / C145 -$2.00 -$47.00
Closing the call-side vertical of the Jade Lizard, total is now 1.53-2.00=-0.47; now I only have the -put left (~16D).

Given that earnings are coming up, and that ROKU behaves like a bee-stung pig - squealing and snorting and kicking up mud - even without any provocation, this is not yet over by any means. At least this time I'm aware of what a mad beast it is, so it won't be a surprise.

Man, what a rite of passage this trade has been! On the one hand, it really sucked; there were times when I felt totally lost, clueless about what to do next, and incredibly uncomfortable about that. On the other, I've learned more about the reality of trading, what it's like to take real heat and how I react to that, than I had in the entire preceding year.

Radical honesty here: without this experience, the academic bits were starting to feel like a grind. It was like being stuck endlessly studying and "perfecting" flying theory but never actually strapping on a plane and feeling the wheels leave the runway. Now, I have lots of motivation to dive back in... Euan Sinclair's stuff was actually pretty cool, but I really needed to sink my teeth into some practical trading, instead of always waiting for the other shoe to drop.

(OK, so maybe thinking of a madly-swerving option trade as a "reward" is weird. So be it. I need practical experience to nail things down; my patience for studying abstract theory is much less than it was in my younger days, and I am unable to think of this as a bad thing.)
 
$119.60 WMT 191115P115 -$0.75 $80.00
Taking off this trade in the IRA for ~53% profit

$118.89 ROKU 191115P120 -> 191122P120 $1.32
Dropped like a rock-u after earnings, despite beating all numbers. [shrug] So it goes. Rolling out another week, total is now -0.47+1.32=0.85 or 120-0.85=119.15 as basis. On one hand, I'm still in it; on the other, I'm finally in credit again!

Truth to tell, I was thinking about rolling this rock-u (OK, I'll stop now) anyway; somehow, it irked me to close in the negative after all that work. Yeah, silly damn attitude that's likely to cost me big... but then, along comes this drop that says "yo, you wanna think about taking assignment again?" And since that is how it's going to be, then - off we go playing the basis reduction game. I did say that I needed the practice... and the ever-helpful Mr. Market is giving it to me.

What I'm thinking I need, just for my own peace of mind, is to write out EXACTLY what my actions should be for the various situations that come along - at least for the simple case where I've sold a put. That's also going to take figuring out what the triggers for action are. Like, do I actually care if a stock drops by 10% when it's still 45 days out? What about by 20%? Is there a situation where I would or should care, that far out? What about when I get closer to expiration... what's the combination of factors where it makes sense to take action, and what are the actions that I should take?

I'm realizing, as I write, that this is my #1 challenge right now. I've been going by "this feels wrong - gotta do something", and that's... ugh. Terrible. I need a rational basis, not some inchoate "uh-oh" feeling. Yes, there is quite a bit of art to this - watching professionals doing it is something like seeing a matador gracefully side-stepping a rushing bull - but that's based on skill, not on some guessing game driven by lack of experience and (let's call it what it is) fears and worries.

Hell, I don't even know that I'll have good answers to most of these questions. But it's important that I start trying to answer them.
 
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