After a disastrous start to 2023, where I suffered 2 consecutive months of losses (-5.3k in Feb, -4.8k in March), I finally ended April with a small amount of earnings of $389. This may seems like a consolation and not worth mentioning, but a small profit is still a profit and it is better than ending the month with a loss, like the the previous 2 months.
Doing More With Less
The surprising thing is that in the month of April, I did significantly lesser trades, spent less time monitoring the stock market, less time chasing after the trends and in the end earn more. In my opinion, 2023 will be a very tricky that may confuse (or trap) even the best and most technical traders out there. Thus, it is important to be prepared for the other outcome, no matter if you are bullish or bearish. I believe that my new strategy (which I will share in detailed in a later post) has given me the margin of error (safety net) and the results will eventually follow to support the thesis.
My April 2023 Trades
I have 2 successful trades in selling PUT on Tesla and Nvidia. The moment the share prices started to shoot up and the premium dropped, I bought to close the contract to secure my profits. I do not need to wait for expiration date and can secure my profits in a much shorter period than the original contract duration.
I closed my remaining Vertical Spreads positions (with a small loss) and probably not go back to them again unless I can find a trend that is consistent and last a long time, e.g. the start of a new bull market. While the vertical spreads uses a smaller capital, I feel that the downside protection is not adequate and eventually will cause us more losses (in premium) if the trend does not go in our favour.
Concluding Thought
April is another unpredictable month and looking at the chart of the S&P500 ETF share price, which is supposedly the least volatile, you can see big ups and downs. The Fed’s decision to continue to hike another 25 basis points has led to the market to sell off. And when people thought that the next crash is finally here, the market shoots up again.
I believe this kind of choppiness is here to stay and to trap more traders who are buying into the bull run & bear run thesis. I too made this mistake by thinking that the biggest crash in history will happen in 2023 and go heavy on my shorts (bearish trades) and finally gave up when the stock market just wouldn’t crash.
My short term strategy of using vertical spreads also failed because the market was too volatile and not moving consistently in one direction. I ended having to close most of my trades in losses because I kept getting the direction wrong and losing bulk of the premium in the contract due to the wrong direction and theta decay. However, I believe that through these losses, I have learnt my lesson and be able to refine my options trading strategies better to ensure a more profitable path ahead.
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