Five winners, zero losers--a good month of trading for the February option cycle. It was certainly a rollercoaster ride, as every position was in the red for a time, many deeply in the red. The winning trades were short puts on GLD, SPY, TLT, TM, and a long put on SPY.
Yes, long premium worked out for a gain this time, even though the odds are against that result. I lucked out on the long SPY puts (part of a bearish SPY vertical put spread) as the market continued straight up after I sold the puts. The option value declined about 50% in three days, as the market rallied and time decay started to accelerate on the March option.
Toyota TM moved lower from 77 to 70 after I sold the put, but the margin of safety of selling the 65 strike, way out of the money, worked out. The drawdown was over 150%. Drawdown is the hypothetical exit at the worst point in the trade. It is extremely relevant for sellers of options because of potential margin calls.
The markets "dodged the meteor" when a surprise Fed rate hike rattled the overseas SP futures, but strong buyers stepped in and bought in New York. If the market was more fragile, that kind of news could bring -200 or -300 on the Dow on the day. Doing it on option expiration can make for a lot of impact on financial markets.
Long GLD, SPY, TLT for March expiration, all short puts
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