July options trading review

This month I received $1,068 in premiums from trading options. This is a new record for me!

In today’s post I’ll break down my trades for July. And I’ll explain how I make option trading decisions to maximize income without blowing up my portfolio. 🙂

Here are some key points from this month.

• I sold 8 options, 6 Puts and 2 Calls.
• My largest trade was selling a put option on the S&P 500 (SPY), expiring in a year, worth over $500.
• My total trading commission was $8 for the month.
• 11 options from previous months expired in July. All 11 expired worthless. 🙂

Below is a table detailing my transaction details.

Thanks to reader feedback I have added a few new columns for clearer trading insights!

• Initial underlying price – The market price of the underlying stock/ETF when I made the options trade.
• Price difference % – How much the underlying will have to rise or fall to be in-the-money (ITM).
• Initial days to expiry – How many days remain until the option expires, from the day that I traded it.
• Initial Delta – Delta measures the probability of an option expiring ITM. For example, if a put option has a Delta of -10%, it means there is a 10% chance it will get exercised, and a 90% chance it’ll expire worthless.

Raw data from IB statement here.

Taking a LEAP of faith

A LEAP, or “Long Term Equity Anticipation” is a longer term options strategy where the expiration date is more than one year away. Due to this longer term contract, LEAPs generally offer very attractive premiums.

As mentioned on Twitter I sold a LEAP this month (my first ever) on the SPDR S&P 500 ETF.
I chose this fund because it’s well diversified with a lot of liquidity.
The strike price I chose was $290, which is a 33% discount. The average market correction historically is 33%.

The expiration date is in June 2022. It’s not quite 1 year away, but close enough.
After commission I earned US $517.36 from this one LEAP options trade. 🙂

The Delta for this trade was -7.4%. So there’s basically a 93% chance this will expire worthless.

Other options sold

I sold 2 AMC puts with a $15 strike. This was a calculated gamble on a meme stock. The high implied volatility means the premiums are too good to ignore. But to limit my risk I kept the expiration date short (15 days.) I also chose a strike price that’s deep out-of-the-money so that AMC would have to fall 65% to trigger an assignment. This option had a 98% chance of expiring worthless. It expired just last week, worthless. 🙂

I sold a $40 covered call for Summit Materials (SUM.) This is a construction materials company that makes cement. I originally bought this stock in 2017 because I thought Donald Trump was going to build a wall at the US/Mexico border. Alas, that didn’t happen, lol.

The stock is still up a decent 34% since my purchase. But it’s overvalued now. And its return on capital is a measly 5%. There’s little reason for me to keep this stock. This is why I don’t mind the Delta being a little higher for this trade at 17%.

How I make my options trading decisions

If you want to know how I choose my options and strike prices, take a look at my recent video.

I break down my thought process to earn the most premiums without taking on excessive risk. 🙂

You can watch the video here, or see below.

It’s probably easier to follow my thoughts in a recorded demonstration than to read a blog post about it.

Options trading at a glance

Since I started in April I’ve traded over 30 options that have already expired. Surprisingly none expired ITM.
I like to play it safe and choose trades with conservatively low Delta values. 🙂

So far I have earned $3,564 from option premiums. This is before capital gains tax.

Thanks for joining me on my options trading adventure. I hope to continue trading options in August and keep doing my “Wheel” strategy, as well as sell covered calls on stocks that I no longer want to keep.

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Random Useless Fact:

Not everyone can afford healthy food all the time.